SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
INMAC CORP.
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(Name of Issuer)
Common Stock, par value $.01 per share
------------------------------------------------
(Title of Class of Securities)
45753810
--------------
(CUSIP Number)
Bruce L. Lev, Esq.
Micro Warehouse, Inc.
535 Connecticut Ave.
Norwalk, Connecticut 06854
(203) 899-4000
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(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
With a copy to:
Randi L. Strudler, Esq.
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
(212) 326-3939
November 30, 1995
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Check the following box if a fee is being paid with the statement [X].
<PAGE>
CUSIP No. 45753810 13D Page 2 of 7 Pages
1 NAME OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
Micro Warehouse, Inc.
06-1192793
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY
OWNED BY 8 SHARED VOTING POWER
EACH
REPORTING 2,754,235
PERSON WITH
9 SOLE DISPOSITIVE POWER
2,754,235
10 SHARED DISPOSITIVE POWER
-0-
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,754,235
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
26.0%
14 TYPE OF REPORTING PERSON*
CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
-2-
<PAGE>
Item 1. Security and Issuer.
The securities to which this statement relates are the shares of common
stock, par value $0.01 per share ("Common Stock"), of Inmac Corp., a Delaware
corporation (the "Company"). The Company's principal offices are located at
2465 Augustine Drive, Santa Clara, CA 95052.
Item 2. Identity and Background.
This Statement is filed by Micro Warehouse, Inc. ("MWHS"). MWHS's state
of organization is Delaware. MWHS is a specialty catalog retailer of
microcomputer software and hardware products for users of Macintosh and IBM-
compatible personal computers. MWHS's principal offices are located at 535
Connecticut Ave., Norwalk, Connecticut 06854.
Schedule I hereto, which is incorporated herein by this reference, sets
forth the name, the business address, the present principal occupation or
employment (and the name, principal business, and address of any corporation
or other organization in which such employment is conducted), and the
citizenship of the directors and executive officers of MWHS.
Neither MWHS nor, to its knowledge, any of the persons identified in
Schedule I hereto has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject
to a judgment, decree, or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The consideration payable by MWHS to purchase the shares of Common Stock
to which this statement relates is Common Stock of MWHS ("MWHS Common
Stock"). See Item 4.
Item 4. Purpose of Transaction.
On November 30, 1995, the Company, MWHS, and a wholly owned subsidiary
of MWHS, Indigo Company, Inc. ("Indigo"), entered into an Agreement and Plan
of Merger (the "Merger Agreement"), pursuant to which, on the terms and
subject to the conditions set forth therein, Indigo will be merged with and
into the Company (the "Merger"). At the effective time of the Merger, among
other things, each then-outstanding share of Common Stock (other than shares
of Common Stock held by MWHS or any of its wholly owned subsidiaries or by
any of the Company's wholly owned subsidiaries, which shares will be
cancelled) will be converted into the right to receive that number of shares
of MWHS Common Stock based upon a floating exchange rate, the numerator of
which will be 12 and the denominator of which will be the average closing
price of MWHS's Common Stock for
-3-
<PAGE>
the twenty trading days ending five business days before the Merger is
consummated. The exchange rate will be a minimum of 0.225 and a maximum of
0.276. As a result of the Merger, the Company will become a subsidiary of
MWHS and the Common Stock will be delisted from the Nasdaq National Market.
The Merger is conditioned upon, among other things: (i) adoption by the
Company's stockholders of the Merger Agreement; (ii) the waiting period
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, having expired or been terminated; (iii) the absence of any order or
injunction which prohibits the consummation of the transactions contemplated
by the Merger Agreement; (iv) a Registration Statement on Form S-4 having
become effective and all necessary approvals under state securities laws
having been obtained; and (v) all consents, authorizations, orders, and
approvals of any governmental authority required in connection with the
Merger Agreement having been obtained, other than any such consents,
authorizations, orders, or approvals which, if not obtained, would not have a
material adverse effect on the business, financial condition, or results of
operations of the Company.
As a condition to its willingness to enter into the Merger Agreement,
MWHS required that, simultaneously with the execution thereof, each of the
Kenneth and Roberta Eldred Revocable Trust U/T/A and the Eldred 1995
Charitable Remainder Unit Trust U/T/A (the "Stockholders") enter into an
agreement with MWHS (the "Stock Agreement"). Pursuant to the Stock
Agreement, among other things, the Stockholders agreed to vote all of the
shares of Common Stock owned by each of them in favor of the adoption of the
Merger Agreement at the meeting of the Company's stockholders to be called to
vote thereon (the "Stockholder Meeting"), granted to MWHS the right to
purchase such shares for a purchase price payable in shares of MWHS Common
Stock at the Conversion Rate (the "Option"), and agreed to certain
restrictions on transfer of those shares of Common Stock. See Item 5.
MWHS's principal purpose in entering into the Merger Agreement is to
acquire the Company. MWHS's principal purpose in entering into the Stock
Agreement is to enhance the likelihood of the Merger being consummated. If,
prior to the Merger, MWHS exercises the Option, MWHS intends to enforce its
right under the Merger Agreement to require the Company to take all available
action to cause a number of directors of the Company proportionate to the
amount of Common Stock owned by MWHS to be persons designated by MWHS.
Following the Merger MWHS intends to seek to change the composition of the
Company's Board of Directors and thereby control the Company and to seek to
cause one or more of the executive officers of the Company to be replaced.
MWHS believes that the Merger is in the best interest of it and its
Stockholders. The Merger will permit MWHS to expand its business operations
in certain geographical areas (particularly Europe and the United Kingdom) in
which MWHS operates. MWHS anticipates the consolidation of the United States
operations following the Merger. As of the date of this statement, however,
MWHS had not entered into any agreements providing for dispositions and there
can be no assurance that MWHS will do so or as to the timing or terms
thereof.
-4-
<PAGE>
The foregoing response to this Item 4 is qualified in its entirety by
reference to the Merger Agreement and the Stock Agreement, copies of which
are filed respectively as Exhibits 1 and 2 hereto and incorporated herein by
this reference.
Item 5. Interest in Securities of the Issuer.
The response to Item 4 is incorporated herein by this reference.
Pursuant to the Stock Agreement, the Stockholders have represented to
MWHS that, as of November 30, 1995, the Stockholders were the beneficial and
pecuniary owners of 1,954,235 shares and 800,000 shares, respectively, of
Common Stock, or 26.0% of the total number of shares of Common Stock then
outstanding. As a result of the Option and the other provisions of the Stock
Agreement, MWHS may be deemed to be the beneficial owner of all of these
2,754,235 shares of Common Stock. MWHS's potential beneficial ownership
arises from the fact that it may be deemed to have shared power to vote or
direct the voting of the 2,754,235 shares of Common Stock owned by the
Stockholders and the sole power to dispose or direct the disposition of such
shares.
Except as disclosed in this Statement, neither MWHS nor, to its
knowledge, any of the persons identified on Schedule I hereto have effected
transactions in shares of Common Stock during the preceding 60 days.
Item 6. Contracts, Arrangements, Understandings or Relationships With
Respect to
Securities of the Issuer.
The responses to Items 4 and 5 are incorporated herein by this
reference.
Item 7. Material to be Filed as Exhibits.
Exhibit 1 -- Agreement and Plan of Merger, dated as of November 30,
1995, by and among the Company, MWHS, and Indigo.
Exhibit 2 -- Stock Agreement, dated as of November 30, 1995, by and
between MWHS and the Stockholders.
-5-
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete,
and correct.
MICRO WAREHOUSE, INC.
By: /s/ Bruce L. Lev
---------------------------------------
Name: Bruce L. Lev
Title: Vice President
Date: December 4, 1995
-6-
<PAGE>
SCHEDULE I
----------
Information with Respect to
Directors and Executive Officers of MWHS
----------------------------------------
Each of the individuals listed below is a United States citizen unless
otherwise noted. The business address of each such individual is 535
Connecticut Avenue, Norwalk, Connecticut 06854. The address of the
corporation or organization (if other than MWHS), if any, in which the
principal occupation or employment of each such individual is conducted is
set forth opposite such individual's name below.
<TABLE><CAPTION>
Present Principal Occupation or
Name Title Employment
-------------------------- ---------------------------------- ---------------------------------------
<S> <C> <C>
Peter Godfrey Chairman, President, Chief Chairman, President, Chief Executive
Executive Officer and Director Officer and Director of MWHS
Melvin Seiler Executive Vice President, Chief Executive Vice President, Chief
Operating Officer and Director Operating Officer and Director of MWHS
Steven Purcell Vice President - Finance, Chief Vice President - Finance, Chief
Financial Officer and Treasurer Financial Officer and Treasurer of MWHS
Bruce L. Lev Vice President, General Counsel Vice President, General Counsel and
and Secretary Secretary of MWHS
Deborah Cooper Vice President of Mac Marketing Vice President of Mac Marketing at MWHS
Powell Crawley Vice President-International Vice President-International Business
Business Development Development at MWHS
George D'Amico Vice President-Sales and TQM Vice President-Sales and TQM at MWHS
Stephen F. England Vice President-Worldwide Vice President-Worldwide Advertising at
Advertising MWHS
Martin Gordon Vice President and Chief Vice President and Chief Information
Information Officer Officer at MWHS
Merle McIntosh Vice President, Purchasing Vice President, Purchasing at MWHS
Adam Shaffer Vice President-Marketing Vice President-Marketing at MWHS
</TABLE>
-7-
<PAGE>
<TABLE><CAPTION>
Present Principal Occupation or
Name Title Employment
-------------------------- ---------------------------------- ---------------------------------------
<S> <C> <C>
Bruce Schellinkhout Vice President, Distribution
Vice President, Distribution at MWHS
Jeffrey Sheahan Vice President-General Manager of Vice President-General Manager of
European Operations European Operations at MWHS
Eric Furman Corporate Controller and Chief Corporate Controller and Chief
Accounting Officer Accounting Officer of MWHS
Felix Dennis Director Chairman of Dennis Publishing Ltd.
U.K. citizen 39 Goodge Street
London, England W1P 1FD
Principal business of company -
Publishing
Frederick H. Director Managing Director of Loeb Partners
Fruitman Corporation
61 Broadway - 24th Floor
New York, New York 10006
Principal business of company -
Investment Banking
Joseph M. Walsh Director Chairman and Chief Executive Officer of
Curtis Circulation Company
Continental Plaza
Building 3
433 Hackensack Avenue
Hackensack, NJ 07601
Principal business of company -
Magazine distribution
</TABLE>
-8-
Exhibit 1
==============================================================================
AGREEMENT AND PLAN OF MERGER
by and among
MICRO WAREHOUSE, INC.,
INDIGO HOLDING COMPANY, INC.
and
INMAC CORP.
-----------------------------------
Dated as of November 30, 1995
-----------------------------------
==============================================================================
<PAGE>
Table of Contents
Page
1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . 2
2. Certificate of Incorporation, By-laws, Directors
and Officers of the Surviving Corporation . . . . . . . . . . . . . 2
2.1 Certificate of Incorporation and By-laws of Surviving
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Directors and Officers of Surviving Corporation . . . . . . . 2
3. Conversion of Securities . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Conversion of Securities . . . . . . . . . . . . . . . . . . 3
3.2 Payment for Company Common Shares . . . . . . . . . . . . . . 4
3.3 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . 6
3.4 No Transfer after the Effective Time . . . . . . . . . . . . 6
4. Representations and Warranties of the Company . . . . . . . . . . . . 6
4.1 Existence; Good Standing; Corporate Authority . . . . . . . . 6
4.2 Authorization, Validity and Effect of Agreement . . . . . . . 7
4.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 7
4.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 8
4.5 Other Interests . . . . . . . . . . . . . . . . . . . . . . . 8
4.6 No Conflict; Required Filings and Consents . . . . . . . . . 8
4.7 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.8 SEC Documents and Financial Statements . . . . . . . . . . . 10
4.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . 11
4.10 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.11 Employee Benefit Plans; Employment Agreements . . . . . . . . 11
4.12 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 13
4.13 Registration Statement . . . . . . . . . . . . . . . . . . . 13
4.14 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.15 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.16 Environmental Matters . . . . . . . . . . . . . . . . . . . . 15
4.17 Intellectual Property . . . . . . . . . . . . . . . . . . . . 16
4.18 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 18
4.19 Product Warranties and Liabilities . . . . . . . . . . . . . 18
4.20 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 19
4.21 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.22 Material Contracts . . . . . . . . . . . . . . . . . . . . . 19
4.23 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.24 State Takeover Statutes . . . . . . . . . . . . . . . . . . . 20
4.25 Opinion of Financial Advisor . . . . . . . . . . . . . . . . 20
i
<PAGE>
Table of Contents (Cont'd)
Page
----
4.26 Ownership of Parent Common Shares . . . . . . . . . . . . . . 20
5. Representations and Warranties of Parent and Merger Sub . . . . . . . 21
5.1 Existence; Good Standing; Corporate Authority . . . . . . . . 21
5.2 Authorization, Validity and Effect of Agreement . . . . . . . 21
5.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 No Conflict; Required Filings and Consents . . . . . . . . . 22
5.6 Compliance . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . 23
5.8 Absence of Certain Changes . . . . . . . . . . . . . . . . . 24
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.10 Employee Benefit Plans; Employment Agreements . . . . . . . . 25
5.11 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 25
5.12 Registration Statement . . . . . . . . . . . . . . . . . . . 25
5.13 Properties . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.15 Intellectual Property . . . . . . . . . . . . . . . . . . . . 27
5.16 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.17 Product Warranties and Liabilities . . . . . . . . . . . . . 28
5.18 Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 29
5.19 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.20 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.21 Issuance of Parent Common Shares . . . . . . . . . . . . . . 29
5.22 Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . 29
6. Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.1 Alternative Proposals . . . . . . . . . . . . . . . . . . . . 30
6.2 Conduct of Business by the Company . . . . . . . . . . . . . 30
6.3 Conduct of Business by Parent . . . . . . . . . . . . . . . . 33
6.4 Meeting of Stockholders . . . . . . . . . . . . . . . . . . . 34
6.5 Filings, Other Action . . . . . . . . . . . . . . . . . . . . 34
6.6 Access to Information; Confidentiality . . . . . . . . . . . 34
6.7 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.8 Registration Statement . . . . . . . . . . . . . . . . . . . 35
6.9 Listing Application . . . . . . . . . . . . . . . . . . . . . 36
6.10 Further Action . . . . . . . . . . . . . . . . . . . . . . . 36
6.11 Affiliate Letters . . . . . . . . . . . . . . . . . . . . . . 36
6.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.13 Insurance; Indemnity . . . . . . . . . . . . . . . . . . . . 37
6.14 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . 38
6.15 Conveyance Taxes . . . . . . . . . . . . . . . . . . . . . . 39
ii
<PAGE>
Table of Contents (Cont'd)
Page
----
6.16 Consents . . . . . . . . . . . . . . . . . . . . . . . . . . 39
6.17 Pooling Accounting Treatment . . . . . . . . . . . . . . . . 39
6.18 Company Warrants . . . . . . . . . . . . . . . . . . . . . . 39
7. Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.1 Conditions to Each Party's Obligation To Effect the Merger . 39
7.2 Conditions to Obligation of Company To Effect the Merger . . 40
7.3 Conditions to Obligation of Parent and Merger Sub to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 41
8. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . 42
8.2 Termination by Either Parent or Company . . . . . . . . . . . 42
8.3 Termination by Company . . . . . . . . . . . . . . . . . . . 43
8.4 Termination by Parent and Merger Sub . . . . . . . . . . . . 43
8.5 Effect of Termination and Abandonment . . . . . . . . . . . . 44
8.6 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 44
9. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.1 Nonsurvival of Representations, Warranties and Agreements . . 45
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.3 Assignment; Binding Effect . . . . . . . . . . . . . . . . . 46
9.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 46
9.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 46
9.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 47
9.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 47
9.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.9 Interpretation . . . . . . . . . . . . . . . . . . . . . . . 47
9.10 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
9.11 Incorporation of Schedules . . . . . . . . . . . . . . . . . 47
9.12 Severability . . . . . . . . . . . . . . . . . . . . . . . . 47
9.13 Enforcement of Agreement . . . . . . . . . . . . . . . . . . 47
9.14 Effect of Exercise of Purchase Option . . . . . . . . . . . . 48
iii
<PAGE>
<TABLE>
<CAPTION>
List of Schedules
<S> <C>
Schedule 3.1(e) -Options
Schedule 4.4 -Company Subsidiaries
Schedule 4.6(a) -Company Required Filings and Consents
Schedule 4.7 -Company Compliance
Schedule 4.8 -Company SEC Correspondence
Schedule 4.10 -Company Litigation
Schedule 4.11(a) -Company Employee Benefit Plans and Employment
Agreements
Schedule 4.11(f) -Merger-related Changes to Company Employee Benefit Plans
Schedule 4.12 -Company Labor Matters
Schedule 4.15(b) -Company Sales and Use Taxes
Schedule 4.16 -Company Environmental Matters
Schedule 4.17 -Company Intellectual Property
Schedule 4.18 -Company Insurance
Schedule 4.19(a) -Company Product Warranties and Liabilities
Schedule 4.19(c) -Company Trade Regulation Correspondence
Schedule 4.22(a) -Company Material Contracts
Schedule 4.22(b) -Company Material Contracts with a Change in Control Provision
Schedule 4.22(c) -Company Arrangements regarding Assets
Schedule 5.4 -Parent Subsidiaries
Schedule 5.5(a) -Parent Required Filings and Consents
Schedule 5.6 -Parent Compliance
Schedule 5.10 -Parent Employee Benefit Plans and Employment Agreements
Schedule 5.15 -Parent Intellectual Property
Schedule 5.16 -Parent Insurance
Schedule 5.17(a) -Parent Product Warranties and Liabilities
Schedule 5.17(c) -Parent Trade Regulation Correspondence
Schedule 7.3(f) -Obligations of the Company
</TABLE>
<TABLE>
<CAPTION>
List of Exhibits
<S> <C>
Exhibit A - Form of Amended and Restated Certificate of Incorporation
Exhibit B - Form of Amended and Restated By-Laws
Exhibit C - Form of Company Affiliate Letter
Exhibit D - Form of Parent Affiliate Letter
Exhibit E - Form of Company Representation Letter
Exhibit F - Form of Parent and Merger Sub Representation Letter
</TABLE>
iv
<PAGE>
INDEX OF DEFINED TERMS
----------------------
Page
----
Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Affiliate Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Alternative Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Cap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Closing Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Closing Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Benefit Arrangement . . . . . . . . . . . . . . . . . . . . . . . 12
Company Common Share . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Employee Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Company Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Company Equity Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Company Intellectual Property Rights . . . . . . . . . . . . . . . . . . 17
Company Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 7
Company Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . 7
Company Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Company Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Competing Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Continuing Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Controlled Group Liability . . . . . . . . . . . . . . . . . . . . . . . 12
Conversion Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
FTC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
v
<PAGE>
Indemnification Agreements . . . . . . . . . . . . . . . . . . . . . . . 37
Indemnified Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Indemnified Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . 17
Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Parent Benefit Arrangement . . . . . . . . . . . . . . . . . . . . . . . 25
Parent Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Parent Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Parent Employee Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Parent Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Parent Equity Rights . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Parent Intellectual Property Rights . . . . . . . . . . . . . . . . . . . 28
Parent Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . 21
Parent Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . 21
Parent Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Parent Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Product Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . . . . . 35
Purchase Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Stock Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Stock Agreement Transaction . . . . . . . . . . . . . . . . . . . . . . . 20
Stockholders' Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Termination Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
vi
<PAGE>
Agreement and Plan of Merger
Agreement and Plan of Merger (this "Agreement"), dated as of
November 30, 1995, by and among Micro Warehouse, Inc., a Delaware corporation
("Parent"), Indigo Holding Company, Inc., a Delaware corporation and a wholly
owned subsidiary of Parent ("Merger Sub"), and Inmac Corp., a Delaware
corporation (the "Company").
Recitals
A. Each of the Boards of Directors of the Company and Parent has
determined that a business combination between the Company and Parent is in
the best interests of its respective companies and stockholders.
B. Each of the Company, Parent and Merger Sub desires to effect a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), whereby Merger Sub will merge with and
into the Company (the "Merger"), with the Company being the surviving
corporation, and such Merger will be accounted for financial accounting
purposes as a "pooling of interests," all upon the terms and subject to the
conditions of this Agreement.
C. As a condition to its willingness to enter into this
Agreement, Parent has required that, simultaneously with the execution
herewith, Kenneth A. Eldred and Roberta E. Eldred, trustees of the Kenneth
and Roberta Eldred Revocable Trust U/T/A, dated November 28, 1983, as amended
as of January 19, 1990, and Kenneth A. Eldred, trustee of the Eldred 1995
Charitable Remainder Unit Trust U/T/A, dated as of September 14, 1995
(collectively, the "Stockholders") enter into the Stock Agreement, dated as
of even date herewith (the "Stock Agreement"), with Parent, pursuant to which
Stockholders are granting to Parent the option (the "Purchase Option") to
purchase the Company Common Shares (as defined below) owned by Stockholders
and are agreeing to certain voting and other restrictions.
D. Each of the Company, Parent and Merger Sub desires to provide
for the consummation of the Merger and certain other transactions relating
thereto, on the terms and subject to the conditions set forth herein.
1. The Merger
1.1 The Merger. (a) On the terms and subject to the conditions
----------
of this Agreement, at the Effective Time (as defined below), Merger Sub will
be merged with and into the Company in accordance with the applicable
provisions of the General Corporation Law of the State of Delaware (the
"DGCL"), and the separate corporate existence of Merger Sub will thereupon
cease. The Company will be the surviving corporation in the Merger (as such,
the "Surviving Corporation") and shall be a wholly owned subsidiary of
Parent.
<PAGE>
(b) At the Effective Time, the corporate existence of the Company
with all its rights, privileges, powers and franchises will continue
unaffected and unimpaired by the Merger. The Merger will have the effects
specified in the DGCL.
1.2 The Closing. The closing of the transactions contemplated by
-----------
this Agreement (the "Closing") will take place at the offices of Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, New York, New York, at 10:00 a.m.,
local time, within two business days following the date on which the last of
the conditions (excluding conditions that by their terms cannot be satisfied
until the Closing Date (as defined below)) set forth in Article 7 is
satisfied or waived in accordance herewith, or at such other place, time or
date as the parties may agree. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date".
1.3 Effective Time. On the Closing Date, Merger Sub and the
--------------
Company will cause a certificate of merger (the "Certificate of Merger"),
executed in accordance with the relevant provisions of the DGCL, to be filed
with the Secretary of State of the State of Delaware as provided in Section
251 of the DGCL. Upon completion of such filing, the Merger will become
effective in accordance with the DGCL. The time and date on which the Merger
becomes effective is herein referred to as the "Effective Time."
2. Certificate of Incorporation, By-laws, Directors
and Officers of the Surviving Corporation
2.1 Certificate of Incorporation and By-laws of Surviving
-----------------------------------------------------
Corporation. (a) The certificate of incorporation of the Surviving
-----------
Corporation to be in effect from and after the Effective Time until amended
in accordance with its terms and the DGCL will be the certificate of
incorporation of the Company immediately prior to the Effective Time, as
amended and restated in the form of Exhibit A.
(b) The by-laws of the Surviving Corporation to be in effect from
and after the Effective Time until amended in accordance with their terms and
the DGCL will be the by-laws of the Company immediately prior to the
Effective Time, as amended and restated in the form of Exhibit B.
2.2 Directors and Officers of Surviving Corporation. (a) The
-----------------------------------------------
members of the initial Board of Directors of the Surviving Corporation will
be the members of the Board of Directors of Merger Sub immediately prior to
the Effective Time, each of whom will serve on the Board of Directors of the
Surviving Corporation in accordance with the certificate of incorporation and
by-laws of the Surviving Corporation until his/her successor has been duly
elected or appointed and qualified or until his/her earlier death,
resignation or removal in accordance with the certificate of incorporation
and the by-laws of the Surviving Corporation.
(b) The officers of the Surviving Corporation as of the Effective
Time will be the officers of Merger Sub immediately prior to the Effective
Time. Each such
2
<PAGE>
person will continue in such office of the Surviving Corporation until
his/her successor has been duly elected or appointed and qualified or until
his/her earlier death, resignation or removal in accordance with the
certificate of incorporation and the by-laws of the Surviving Corporation.
3. Conversion of Securities
3.1 Conversion of Securities. (a) At the Effective Time, each
------------------------
share of Common Stock, par value $0.01 per share, of the Company (each a
"Company Common Share") issued and outstanding immediately prior to the
Effective Time (other than Company Common Shares owned by Parent or any
direct or indirect wholly owned Subsidiary (as defined below) of Parent or
any of the Company's direct or indirect wholly owned Subsidiaries, which
shall be cancelled) will, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into the right to receive a
number of shares of Common Stock, par value $0.01 per share, of Parent (the
"Parent Common Shares") equal to a fraction (the "Conversion Rate"), the
numerator of which will be 12 and the denominator of which will be the
Closing Market Price (as defined below) of one Parent Common Share; provided,
however, that (i) in the event the Closing Market Price of one Parent Common
Share is less than $43.54, the Conversion Rate shall be equal to 0.276 and
(ii) in the event the Closing Market Price of one Parent Common Share is
greater than $53.21, the Conversion Rate shall be equal to 0.225. For
purposes hereof, "Closing Market Price" shall mean, with respect to one
Parent Common Share, the average Closing Price for such a Parent Common Share
for the period of the 20 most recent trading days ending on the fifth
business day prior to the Closing Date. "Closing Price" shall mean, on any
date, the last reported sale price of one Parent Common Share on the Nasdaq
National Market (the "NASDAQ").
(b) All Company Common Shares to be converted into Parent Common
Shares pursuant to this Section 3.1 will by virtue of the Merger and without
any action on the part of the holders thereof, cease to be outstanding, be
cancelled and retired and cease to exist, and each holder of a certificate
previously representing any such Company Common Shares will thereafter cease
to have any rights with respect to such Company Common Shares, except the
right to receive for each of the Company Common Shares, upon the surrender of
such certificate in accordance with Section 3.2, the amount of Parent Common
Shares specified above and cash in lieu of fractional Parent Common Shares as
contemplated by Section 3.3 (collectively, the "Consideration").
(c) At the Effective Time, each Company Common Share issued and
outstanding and owned by any of Parent's direct or indirect wholly owned
Subsidiaries or any of the Company's direct or indirect wholly owned
Subsidiaries immediately prior to the Effective Time will, by virtue of the
Merger and without any action on the part of the holder thereof, cease to be
outstanding, be cancelled and retired without payment of any consideration
therefor and cease to exist.
(d) At the Effective Time, each share of common stock, par value
$0.01 per share, of Merger Sub issued and outstanding immediately prior to
the Effective Time will, by virtue of the Merger and without any action on
the part of Merger Sub or the holder
3
<PAGE>
thereof, be converted into one share of common stock, par value $0.01 per
share, of the Surviving Corporation, with the result that the Surviving
Corporation will be a wholly owned Subsidiary of Parent.
(e) Subject to the satisfaction of the obligations of the Company
with respect thereto in Schedule 7.3(f), at the Effective Time, each
outstanding option, whether exercisable or unexercisable, to purchase Company
Common Shares (each, an "Option") listed on Schedule 3.1(e) and each
outstanding Option issued in accordance with Section 6.2(f) will be assumed
by Parent and will constitute an option to acquire, on substantially the same
terms and conditions as were applicable under such Option immediately prior
to the Effective Time, a number of Parent Common Shares equal to the product
of the Conversion Rate and the number of Company Common Shares subject to
such Option immediately prior to the Effective Time, at a price per share
equal to the aggregate exercise price for the Company Common Shares subject
to such Option divided by the number of full Parent Common Shares deemed to
be purchasable pursuant to such Option, rounded to the nearest cent;
provided, however, that (i) subject to the provisions of clause (ii) below,
Parent will not issue any fractional Parent Common Share upon any exercise of
any Option and any right in respect thereof will, without further action, be
forfeited and (ii) in the case of any Option to which Section 421 of the Code
applies by reason of its qualification under Section 422 or Section 423 of
the Code, the option price, the number of shares purchasable pursuant to such
Option and the terms and conditions of exercise of such Option shall be
determined in order to comply with Section 424 of the Code. Notwithstanding
the foregoing, the Company will not take any actions to effect this Section
3.1(e) to the extent such actions would be inconsistent with accounting for
the Merger as a "pooling of interests." Schedule 3.1(e) is a true and
complete list of persons who have received options granted pursuant to
Company Stock Plans, the amounts of such grants and the grant prices thereof.
After the Effective Time, Parent will issue to each holder of an outstanding
Option a document evidencing the foregoing agreement and will promptly file
and keep effective a registration statement on Form S-8 or other applicable
form for the Parent Common Shares issued upon exercise of such Options.
(f) At or promptly following the Effective Time, unless the
Company Warrant (as defined below) is exercised, Parent will, and will cause
the Surviving Corporation to, execute an agreement providing that any holder
of a Company Warrant will have the right until the expiration date thereof to
exercise such Company Warrant for the number of Parent Common Shares
receivable pursuant to Section 3.1(a) by a holder of the number of Company
Common Shares for which such Company Warrant might have been exercised
immediately prior to the Effective Time upon the payment of the exercise
price and the other terms and conditions of such Company Warrants.
3.2 Payment for Company Common Shares. (a) At the Effective
---------------------------------
Time, Parent will make available to State Street Bank and Trust Company or
such other exchange agent as may be selected by Parent and reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the
holders of Company Common Shares, a sufficient number of certificates
representing Parent Common Shares required to effect the delivery of the
aggregate Consideration pursuant to Section 3.1(a) (the certificates
representing Parent Common Shares and any cash delivered to the Exchange
Agent pursuant to Section 3.3
4
<PAGE>
comprising such aggregate Consideration being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent will, pursuant to irrevocable
instructions, deliver the Parent Common Shares contemplated to be issued
pursuant to Section 3.1(a) out of the Exchange Fund, and, except as provided
in Section 3.3, the Exchange Fund will not be used for any other purpose.
(b) Promptly after the Effective Time, the Exchange Agent will
mail to each holder of record (other than holders of certificates for Company
Common Shares referred to in Section 3.1(c)) of a certificate or certificates
which immediately prior to the Effective Time represented outstanding Company
Common Shares (the "Certificates") (i) a form of letter of transmittal (which
will specify that delivery will be effected, and risk of loss and title to
the Certificates will pass, only upon proper delivery of the Certificates to
the Exchange Agent) and (ii) instructions for use in effecting the surrender
of the Certificates for payment therefor. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of transmittal
duly executed and any other required documents, the holder of such
Certificates will be entitled to receive for each of the Company Common
Shares represented by such Certificates the Consideration and the
Certificates so surrendered will promptly be cancelled. Until so
surrendered, Certificates will represent solely the right to receive the
Consideration. No dividends or other distributions that are declared after
the Effective Time on Parent Common Shares and payable to the holders of
record thereof after the Effective Time will be paid to persons entitled by
reason of the Merger to receive Parent Common Shares until such persons
surrender their Certificates. Upon such surrender, there will be paid to the
person in whose name the Parent Common Shares are issued any such dividends
or other distributions, with a record date after the Effective Time but prior
to the time of such surrender, previously paid to the holders of Parent
Common Shares, and any such dividends or distributions not previously paid to
the holders of Parent Common Shares shall be paid to the person in whose name
the Parent Common Shares are issued on the appropriate payment date. In no
event will the persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions. If any cash or certificate representing Parent Common Shares
is to be paid to or issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of
such exchange that the Certificate so surrendered be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such Parent Common Shares in a
name other than that of the registered holder of the Certificate surrendered,
or establish to the satisfaction of the Exchange Agent that such tax has been
paid or is not applicable. The Exchange Agent will not be entitled to vote
or exercise any rights of ownership with respect to such Parent Common Shares
for the account of the persons entitled thereto.
(c) Any portion of the Exchange Fund or the cash made available to
the Exchange Agent pursuant to Section 3.3 which remains unclaimed by the
former stockholders of the Company for 180 days after the Effective Time will
be delivered to Parent and any former stockholders of the Company will
thereafter look only to Parent for payment of their claim for the
Consideration for the Company Common Shares.
5
<PAGE>
(d) Neither Parent, Merger Sub, the Surviving Company nor the
Exchange Agent shall be liable to any holder of Company Common Shares for
such shares (or dividends or distributions with respect thereto) or cash from
the Exchange Fund (or from Parent after the Exchange Fund has terminated)
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. At such time as any amounts remaining unclaimed by
holders of any such shares would otherwise escheat to or become property of
any Governmental Entity (as defined below), such amounts shall, to the extent
permitted by applicable law, become the property of Parent free and clear of
any claims or interest of any such holders or their successors, assigns or
personal representatives previously entitled thereto.
(e) The Exchange Agent shall invest any cash included in the
Exchange Fund, as directed by Parent, on a daily basis. Any interest and
other income resulting from such investments shall be paid to Parent.
(f) Certificates surrendered for exchange by any affiliate of the
Company within the meaning of Rule 145 of the rules and regulations
promulgated by the Securities Act (each such person, an "Affiliate") shall
not be exchanged for certificates representing Parent Common Shares until
Parent has received an Affiliate Letter from such Affiliate as provided in
Section 6.11.
3.3 Fractional Shares. No fractional Parent Common Shares will be
-----------------
issued in the Merger. In lieu of any such fractional securities, each holder
of Company Common Shares who would otherwise have been entitled to a fraction
of a Parent Common Share upon surrender of Certificates for exchange pursuant
to this Article 3 will be paid an amount in cash (without interest), rounded
to the nearest cent, determined by multiplying (a) the per share Closing
Price on the NASDAQ of Parent Common Shares on the date of the Effective Time
(or, if Parent Common Shares do not trade on the NASDAQ on such date, the
first date of trading of Parent Common Shares on the NASDAQ after the
Effective Time) by (b) the fractional interest to which such holder otherwise
would be entitled. Promptly upon request from the Exchange Agent, Parent
will make available to the Exchange Agent the cash necessary for this
purpose.
3.4 No Transfer after the Effective Time. No transfers of Company
------------------------------------
Common Shares will be made on the stock transfer books of the Company after
the close of business on the day prior to the date of the Effective Time.
4. Representations and Warranties of the Company
The Company hereby represents and warrants to each of the Merger
Sub and Parent as follows:
4.1 Existence; Good Standing; Corporate Authority. The Company is
---------------------------------------------
a corporation duly incorporated, validly existing and in good standing under
the laws of Delaware. The Company is duly licensed or qualified to do
business as a foreign corporation and is in good standing under the laws of
any other state of the United States in which the
6
<PAGE>
character of the properties owned or leased by it or in which the transaction
of its business makes such qualification necessary, except where the failure
to be so qualified or to be in good standing would not have a material
adverse effect on the business, assets, results of operations or financial
condition of the Company and its Subsidiaries (as defined below) taken as a
whole (a "Company Material Adverse Effect"). The Company has all requisite
corporate power and authority to own, operate and lease its properties and
carry on its business as now conducted. Each of the Company's Subsidiaries
is a corporation or partnership duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has the corporate or partnership power and authority to own its properties
and to carry on its business as it is now being conducted, and is duly
qualified to do business and is in good standing in each jurisdiction in
which the ownership of its property or the conduct of its business requires
such qualification, except for jurisdictions in which such failure to be so
qualified or to be in good standing would not have a Company Material Adverse
Effect. The copies of the Company's certificate of incorporation and by-laws
previously made available to Parent are true and correct. As used in this
Agreement, the word "Subsidiary" when used with respect to any party means
any corporation or other organization, whether incorporated or
unincorporated, of which such party directly or indirectly owns or controls
at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the board of directors or
others performing similar functions.
4.2 Authorization, Validity and Effect of Agreement. The Company
-----------------------------------------------
has the requisite corporate power and authority to execute and deliver this
Agreement and all agreements and documents contemplated hereby to be executed
and delivered by it, and, subject to receipt of necessary stockholder
approval, to consummate the transactions contemplated hereby and thereby.
Subject only to the approval of this Agreement, the Merger and the
transactions contemplated hereby by the holders of a majority of the
outstanding Company Common Shares, this Agreement, the Merger and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all requisite corporate action. This Agreement has been
duly and validly executed by the Company and constitutes, and all agreements
and documents contemplated hereby to be executed and delivered by the Company
(when executed and delivered pursuant hereto) will constitute, the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally and (ii) the availability of
injunctive relief and other equitable remedies.
4.3 Capitalization. The authorized capital stock of the Company
--------------
consists of 30,000,000 Company Common Shares and 2,000,000 shares of
preferred stock, par value $0.01 per share (the "Company Preferred Shares").
As of November 29, 1995, (a) 10,578,873 Company Common Shares were issued and
outstanding, all of which are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights, and 175,000 shares were held in
the Company's treasury, (b) no Company Preferred Shares were outstanding or
held in the Company's treasury, (c) no Company Common Shares or Company
Preferred Shares were held by Subsidiaries of the Company, (d) 1,545,811
Company Common Shares were reserved for future issuance pursuant to
outstanding stock options granted under the Company's stock option plans
described on Schedule 4.11(a) (the
7
<PAGE>
"Company Stock Plans") and 163,390 shares were reserved for future grants
under such plans, and (e) 175,000 Company Common Shares were reserved for
future issuance upon conversion of the Company Warrants. Except as set forth
in this Section 4.3, there are no outstanding options, warrants, calls,
subscriptions, bonds, debentures, notes or other obligations the holders of
which have the right to vote or which are convertible into or exercisable for
securities having the right to vote with the stockholders of the Company on
any matter. Since such date, (i) no additional shares of capital stock of
the Company have been issued, except pursuant to the Company Stock Plans or
pursuant to the exercise of options thereunder and (ii) no options, warrants
or other rights to subscribe for, securities or rights convertible into or
exchangeable for, or contracts, commitments or arrangements by which the
Company is or may be required to issue or sell additional shares of the
Company's capital stock (collectively, "Company Equity Rights") have been
granted.
4.4 Subsidiaries. Schedule 4.4 sets forth a complete and accurate
------------
list of the Subsidiaries of the Company and indicates for each such
Subsidiary the jurisdiction of incorporation or organization. The Company
owns, directly or indirectly, each of the outstanding shares of capital stock
(or other ownership interests having by their terms ordinary voting power to
elect a majority of directors or others performing similar functions with
respect to such Subsidiary) of each of the Company's Subsidiaries (except for
directors' qualifying shares). No equity securities of any of the Company's
Subsidiaries may be required to be issued (other than to the Company or
another of the Company's Subsidiaries) by reason of any Company Equity Rights
for shares of the capital stock of any of the Company's Subsidiaries. There
are no contracts, commitments, understandings or arrangements by which the
Company or any of the its Subsidiaries is or may be obligated to transfer any
shares of the capital stock of any of the Company's Subsidiaries. Each of
the outstanding shares of capital stock of each of the Company's Subsidiaries
is duly authorized, validly issued, fully paid and nonassessable, and is
owned, directly or indirectly, by the Company (except for directors'
qualifying shares) free and clear of all liens, pledges, security interests,
claims or other encumbrances other than liens imposed by local or foreign law
which are not material. The following information for each of the Company's
Subsidiaries has been previously provided to Parent, if applicable: (i) its
name and jurisdiction of incorporation or organization; (ii) its authorized
capital stock or share capital; and (iii) the number of issued and
outstanding shares of capital stock or share capital.
4.5 Other Interests. Except for interests in the Company's
---------------
Subsidiaries, neither the Company nor any of the Company's Subsidiaries owns,
directly or indirectly, any interest or investment (whether equity or debt)
in any corporation, partnership, joint venture, business, trust or entity
(other than (a) non-controlling investments in the ordinary course of
business and corporate partnering, development, cooperative marketing and
similar undertakings and arrangements entered into in the ordinary course of
business and (b) other investments of less than $1,000,000 in the aggregate).
4.6 No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by the Company do not, and the
consummation by the Company of the transactions contemplated hereby will not,
(i) conflict with or violate the certificate of incorporation or by-laws or
equivalent organizational documents of the Company or any of its
Subsidiaries, (ii) subject to making the filings and obtaining the approvals
identified in
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Section 4.6(b), conflict with or violate any law, rule, regulation, order,
judgment or decree (whether United States or foreign) applicable to the
Company or any of its Subsidiaries or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected, or (iii) subject to
making the filings, obtaining the approvals and effecting any other matters
identified in Schedule 4.6(a), result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become
a default) under, result in the loss of a material benefit under, or give to
others any right of purchase or sale, or any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the
Company or any of its Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any property or
asset of the Company or any of its Subsidiaries is bound or affected, except,
in the case of clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences which would not prevent or delay
consummation of any of the transactions contemplated hereby in any material
respect, or otherwise prevent the Company from performing its obligations
under this Agreement in any material respect, and would not, individually or
in the aggregate, have a Company Material Adverse Effect.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement and the consummation by the
Company of the transactions contemplated hereby will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign (each a
"Governmental Entity") by either the Company or any of its Subsidiaries,
except (i) for (A) applicable requirements, if any, of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Securities Act of
1933, as amended (the "Securities Act"), and state securities or "blue sky"
laws ("Blue Sky Laws"), (B) the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR Act") and required approvals and
consents of other Governmental Entities (whether domestic or foreign) and the
rules and regulations thereunder, (C) the filing of the Certificate of Merger
pursuant to the DGCL, (D) filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval, triggered by the Merger or the
other transactions contemplated by this Agreement, and (E) applicable
requirements, if any, of the Code, and state, local and foreign tax laws, and
(ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent the
Company from performing its obligations under this Agreement in any material
respect, and would not, individually or in the aggregate, have a Company
Material Adverse Effect.
(c) The affirmative vote of the holders of a majority of the
outstanding Company Common Shares is the only vote of the holders of any
class or series of capital stock of the Company necessary to approve this
Agreement and the transactions contemplated hereby on behalf of the Company.
4.7 Compliance. Except as set forth in Schedule 4.7, neither the
----------
Company nor any of its Subsidiaries is in conflict with, or in default or
violation of, (a) any law, rule,
9
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regulation, order, judgment or decree (whether United States or foreign)
applicable to the Company or any of its Subsidiaries or by which any property
or asset of the Company or any of its Subsidiaries is bound or affected or
(b) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any property or asset of the Company or any of its
Subsidiaries is bound or affected, in each case except for such conflicts,
defaults or violations that would not, individually or in the aggregate, have
a Company Material Adverse Effect. The Company and its Subsidiaries have
obtained all licenses, permits and other authorizations and have taken all
actions required by applicable law or government regulations in connection
with their business as now conducted, except where the failure to obtain any
such item or to take any such action would not, individually or in the
aggregate, have a Company Material Adverse Effect. Neither the Company nor
any of its Subsidiaries has received any notification or communication from
any Governmental Entity threatening to revoke any license, franchise, permit
or authorization of any Governmental Entity, which revocation would have a
Company Material Adverse Effect.
4.8 SEC Documents and Financial Statements. (a) Attached to
--------------------------------------
Schedule 4.8 are (i) all comment, inquiry or similar type letters received by
the Company and/or its Subsidiaries from any federal and/or state securities
regulatory authorities and any written communication by the Company and/or
its Subsidiaries in response and (ii) all no-action requests or similar
inquiries sent by the Company and/or its Subsidiaries to such authorities and
any written communication received in response, in each case since July 1,
1992. The Company has filed all forms, reports and documents required to be
filed by it with the Securities and Exchange Commission (the "SEC") since
January 1, 1990 (collectively, the "Company Reports"). As of their
respective dates, the Company Reports and any such reports, forms and other
documents filed by the Company with the SEC after the date of this Agreement
(x) complied, or will comply, as to form in all material respects with the
applicable requirements of the Securities Act, the Exchange Act and the rules
and regulations thereunder and (y) did not, or will not, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. The
representation in clause (y) of the preceding sentence does not apply to any
misstatement or omission in any Company Report filed prior to the date of
this Agreement which was superseded by a subsequent Company Report filed
prior to the date of this Agreement. No Subsidiary of the Company is
required to file any report, form or other document with the SEC.
(b) Each of the consolidated balance sheets of the Company
included in or incorporated by reference into the Company Reports (including
the related notes and schedules) presents fairly, in all material respects,
the consolidated financial position of the Company and its Subsidiaries as of
its date, and each of the consolidated statements of income, stockholders'
equity and cash flows of the Company included in or incorporated by reference
into the Company Reports (including any related notes and schedules) presents
fairly, in all material respects, the results of operations, stockholders
equity or cash flows, as the case may be, of the Company and its Subsidiaries
for the periods set forth therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments which
10
<PAGE>
would not be material in amount or effect), in each case in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as may be noted therein.
(c) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) that would be required to be reflected on, or
reserved against in, a balance sheet of the Company or in the notes thereto,
prepared in accordance with generally accepted accounting principles
consistently applied, except for (i) liabilities or obligations that were so
reserved on, or reflected in (including the notes to), the consolidated
balance sheet of the Company as of July 29, 1995, (ii) liabilities or
obligations arising in the ordinary course of business since July 29, 1995,
and (iii) liabilities or obligations which would not, individually or in the
aggregate, have a Company Material Adverse Effect.
(d) The Company has previously furnished to Parent all accounting
management letters and audit response letters for the Company or its
Subsidiaries since January 1, 1992.
4.9 Absence of Certain Changes. Except as described in the
--------------------------
Company Reports, since July 29, 1995, there has not been (a) any Company
Material Adverse Effect, (b) any declaration, setting aside or payment of any
dividend of other distribution with respect to its capital stock, or (c) any
material change in its accounting principles, practices or methods.
4.10 Litigation. Except as set forth in Schedule 4.10, there are
----------
no actions, suits or proceedings pending against the Company or any of its
Subsidiaries or, to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, or against any property, asset, interest
or right of any of them, at law or in equity, or before or by any
Governmental Entity, that, individually or in the aggregate, are likely to
have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is subject to any judgment, order, writ, injunction or decree
that would have a Company Material Adverse Effect.
4.11 Employee Benefit Plans; Employment Agreements. (a) Schedule
---------------------------------------------
4.11(a) sets forth a true and complete list of all the following: (i) each
"employee benefit plan," as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974 ("ERISA"), pursuant to which
the Company or any of its Subsidiaries has (A) any material liability with
respect to current or former employees, agents, directors, or independent
contractors of the Company or its Subsidiaries ("Company Employees") or (B)
any obligation to issue capital stock of the Company or any of its
Subsidiaries (each, a "Company Employee Plan"), and (ii) each other foreign
or domestic plan, program, policy, contract, arrangement or scheme providing
for bonuses, pensions, deferred pay, stock or stock related awards, severance
pay, salary continuation or similar benefits, hospitalization, medical,
dental or disability benefits, life insurance or other employee benefits, or
compensation to or for any Company Employees or any beneficiaries or
dependents of any Company Employees (other than directors' and officers'
liability policies), whether or not insured or funded, (A) pursuant to which
the Company or any of its Subsidiaries has any
11
<PAGE>
material liability or (B) constituting an employment, severance or
termination agreement or arrangement with any officer or director of the
Company or any Subsidiary (each, a "Company Benefit Arrangement"). The
Company has provided to Parent with respect to each Company Employee Plan and
Company Benefit Arrangement: (i) a true and complete copy of all written
documents comprising such Company Employee Plan or Company Benefit
Arrangement (including amendments and forms of individual agreements relating
thereto) or, if there is no such written document, an accurate and complete
description of such Company Employee Plan or Company Benefit Arrangement;
(ii) the most recent Form 5500 or Form 5500-C (including all schedules
thereto), if applicable; (iii) the most recent financial statements and
actuarial reports, if any; (iv) the summary plan description currently in
effect and all material modifications thereof, if any; and (v) the most
recent Internal Revenue Service determination letter, if any.
(b) Each Company Employee Plan and Company Benefit Arrangement has
been established and maintained in all material respects in accordance with
its terms and all applicable laws, including, but not limited to, ERISA and
the Code. Neither the Company nor any of its Subsidiaries nor any of their
respective current or former directors, officers, or employees, nor, to the
knowledge of the Company, any other disqualified person or party-in-interest
with respect to any Company Employee Plan, have engaged directly or
indirectly in any "prohibited transaction," as such term is defined in
section 4975 of the Code or section 406 of ERISA, with respect to which the
Company or any of its Subsidiaries could have or has any material liability.
All contributions required to be made to the Company Employee Plans and
Company Benefit Arrangements have been made in a timely fashion. Each
Company Employee Plan that is intended to be qualified under section 401(a)
of the Code is so qualified, and each related trust is exempt from taxation
under section 501(a) of the Code.
(c) With respect to each Company Employee Plan that is subject to
Title IV of ERISA: (i) as of the last applicable valuation date, the present
value of all benefit liabilities under such Company Employee Plan exceeded
the value of the assets of such Company Employee Plan allocable to such
benefit liabilities using the actuarial methods, factors and assumptions used
for the most recent actuarial report with respect to such Company Employee
Plan; and (ii) there has been no termination, partial termination or
"reportable event" (as defined in section 4043 of ERISA) with respect to any
such Company Employee Plan. No Company Employee Plan that is subject to
section 412 of the Code has incurred any "accumulated funding deficiency" (as
defined in section 412 of the Code), whether or not waived.
(d) No Company Employee Plan is a "multiemployer plan" as that
term is defined in section 3(37) of ERISA or a "multiple employer plan"
described in section 4063(a) of ERISA, and neither the Company nor any ERISA
Affiliate of the Company has at any time contributed to or been obligated to
contribute to such a multiemployer plan or multiple employer plan.
(e) Except with respect to a Company Employee Plan, neither the
Company nor any ERISA Affiliate of the Company has any Controlled Group
Liability, nor do any circumstances exist that could result in any of them
having any Controlled Group Liability. "Controlled Group Liability" means
any and all liabilities under (i) Title IV of
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ERISA, (ii) section 302 of ERISA, (iii) sections 412 and 4971 of the Code and
(iv) the continuation coverage requirements of section 601 et seq. of ERISA
and section 4980B of the Code.
(f) Except as set forth in Schedule 4.11(f), neither the execution
nor delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, constitutes an event under any Company Employee Plan,
Company Benefit Arrangement, loan to, or individual agreement or contract
with, a Company Employee that will result in any payment (whether of
severance pay or otherwise), restriction or limitation upon the assets of any
Company Employee Plan or Company Benefit Arrangement, acceleration of payment
or vesting, increase in benefits or compensation, or required funding, with
respect to any Company Employee, or the forgiveness of any loan or other
commitment of any Company Employee.
(g) There are no actions, suits, arbitrations, inquiries,
investigations or other proceedings (other than routine claims for benefits)
pending or, to the Company's knowledge, threatened with respect to any
Company Employee Plan or Company Benefit Arrangement.
(h) No amounts paid or payable by the Company or any Subsidiary to
or with respect to any Company Employee as a result of or in connection with
the transactions contemplated hereby will fail to be deductible for federal
income tax purposes by reason of section 280G of the Code.
(i) No employees and no beneficiaries or dependents of the Company
Employees are or may become entitled under any Company Employee Plan or
Company Benefit Arrangement to post-employment welfare benefits of any kind,
including without limitation death or medical benefits, other than coverage
mandated by section 4980B of the Code.
4.12 Labor Matters. Except as set forth in Schedule 4.12 or the
-------------
Company Reports as of the date hereof, (i) there are no controversies pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened,
between the Company or any of its Subsidiaries and any of their respective
employees, which controversies have or could reasonably be expected to have a
Company Material Adverse Effect; (ii) neither the Company nor any of its
Subsidiaries is a party to any material collective bargaining agreement or
other labor union contract applicable to persons employed by the Company or
its Subsidiaries, nor does the Company or any of its Subsidiaries know of any
activities or proceedings of any labor union to organize any such employees;
and (iii) neither the Company nor any of its Subsidiaries has any knowledge
of any strikes, slowdowns, work stoppages, lockouts, or threats thereof, by
or with respect to any employees of the Company or any of its Subsidiaries
which could reasonably be expected to have a Company Material Adverse Effect.
4.13 Registration Statement. None of the information supplied or
----------------------
to be supplied by the Company for inclusion in the Form S-4 (as defined
below) or the Proxy Statement/Prospectus (as defined below) shall, at the
respective times such documents are
13
<PAGE>
filed with the SEC, and, in the case of the Registration Statement, when it
becomes effective, and, in the case of the Proxy Statement/Prospectus, when
it is first mailed to the stockholders of the Company and at the time of the
Stockholders' Meeting (as defined below), be false or misleading with respect
to any material fact, or omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances under which
they are made, not misleading. All documents that the Company is responsible
for filing with the SEC or any other Governmental Entity in connection with
the transactions contemplated hereby shall comply as to form in all material
respects with the provisions of applicable law and the applicable rules and
regulations thereunder.
4.14 Properties. Except as disclosed or reserved against in the
----------
most recent financial statements contained in the Company Reports, the
Company and each of its Subsidiaries have good and marketable title to all of
the properties and assets, tangible or intangible, reflected in such
financial statements as being owned by the Company and each of its
Subsidiaries as of the dates thereof, free and clear of all liens,
encumbrances, charges, defaults or equities of whatever character except such
imperfections or irregularities of title, liens, encumbrances, charges or
defaults that do not affect the use thereof in any material respect and
statutory liens securing payments not yet due ("Liens"). All leased
buildings and all leased fixtures, equipment and other property and assets
that are material to the Company's business on a consolidated basis are held
under leases or subleases that are valid and binding instruments enforceable
in accordance with their respective terms, and there is not, to the knowledge
of the Company, under any of such leases, any existing material default or
event of default (or event which with notice or lapse of time, or both, would
constitute a material default), except where the lack of such validity and
binding nature or the existence of such default or event of default would not
have a Company Material Adverse Effect.
4.15 Taxes. (a) The Company and each of its Subsidiaries has
-----
filed all tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, and all tax returns and reports are complete and
accurate in all respects, except to the extent that such failures to file or
be complete and accurate in all respects, as applicable, individually or in
the aggregate, would not have a Company Material Adverse Effect. The Company
and each of its Subsidiaries has paid (or the Company has paid on its behalf)
or made provision for all taxes shown as due on such tax returns and reports.
No claim has been made since January 1, 1991 by an authority in a
jurisdiction where the Company or any of its Subsidiaries does not file tax
returns that it is or may be subject to taxation by that jurisdiction. The
most recent financial statements contained in the Company Reports reflect
adequate reserves for all taxes payable by the Company and its Subsidiaries
for all taxable periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have been proposed,
asserted or assessed against the Company or any of its Subsidiaries that are
not adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a Company Material Adverse Effect. There are no liens for
taxes (other than for current taxes not yet due and payable) on the assets of
the Company or its Subsidiaries. No requests for waivers of the time to
assess any taxes against the Company or any of its Subsidiaries have been
granted or are pending, except for requests with respect to such taxes that
have been adequately
14
<PAGE>
reserved for in the most recent financial statements contained in the Company
Reports, or, to the extent not adequately reserved, the assessment of which
would not, individually or in the aggregate, have a Company Material Adverse
Effect. Neither the Company nor any of its Subsidiaries is a party to or
bound by any agreement providing for the allocation or sharing of taxes.
Neither the Company nor any of its Subsidiaries has filed a consent pursuant
to or agreed to the application of Section 341(f) of the Code. Each of the
Company and its Subsidiaries has disclosed on its federal income tax returns
all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of Section 6662 of
the Code. All taxes that are required by the laws of the United States, any
state or political subdivision thereof, or any foreign country to be withheld
or collected by the Company or any of its Subsidiaries have been duly
withheld or collected and, to the extent required, have been paid to the
proper governmental authorities or properly deposited as required by
applicable laws. None of the Company and its Subsidiaries (i) has been a
member of an affiliated group filing a consolidated federal income tax return
(other than a group the common parent of which was the Company), or (ii) has
any liability for the taxes of any person (other than any of the Company and
its Subsidiaries) under Treas. Reg. Sec. 1.1502-6 (or any similar provision of
state, local, or foreign law), as a transferee or successor, by contract or
otherwise. For purposes of this Agreement, the term tax (including, with
correlative meaning, the terms "taxes" and "taxable") shall include all
federal, state, local, and foreign income, profits, franchise, gross
receipts, payroll, sales, employment, use, property, withholding, excise, and
other taxes, duties, or assessments of any nature whatsoever, together with
all interest, penalties, and additions imposed with respect to such amounts.
(b) Schedule 4.15(b) sets forth each state in which the Company
and its Subsidiaries have collected or remitted any sales and/or use taxes
since January 1, 1991. To the Company's knowledge, neither the Company nor
any of its Subsidiaries has conducted activities in any other state that
would require such taxes to be collected or remitted. No claim has ever been
made since January 1, 1991 by an authority in a jurisdiction where the
Company or any of its Subsidiaries does not pay sales and/or use taxes that
it is or may be subject to a requirement to remit such taxes in that
jurisdiction.
(c) The consummation of the Merger and the other transactions
contemplated hereby will not result in any taxes being imposed by any state
of the United States on the stockholders of the Company as a result of the
ownership by the Company or any of its Subsidiaries of any interest in real
property.
(d) None of the Company, its predecessors or, to the knowledge of
the Company, any of its Affiliates or stockholders has taken or agreed to
take any action that would prevent the Merger from being effected as a
"pooling of interests" or would prevent the Merger from constituting a
transaction qualifying as a tax-free reorganization under Section 368(a) of
the Code.
4.16 Environmental Matters. Except as set forth in Schedule 4.16
---------------------
or the Company Reports, and except in all cases as, in the aggregate have not
had and could not reasonably be expected to have a Company Material Adverse
Effect, the Company and each of its Subsidiaries to the Company's knowledge
(i) have obtained all applicable permits,
15
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licenses and other authorization which are required to be obtained under all
applicable federal, state, local or foreign laws or any regulation, code,
plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder ("Environmental Laws") relating to
pollution or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, or hazardous or toxic materials or wastes into ambient air,
surface water, ground water, or land or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants or hazardous or toxic
materials or wastes by the Company or its Subsidiaries (or their respective
agents); (ii) are in compliance with all terms and conditions of such
required permits, licenses and authorization, and also are in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in applicable
Environmental Laws; (iii) as of the date hereof, are not aware of nor have
received notice of any past or present violations of Environmental Laws, or
any event, condition, circumstance, activity, practice, incident, action or
plan which is reasonably likely to interfere with or prevent continued
compliance with or which would give rise to any common law or statutory
liability, or otherwise form the basis of any claim, action, suit or
proceeding, against the Company or any of its Subsidiaries based on or
resulting from the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling, or the emission, discharge or
release into the environment, of any pollutant, contaminant or hazardous or
toxic material or waste; and (iv) have taken all actions necessary under
applicable Environmental Laws to register any products or materials required
to be registered by the Company or its Subsidiaries (or any of their
respective agents) thereunder.
4.17 Intellectual Property. (a) Schedule 4.17 sets forth an
---------------------
accurate and complete list of all material (i) patents, patent applications,
patent rights, trademarks (registered and unregistered), trademark
applications, trade names (registered and unregistered), service marks
(registered and unregistered), service mark applications, and computer
programs, that are owned by the Company or any of its Subsidiaries, (ii)
unexpired licenses relating to the Company Intellectual Property Rights (as
defined below) that have been granted to or by the Company or any of its
Subsidiaries and (iii) other agreements relating to Intellectual Property
Rights necessary for the conduct of the business of the Company and its
Subsidiaries, together with a complete listing of all liens, security
interests, claims and rights to use of third parties with respect to each
listed item of Intellectual Property Rights.
(b) The Company and its Subsidiaries collectively own or have the
right to use all of the Company Intellectual Property Rights that are in the
aggregate material to the conduct of the business of the Company and its
Subsidiaries. Such ownership or right to use are free and clear of all
liens, security interests, claims and rights to use of third parties that
would in the aggregate be material to the business of the Company and its
Subsidiaries.
(c) The Company has taken steps sufficient to safeguard and
maintain the secrecy and confidentiality of, or the Company's proprietary
rights in, all of the unpatented know how, technology, proprietary processes,
formulae and other information owned by the Company or any of its
Subsidiaries, except for such items as are not, in the aggregate material to
the conduct of the business of the Company and its Subsidiaries. Without
16
<PAGE>
limiting the generality of the foregoing, the Company and its Subsidiaries
have obtained confidentiality and invention assignment agreements from
substantially all past and present employees and independent contractors
involved in the creation or development of the Company Intellectual Property
Rights.
(d) Except for licenses listed in Schedule 4.17 as royalty
bearing, there are no royalties, honoraria, fees or other payments payable by
the Company or any of its Subsidiaries to any person by reason of the
ownership, use, license, sale or disposition of any of the Company
Intellectual Property Rights.
(e) Neither the Company nor, to the Company's knowledge, any of
its Subsidiaries (i) is infringing or misappropriating the right or claimed
right of any other party with respect to any Intellectual Property Rights or
(ii) has knowledge of any alleged or claimed infringement or misappropriation
of any third party Intellectual Property Right by any product or process
manufactured, used, sold or under development by or for the Company or its
Subsidiaries that in the case of (i) or (ii), if proven, would be reasonably
likely to have a Company Material Adverse Effect.
(f) No independent contractor who has performed services for the
Company or any of its Subsidiaries has any right, title or interest in the
Company Intellectual Property Rights that is reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect.
(g) The execution, delivery and performance of this Agreement by
the Company, and the consummation by the Company of the transactions
contemplated hereby will not breach, violate or conflict with any agreement
governing the Company Intellectual Property Rights, and will not cause the
forfeiture or termination of, give rise to a right of forfeiture or
termination of, or impair the right of the Company or any of its Subsidiaries
to use, sell, license or dispose of, any such Company Intellectual Property
Right, which breach, violation, conflict, forfeiture, termination or
impairment would result in a Company Material Adverse Effect.
(h) For purposes of this Agreement, "use," with respect to
Intellectual Property Rights, includes make, reproduce, display or perform
(publicly or otherwise), prepare derivative works based on, sell, distribute,
disclose and otherwise exploit such Intellectual Property Rights and products
incorporating or subject to such Intellectual Property Rights.
(i) As used in this Agreement, the term "Intellectual Property
Rights" means intellectual property rights, including patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
service marks, service mark applications, copyrights, copyright applications,
publication rights, computer programs and other computer software (including
source codes and object codes), inventions, know how, trade secrets,
technology, proprietary processes and formulae. The term "Company
Intellectual Property Rights" means all Intellectual Property Rights that are
used, have been used, or are intended to be used in, or relate to, the
conduct of any business by the Company or any of its Subsidiaries.
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4.18 Insurance. Schedule 4.18 sets forth all policies of insurance
---------
of the Company and all material policies of insurance of its Subsidiaries and
fidelity or surety bonds insuring the Company or any of its Subsidiaries or
their respective businesses, assets, employees, officers and directors. All
policies of insurance and fidelity or surety bonds listed on Schedule 4.18
are in full force and effect. Except as described in Schedule 4.18, as of
the date hereof, there are no claims by the Company or any of its
Subsidiaries under any such policy or instrument as to which any insurance
company is denying liability or defending under a reservation of rights
clause. The life insurance policy on Kenneth A. Eldred with American Life
Insurance Company can be terminated by the Company on any anniversary date
thereof.
4.19 Product Warranties and Liabilities. (a) Except as set forth
----------------------------------
in Schedule 4.19(a), neither the Company nor any of its Subsidiaries has any
material forms of warranties or guarantees of its products and services that
are in effect or proposed to be used by it. Schedule 4.19(a) sets forth (i)
the form of warranty for each product or category of product manufactured by
the Company and (ii) a description of each pending or, to the knowledge of
the Company, threatened material action, suit, investigation or proceeding
under any warranty or guaranty against the Company or any of its
Subsidiaries. Except as set forth in Schedule 4.19(a), neither the Company
nor any of its Subsidiaries has incurred, nor does the Company know of any
basis for alleging, any material liability, damage, loss, cost or expense as
a result of any defect or other deficiency (whether of design, materials,
workmanship, labeling instructions or otherwise) ("Product Liability") with
respect to any product sold or services rendered by or on behalf of the
Company or any of its Subsidiaries, whether such Product Liability is
incurred by reason of any express warranty (including, without limitation,
any warranty of merchantability or fitness), any doctrine of common law
(tort, contract or other), any statutory provision, any foreign law or
otherwise and irrespective of whether such Product Liability is covered by
insurance, which Product Liability would have a Company Material Adverse
Effect.
(b) There is no pending or, to the knowledge of the Company,
threatened recall or investigation of any product sold by the Company or any
of its Subsidiaries, which recall or investigation would have a Company
Material Adverse Effect.
(c) Attached to Schedule 4.19(c) are (i) all requests for
information, inquiry or similar type letters received by the Company and/or
its Subsidiaries from any federal, state and/or foreign trade regulatory
authorities (including without limitation the Federal Trade Commission (the
"FTC") and the Federal Communications Commission (the "FCC")), and any
written communication by the Company and/or its Subsidiaries in response and
(ii) all inquiries sent by the Company and/or its Subsidiaries to such
authorities and any written communication received in response, in each case
of (i) and (ii) since January 1, 1991. The Company has obtained all
necessary approvals and licenses, and is in compliance with all rules,
regulations and promulgations of any Government Entity (including without
limitation the FTC or FCC), relating to the manufacture, production or
provision of goods and services meant for sale or distribution, except where
the failure to have such approvals or be in compliance would not result in a
Company Material Adverse Effect.
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4.20 Accounts Receivable. The accounts receivable of the Company
-------------------
and its Subsidiaries as reflected in the most recent financial statements
contained in the Company Reports, to the extent uncollected on the date
hereof, and the accounts receivable reflected on the books of the Company and
its Subsidiaries are valid and existing and represent monies due, and the
Company has made adequate reserves for receivables not collectible in the
ordinary course of business (subject to year-end adjustments in the ordinary
course), and (subject to the aforesaid reserves) are subject to no refunds or
other adjustments and to no defenses, rights of setoff, assignments,
restrictions, encumbrances or conditions enforceable by third parties on or
affecting any thereof, except for such refunds, adjustments, defenses, rights
of setoff, assignments, restrictions, encumbrances or conditions that would
not have a Company Material Adverse Effect.
4.21 Inventory. The inventories of the Company and its
---------
Subsidiaries as reflected in the most recent financial statements contained
in the Company Reports, or acquired by the Company or any of its Subsidiaries
after the date thereof, (i) are carried at an amount not in excess of the
lower of cost or net realizable value, and (ii) do not include any inventory
which is obsolete, surplus or not usable or saleable in the lawful and
ordinary course of business of the Company and its Subsidiaries as heretofore
conducted, in each case net of reserves provided therefor.
4.22 Material Contracts. (a) Except (i) as set forth in the
------------------
Company Reports (including the exhibits thereto) filed prior to the date of
this Agreement, (ii) as set forth in Schedule 4.22(a), and (iii) for this
Agreement and other agreements that are not material to the Company's
business, as of the date of this Agreement neither the Company nor any of its
Subsidiaries is a party to any oral or written (A) consulting agreement, (B)
joint venture, (C) noncompetition or similar agreement that restricts the
Company or its Subsidiaries from engaging in a line of business, (D) supply
or operating contract, and (E) agreement or other arrangement of or involving
the Company or any of its Subsidiaries with respect to indebtedness for money
borrowed, including letters of credit, guaranties, indentures, swaps and
similar agreements.
(b) Each of the contracts, instruments, mortgages, notes, security
agreements leases, agreements or understandings, whether written or oral, to
which the Company or any of its Subsidiaries is a party that relates to or
affects the assets or operations of the Company or any of its Subsidiaries or
to which the Company or any of its Subsidiaries or their respective assets or
operations may be bound or subject is a valid and binding obligation of the
Company and in full force and effect with respect to the Company or such
Subsidiary and, to the Company's knowledge, with respect to all other parties
thereto, except for where the failure to be valid, binding and in full force
and effect would not in the aggregate have a Company Material Adverse Effect.
Any of the foregoing that contain a provision that triggers upon a change in
control of the Company (other than those agreements set forth in Schedule
4.11(f)) are set forth on Schedule 4.22(b). Except to the extent that the
consummation of the transactions contemplated by this Agreement may require
the consent of third parties which consent requirements are set forth on
Schedule 4.6(a), there are no existing defaults by the Company or any of its
Subsidiaries thereunder or, to the knowledge of the Company, by any other
party thereto, which defaults in the aggregate would have a Company Material
Adverse Effect; and no event of default has occurred, and no event,
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condition or occurrence exists, that (whether with or without notice, lapse
of time, the declaration of default or other similar event) would constitute
a default by the Company or any of its Subsidiaries thereunder, other than
defaults that would not in the aggregate have a Material Adverse Effect.
(c) Except as set forth in Schedule 4.22(c), the Company has no
agreements or arrangements to sell or otherwise dispose of, or lease, acquire
or otherwise invest in, any property, lines of business or other assets that
are in the aggregate material to the Company's business, other than
agreements and arrangements for such sale, disposition, lease, acquisition or
investment that are in the ordinary course of the Company's business.
4.23 No Brokers. The Company has not entered into any contract,
----------
arrangement or understanding with any person or firm which may result in the
obligation of the Company or Parent to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby, except that the Company has retained
William Blair & Company as its financial advisors, the arrangements with
which have been disclosed in writing to Parent prior to the date hereof.
Other than the foregoing arrangements, none of the executive officers of the
Company is aware of any claim for payment of any finder's fees, brokerage or
agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
4.24 State Takeover Statutes. The Board of Directors of the
-----------------------
Company has approved the Merger, this Agreement, the transactions
contemplated hereby, and the grant of the Purchase Option and the purchase of
Company Common Shares pursuant thereto (collectively, the "Stock Agreement
Transaction") and such approval is sufficient to render inapplicable to the
Merger, this Agreement, the transactions contemplated hereby and the Stock
Agreement Transaction, the provisions of Section 203 of the DGCL. To the
knowledge of the Company, no other "fair price," "merger moratorium,"
"control share acquisition" or other anti-takeover statute or similar statute
or regulation applies or purports to apply to the Merger, this Agreement, the
Stock Agreement or any of the transactions contemplated hereby or thereby.
4.25 Opinion of Financial Advisor. The Company has received the
----------------------------
opinion of William Blair & Company to the effect that, as of the date hereof,
the consideration to be received by the holders of Company Common Shares in
the Merger is fair to such holders from a financial point of view.
4.26 Ownership of Parent Common Shares. None of the Company or any
---------------------------------
Affiliates of the Company owns any Parent Common Shares or other securities
convertible into Parent Common Shares.
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5. Representations and Warranties of Parent and Merger Sub
Each of Parent and Merger Sub represents and warrants to the
Company as of the date of this Agreement as follows:
5.1 Existence; Good Standing; Corporate Authority. Each of Parent
---------------------------------------------
and Merger Sub is a corporation duly incorporated, validly existing and in
good standing under the laws of Delaware. Parent is duly licensed or
qualified to do business as a foreign corporation and is in good standing
under the laws of any other state of the United States in which the character
of the properties owned or leased by it or in which the transaction of its
business makes such qualification necessary, except where the failure to be
so qualified or to be in good standing would not have a material adverse
effect on the business, assets, results of operations or financial condition
of Parent and its Subsidiaries taken as a whole (a "Parent Material Adverse
Effect"). Parent has all requisite corporate power and authority to own,
operate and lease its properties and carry on its business as now conducted.
The copies of the certificate of incorporation and by-laws of Parent and the
certificate of incorporation and by-laws of Merger Sub previously made
available to the Company are true and correct.
5.2 Authorization, Validity and Effect of Agreement. Each of
-----------------------------------------------
Parent and Merger Sub has the requisite corporate power and authority to
execute and deliver this Agreement and all agreements and documents
contemplated hereby to be executed and delivered respectively by it and to
consummate the transactions contemplated hereby and thereby. This Agreement,
the Merger and the consummation by Parent and Merger Sub of the transactions
contemplated hereby have been duly and validly authorized by the respective
Boards of Directors of Parent and Merger Sub and by Parent as sole
stockholder of Merger Sub, and no other corporate action on the part of
Parent and Merger Sub is necessary to authorize this Agreement or the Merger
or to consummate the transactions contemplated hereby. This Agreement has
been duly and validly executed by each of Parent and Merger Sub and
constitutes, and all agreements and documents contemplated hereby to be
executed and delivered by Parent or Merger Sub (when executed and delivered
pursuant hereto) will constitute, the valid and binding obligations of Parent
or Merger Sub, as the case may be, enforceable respectively against them in
accordance with their respective terms, subject to (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to creditors' rights generally and (ii) the availability of
injunctive relief and other equitable remedies.
5.3 Capitalization. The authorized capital stock of Parent
--------------
consists of 50,000,000 Parent Common Shares and 100,000 shares of preferred
stock, par value $0.01 per share (the "Parent Preferred Shares"). As of
November 29, 1995, (a) 30,929,058 Parent Common Shares were issued and
outstanding, all of which are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights, and no shares were held in
Parent's treasury, (b) no Parent Preferred Shares were outstanding or held in
Parent's treasury, (c) no Parent Common Shares or Parent Preferred Shares
were held by Subsidiaries of the Parent, and (d) 975,610 Parent Common Shares
were reserved for future issuance pursuant to outstanding stock options
granted under Parent's stock option plans described on Schedule 5.10 (the
"Parent Stock Plans") and 297,768 shares were reserved for future grants
under such plans. Except as set forth in this Section 5.3, there are no
outstanding options,
21
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warrants, calls, subscriptions, bonds, debentures, notes or other obligations
the holders of which have the right to vote or which are convertible into or
exercisable for securities having the right to vote with the stockholders of
Parent on any matter. Since such date, (i) no additional shares of capital
stock of Parent have been issued, except pursuant to the Parent's Stock Plans
and (ii) no options, warrants or other rights to subscribe for, securities or
rights convertible into or exchangeable for, or contracts, commitments or
arrangements by which Parent is or may be required to issue or sell
additional shares of the Parent's capital stock (collectively, "Parent Equity
Rights") have been granted. The Parent Common Shares to be issued pursuant
to the Merger will be duly authorized, validly issued, fully paid and non-
assessable.
5.4 Subsidiaries. Schedule 5.4 sets forth a complete and accurate
------------
list of the Subsidiaries of Parent and indicates for each such Subsidiary the
jurisdiction of incorporation or organization. Parent owns, directly or
indirectly, each of the outstanding shares of capital stock (or other
ownership interests having by their terms ordinary voting power to elect a
majority of directors or others performing similar functions with respect to
such Subsidiary) of each of its Subsidiaries. No equity securities of any of
Parent's Subsidiaries may be required to be issued (other than to Parent or
another of Parent's Subsidiaries) by reason of any Parent Equity Rights for
shares of the capital stock of any of Parent's Subsidiaries. There are no
contracts, commitments, understandings or arrangements by which Parent or any
of the its Subsidiaries is or may be obligated to transfer any shares of the
capital stock of any of Parent's Subsidiaries. Each of the outstanding
shares of capital stock of each of Parent's Subsidiaries is duly authorized,
validly issued, fully paid and nonassessable, and is owned, directly or
indirectly, by Parent. Each of the outstanding shares of capital stock of
each of Parent's Subsidiaries is owned, directly or indirectly, by Parent
free and clear of all liens, pledges, security interests, claims or other
encumbrances other than liens imposed by local or foreign law which are not
material. The following information for each of Parent's Subsidiaries has
been previously provided to the Company, if applicable: (i) its name and
jurisdiction of incorporation or organization; (ii) its authorized capital
stock or share capital; and (iii) the number of issued and outstanding shares
of capital stock or share capital.
5.5 No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the consummation by Parent and Merger Sub of the transactions contemplated
hereby will not, (i) conflict with or violate the certificate of
incorporation or by-laws or equivalent organizational documents of Parent or
Merger Sub, (ii) subject to making the filings and obtaining the approvals
identified in Section 5.5(b), conflict with or violate any law, rule,
regulation, order, judgment or decree (whether United States or foreign)
applicable to Parent or any of its Subsidiaries or by which any property or
asset of Parent or any of its Subsidiaries is bound or affected, or (iii)
subject to making the filings, obtaining the approvals and effecting any
other matters identified in Schedule 5.5(a), result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, result in the loss of a material benefit
under, or give to others any right of termination, amendment, acceleration,
increased payments or cancellation of, or result in the creation of a lien or
other encumbrance on any property or asset of Parent or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its Subsidiaries is a party or by
22
<PAGE>
which Parent or any of its Subsidiaries or any property or asset of Parent or
any of its Subsidiaries is bound or affected, except in the case of clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or
other occurrences which would not prevent or delay consummation of any of the
transactions contemplated hereby in any material respect, or otherwise
prevent Parent or Merger Sub from performing its obligations under this
Agreement in any material respect, and would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and
Merger Sub do not, and the performance of this Agreement and the consummation
of the transactions contemplated hereby by either of them will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Entity, except (i) for (A) applicable
requirements, if any, of the Exchange Act, the Securities Act and Blue Sky
Laws, (B) the pre-merger notification requirements of the HSR Act, and
required approvals and consents of other Governmental Entities (whether
domestic or foreign) and the rules and regulations thereunder (C) the filing
of a certificate of merger pursuant to the DGCL, (D) such filings and
consents as may be required under any environmental, health or safety law or
regulation pertaining to any notification, disclosure or required approval
triggered by the Merger or the transactions contemplated by this Agreement,
and (E) applicable requirements, if any, of the Code and state, local and
foreign tax laws, and (ii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or delay consummation of any of the transactions contemplated
hereby in any material respect, or otherwise prevent Parent or Merger Sub
from performing its obligations under this Agreement in any material respect,
and would not, individually or in the aggregate, have a Parent Material
Adverse Effect.
5.6 Compliance. Except as set forth in Schedule 5.6, neither
----------
Parent nor any of its Subsidiaries is in conflict with, or in default or
violation of, (a) any law, rule, regulation, order, judgment or decree
(whether United States or foreign) applicable to Parent or any of its
Subsidiaries or by which any property or asset of Parent or any of its
Subsidiaries is bound or affected or (b) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which Parent or any of its Subsidiaries or any property or
asset of Parent or any of its Subsidiaries is bound or affected, in each case
except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Parent Material Adverse Effect.
Parent and its Subsidiaries have obtained all licenses, permits and other
authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their business as now conducted,
except where the failure to obtain any such item or to take any such action
would not, individually or in the aggregate, have a Parent Material Adverse
Effect. Neither Parent nor any of its Subsidiaries has received any
notification or communication from any Governmental Entity threatening to
revoke any license, franchise, permit or authorization of any Governmental
Entity, which revocation would have a Parent Material Adverse Effect.
5.7 SEC Documents. (a) Parent has filed all forms, reports and
-------------
documents required to be filed by it with the SEC since January 1, 1990
(collectively, the "Parent Reports"). As of their respective dates, the
Parent Reports, and any such reports,
23
<PAGE>
forms and other documents filed by Parent with the SEC after the date of this
Agreement (i) complied, or will comply, as to form in all material respects
with the applicable requirements of the Securities Act, the Exchange Act and
the rules and regulations thereunder and (ii) did not, or will not, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. The representation in clause (ii) of the preceding sentence will
not apply to any misstatement or omission in any Parent Report filed prior to
the date of this Agreement which was superseded by a subsequent Parent Report
filed prior to the date of this Agreement. No Subsidiary of Parent is
required to file any report, form or other document with the SEC.
(b) Each of the consolidated balance sheets included in or
incorporated by reference into the Parent Reports (including the related
notes and schedules) presents fairly, in all material respects, the
consolidated financial position of Parent and its Subsidiaries, as of its
date, and each of the consolidated statements of income, retained earnings
and cash flows included in or incorporated by reference into the Parent
Reports (including any related notes and schedules) presents fairly, in all
material respects, the results of operations, retained earnings or cash
flows, as the case may be, of Parent and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal year-
end audit adjustments which would not be material in amount or effect), in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein.
(c) Neither Parent nor any of its Subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise) that would be required to be reflected on, or reserved against in,
a balance sheet of Parent or in the notes thereto, prepared in accordance
with generally accepted accounting principles consistently applied, except
for (i) liabilities or obligations that were so reserved on, or reflected in
(including the notes to), the consolidated balance sheet of Parent as of
December 31, 1994, (ii) liabilities or obligations arising in the ordinary
course of business since December 31, 1994, and (iii) liabilities or
obligations which would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
5.8 Absence of Certain Changes. Except as described in the Parent
--------------------------
Reports, since September 30, 1995, there has not been (a) any Parent Material
Adverse Effect, (b) any declaration, setting aside or payment of any dividend
of other distribution with respect to its capital stock, or (c) any material
change in its accounting principles, practices or methods.
5.9 Litigation. Except as described in the Parent Reports, there
----------
are no actions, suits or proceedings pending against Parent or its
Subsidiaries or, to the knowledge of the executive officers of Parent,
threatened against Parent or any of its Subsidiaries, or against any
property, interest, asset or right of any of them, at law or in equity, or
before or by any Government Entity that, individually or in the aggregate,
are likely to have a Parent Material Adverse Effect. Neither Parent nor any
of its Subsidiaries is subject to any judgment, order, writ, injunction or
decree that would have a Parent Material Adverse Effect.
24
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5.10 Employee Benefit Plans; Employment Agreements. (a) Schedule
---------------------------------------------
5.10 sets forth a true and complete list of all the following: (i) each
"employee benefit plan," as such term is defined in Section 3(3) of ERISA,
pursuant to which Parent or any of its Subsidiaries has (A) any material
liability with respect to current or former employees, agents, directors, or
independent contractors of Parent or its Subsidiaries ("Parent Employees") or
(B) any obligation to issue capital stock of Parent or any of its
Subsidiaries (each, a "Parent Employee Plan"), and (ii) each other foreign or
domestic plan, program, policy, contract, arrangement or scheme providing for
bonuses, pensions, deferred pay, stock or stock related awards, severance
pay, salary continuation or similar benefits, hospitalization, medical,
dental or disability benefits, life insurance or other employee benefits, or
compensation to or for any Parent Employees or any beneficiaries or
dependents of any Parent Company Employees (other than directors' and
officers' liability policies), whether or not insured or funded, (A) pursuant
to which Parent or any of its Subsidiaries has any material liability or (B)
constituting an employment, severance or termination agreement or arrangement
with any officer or director of Parent or any Subsidiary (each, a "Parent
Benefit Arrangement"). Parent has provided to the Company with respect to
each Parent Employee Plan and Parent Benefit Arrangement: (i) a true and
complete copy of all written documents comprising such Parent Employee Plan
or Parent Benefit Arrangement (including amendments and individual agreements
relating thereto) or, if there is no such written document, an accurate and
complete description of such Parent Employee Plan or Parent Benefit
Arrangement; (ii) the most recent Form 5500 or Form 5500-C (including all
schedules thereto), if applicable; (iii) the most recent financial statements
and actuarial reports, if any; (iv) the summary plan description currently in
effect and all material modifications thereof, if any; and (v) the most
recent Internal Revenue Service determination letter, if any.
(b) Each Parent Employee Plan and Parent Benefit Arrangement has
been established and maintained in all material respects in accordance with
its terms and all applicable laws, including, but not limited to, ERISA and
the Code.
5.11 Labor Matters. Except as set forth in the Parent Reports as
-------------
of the date hereof, (i) there are no controversies pending or, to the
knowledge of Parent or any of its Subsidiaries, threatened, between Parent or
any of its Subsidiaries and any of their respective employees, which
controversies have or could reasonable be expected to have a Parent Material
Adverse Effect; (ii) neither Parent nor any of its Subsidiaries is a party to
any material collective bargaining agreement or other labor union contract
applicable to persons employed by Parent or its Subsidiaries, nor does Parent
or any of its Subsidiaries know of any activities or proceedings of any labor
union to organize any such employees; and (iii) neither Parent nor any of its
Subsidiaries has any knowledge of any strikes, slowdowns, work stoppages,
lockouts, or threats thereof, by or with respect to any employees of Parent
or any of its subsidiaries which could reasonably be expected to have a
Parent Material Adverse Effect.
5.12 Registration Statement. None of the information supplied or
----------------------
to be supplied by Parent for inclusion in the Form S-4 or the Proxy
Statement/Prospectus shall, at the respective times such documents are filed
with the SEC, and, in the case of the Form
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S-4, when it becomes effective, and, in the case of the Proxy
Statement/Prospectus, when it is first mailed to the stockholders of the
Company and at the time of the Stockholders' Meeting, be false or misleading
with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. All documents that
Parent is responsible for filing with the SEC or any other Governmental
Entity in connection with the transactions contemplated hereby shall comply
as to form in all material respects with the provisions of applicable law and
the applicable rules and regulations thereunder.
5.13 Properties. Except as disclosed or reserved against in the
----------
most recent financial statements contained in the Parent Reports, Parent and
each of its Subsidiaries have good and marketable title to all of the
material properties and assets, tangible or intangible, reflected in such
financial statements as being owned by Parent and each of its Subsidiaries as
of the dates thereof, free and clear of all Liens. All leased buildings and
all leased fixtures, equipment and other property and assets that are
material to Parent's business on a consolidated basis are held under leases
or subleases that are valid and binding instruments enforceable in accordance
with their respective terms, and there is not, to the knowledge of Parent,
under any of such leases, any existing material default or event of default
(or event which with notice or lapse of time, or both, would constitute a
material default), except where the lack of such validity and binding nature
or the existence of such default or event of default would not have a Parent
Material Adverse Effect.
5.14 Taxes. (a) Each of Parent and its Subsidiaries has filed all
-----
tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed and granted
and have not expired, and all tax returns and reports are complete and
accurate in all respects, except to the extent that such failures to file or
be complete and accurate in all respects, as applicable, individually or in
the aggregate, would not have a Parent Material Adverse Effect. Parent and
each of its Subsidiaries has paid (or Parent has paid on its behalf) or made
provision for all taxes shown as due on such tax returns and reports. The
most recent financial statements contained in the Parent Reports reflect
adequate reserves for all taxes payable by Parent and its Subsidiaries for
all taxable periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have been proposed,
asserted or assessed against Parent or any of its Subsidiaries that are not
adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not, individually or in the
aggregate, have a Parent Material Adverse Effect. No requests for waivers of
the time to assess any taxes against Parent or any Parent Subsidiary have
been granted or are pending, except for requests with respect to such taxes
that have been adequately reserved for in the most recent financial
statements contained in the Parent Reports, or, to the extent not adequately
reserved, the assessment of which would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
(b) None of Parent, its predecessors, Merger Sub or, to the
knowledge of Parent, any of Parent's Affiliates has taken or agreed to take
any action that would prevent the Merger from being effected as a "pooling of
interests" or would prevent the Merger from constituting a transaction
qualifying as a tax-free reorganization under Section 368(a) of the Code.
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5.15 Intellectual Property. (a) Schedule 5.15 sets forth an
---------------------
accurate and complete list of all material (i) patents, patent applications,
patent rights, trademarks (registered and unregistered), trademark
applications, trade names (registered and unregistered), service marks
(registered and unregistered), service mark applications and copyrights that
are owned by Parent or any of its Subsidiaries, (ii) unexpired licenses
relating to the Parent Intellectual Property Rights (as defined below) that
have been granted to or by Parent or any of its Subsidiaries and (iii) other
agreements relating to Intellectual Property Rights necessary for the conduct
of the business of Parent and its Subsidiaries, together with a complete
listing of all liens, security interests, claims and rights to use of third
parties with respect to each listed item of Intellectual Property Rights.
(b) Parent and its Subsidiaries collectively own or have the right
to use all of the Parent Intellectual Property Rights that are in the
aggregate material to the conduct of the business of Parent and its
Subsidiaries. Such ownership or right to use are free and clear of all
liens, security interests, claims and rights to use of third parties that
would in the aggregate be material to the business of the Parent and its
Subsidiaries.
(c) Parent has taken steps sufficient to safeguard and maintain
the secrecy and confidentiality of, or Parent's proprietary rights in, all of
the unpatented know how, technology, proprietary processes, formulae and
other information owned by Parent or any of its Subsidiaries, except for such
items as are not, in the aggregate material to the conduct of the business of
Parent and its Subsidiaries. Without limiting the generality of the
foregoing, Parent and its Subsidiaries have obtained confidentiality and
invention assignment agreements from substantially all past and present
employees and independent contractors involved in the creation or development
of the Parent Intellectual Property Rights.
(d) Except for licenses listed in Schedule 5.15 as royalty
bearing, there are no royalties, honoraria, fees or other payments payable by
Parent or any of its Subsidiaries to any person by reason of the ownership,
use, license, sale or disposition of any of the Parent Intellectual Property
Rights.
(e) Neither Parent nor any of its Subsidiaries (i) is infringing
or misappropriating the right or claimed right of any other party with
respect to any Intellectual Property Rights or (ii) has knowledge of any
alleged or claimed infringement or misappropriation of any third party
Intellectual Property Right by any product or process manufactured, used,
sold or under development by or for Parent or its Subsidiaries that in the
case of (i) or (ii), if proven, would be reasonably likely to have a Parent
Material Adverse Effect.
(f) No independent contractor who has performed services for
Parent or any of its Subsidiaries has any right, title or interest in the
Parent Intellectual Property Rights that is reasonably likely to have,
individually or in the aggregate, a Parent Material Adverse Effect.
(g) The execution, delivery and performance of this Agreement by
Parent, and the consummation by Parent of the transactions contemplated
hereby will not breach, violate or conflict with any agreement governing the
Parent Intellectual Property Rights, and
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<PAGE>
will not cause the forfeiture or termination of, give rise to a right of
forfeiture or termination of, or impair the right of Parent or any of its
Subsidiaries to use, sell, license or dispose of, any such Parent
Intellectual Property Right, which breach, violation, conflict, forfeiture,
termination or impairment would result in a Parent Material Adverse Effect.
(h) The term "Parent Intellectual Property Rights" means all
Intellectual Property Rights that are used, have been used, or are intended
to be used in, or relate to the conduct of any business by Parent or any of
its Subsidiaries.
5.16 Insurance. All policies of insurance and fidelity or surety
---------
bonds insuring Parent or any of its Subsidiaries or their respective
businesses, assets, employees, officers and directors are in full force and
effect. Except as described in Schedule 5.16, as of the date hereof, there
are no claims by Parent or any of its Subsidiaries under any such policy or
instrument as to which any insurance company is denying liability or
defending under a reservation of rights clause.
5.17 Product Warranties and Liabilities. (a) Except as set forth
----------------------------------
in Schedule 5.17(a), neither Parent nor any of its Subsidiaries has any
material forms of warranties or guarantees of its products and services that
are in effect or proposed to be used by it. Schedule 5.17(a) sets forth (i)
the form of warranty for each product or category of product manufactured by
Parent and (ii) a description of each pending or, to the knowledge of Parent,
threatened material action, suit, investigation or proceeding under any
warranty or guaranty against Parent or any of its Subsidiaries. Except as
set forth in Schedule 5.17(a), neither Parent nor any of its Subsidiaries has
incurred, nor does Parent know of any basis for alleging, any Product
Liability with respect to any product sold or services rendered by or on
behalf of Parent or any of its Subsidiaries, whether such Product Liability
is incurred by reason of any express warranty (including, without limitation,
any warranty of merchantability or fitness), any doctrine of common law
(tort, contract or other), any statutory provision, any foreign law or
otherwise and irrespective of whether such Product Liability is covered by
insurance, which Product Liability would have a Parent Material Adverse
Effect.
(b) There is no pending or, to the knowledge of Parent, threatened
recall or investigation of any product sold by Parent or any of its
Subsidiaries, which recall or investigation would have a Parent Material
Adverse Effect.
(c) Attached to Schedule 5.17(c) are (i) all requests for
information, inquiry or similar type letters received by Parent and/or its
Subsidiaries from any federal, state and/or foreign trade regulatory
authorities (including without limitation the FTC and the FCC, and any
written communication by Parent and/or its Subsidiaries in response and (ii)
all inquiries sent by Parent and/or its Subsidiaries to such authorities and
any written communication received in response, in each case of (i) and (ii)
since January 1, 1991. Parent has obtained all necessary approvals and
licenses, and is in compliance with all rules, regulations and promulgations
of any Government Entity (including without limitation the FTC or FCC),
relating to the manufacture, production or provision of goods and services
meant for sale or distribution, except where the failure to have such
approvals or be in compliance would not result in a Parent Material Adverse
Effect.
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<PAGE>
5.18 Accounts Receivable. The accounts receivable of Parent and
-------------------
its Subsidiaries as reflected in the most recent financial statements
contained in the Parent Reports, to the extent uncollected on the date
hereof, and the accounts receivable reflected on the books of Parent and its
Subsidiaries are valid and existing and represent monies due, and Parent has
made reserves reasonably considered adequate for receivables not collectible
in the ordinary course of business, and (subject to the aforesaid reserves)
are subject to no refunds or other adjustments and to no defenses, rights of
setoff, assignments, restrictions, encumbrances or conditions enforceable by
third parties on or affecting any thereof, except for such refunds,
adjustments, defenses, rights of setoff, assignments, restrictions,
encumbrances or conditions that would not have a Parent Material Adverse
Effect.
5.19 Inventory. The inventories of Parent and its Subsidiaries as
---------
reflected in the most recent financial statements contained in the Parent
Reports, or acquired by Parent or any of its Subsidiaries after the date
thereof, (i) are carried at an amount not in excess of the lower of cost or
net realizable value, and (ii) do not include any inventory which is
obsolete, surplus or not usable or saleable in the lawful and ordinary course
of business of Parent and its Subsidiaries as heretofore conducted, in each
case net of reserves provided therefor.
5.20 No Brokers. Neither Parent nor Merger Sub has entered into
----------
any contract, arrangement or understanding with any person or firm which may
result in the obligation of the Company or Parent to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with
the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby, except that Parent has retained Goldman,
Sachs & Co. and Montgomery Securities as its financial advisers. Other than
the foregoing arrangements, none of the executive officers of the Company is
aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions
contemplated hereby.
5.21 Issuance of Parent Common Shares. The Parent Common Shares
--------------------------------
required to be issued pursuant to Article 3 will, when issued in accordance
with Article 3, be duly authorized, validly issued, fully paid and
nonassessable, and no stockholder of Parent will have any preemptive right of
subscription or purchase in respect thereof.
5.22 Merger Sub. Merger Sub was formed solely for the purpose of
----------
engaging in the transactions contemplated hereby. Except for obligations or
liabilities incurred in connection with its incorporation or organization and
the transactions contemplated hereby, Merger Sub has not incurred any
obligations or liabilities or engaged in any business or activities of any
type or kind whatsoever or entered into any agreements or arrangements with
any person or entity.
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<PAGE>
6. Covenants
6.1 Alternative Proposals. Upon execution of this Agreement, the
---------------------
Company will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted
heretofore. Prior to the Effective Time, the Company agrees (a) that neither
it nor any of its Subsidiaries will, nor will it or any of its Subsidiaries
permit their respective officers, directors, employees, agents and
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it or any of its Subsidiaries) to,
initiate, solicit or encourage, directly or indirectly, any Alternative
Proposal (as defined below) or, except as set forth below, engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Alternative Proposal,
or otherwise facilitate any effort or attempt to make or implement an
Alternative Proposal. An "Alternative Proposal" means, other than the
transactions contemplated hereby and by the Stock Agreement, the receipt by
the Company of any inquiries or the making or implementation of any proposal
or offer (including without limitation any proposal or offer to its
stockholders) with respect to a merger, acquisition, consolidation or similar
transaction involving any purchase of all or any significant portion of the
assets of the Company or any of its Subsidiaries or a 10% or more equity
interest in the Company by a person or entity that takes a position
detrimental to the Merger. Notwithstanding the foregoing, in the event the
Company receives an unsolicited written proposal or written offer with
respect to an Alternative Proposal, the Board of Directors of the Company
shall be entitled, solely to the extent it has been advised (i) by its
outside counsel that a failure to do so would violate its fiduciary
obligations under applicable law and (ii) by its financial advisor that the
Alternative Proposal is financially superior to the Merger and the
transactions contemplated thereby, to review and participate in negotiations
concerning such proposal and furnish relevant information concerning the
Company to the offeror; provided that (A) the Company shall have furnished,
or concurrently with the provision of such information to such offeror shall
furnish, Parent with all such information provided to such offeror and (B)
the offeror executes a confidentiality agreement with the Company on
substantially the same terms as that entered into with Parent. The Company
shall notify Parent promptly of any such unsolicited Alternative Proposal, or
any inquiry or contact with any person with respect thereto. In addition, in
the event the Company (i) enters into negotiations with respect to an
unsolicited Alternative Proposal or (ii) the Company's Board of Directors
shall withdraw its approval of this Agreement and the transactions
contemplated hereby or its recommendation to the stockholders of the Company
to approve the same, then the Company shall immediately deliver an additional
notice of such events to Parent. Nothing in this Section 6.1 will (x) permit
the Company to terminate this Agreement, (y) permit the Company to enter into
any agreement with respect to an Alternative Proposal for as long as this
Agreement remains in effect (it being agreed that for as long as this
Agreement remains in effect, the Company will not enter into any agreement
with any person that provides for, or in any way facilitates, an Alternative
Proposal), or (z) affect any other obligation of the Company under this
Agreement.
6.2 Conduct of Business by the Company. Prior to the Effective
----------------------------------
Time, except as contemplated by any other provision of this Agreement, unless
Parent has previously consented in writing thereto, the Company:
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<PAGE>
(a) Will, and will cause each of its Subsidiaries to, conduct its
operations in the ordinary and normal course, consistent with past practice;
(b) Will use its reasonable best efforts, and will cause each of
its Subsidiaries to use its reasonable best efforts, to preserve intact their
business organizations and goodwill, keep available the services of their
respective officers and employees and maintain satisfactory relationships
with those persons having business relationships with them;
(c) Will not amend its certificate of incorporation or by-laws or
comparable governing instruments;
(d) Will, upon the occurrence of any event or change in
circumstances as a result of which any representation or warranty of the
Company contained in Article 4 would be untrue or incorrect if such
representation or warranty were made immediately following the occurrence of
such event or change in circumstance, promptly (and in any event within two
business days of an executive officer of the Company obtaining knowledge
thereof) notify Parent thereof;
(e) Will promptly deliver to Parent true and correct copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(f) Will not (i) except pursuant to the exercise of Company Equity
Rights and other contractual rights existing on the date hereof and disclosed
pursuant to this Agreement, issue any shares of its capital stock, effect any
stock split or otherwise change its capitalization as it existed on the date
hereof, (ii) grant, confer or award any option, warrant, conversion right or
other Company Equity Rights not existing on the date hereof to acquire any
shares of its capital stock, (iii) grant, confer or award any bonuses or
other forms of incentive compensation to any officer, director or employee,
except for cash bonuses or incentives consistent with past practice or under
any existing agreement, (iv) increase any compensation under any employment
agreement with any of its present or future officers, directors or employees,
except for normal increases for officers and employees consistent with past
practice or the terms of such employment agreement, (v) grant any severance
or termination pay to, or enter into any employment, severance or termination
agreement with any officer, director or employee or amend any such agreement
in any material respect, except for severance arrangements consistent with
past practice with respect to officers and employees terminated by the
Company, or (vi) adopt any new employee benefit plan or program (including
any stock option, stock benefit or stock purchase plan) or amend any existing
employee benefit plan or program in any material respect;
(g) Will not (i) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its capital
stock or other ownership interests or (ii) directly or indirectly redeem,
purchase or otherwise acquire any shares of its capital stock or capital
stock of any of its Subsidiaries, or make any commitment for any such action;
(h) Will not, and will not permit any of its Subsidiaries to,
sell, lease or otherwise dispose of any of its assets (including capital
stock of Subsidiaries) or to acquire
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<PAGE>
any business or assets, except for (i) any purchase of inventory undertaken
in the ordinary course of business, (ii) any printing services contracted for
in the ordinary course of business (provided that the term of any such
contract in (i) or (ii) is no longer than one year), or (iii) in the ordinary
course of business and for an amount not exceeding $250,000;
(i) Will not incur any material amount of indebtedness for
borrowed money or make any loans, advances or capital contributions to, or
investments (other than non-controlling investments in the ordinary course of
business) in, any other person other than a wholly owned Subsidiary of the
Company, or issue or sell any debt securities, other than borrowings under
existing lines of credit in the ordinary course of business;
(j) Will not, except pursuant to and in accordance with the
capital budget previously disclosed in writing to Parent, authorize, commit
to or make capital expenditures;
(k) Will not mortgage or otherwise encumber or subject to any lien
any properties or assets except for such of the foregoing as are in the
ordinary course of business and would not be reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect;
(l) Will not enter into or agree to enter into any contract
without the prior written consent of Parent unless such contract is entered
into by the Company for (i) any purchase of inventory undertaken in the
ordinary course of business, (ii) any printing services contracted for in the
ordinary course of business (provided that the term of any such contract in
(i) or (ii) is no longer than one year), or (iii) any other contract in the
ordinary course of business and the total payments by the Company
contemplated thereby do not exceed $100,000 and have a term of no longer than
one year (or as provided in Section 6.2(m);
(m) Will not enter into that certain contract with GSI S.A. unless
such contract has a maximum termination liability of $250,000;
(n) Will, in advance of execution, review with Parent the terms
and conditions of the proposed new contract with United Parcel Service;
(o) Will maintain insurance consistent with past practices for its
businesses and properties;
(p) Will not make any change to its accounting (including tax
accounting) methods, principles or practices, except as may be required by
generally accepted accounting principles and except, in the case of tax
accounting methods, principles or practices, in the ordinary course of
business of the Company or any of its Subsidiaries;
(q) Will not knowingly take any action, or knowingly fail to take
any action, that would (i) jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes or (ii) jeopardize
qualification of the merger as a tax-free reorganization within the meaning
of Section 368(a) of the Code; and
32
<PAGE>
(r) Will not take or agree in writing or otherwise to take any
action which would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect or prevent the
Company from performing or cause the Company not to perform its covenants
hereunder.
6.3 Conduct of Business by Parent. Prior to the Effective Time,
-----------------------------
except as contemplated by any other provision of this Agreement, unless the
Company has previously consented in writing thereto, Parent:
(a) Will, and will cause each of its Subsidiaries to, conduct its
operations in the ordinary and normal course, consistent with past practice;
(b) Will use its reasonable best efforts, and will cause each of
its Subsidiaries to use its reasonable best efforts, to preserve intact their
business organizations and goodwill, keep available the services of their
respective officers and employees and maintain satisfactory relationships
with those persons having business relationships with them;
(c) Will not amend its certificate of incorporation or by-laws or
comparable governing instruments (other than by-law amendments which are not
material to Parent or to the consummation of the transactions contemplated by
this Agreement);
(d) Will, upon the occurrence of any event or change in
circumstances as a result of which any representation or warranty of Parent
contained in Article 5 would be untrue or incorrect if such representation or
warranty were made immediately following the occurrence of such event or
change in circumstance, promptly (and in any event within two business days
of an executive officer of Parent obtaining knowledge thereof) notify the
Company thereof;
(e) Will promptly deliver to the Company true and correct copies
of any report, statement or schedule filed with the SEC subsequent to the
date of this Agreement;
(f) Will not declare, set aside or pay any extraordinary dividend
or make any other extraordinary distribution or payment with respect to any
shares of its capital stock;
(g) Will not knowingly take any action, or knowingly fail to take
any action, that would (i) jeopardize the treatment of the Merger as a
"pooling of interests" for accounting purposes or (ii) jeopardize
qualification of the merger as a tax-free reorganization within the meaning
of Section 368(a) of the Code; and
(h) Will not take or agree in writing or otherwise to take any
action which would make any of the representations or warranties of Parent
contained in this Agreement untrue or incorrect or prevent Parent from
performing or cause Parent not to perform its covenants hereunder.
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<PAGE>
6.4 Meeting of Stockholders. The Company will take all action
-----------------------
necessary in accordance with applicable law and its certificate of
incorporation and by-laws to convene a meeting of its stockholders (the
"Stockholders' Meeting") as promptly as practicable after the date hereof to
consider and vote upon the adoption of this Agreement and the approval of the
Merger, the other transactions contemplated hereby and such other related
matters as it deems appropriate. The Board of Directors of the Company will
recommend such adoption and approval and the Company and the Board will each
take all lawful action to solicit such approval, including, without
limitation, timely mailing the Proxy Statement/Prospectus (as defined below);
provided, however, that the Board of Directors of the Company may withdraw,
modify or change such recommendation if the Company receives an Alternative
Proposal and the Board believes based upon consultation with its outside
counsel and its financial advisor that a failure to do so would violate its
fiduciary duties to the stockholders of the Company imposed by law and the
Alternative Proposal is financially superior to the Merger and the
transactions contemplated thereby (taking into account the presence or
absence of a financing contingency.)
6.5 Filings, Other Action. Subject to the terms and conditions
---------------------
herein provided, the parties will: (a) promptly make their respective
filings and thereafter make any other required submissions under the HSR Act;
(b) use all reasonable efforts to cooperate with one another in
(i) determining which filings are required to be made prior to the Effective
Time with, and which consents, approvals, permits or authorizations are
required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (ii) timely
making all such filings and timely seeking all such consents, approvals,
permits or authorizations; and (c) use all reasonable efforts to take, or
cause to be taken, all other action and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purpose of this Agreement, the proper officers and directors of parties will
take all such necessary action.
6.6 Access to Information; Confidentiality. From the date hereof
--------------------------------------
to the Effective Time, each of the Company and Parent will (a) allow all
designated officers, attorneys, accountants and other representatives of the
other reasonable access at all reasonable times to the offices, records and
files, correspondence, audits and properties, as well as to all information
relating to commitments, contracts, titles and financial position, or
otherwise pertaining to the business and affairs, of the Company and Parent
and their respective Subsidiaries, as the case may be, (b) furnish to the
other, the other's counsel, financial advisors, auditors and other authorized
representatives such financial and operating data and other information as
such persons may reasonably request, (c) instruct the employees, counsel and
financial advisors of the Company and Parent, as the case may be, to
cooperate with the other in the other's investigation of the business of it
and its Subsidiaries and (d) keep the other fully apprised and informed of
all significant developments with respect to the assets, business activities,
financial condition, earnings and prospects of it and its Subsidiaries. Each
of the Company and Parent will be permitted to make extracts from or to make
copies of such books and records as may be reasonably necessary. Each party
shall
34
<PAGE>
keep such information confidential, subject to the requirements of any
governmental or other authorities, except with respect to information that is
ascertainable from public or published information or trade sources.
6.7 Publicity. The initial press release relating to this
---------
Agreement will be a joint press release and thereafter the Company and Parent
will, subject to their respective legal obligations (including requirements
of stock exchanges and other similar regulatory bodies), consult with each
other, and use reasonable efforts to agree upon the text of any press
release, before issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby and in making
any filings with any Governmental Entity or with any national securities
exchange with respect thereto.
6.8 Registration Statement. (a) As soon as practicable following
----------------------
the date hereof, Parent and the Company will cooperate and promptly prepare
and file with the SEC a Registration Statement on Form S-4 (the "Form S-4")
under the Securities Act, which will contain a proxy statement/prospectus and
a form of proxy in connection with the vote of the Company's stockholders
with respect to the Merger and the offer to such stockholders of the
securities to be issued pursuant to the Merger (the "Proxy Statement/
Prospectus"). The respective parties will cause the Form S-4 to comply as to
form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Parent will use all reasonable efforts, and the Company will cooperate with
Parent, to have the Form S-4 declared effective by the SEC as promptly as
practicable and to keep the Form S-4 effective as long as is necessary to
consummate the Merger. Parent will, as promptly as practicable, provide
copies of any written comments received from the SEC with respect to the Form
S-4 to the Company and advise the Company of any verbal comments with respect
to the Form S-4 received from the SEC. Parent will use its reasonable
efforts to obtain, prior to the effective date of the Form S-4, all necessary
state securities law or "Blue Sky" permits or approvals required to carry out
the transactions contemplated by this Agreement and will pay all expenses
incident thereto. Parent agrees that the Proxy Statement/Prospectus and each
amendment or supplement thereto at the time of mailing thereof and at the
time of the Stockholders' Meeting or, in the case of the Form S-4 and each
amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit 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; provided, however, that the foregoing will not apply to the
extent that any such untrue statement of a material fact or omission to state
a material fact was made by Parent in reliance upon and in conformity with
written information concerning the Company furnished to Parent by the Company
specifically for use in the Form S-4. The Company agrees that the written
information concerning the Company provided by it for inclusion in the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the meeting of stockholders of the
Company, or, in the case of written information concerning the Company
provided by the Company for inclusion in the Form S-4 or any amendment or
supplement thereto, at the time it is filed or becomes effective, will not
include an untrue statement of a material fact or omit 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. No amendment or supplement
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<PAGE>
to the Form S-4 or the Proxy Statement/Prospectus will be made by Parent or
the Company without the approval of the other party, such approval not to be
unreasonably withheld or delayed. Parent will advise the Company, promptly
after it receives notice thereof, of the time when the Form S-4 has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the denial or suspension of the qualification of Parent Common
Shares issuable in connection with the Merger for offering or sale in any
jurisdiction, or any request by the SEC for any amendment or supplement to
the Form S-4 or the Proxy Statement/Prospectus or comments thereon and
responses thereto or requests by the SEC for additional information.
(b) Parent will use its reasonable best efforts to facilitate the
prompt receipt of registered shares by all of the Company's stockholders.
6.9 Listing Application. Parent will promptly prepare and submit
-------------------
to the NASDAQ a supplemental listing application covering Parent Common
Shares issuable in the Merger, and will use reasonable efforts to obtain,
prior to the Effective Time, approval for the listing of such Parent Common
Shares, subject to official notice of issuance.
6.10 Further Action. Each party hereto will, subject to the
--------------
fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the
Merger.
6.11 Affiliate Letters. (a) Promptly after the Company sets the
-----------------
record date for the Stockholder's Meeting, the Company will deliver to Parent
a list of names and addresses of those persons who were, in the Company's
reasonable judgment, at the record date for the Stockholders' Meeting,
Affiliates of the Company. The Company will use all reasonable efforts to
deliver or cause to be delivered to Parent, prior to the Closing Date, from
each of the Affiliates of the Company identified in the foregoing list, a
letter which will include, among other things, an agreement of such Affiliate
to the effect that such Affiliate did not within 30 days prior to the
Effective Time, sell, transfer or otherwise dispose of any shares of the
capital stock of the Company or the Parent (as the case may be) held by the
Affiliate, and that the Affiliate will not sell, transfer or otherwise
dispose of, or reduce his risk relative to any shares of the capital stock of
the Parent until after such time as results covering at least 30 days of
combined operations of the Parent and the Company have been published by the
Parent within the meaning of Section 201.01 of the SEC's Codification of
Financial Reporting Policies (an "Affiliate Letter"). Such letter for
Affiliates of the Company will be in the form attached hereto as Exhibit C.
Parent will be entitled to place legends as specified in such Affiliate
Letters on the certificates evidencing any Parent Common Stock to be received
by such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop-transfer instructions to the transfer agent for Parent
Common Stock, consistent with the terms of such Affiliate Letters.
(b) Promptly after the Company sets the record date for the
Stockholders' Meeting, Parent will deliver to the Company a list of names and
addresses of those persons who were, in Parent's reasonable judgment, at the
record date for the Stockholders' Meeting, Affiliates of Parent. Parent will
use all reasonable efforts to deliver or cause to be delivered
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<PAGE>
to the Company, prior to the Closing Date, from each of the Affiliates of
Parent identified in the foregoing list, an Affiliate Letter in the form
attached hereto as Exhibit D.
6.12 Expenses. Whether or not the Merger is consummated, all costs
--------
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such expenses except
as expressly provided herein and except that (a) the filing fee in connection
with the HSR Act filing, (b) the filing fee in connection with the filing of
the Form S-4 or Proxy Statement/Prospectus with the SEC, and (c) the expenses
incurred in connection with printing and mailing the Proxy Statement/
Prospectus, will be shared equally by the Company and Parent.
6.13 Insurance; Indemnity. (a) From and after the Effective Time,
--------------------
Parent will cause the Surviving Corporation to indemnify, defend and hold
harmless, to the fullest extent that the Company would be required under its
certificate of incorporation, by-laws, indemnification agreements with its
officers and directors (the "Indemnification Agreements") and applicable law,
each person who is now or was during the past six months prior to the date
hereof an officer or director of the Company (individually, an "Indemnified
Party" and collectively, the "Indemnified Parties"), against all losses,
claims, damages, liabilities, costs or expenses (including attorneys' fees),
judgments, fines, penalties and amounts paid in settlement in connection with
any claim, action, suit, proceeding or investigation arising out of or
pertaining to acts or omissions, or alleged acts or omissions, by them in
their capacities as such occurring at or prior to the Effective Time. In the
event of any such claim, action, suit, proceeding or investigation (an
"Action"), any Indemnified Party wishing to claim indemnification will
promptly notify the Surviving Corporation thereof (provided that failure to
so notify the Surviving Corporation will not affect the obligations of the
Surviving Corporation to provide indemnification except to the extent that
the Surviving Corporation shall have been prejudiced as a result of such
failure). With respect to any Action for which indemnification is requested,
the Surviving Corporation will be entitled to participate therein at its own
expense and, except as otherwise provided below, to the extent that it may
wish, the Surviving Corporation may assume the defense thereof, with counsel
reasonably satisfactory to the Indemnified Party. After notice from the
Surviving Corporation to the Indemnified Party of its election to assume the
defense of an Action, the Surviving Corporation will not be liable to the
Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof, other than as
provided below. The Surviving Corporation will not settle any Actions
without the consent of the Indemnified Party where such settlement includes
an admission of civil or criminal liability on behalf of an officer or
director or requires any payment to be made by the Indemnified Party. The
Indemnified Party will have the right to employ counsel in any Action, but
the fees and expenses of such counsel incurred after notice from the
Surviving Corporation of its assumption of the defense thereof will be at the
expense of the Indemnified Party, unless (i) the employment of counsel by the
Indemnified Party has been authorized by the Surviving Corporation, (ii) the
Indemnified Party will have reasonably concluded upon the advice of counsel
that there may be a conflict of interest between the Indemnified Party and
the Surviving Corporation in the conduct of the defense of an Action, or
(iii) the Surviving Corporation shall not in fact have employed counsel to
assume the defense of an Action, in each of which cases the reasonable fees
and expenses of counsel selected by the Indemnified Party will be at the
expense of the Surviving Corporation. Notwithstanding the
37
<PAGE>
foregoing, the Surviving Corporation will not be liable for any settlement
effected without its written consent and the Surviving Corporation will not
be obligated pursuant to this Section 6.13(a) to pay the fees and
disbursements of more than one counsel for all Indemnified Parties in any
single Action, except to the extent two or more of such Indemnified Parties
have conflicting interests in the outcome of such action. In the event of
any conflict between the provisions of the Indemnification Agreements and
this Section 6.13, the provisions of the Indemnification Agreements shall
prevail.
(b) For a period of five years after the Effective Time, Parent
will cause to be maintained officers' and directors' liability insurance
covering the Indemnified Parties who are currently covered, in their
capacities as officers and directors, by the Company's existing officers' and
directors' liability insurance policies on terms substantially no less
advantageous to the Indemnified Parties than such existing insurance;
provided, however, that Parent will not be required in order to maintain or
procure such coverage to pay premiums on an annualized basis in excess of
200% of the current annual premium paid by the Company for its existing
coverage (the "Cap") (which current annual premium the Company represents and
warrants to be approximately $135,000); and provided, further, that if
equivalent coverage cannot be obtained, or can be obtained only by paying an
annual premium in excess of the Cap, Parent will only be required to obtain
as much coverage as can be obtained by paying premiums on an annualized basis
equal to the Cap.
(c) The provisions of this Section 6.13 will survive the
consummation of the Merger and expressly are intended to benefit each of the
Indemnified Parties.
6.14 Employee Benefits. Notwithstanding anything to the contrary
-----------------
contained herein, from and after the Effective Time, the Surviving
Corporation will have sole discretion over the hiring, promotion, retention
and firing of employees of the Surviving Corporation. Notwithstanding the
immediately preceding sentence, Parent will (i) satisfy, or cause the
Surviving Corporation to satisfy, all obligations of the Company or any of
its Subsidiaries under any existing severance agreement between the Company
or any of its Subsidiaries and any of their officers or employees and (ii)
until the expiration of one year after the Effective Time, satisfy, or cause
the Surviving Corporation to satisfy, all obligations of the Company or any
of its Subsidiaries under their current respective severance policies.
Parent will provide, or will cause the Surviving Corporation to provide, for
the benefit of employees of the Surviving Corporation who were employees of
the Company immediately prior to the Effective Time "employee benefit plans"
within the meaning of Section 3(3) of ERISA (a) until the expiration of one
year after the Effective Time, that are, in the aggregate, substantially
comparable to the "employee benefit plans" provided to such individuals by
the Company or any Subsidiary on the date hereof, and (b) thereafter that
are, at the election of Parent, either (i) in the aggregate, substantially
comparable to the "employee benefit plans" provided to such individuals by
the Company or any Subsidiary on the date hereof or (ii) in the aggregate,
substantially comparable to the "employee benefit plans" provided to
similarly situated employees of Parent or its Subsidiaries who were not
employees of the Company or any Subsidiary immediately prior to the Effective
Time; provided, however, that notwithstanding the foregoing (A) nothing
herein will be deemed to require Parent to modify the benefit formulas under
any pension, profit sharing or savings plan of the Company or any Subsidiary
in a manner that increases the aggregate expenses
38
<PAGE>
thereof as of the date hereof in order to comply with the requirements of
ERISA or the Code, (B) employee stock ownership, stock bonus, stock option
and similar equity-based plans, programs and arrangements of the Company or
any of its Subsidiaries are not encompassed within the meaning of the term
"employee benefit plans" hereunder, and (C) nothing herein will obligate
Parent or the Surviving Corporation to continue any particular "employee
benefit plan" for any period after the Effective Time. Notwithstanding the
foregoing, the life insurance policy on Mr. Eldred referred to in Section
4.18 will be terminated.
6.15 Conveyance Taxes. The Company and Parent will cooperate in
----------------
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes, any
transfer, recording, registration and other fees and any similar taxes which
become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the
Effective Time and each party will pay any such tax or fee which becomes
payable by it on or before the Effective Time.
6.16 Consents. The Company will use all reasonable efforts to
--------
obtain each of the consents identified in Schedule 4.6(a).
6.17 Pooling Accounting Treatment. Each of Parent and the Company
----------------------------
agrees not to take any action that to its knowledge could reasonably be
expected to adversely affect the ability of Parent to treat the Merger as a
pooling of interests.
6.18 Company Warrants. The Company will use reasonable efforts to
----------------
influence The Prudential Insurance Company of America to enter into an
agreement to exercise its Company Warrants at or prior to the Effective Time.
7. Conditions
7.1 Conditions to Each Party's Obligation To Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger will be subject
to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall
have been approved in the manner required by applicable law by the holders of
the issued and outstanding shares of capital stock of the Company.
(b) The waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated.
(c) Neither of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the
consummation of the transactions contemplated by this Agreement. In the
event any such order or injunction shall have been issued, each party agrees
to use its reasonable best efforts to have any such injunction lifted.
39
<PAGE>
(d) The Form S-4 shall have become effective and shall be
effective at the Effective Time, and no stop order suspending effectiveness
of the Form S-4 shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing or, to the knowledge of Parent or the Company, be
threatened in writing, and all necessary approvals under state securities
laws relating to the issuance or trading of Parent Common Shares to be issued
to the Company stockholders in connection with the Merger shall have been
received.
(e) All consents, authorizations, orders and approvals of (or
filings or registrations with) any Governmental Entity required in connection
with the execution, delivery and performance of this Agreement shall have
been obtained or made, except for filings in connection with the Merger and
any other documents required to be filed after the Effective Time and except
where the failure to have obtained or made any such consent, authorization,
order, approval, filing or registration would not have a material adverse
effect on the business, financial condition or results of operations of the
Surviving Corporation following the Effective Time.
(f) Parent Common Shares to be issued to the Company's
stockholders in connection with the Merger shall have been approved for
listing on the NASDAQ, subject only to official notice of issuance.
(g) Each of Parent and the Company shall have received letters,
(i) dated as of the date hereof and (ii) dated as of the Effective Time, from
their respective independent public accountants to the effect that the Merger
will qualify for "pooling of interests" accounting treatment under Accounting
Principles Board Opinion No. 16 if consummated in accordance with this
Agreement.
7.2 Conditions to Obligation of Company To Effect the Merger. The
--------------------------------------------------------
obligation of the Company to effect the Merger will be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) (i) The representations and warranties of Parent and Merger
Sub contained in this Agreement shall have been true and correct in all
material respects as of the date hereof and (ii) the representations and
warranties of Parent and Merger Sub contained in this Agreement and in any
document delivered in connection herewith shall be true and correct in all
material respects as of the Closing Date, except (A) for changes specifically
permitted by this Agreement and (B) that those representations and warranties
which address matters only as of a particular date shall remain true and
correct in all material respects as of such date.
(b) Each of Parent and Merger Sub shall have performed or complied
in all material respects with all agreements and conditions contained in this
Agreement required to be performed or complied with by it on or prior to the
Closing Date.
(c) Parent and Merger Sub shall have delivered to the Company a
certificate, dated the date of the Closing, signed by the President or any
Vice President of
40
<PAGE>
each of Parent and Merger Sub, certifying as to the fulfillment of the
conditions specified in Section 7.2(a) and (b).
(d) From the date of this Agreement through the Effective Time,
there shall not have occurred any material adverse change in the business or
properties of Parent and its Subsidiaries.
(e) Parent and Merger Sub shall have obtained all material
consents, waivers, approvals, authorizations or orders and made all filings
in connection with the authorization, execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by each of the
transactions contemplated hereby.
(f) The Company shall have received an opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, satisfactory to the Company,
dated the Effective Time, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, counsel may rely on, and both
of the Company and Parent and Merger Sub shall make, those representations
substantially in the form contained in Exhibits E and F respectively, and all
of such representatives shall be true as of the Effective Time.
7.3 Conditions to Obligation of Parent and Merger Sub to Effect
-----------------------------------------------------------
the Merger. The obligation of Parent and Merger Sub to effect the Merger
----------
will be subject to the fulfillment at or prior to the Closing Date (or such
other date as may be specified below) of the following additional conditions:
(a) (i) The representations and warranties of the Company
contained in this Agreement shall have been true and correct in all material
respects as of the date hereof and (ii) the representations and warranties of
the Company contained in this Agreement and in any document delivered in
connection herewith shall be true and correct in all material respects as of
the Closing Date, except (A) for changes specifically permitted by this
Agreement and (B) that those representations and warranties which address
matters only as of a particular date shall remain true and correct in all
material respects as of such date.
(b) The Company shall have performed or complied in all material
respects with all agreements and conditions contained in this Agreement
required to be performed or complied with by it on or prior to the Closing
Date.
(c) The Company shall have delivered to Parent and Merger Sub a
certificate, dated the date of the Closing, signed by the President or any
Vice President of the Company, certifying as to the fulfillment of the
conditions specified in Section 7.3(a) and (b).
(d) From the date of this Agreement through the Effective Time,
there shall not have occurred any material adverse change in the business or
properties of the Company or any of its Subsidiaries in the United Kingdom,
France or Germany.
41
<PAGE>
(e) The Company shall have obtained all material consents,
waivers, approvals, authorizations or orders and made all filings in
connection with the authorization, execution and delivery of this Agreement
by the Company and the consummation by it of the transactions contemplated
hereby.
(f) The Company or the Board of Directors of the Company or the
other persons or entities described in Schedule 7.3(f), as the case may be,
shall have taken the actions set forth in Schedule 7.3(f).
(g) The Stock Agreement shall have remained in full force and
effect through the Effective Time.
(h) The Company shall have received an opinion of Wilson Sonsini
Goodrich & Rosati, Professional Corporation, satisfactory to the Company,
dated the Effective Time, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the meaning of Section
368(a) of the Code. In rendering such opinion, counsel may rely on, and both
of the Company and Parent and Merger Sub shall make, those representations
substantially in the form contained in Exhibits E and F, respectively, and
all of such representations shall be true as of the Effective Time.
8. Termination
8.1 Termination by Mutual Consent. This Agreement may be
-----------------------------
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval of this Agreement by the stockholders of
the Company, by the mutual consent of Parent and the Company.
8.2 Termination by Either Parent or Company. This Agreement may
---------------------------------------
be terminated and the Merger may be abandoned by action of the Board of
Directors of either Parent or the Company if (a) the Merger shall not have
been consummated by March 31, 1996, which date will be automatically extended
by that amount of time that is reasonably required by the SEC or other
Governmental Entities (whether domestic or foreign) to review filings, which
date will be no later than April 30, 1996; subject to further extension if
necessary to allow 30 days to pass from the date the Company receives an
Alternative Proposal (the "Outside Date") (b) the approval of the Company's
stockholders required by Section 7.1(a) is not obtained at the Stockholders'
Meeting or at any adjournment thereof or by written consent, or (c) a United
States federal or state court of competent jurisdiction or United States
federal or state governmental, regulatory or administrative agency or
commission issues an order, decree or ruling or takes any other action
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other action
becomes final and non-appealable; provided, that the party seeking to
terminate this Agreement pursuant to this clause (c) has used all reasonable
efforts to remove such injunction, order or decree; and provided, in the case
of a termination pursuant to the foregoing, that the terminating party has
not breached this Agreement in any manner that proximately contributes to the
failure to consummate the Merger by the Outside Date.
42
<PAGE>
8.3 Termination by Company. This Agreement may be terminated and
----------------------
the Merger may be abandoned at any time prior to the Effective Time, before
or after the adoption by the stockholders of the Company referred to in
Section 7.1(a), by action of the Board of Directors of the Company, if (a)
there has been a breach by Parent or Merger Sub of any representation or
warranty contained in this Agreement which is not curable or, if curable, is
not cured by the Outside Date and such breach had or is reasonably likely to
have a Parent Material Adverse Effect or (b) there has been a material breach
of any of the covenants set forth in this Agreement on the part of Parent,
which breach is not curable or, if curable, is not cured within 30 calendar
days after written notice of such breach is given by the Company to Parent,
provided, that such 30 day period shall be extended for so long as Parent
shall be making all reasonable attempts to cure such breach, (c) an
involuntary case under the United States Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law is commenced against Parent or
any of its Subsidiaries, a decree or order of a court of competent
jurisdiction for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers of Parent or any of
its Subsidiaries or over their respective assets shall have been entered or
the involuntary appointment of an interim receiver, trustee or other
custodian of Parent or any of its Subsidiaries shall have occurred and any
such event described in this clause (c) shall have continued for 30 days or
(d) Parent or any of its Subsidiaries has an order for relief entered with
respect to it or commences a voluntary case under the United States
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar
law, or consents to the entry of an order for relief in an involuntary case,
to the conversion of an involuntary case to a voluntary case or to the
appointment of or taking possession by a receiver, trustee or other custodian
of any part of the Parent's property, or makes any assignment for the benefit
of creditors.
8.4 Termination by Parent and Merger Sub. This Agreement may be
------------------------------------
terminated and the Merger may be abandoned at any time prior to the Effective
Time, before or after the approval by the stockholders of the Company
referred to in Section 7.1(a), by action of the Boards of Directors of
Parent, if (a) the Board of Directors of the Company shall have withdrawn or
modified in a manner materially adverse to Parent or Merger Sub its approval
or recommendation of this Agreement or the Merger or shall have recommended
an Alternative Proposal to the Company's stockholders, (b) there has been a
breach by the Company of any representation or warranty contained in this
Agreement which is not curable or, if curable, is not cured by the Outside
Date and such breach had or is reasonably likely to have a Company Material
Adverse Effect, (c) there has been a material breach of any of the covenants
set forth in this Agreement on the part of the Company, which breach is not
curable or, if curable, is not cured within 30 days after written notice of
such breach is given by Parent to the Company, provided, that such 30 day
period shall be extended for so long as the Company shall be making all
reasonable attempts to cure such breach, (d) there has been a material breach
by Stockholders of the Stock Agreement, (e) an involuntary case under the
United States Bankruptcy Code or any applicable bankruptcy, insolvency or
other similar law is commenced against the Company or any of its
Subsidiaries, a decree or order of a court of competent jurisdiction for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers of the Company or any of its Subsidiaries
or over their respective assets shall have been entered or the involuntary
appointment of an interim receiver, trustee or other custodian of the Company
or any of its Subsidiaries shall have occurred and any such event described
in this clause (e) shall have
43
<PAGE>
continued for 30 days or (f) the Company or any of its Subsidiaries has an
order for relief entered with respect to it or commences a voluntary case
under the United States Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law, or consents to the entry of an order for
relief in an involuntary case, to the conversion of an involuntary case to a
voluntary case or to the appointment of or taking possession by a receiver,
trustee or other custodian of any part of the Company's property, or makes
any assignment for the benefit of creditors.
8.5 Effect of Termination and Abandonment. In the event of
-------------------------------------
termination of this Agreement and the abandonment of the Merger pursuant to
this Article 8, all obligations of the parties hereto will terminate, except
the obligations of the parties pursuant to this Section 8.5, Section 8.6 and
Section 6.12 and the confidentiality provisions contained in Section 6.6 and
except for the provisions of Sections 9.3, 9.4, 9.6, 9.8, 9.9, 9.12, 9.13
and, if the Purchase Option has been exercised prior to the termination
thereof, 9.14. Moreover, in the event of termination of this Agreement
pursuant to Sections 8.2, 8.3 or 8.4, nothing herein will prejudice the
ability of the non-breaching party from seeking damages from any other party
for any willful breach of this Agreement, including without limitation
attorneys' fees and the right to pursue any remedy at law or in equity.
8.6 Fees and Expenses. (a) Except as provided below and in
-----------------
Section 6.12, all fees and expenses incurred in connection with the Merger,
this Agreement, the Stock Agreement and the transactions contemplated by this
Agreement and the Stock Agreement shall be paid by the party incurring such
fees or expenses, whether or not the Merger is consummated, except that
expenses incurred in connection with printing and mailing the Proxy Statement
and the Form S-4, and governmental filing fees, shall be shared equally by
Parent and the Company.
(b) If the conditions to the Merger set forth in Sections 7.1(b)
through (f) are not satisfied, none of the parties hereto shall be entitled
to a Termination Fee (as defined below) or Expenses (as defined below).
(c) The Company shall pay in immediately available funds to Parent
upon demand a fee (a "Termination Fee") plus all Expenses, promptly, but in
no event later than two business days, in an amount equal to $1,480,677, if
(i) the conditions to the Merger set forth in Section 7.3 are not satisfied
(other than as a result of a willful and material breach of this Agreement by
Parent or Merger Sub, which breach shall not have been cured within five
business days following Parent's receipt of written notice of such breach
from the Company (a "Parent Breach")), (ii) the Company breaches this
Agreement, or (iii) the requisite approval of the Company's stockholders for
the Merger is not obtained at the Stockholders' Meeting, at any adjournment
thereof or by written consent, and there is no Alternative Proposal.
(d) Parent or Merger Sub shall pay in immediately available funds
to the Company upon demand a Termination Fee plus all Expenses, promptly, but
in no event later than two business days, in an amount equal to $1,480,677,
(i) if the conditions to the Merger set forth in Section 7.2 are not
satisfied (other than as a result of a willful and material breach of this
Agreement by the Company, which breach shall not have been cured within
44
<PAGE>
five business days following the Company's receipt of written notice of such
breach from Parent or Merger Sub) or (ii) Parent or Merger Sub breaches this
Agreement.
(e) The Company shall pay in immediately available funds to Parent
upon demand a Termination Fee plus all Expenses, promptly, but in no event
later than two business days, in an amount equal to $4,442,032, if (i) the
requisite approval of the Company's stockholders for the Merger is not
obtained at the Stockholders' Meeting, at any adjournment thereof or by
written consent and there is any Alternative Proposal, (ii) the Stockholders'
Meeting does not occur prior to the Outside Date and there is any Alternative
Proposal, (iii) the Company's Board of Directors shall have withdrawn or
materially modified its approval or recommendation of this Agreement other
than due to the occurrence of a Parent Material Adverse Effect and Parent or
Merger Sub terminates this Agreement, or (iv) the Company engages in a
Competing Transaction.
For purposes of this Agreement, a "Competing Transaction" means, if
within six months following the earlier of (x) termination of this Agreement,
(y) the date, if any, that the stockholders of the Company fail to approve
the Merger, and (z) the date, if any, that the Board of Directors of the
Company withdraws or materially modifies its approval or recommendation of
this Agreement:
(A) The Company and a person or entity other than Parent
and/or Merger Sub shall have entered into a letter of intent or a
definitive agreement with respect to an Alternative Proposal; or
(B) A tender or exchange offer for 25% or more of the shares
of any capital stock of the Company shall have been commenced.
(f) For purposes of this Agreement "Expenses" shall mean all fees
and expenses, up to a maximum of $2,000,000, reasonably incurred or paid by
or on behalf of a party or any of its affiliates in connection with the
Merger or the consummation of any of the transactions contemplated by this
Agreement or the Stock Agreement, including all fees and expenses of counsel,
investment banking firms, accountants, experts and consultants to a party or
any of its affiliates.
9. General Provisions
9.1 Nonsurvival of Representations, Warranties and Agreements.
---------------------------------------------------------
All representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement will be deemed to the extent
expressly provided herein to be conditions to the Merger and will not survive
the Merger, provided, however, that the agreements contained in Article 3,
Section 6.13 and this Article 9 will survive the Merger and Sections 6.12,
8.5 and 8.6 will survive termination.
9.2 Notices. Any notice required to be given hereunder will be
-------
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service),
45
<PAGE>
hand delivery or certified or registered mail (return receipt requested and
first-class postage prepaid), addressed as follows:
If to Parent or Merger Sub: If to the Company:
Micro Warehouse, Inc. Inmac Corp.
535 Connecticut Avenue 2465 Augustine Drive
Norwalk, CT 06854 Santa Clara, CA 95052
Attention: Bruce L. Lev Attention: Jeffrey A. Heimbuck
Fax No.: (203) 899-4203 Fax No.: (408) 727-4131
With copies to: With copies to:
Jones, Day, Reavis & Pogue Wilson, Sonsini, Goodrich & Rosati
901 Lakeside Avenue Professional Corporation
Cleveland, Ohio 44114 650 Page Mill Road
Attention: Paul T. Ruxin Palo Alto, CA 94304-1050
Fax No.: (216) 579-0212 Attention: Barry Taylor
Fax No.: (415) 496-4092
or to such other address as any party will specify by written notice so
given, and such notice will be deemed to have been delivered as of the date
so telecommunicated, personally delivered or mailed.
9.3 Assignment; Binding Effect. Neither this Agreement nor any of
--------------------------
the rights, interests or obligations hereunder will be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence,
this Agreement will be binding upon and will inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the
provisions of Section 6.13, nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.4 Entire Agreement. This Agreement, the Exhibits, the Schedules
----------------
and any documents delivered by the parties in connection herewith, together
with the Confidentiality Agreement, dated October 6, 1995, between Parent and
the Company, which will survive the execution and delivery of this Agreement,
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any
provision of this Agreement will be binding upon any party hereto unless made
in writing and signed by all parties hereto.
9.5 Amendment. This Agreement may be amended by the parties
---------
hereto, by action taken by their respective Board of Directors, at any time
before or after approval of matters presented in connection with the Merger
by the stockholders of the Company but
46
<PAGE>
after any such stockholder approval, no amendment will be made which by law
requires the further approval of such stockholders without obtaining such
further approval. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
9.6 Governing Law. This Agreement will be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard
to its rules of conflict of laws.
9.7 Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and delivered
will be an original, but all such counterparts will together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the
parties hereto.
9.8 Headings. Headings of the Articles and Sections of this
--------
Agreement are for the convenience of the parties only, and will be given no
substantive or interpretive effect whatsoever.
9.9 Interpretation. In this Agreement, unless the context
--------------
otherwise requires, words describing the singular number will include the
plural and vice versa, and words denoting any gender will include all genders
and words denoting natural persons will include corporations and partnerships
and vice versa.
9.10 Waivers. Except as provided in this Agreement, no action
-------
taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, will be deemed to constitute a
waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision
hereunder will not operate or be construed as a waiver of any prior or
subsequent breach of the same or any other provision hereunder.
9.11 Incorporation of Schedules. The Schedules attached hereto and
--------------------------
referred to herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
9.12 Severability. Any term or provision of this Agreement which
------------
is invalid or unenforceable in any jurisdiction will, as to that
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision will be interpreted to be only so broad as is
enforceable.
9.13 Enforcement of Agreement. The parties hereto agree that
------------------------
irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly
47
<PAGE>
agreed that the parties will be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any Delaware Court, this being in addition to any other
remedy to which they are entitled at law or in equity.
9.14 Effect of Exercise of Purchase Option. In the event that
-------------------------------------
Parent purchases Company Common Shares upon exercise of the Purchase Option:
(a) If requested by Parent, the Company will, promptly following
the purchase of Company Common Shares upon exercise of the Purchase Option
and from time to time thereafter, take all action which can be taken by the
Company to cause a number of directors of the Company proportionate to the
amount of Company Common Shares owned by Parent to be persons designated by
Parent (whether, at the request of Parent, by increasing the size of the
number of directors of the Company or by seeking the resignation of directors
and causing Parent's designees to be elected to fill the vacancies so
created). At such time, the Company also will take all action permitted by
law to cause persons designated by Parent to constitute at least the same
percentage as is on the Company's Board of Directors and of each committee of
the Company's Board of Directors. The Company's obligation to cause
designees of Parent to be so elected or appointed as directors of the Company
will be subject to Section 14(f) of the Exchange Act and Rule 14(f)-1
promulgated thereunder. Parent will supply to the Company in writing and
will be solely responsible for any information with respect to it and its
designees, officers, directors and affiliates required by Section 14(f) and
Rule 14f-1, and the Company will use all reasonable efforts to file as
promptly as practicable with the SEC and transmit to all holders of record of
securities of the Company who would be entitled to vote at a meeting for
election of directors such information as is required under Section 14(f) and
Rule 14(f)-1. Notwithstanding the foregoing, until the Effective Time, the
Company will use all reasonable efforts to assure that the Company's Board of
Directors has at least three directors who are directors on the date hereof
(the "Continuing Directors") and to assure that the Continuing Directors
represent a majority of the Company's directors; provided further, that, in
such event, if the number of Continuing Directors is reduced below three for
any reason whatsoever, any remaining Continuing Directors (or Continuing
Director, if there is only one remaining) will be entitled to designate three
persons to fill such vacancies who will be deemed to be Continuing Directors
for purposes of this Agreement or, if no Continuing Director then remains,
the other directors will designate three persons to fill such vacancies who
are not shareholders, affiliates or associates of Parent and such persons
will be deemed to be Continuing Directors for purposes of this Agreement.
The Company will use all reasonable efforts to cause the person(s) so
designated by the Continuing Directors to be elected to the Board of
Directors of the Company.
(b) Parent will use all reasonable efforts in accordance with
applicable law and the Company's certificate of incorporation and by-laws to
convene a meeting of the Company's stockholders as promptly as practicable to
consider and vote upon the Merger, including, without limitation, timely
mailing of the Proxy Statement/Prospectus.
(c) Parent will, with respect to all Company Common Shares
acquired by it upon exercise of the Purchase Option and any other Company
Common Shares that it owns
48
<PAGE>
of record or beneficially on the record date for voting at the meeting of
stockholders called to consider and vote upon the Merger, vote or cause to be
voted such Company Common Shares (or execute or cause to be executed written
consents with respect thereto) (i) in favor of the adoption of this Agreement
and approval of the Merger and the other transactions contemplated hereby,
(ii) against any Alternative Proposal, and (iii) in favor of any other matter
necessary for the consummation of the transactions contemplated by this
Agreement and considered and voted upon at such meeting of the Company's
stockholders.
(d) Notwithstanding any other provision contained herein to the
contrary, from and after the date of the closing of the exercise of the
Purchase Option, the obligations of Parent and the Merger Sub to effect the
Merger will be subject only to the fulfillment at or prior to the Closing
Date of the conditions set forth in Section 7.1(a), (c) and (d) and all other
conditions to the obligations of the Parent and the Merger Sub to effect the
Merger on the terms and conditions of this Agreement as in effect immediately
prior to the exercise of the Purchase Option will be deemed satisfied or
waived and the conditions to the obligations of the Company to effect the
Merger in Sections 7.1(g) and 7.2(f) will be deemed waived.
(e) Notwithstanding any other provision contained herein to the
contrary, from and after the date of the closing of the exercise of the
Purchase Option, Parent and Merger Sub will not be entitled to terminate this
Agreement or abandon the Merger unless a United States federal or state court
of competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission issues an order, decree or
ruling or takes any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and
such order, decree, ruling or other action becomes final and non-appealable.
(f) Any action by the Company to waive or amend any provision of
this Agreement will require the approval of a majority of the Continuing
Directors.
49
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement and
caused the same to be duly delivered on their behalf on the day and year
first written above.
MICRO WAREHOUSE, INC.
By: /s/ Peter Godfrey
------------------------
Peter Godfrey
President
INDIGO HOLDING COMPANY, INC.
By: /s/ Steven Purcell
------------------------
Steven Purcell
President
INMAC CORP.
By: /s/ Jeffrey A. Heinbuck
------------------------
Jeffrey A. Heimbuck
President
50
<PAGE>
Schedule 7.3(f)
Obligations of the Company
--------------------------
1. The Company will prior to the Effective Time (a) provide notice of
the Merger as required under Section 3.2 of the Warrant Agreement,
dated as of June 29, 1995, between the Company and The Prudential
Insurance Company of America (the "Warrant Agreement") and (b)
cooperate with Parent in taking any other action required to be
taken under the Warrant Agreement or otherwise in order to effect
the treatment of the Company Warrant as contemplated by Section
3.1(f) of this Agreement.
2. The Company will not authorize any discretionary accelerated
payment or distribution of benefits under any compensation plan or
program of the Company.
3. The Company will take any action that needs to be taken to provide
that options issued pursuant to the Company Stock Plans will be
treated as provided in the Agreement.
4. The Company will reconcile all bank accounts of the Subsidiary in
the United Kingdom, including the nature of all differences between
book and cash balances.
Exhibit 2
==============================================================================
STOCK AGREEMENT
by and between
Micro Warehouse, Inc.
and
Kenneth and Roberta Eldred Revocable Trust U/T/A
and
Eldred 1995 Charitable Remainder Unit Trust U/T/A
----------------------------------------
Dated as of November 30, 1995
----------------------------------------
==============================================================================
<PAGE>
Table of Contents
Page
1. Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Option . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Prohibited Transfers . . . . . . . . . . . . . . . . . . 4
2. Representations and Warranties of each of the Stockholders . . . 4
2.1 Authorization, Validity and Effect of Agreement . . . . . 4
2.2 No Conflict; Required Filings and Consents . . . . . . . 4
2.3 Ownership of Owned Shares . . . . . . . . . . . . . . . . 5
2.4 Purchase Not for Distribution . . . . . . . . . . . . . . 5
2.5 No Brokers . . . . . . . . . . . . . . . . . . . . . . . 5
3. Representations and Warranties of Parent . . . . . . . . . . . . 5
3.1 Authorization, Validity and Effect of Agreement . . . . . 5
3.2 No Conflict; Required Filings and Consents . . . . . . . 5
3.3 Purchase Not for Distribution . . . . . . . . . . . . . . 6
3.4 No Brokers . . . . . . . . . . . . . . . . . . . . . . . 6
3.5 Issuance of Parent Common Shares . . . . . . . . . . . . 6
4. Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . 6
4.1 Voting of Shares . . . . . . . . . . . . . . . . . . . . 6
4.2 No Solicitation . . . . . . . . . . . . . . . . . . . . . 7
4.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . 7
4.4 Registration Rights and Indemnification . . . . . . . . . 7
4.5 Delivery on Exercise . . . . . . . . . . . . . . . . . . 11
4.6 Tax-Free Reorganization . . . . . . . . . . . . . . . . . 11
5. General Provisions . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Assignment; Binding Effect . . . . . . . . . . . . . . . 12
5.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . 12
5.4 Governing Law . . . . . . . . . . . . . . . . . . . . . . 12
5.5 Amendments . . . . . . . . . . . . . . . . . . . . . . . 12
5.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . 12
5.7 Headings . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 Interpretation . . . . . . . . . . . . . . . . . . . . . 12
5.9 Severability . . . . . . . . . . . . . . . . . . . . . . 13
5.10 Termination . . . . . . . . . . . . . . . . . . . . . . . 13
5.11 Specific Performance and Attorney Fees . . . . . . . . . 13
- i -
<PAGE>
Stock Agreement
Stock Agreement (this "Agreement"), dated as of November 30, 1995, by
and between Micro Warehouse, Inc., a Delaware corporation ("Parent"), and
Kenneth A. Eldred and Roberta E. Eldred, trustees of the Kenneth and Roberta
Eldred Revocable Trust U/T/A, dated November 28, 1983, as amended as of
January 19, 1990 (the "Revocable Trust"), and Kenneth A. Eldred, trustee of
the Eldred 1995 Charitable Remainder Unit Trust U/T/A, dated as of September
14, 1995 (the "Charitable Trust")(each of the Revocable Trust and the
Charitable Trust being a "Stockholder" and collectively the "Stockholders").
Recitals
A. Parent, Micro Warehouse, Inc., Indigo Holding Company, Inc. a
Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub"),
and Inmac Corp., a Delaware corporation (the "Company"), have entered into an
Agreement and Plan of Merger, dated the date hereof (the "Merger Agreement"),
pursuant to which the parties thereto have agreed, on the terms and subject
to the conditions set forth therein, to merge Merger Sub with and into the
Company (the "Merger").
B. As of the date hereof, each of the Revocable Trust and the
Charitable Trust is the record, beneficial and pecuniary owner of, and has
the sole right to vote and dispose of, 1,954,235 shares and 800,000 shares,
respectively, (the "Owned Shares") of Common Stock, par value $.01 per share,
of the Company ("Company Common Shares").
C. As a condition to its willingness to enter into the Merger
Agreement, Parent has required that simultaneously with the execution of the
Merger Agreement the Stockholders agree, and the Stockholders are willing to
agree, to the matters set forth herein.
1. Option
1.1 Option. (a) Each of the Stockholders hereby grants to Parent
------
an irrevocable option (the "Option") to purchase, on the terms and subject to
the conditions set forth herein, all of the Owned Shares, together with
(i) any additional shares of capital stock of the Company which such
Stockholder is or becomes entitled to receive from the Company by reason of
being a record holder of the Owned Shares, (ii) any securities or other
property into which any such Owned Shares shall have been or shall be
converted or changed (other than Parent Common Shares (as defined below)),
whether by amendment to the Certificate of Incorporation of the Company,
merger, consolidation, reorganization, capital change or otherwise, (iii) any
additional Company Common Shares acquired by such Stockholder as the result
of such Stockholder exercising an option, warrant or other right to acquire
shares of capital stock from the Company (all of the foregoing hereinafter
collectively referred to as the "Additional Owned Shares"), and (iv) any
shares of capital stock referred to in clauses (i), (ii), and (iii) above
that are issued or issuable in respect of Additional Owned Shares (the Owned
Shares, the Additional Owned Shares and any securities referred to in clause
(iv) above hereinafter collectively referred to as the "Option Shares").
<PAGE>
(b) Subject to the conditions set forth in Section 1.1(h), the
Option may be exercised in whole but not in part by notice given by Parent to
each Stockholder on or subsequent to the date of receipt of an Alternative
Proposal (as defined in the Merger Agreement) by the Company or its
stockholders and at any time prior to the termination of this Agreement as
provided in Section 5.10.
(c) In the event Parent wishes to exercise the Option, Parent
first will send a written notice to each Stockholder specifying a place, date
(not less than two and more than five business days from the date such notice
is given) and time for the closing of the purchase of the Option Shares (the
"Closing"). Parent will send a copy of any such notice to the Company at the
address set forth in the Merger Agreement.
(d) The total price payable to a Stockholder upon exercise of the
Option will be the number of shares of Common Stock, par value $.01 per
share, of Parent ("Parent Common Share") equal to the product of (i) the
Conversion Rate (as defined in the Merger Agreement) calculated using the
date of exercise of the Option in lieu of the Closing Date (as defined in the
Merger Agreement) and (ii) the number of Option Shares to be purchased upon
such exercise; provided, however, that if any additional shares of capital
stock of the Company or any of its Subsidiaries (as defined in the Merger
Agreement) are issued by the Company or any of its Subsidiaries or any of
their respective successors, other than those set forth in Section 4.3 to the
Merger Agreement (the "Excess Shares"), the total number of Parent Common
Shares payable to such Stockholder for all of the Option Shares, including
any Excess Shares owned beneficially or of record by such Stockholder, will
be the number of Parent Common Shares equal to the product of (A) the
Conversion Rate and (B) the total number of Option Shares, less the total
number of Excess Shares owned beneficially or of record by such Stockholder.
(e) At the Closing, each Stockholder will deliver to Parent a
certificate or certificates representing the Option Shares, duly endorsed for
transfer or accompanied by appropriate stock powers, duly executed in blank,
and Parent will issue or deliver to such Stockholder a certificate
representing the number of Parent Common Shares to which such Stockholder is
entitled pursuant to Section 1.1(d). Parent agrees to exercise the Option
only in states where there are no transfer taxes.
(f) In the event that (i) the Option has been exercised, (ii) the
Merger has not been consummated, (iii) within one year after the exercise of
the Option Parent sells the Option Shares to, or the Company enters into an
agreement providing for a merger, consolidation or transaction involving any
purchase of all or any significant portion of the assets or equity interests
of the Company (the events referred to in this clause (iii) are hereinafter
referred to as a "Transaction"), with, a third party (other than an affiliate
of Parent), and (iv) the Transaction closes within one year thereafter,
Parent will notify each Stockholder, within two business days of such event,
of the receipt of proceeds paid to Parent in a Transaction with respect to
the Option Shares, and Parent will pay to the Stockholders within five
business days after its receipt of such proceeds, by delivery of a certified
check or an official bank check in immediately available funds payable to
each of the Stockholders or by wire transfer of immediately available funds
to an account specified in writing by each of the Stockholders, an amount in
cash or in kind (in accordance with the consideration paid in the
Transaction) equal to one-half of the excess (if any) of (A) the total
consideration received by Parent or its affiliates with respect to the Option
Shares upon the closing of a Transaction over (B) the total consideration
received by the Stockholders pursuant to Section 1.1(d) hereof upon exercise
of the Option. For purpose of this Section 1.1(f), any non-cash
consideration will be valued as follows: (1) any publicly traded securities
(other than Parent Common Shares) will be valued at the average of the
closing prices for such securities for the 20 trading days ending five days
prior to the date of the closing of the Transaction and (2) any non-cash
consideration other than publicly traded securities will be valued at its
fair market value; in the event Parent and the Stockholders cannot agree on
the fair market value, Parent and the Stockholders will, in good faith,
mutually select an appraiser, whose determination will be final and binding,
with the expenses of the appraiser being shared equally by Parent and the
Stockholders.
-2-
<PAGE>
(g) In the event that (i) the Option has been exercised, (ii) the
Merger is consummated, and (iii) Parent has increased the price per share
reflected in the numerator of the Conversion Rate (the "New Conversion
Rate"), Parent will issue to the Stockholders contemporaneously with the
issuance of shares pursuant to Section 3.2 of the Merger Agreement, a number
of Parent Common Shares equal to one-half of the excess of (A) Parent Common
Shares calculated using the New Conversation Rate over (B) the Parent Common
Shares calculated using the Conversion Rate applicable to the Stockholders
upon exercise of the Option.
(h) The obligations of Parent and each of the Stockholders to
consummate the purchase and sale of the Option Shares pursuant to this
Section 1.1 will be subject to the fulfillment of the following conditions,
if applicable:
(i) The expiration or termination of the waiting period
applicable to the consummation of such transactions under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR Act"); and
(ii) None of the parties hereto shall be subject to any order
or injunction of a court of competent jurisdiction which prohibits the
consummation of such transactions.
Each of the parties will promptly make, and cause each of their respective
affiliates to make, all such filings and take all such actions as may be
reasonably required in order to permit the lawful exercise of the Option, as
promptly as possible, including without limitation the filing contemplated by
this Section 1.1(h).
1.2 Prohibited Transfers. Neither of the Stockholders will
--------------------
during the term of the Option, except pursuant to this Agreement or the
Merger Agreement (a) sell, pledge or otherwise dispose of any Option Shares
or any interest therein, (b) deposit any Option Shares into a voting trust or
enter into a voting agreement or arrangement with respect to any Option
Shares or grant any proxy with respect thereto, or (c) enter into any
- 3 -
<PAGE>
contract, option or other arrangement or undertaking with respect to the
foregoing or the direct or indirect acquisition or sale, assignment, transfer
or other disposition of any Company Common Shares or any interest therein.
2. Representations and Warranties of each of the Stockholders
Each of the Stockholders hereby represents and warrants to Parent
as follows:
2.1 Authorization, Validity and Effect of Agreement. This
-----------------------------------------------
Agreement has been duly executed and delivered by each of the Stockholders
and constitutes the valid and binding obligation of such Stockholder,
enforceable against such Stockholder in accordance with its terms.
2.2 No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by each of the Stockholders does
not, and the consummation by each of the Stockholders of the transactions
contemplated hereby will not, (i) subject to making the filings and obtaining
the approvals identified in Section 2.2(b), conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to either of the
Stockholders or by which either of the Stockholders or any Option Shares is
bound or affected, or (ii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, result in the loss of a material benefit under, or give to
others any right of purchase or sale, or any right of termination, amendment,
acceleration, increased payments or cancellation of, or result in the
creation of a lien or other encumbrance on any Option Shares pursuant to any
contract, agreement or other instrument or obligation to which either of the
Stockholders is a party or by which either of the Stockholders or any
property or asset of the Stockholders is bound or affected.
(b) The execution and delivery of this Agreement by the
Stockholders does not, and the performance of this Agreement and the
consummation by the Stockholders of the transactions contemplated hereby will
not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority, domestic
or foreign (each a "Governmental Entity"), except for (i) applicable
requirements, if any, of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and (ii) the notification requirements under the HSR Act.
2.3 Ownership of Owned Shares. Each of the Stockholders is the
-------------------------
sole record and beneficial owner of the Owned Shares, free and clear of any
security interests, liens, charges, encumbrances, equities, claims, options
(other than the Option), proxies, stockholder agreements or limitations of
whatever nature and free of any other limitation or restriction (including
any restriction on the right to vote, sell or otherwise dispose of the Owned
Shares or any interest therein) except pursuant to this Agreement. The Owned
Shares constitute collectively all of the Company Common Shares in which the
Stockholders have a beneficial and pecuniary interest.
2.4 Purchase Not for Distribution. The Parent Common Shares to be
-----------------------------
acquired upon exercise of the Option will be so acquired without a view to
the public
- 4 -
<PAGE>
distribution thereof except when registered as contemplated herein and such
shares will not be transferred or otherwise disposed of except in a
transaction registered or exempt from registration under the Securities Act
of 1933, as amended (the "Securities Act"), and in compliance with applicable
state securities laws.
2.5 No Brokers. Neither of the Stockholders have entered into any
----------
contract, arrangement or understanding with any person or firm which may
result in the obligation of Parent to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
3. Representations and Warranties of Parent
Parent hereby represents and warrants to the Stockholders as
follows:
3.1 Authorization, Validity and Effect of Agreement. Parent has
-----------------------------------------------
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Parent and constitutes the
valid and binding obligation of Parent, enforceable against Parent in
accordance with its terms.
3.2 No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by Parent do not, and the
consummation by Parent and of the transactions contemplated hereby will not,
(i) conflict with or violate the certificate of incorporation or by-laws of
Parent, (ii) subject to making the filings and obtaining the approvals
identified in Section 3.2(b), conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Parent or by which any
property or asset of Parent is bound or affected, or (iii) subject to making
the filings and obtaining the approvals identified in Schedule 4.6(a) of the
Merger Agreement, result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, result in the loss of a material benefit under, or give to others any
right of termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance on
any property or asset of Parent pursuant to, any contract, agreement or other
instrument or obligation to which Parent is a party or by which Parent or any
property or asset of Parent is bound or affected.
(b) The execution and delivery of this Agreement by Parent do not,
and the performance of this Agreement and the consummation by Parent of the
transactions contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
Governmental Entity, except for (i) applicable requirements, if any, of the
Exchange Act and (ii) the notification requirements under the HSR Act.
3.3 Purchase Not for Distribution. The Option and the securities
-----------------------------
to be acquired upon exercise of the Option (the "Acquired Shares") are and
will be acquired by Parent without a view to the public distribution thereof
and the Acquired Shares will not be
- 5 -
<PAGE>
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the Securities Act and in compliance with
applicable state securities laws.
3.4 No Brokers. Parent has not entered into any contract,
----------
arrangement or understanding with any person or firm which may result in the
obligation of the Stockholders to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations
leading to this Agreement or the consummation of the transactions
contemplated hereby.
3.5 Issuance of Parent Common Shares. The Parent Common Shares to
--------------------------------
be paid to the Stockholders upon exercise of the Option pursuant to this
Agreement will, when issued in accordance with this Agreement, be duly
authorized, validly issued, fully paid and nonassessable.
4. Certain Covenants
4.1 Voting of Shares. (a) Each of the Stockholders will, with
----------------
respect to (i) all Owned Shares and (ii) any other Option Shares that it owns
of record or beneficially on the record date for voting at the meeting of the
stockholders called to consider and vote upon the Merger (the "Stockholders'
Meeting"), vote or cause to be voted such Option Shares (or execute or cause
to be executed written consents with respect to such Option Shares) (A) in
favor of the adoption of the Merger Agreement and approval of the Merger and
the other transactions contemplated by the Merger Agreement, (B) against any
Alternative Proposal (as defined in the Merger Agreement), and (C) in favor
of any other matter necessary for the consummation of the transactions
contemplated by the Merger Agreement and considered and voted upon at the
Stockholders' Meeting. The Stockholders acknowledge receipt and review of a
copy of the Merger Agreement.
(b) Following the acquisition of the Option Shares by Parent upon
the exercise of the Option, Parent will, with respect to the Option Shares
that it owns of record or beneficially on the record date for the
Stockholders' Meeting, vote or cause to be voted such Option Shares (or
execute or cause to be executed written consents with respect to such Option
Shares) (i) in favor of the adoption of the Merger Agreement and approval of
the Merger and the other transactions contemplated by the Merger Agreement,
(ii) against any Alternative Proposal, and (iii) in favor of any other matter
necessary for the consummation of the transactions contemplated by the Merger
Agreement and considered and voted upon at the Stockholders' Meeting.
4.2 No Solicitation. Prior to the Effective Time (as defined in
---------------
the Merger Agreement), (a) neither of the Stockholders will (except Kenneth
A. Eldred in his capacity as a director of the Company and then only to the
extent permitted in the Merger Agreement), and will cause its agents or
representatives (including, without limitation, any investment banker,
attorney or accountant retained by it) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or
implementation of any Alternative Proposal or engage in any negotiations
concerning, or provide any confidential information or data to, or
- 6 -
<PAGE>
have any discussions with, any person relating to an Alternative Proposal, or
otherwise facilitate any effort or attempt to make or implement an
Alternative Proposal, and (b) the Stockholders will notify Parent orally and
in writing immediately if any such inquiries or proposals are received by,
any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it.
4.3 Transfer of Shares. Prior to the Effective Time or, if
------------------
earlier, the termination of the Merger Agreement in accordance with its
terms, neither of the Stockholders will directly or indirectly, through any
affiliate or associate, sell, assign, transfer, pledge or otherwise dispose
of or acquire, or enter into any put, call or other contract, option or other
arrangement or undertaking with respect to the direct or indirect acquisition
or sale, assignment or other disposition of any Parent Common Shares.
4.4 Registration Rights and Indemnification. (a) As promptly as
---------------------------------------
practicable after the exercise of the Option, Parent shall file, and
thereafter use its reasonable best efforts to cause to become and to remain
effective, for so long as neither of the Stockholders may not resell free of
restrictions without registration under the Securities Act the Parent Common
Shares, if any, delivered to the Stockholders pursuant to Section 1.1(d) (the
"Parent Stock"), a registration statement (the "Registration Statement")
registering the resale by each of the Stockholders of the Parent Stock;
provided, however, that Parent shall in no event be required to cause such
- -------- -------
Registration Statement to remain in effect beyond the second anniversary of
the date of exercise of the Option, and (b) the Stockholders will promptly
notify Parent when all shares subject to such registration shall have been
earlier sold or otherwise disposed of by the Stockholders. For so long as
Parent is required to cause such Registration Statement to remain in effect,
Parent shall use its reasonable best efforts to cause the Parent Stock to be
(i) registered or qualified (to the extent not exempt from such registration
or qualification) for sale under the blue sky laws of such states as Seller
may reasonably request and (ii) listed on the Nasdaq National Market or other
nationally recognized exchange. All costs and expenses related to such
registration and listing (excluding any of such Stockholder's related or
unrelated costs and expenses) shall be borne by Parent. Parent will provide
the Stockholders with such number of copies of the Prospectus as the
Stockholders may reasonably request, including all amendments and supplements
thereto that are necessary so that the Registration Statement and Prospectus
at the time of each sale of stock by the Stockholders is not false or
misleading with respect to any material fact and does not omit to state any
material fact necessary in order to make the statements therein in light of
the circumstances under which they are made not misleading.
(b) For the first 90 days upon effectiveness of the Registration
Statement, the Stockholders may distribute Parent Stock without any
restrictions. Thereafter, if Parent determines in good faith that the
distribution of Parent Stock (i) would materially impede, delay or interfere
with any pending financing, acquisition, corporate reorganization or other
significant transaction involving Parent or (ii) would require disclosure of
non-public material information, the disclosure of which would materially and
adversely affect Parent, and, in the case of clause (ii), Parent is
concurrently forbidding purchases or sales in the open market by senior
executives of Parent, Parent will promptly give the stockholder written
notice of such determination and will be entitled to postpone the
distribution of Parent Stock
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<PAGE>
for a reasonable period of time not to exceed two periods of 60 calendar days
in any one year (a "Blackout Period"). Parent will promptly notify the
Stockholders of the expiration or earlier termination of a Blackout Period.
Further, the Stockholders will not engage in a distribution of Parent Stock
during any window period during which Parent is concurrently forbidding
purchases or sales in the open market by senior executives of Parent in
connection with its existing company policy in connection with the
preparation and filing of Parent's Exchange Act reports provided such
forbidden window period may not exceed forty-five (45) days for each calendar
quarter.
(c) Parent will indemnify and hold harmless each of the
Stockholders and its agents against all losses, claims, damages, liabilities
and expenses (including reasonable attorneys' fees, disbursements and
expenses) incurred by it pursuant to any actual or threatened action, suit,
proceeding or investigation arising out of or based upon (A) any violation by
Parent (or its officers, directors or controlling persons) of any federal or
state law, rule or regulation applicable to Parent and relating to any action
required or inaction by Parent (or such other person) in connection with or
relating to any Registration Statement, (B) any untrue or alleged untrue
statement of material fact contained in the Registration Statement, any
Prospectus or preliminary Prospectus, or any amendment or supplement to any
of the foregoing, or (C) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein (in the case of a Prospectus or a preliminary Prospectus,
in light of the circumstances then existing) not misleading, except in each
case insofar as the same arise out of or are based upon any such untrue
statement or omission made in reliance on and in conformity with information
with respect to such indemnified party furnished in writing to Parent by such
indemnified party or its counsel expressly for use therein. In connection
with an underwritten offering, Parent will indemnify the underwriters
thereof, their officers, directors, agents, trustees and each person who
controls such underwriters (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) to the same extent as
provided above with respect to the indemnification of the Stockholders.
Notwithstanding the foregoing provisions of this Section 4.4(c), Parent will
not be liable to the Stockholders (or any agent thereof), any person who
participates as an underwriter in the offering or sale of Parent Stock or any
other person, if any, who controls underwriter (within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act), under the
indemnity agreement in this Section 4.4(c) for any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense that arises
out of either of the Stockholders' or such other person's failure to send or
deliver a copy of the final Prospectus to the person asserting an untrue
statement or alleged untrue statement or omission or alleged omission at or
prior to the written confirmation of the sale of the Parent Stock to such
person if such statement or omission was corrected in such final Prospectus
and Parent had previously furnished copies thereof to the Stockholders or
such other person in accordance with this Agreement.
(d) In connection with the Registration Statement, the
Stockholders will furnish to Parent in writing such information, including
the name, address and the amount of Parent Stock held by such Stockholder, as
Parent reasonably requests for use in such Registration Statement or the
related Prospectus and will indemnify and hold harmless (in the same manner
and to the same extent as set forth in Section 4.4(c)) Parent or any
underwriter, as the case may be, and any of their respective affiliates,
directors, officers, agents, trustees and controlling persons (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act), against any losses, claims, damages, liabilities and expenses resulting
from (A) any violation by either of the Stockholders (or their agents), of
any federal or state law, rule or regulation relating to action required of
or inaction by either of the Stockholders (or such other person) in
connection with their offer and sale of Parent Stock and (B) any untrue or
alleged untrue statement of a material fact contained in, or any omission or
alleged omission of a material fact required to be stated in, such
Registration Statement or Prospectus or any amendment or supplement to either
of them or necessary to make the statements therein (in the case of a
Prospectus, in the light of the circumstances then existing) not misleading,
but only to the extent that any such untrue statement or omission is made in
reliance on and in conformity with information with respect to the
Stockholders furnished in writing to Parent by the Stockholders or their
agent or counsel specifically for inclusion therein. Each of the
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<PAGE>
Stockholders' indemnification obligations under this Section 4 shall be
limited to an amount not to exceed the net proceeds received by such
Stockholder upon the sale of Parent Common Stock pursuant to the Registration
Statement.
(e) Any person entitled to indemnification hereunder agrees to
give prompt written notice to the indemnifying party after the receipt by
such indemnified party of any written notice of the commencement of any
action, suit, proceeding or investigation or threat thereof made in writing
for which such indemnified party may claim indemnification or contribution
pursuant to this Agreement (provided that failure to give such notification
will not affect the obligations of the indemnifying party pursuant to this
Section 4.4 except to the extent the indemnifying party shall have been
actually prejudiced as a result of such failure). In case any such action is
brought against any indemnified party and it notifies the indemnifying party
of the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it wishes, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who may not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under these indemnification provisions for
any legal expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation, unless in the
reasonable judgment of any indemnified party a conflict of interest is likely
to exist, based on the written opinion of counsel, between such indemnified
party and any other of such indemnified parties with respect to such claim,
in which event the indemnifying party will be obligated to pay the reasonable
fees and expenses of such additional counsel. No indemnifying party, in
defense of any such action, suit, proceeding or investigation, may, except
with the consent of each indemnified party, consent to the entry of any
judgment or entry into any settlement (which consent will not be unreasonably
withheld) which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such indemnified party of a release from all
liability in respect to such action, suit, proceeding or investigation to the
extent the same is covered by the indemnity obligation set forth in this
Section 4.4. No indemnified party may consent to entry of any judgment or
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<PAGE>
enter into any settlement without the consent of each indemnifying party
(which consent will not be unreasonably withheld).
(f) If the indemnification from the indemnifying party provided
for in this Section 4.4 is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, will contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages, liabilities and expenses
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified party in connection with the actions which
resulted in such losses, claims, damages, liabilities and expenses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party will be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such action. The amount paid or payable by a party as a result of
the losses, claims, damages, liabilities and expenses referred to above will
be deemed to include, subject to the limitations set forth in Section 4.4(e),
any legal and other fees and expenses reasonably incurred by such indemnified
party in connection with any investigation or proceeding. The parties hereto
agree that it would not be just and equitable if contribution pursuant to
this Section 4.4(f) were determined by pro rata allocation or by any other
method of allocation which does not take account of the equitable
considerations referred to above. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. If indemnification is available under this
Section 4.4(f), the indemnifying parties will indemnify each indemnified
party to the full extent provided in Section 4.4(c) or 4.4(d), as the case
may be, without regard to the relative fault of said indemnifying parties or
indemnified party or any other equitable consideration provided for in this
Section 4.4(f).
(g) The provisions of this Section 4.4 will be in addition to any
liability which any indemnifying party may have to any indemnified party and
will survive the termination of this Agreement.
4.5 Delivery on Exercise. Upon exercise of the Option, counsel
--------------------
satisfactory to Parent shall deliver an opinion to Parent to the effect that
the Stockholders have the authority to sell the Option Shares and that such
sale will not violate the terms of the trust agreements.
4.6 Tax-Free Reorganization. The parties hereto intend that the
-----------------------
exchange of the Company Common Shares for the Parent Common Shares pursuant
to the exercise of the Option and completion of the transactions contemplated
by the Merger Agreement shall be treated as an exchange pursuant to a
reorganization within the meaning of Section 354 and 368(a)(1) of the
Internal Revenue Code of 1986 and shall report the transactions accordingly
for all purposes.
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<PAGE>
5. General Provisions
5.1 Notices. Any notice required to be given hereunder will be
-------
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered
mail (return receipt requested and first class postage prepaid), addressed as
follows:
If to Parent: If to the Stockholders:
Micro Warehouse, Inc. Kenneth A. Eldred
535 Connecticut Avenue Roberta E. Eldred
Norwalk, CT 06854 1075 Westridge Drive
Attention: Bruce L. Lev Portola Valley, CA 94025
Fax No.: (203) 899-4203 Fax No.: (415) 851-8370
With copies to: With copies to:
Jones, Day, Reavis & Pogue Christopher Ream, Esq.
901 Lakeside Avenue 1717 Embarcadero Road
Cleveland, OH 44114-1116 Palo Alto, CA 94303
Attention: Paul T. Ruxin Fax No.: (415) 857-1288
Fax No.: (216) 579-0212
or to such other address as any party shall specify by written notice so
given, and such notice will be deemed to have been delivered as of the date
so telecommunicated, personally delivered or mailed.
5.2 Assignment; Binding Effect. Neither this Agreement nor any of
--------------------------
the rights, interests or obligations hereunder may be assigned or delegated
by any of the parties hereto (whether by operation of law or otherwise).
This Agreement will be binding upon and inure solely to the benefit of the
parties hereto, and nothing in this Agreement, express or implied, is
intended to or will confer upon any person any right, benefit or remedy of
any nature whatsoever under or by reason of this Agreement.
5.3 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings between the parties with
respect thereto.
5.4 Governing Law. This Agreement will be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard
to its rules of conflict of laws.
5.5 Amendments. This Agreement may not be amended except by an
----------
instrument in writing signed on behalf of the parties hereto.
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<PAGE>
5.6 Counterparts. This Agreement may be executed by the parties
------------
hereto in separate counterparts, each of which when so executed and delivered
will be an original, but all such counterparts will together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than both, but together signed by all of the
parties hereto.
5.7 Headings. Headings of the Articles and Sections of this
--------
Agreement are for the convenience of the parties only, and will be given no
substantive or interpretive effect whatsoever.
5.8 Interpretation. In this Agreement, unless the context
--------------
otherwise requires, words describing the singular number will include the
plural and vice versa, and words denoting any gender will include all genders
and words denoting natural persons will include corporations and partnerships
and vice versa.
5.9 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
will nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provisions is invalid, illegal or incapable of being enforced,
the parties hereto will negotiate in good faith to modify this Agreement so
as to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent
possible.
5.10 Termination. If Parent has not purchased the Option Shares
-----------
pursuant to the Option or not then given notice of its desire to exercise the
Option pursuant to Section 1.1(c), this Agreement will terminate
automatically immediately upon the termination of the Merger Agreement as
provided therein. Notwithstanding the foregoing, if the Company receives an
Alternative Proposal while the Merger Agreement is in effect, this Agreement
will not terminate for at least 30 days from the date of receipt of such
Alternative Proposal.
5.11 Specific Performance and Attorney Fees. The parties hereto
--------------------------------------
agree that irreparable damage would occur in the event any provision of this
Agreement was not performed in accordance with the terms hereof and that the
parties will be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or in equity. The prevailing party in
any such action shall be entitled to recover its reasonable attorney fees and
costs of such action.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
MICRO WAREHOUSE, INC.
By:/s/ Peter Godfrey
----------------------------------------
Peter Godfrey
President
KENNETH AND ROBERTA ELDRED
REVOCABLE TRUST U/T/A
By:/s/ Kenneth A. Eldred
----------------------------------------
Kenneth A. Eldred
Trustee
By:/s/ Roberta E. Eldred
----------------------------------------
Roberta E. Eldred
Trustee
ELDRED 1995 CHARITABLE
REMAINDER UNIT TRUST U/T/A
By:/s/ Kenneth A. Eldred
----------------------------------------
Kenneth A. Eldred
Trustee
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