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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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EFFECTIVE MANAGEMENT SYSTEMS, INC.
(NAME OF SUBJECT COMPANY)
EFFECTIVE MANAGEMENT SYSTEMS, INC.
(NAMES OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
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282017 10 2
(CUSIP NUMBER OF CLASS OF SECURITIES)
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MICHAEL D. DUNHAM
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EFFECTIVE MANAGEMENT SYSTEMS, INC.
12000 WEST PARK PLACE
MILWAUKEE, WISCONSIN 53224
(414) 359-9800
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON
BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH COPIES TO:
PHILLIP J. HANRAHAN
JAY O. ROTHMAN
RUSSELL E. RYBA
FOLEY & LARDNER
777 EAST WISCONSIN AVENUE
MILWAUKEE, WISCONSIN 53202-5367
(414) 271-2400
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Effective Management Systems, Inc., a
Wisconsin corporation (the "Company"). The address of the principal executive
offices of the Company is 12000 West Park Place, Milwaukee, Wisconsin 53224. The
title of the class of equity securities to which this Solicitation/
Recommendation Statement on Schedule 14D-9 (as amended or supplemented, this
"Schedule 14D-9") relates is the common stock, $.01 par value per share, of the
Company (the "Common Stock"). Reference herein to the "Shares" means all issued
and outstanding shares of the Common Stock.
ITEM 2. TENDER OFFER OF THE PURCHASER.
This Schedule 14D-9 relates to the cash tender offer by IFS Acquisition,
Inc., a Wisconsin corporation (the "Purchaser") and a wholly-owned subsidiary of
IFS Americas, Inc., a Delaware corporation ("Parent"), as disclosed in the
Tender Offer Statement on Schedule 14D-1, dated September 8, 1999 (as amended or
supplemented, the "Schedule 14D-1"), to purchase all outstanding Shares at $4.50
per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Purchaser's Offer to Purchase, dated September 8,
1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 1, 1999 (the "Merger Agreement"), by and among Parent, the
Purchaser and the Company. Pursuant to the Merger Agreement, as soon as
practicable after completion of the Offer and satisfaction or waiver of all
conditions to the Merger (as defined below), the Purchaser and the Company will
be merged (the "Merger"), and the surviving corporation in the Merger (the
"Surviving Corporation") will be a wholly-owned subsidiary of Parent. At the
effective time of the Merger (the "Effective Time"), each Share outstanding
immediately prior to such time (other than Shares held by Parent, the Purchaser,
any wholly-owned subsidiary of Parent or the Purchaser, in the treasury of the
Company or by any wholly-owned subsidiary of the Company, and by shareholders
who perfect their dissenters' rights under Wisconsin law) will be converted into
the right to receive $4.50 in cash or any higher price per Share paid in the
Offer (the "Offer Price"), without interest thereon. The Merger Agreement is
summarized in Item 3 of this Schedule 14D-9.
Based on the information in the Schedule 14D-1, the principal executive
offices of Parent and the Purchaser are located at 1900 East Golf Road, Suite
900, Schaumburg, Illinois 60173.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above.
(b) The provisions of the Merger Agreement relating to the election and
designation of directors to the Board of Directors of the Company are subject to
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which requires the Company to mail to its shareholders an Information
Statement (the "Information Statement") containing the information required by
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
Reference is made to the information contained under the captions "General
Information Regarding the Company," "Directors and Executive Officers of the
Company -- Information Concerning the Board of Directors," "Executive
Compensation," "Related Party Transactions" and "Principal Shareholders" in the
Information Statement. The Information Statement is attached as Schedule I
hereto and is incorporated herein by reference. Except as described below or
incorporated herein by reference, to the knowledge of the Company, as of the
date hereof, there are no material contracts, agreements, arrangements or
understandings or any actual or potential conflicts of interest between the
Company or its affiliates and (i) its executive officers, directors or
affiliates or (ii) Parent, the Purchaser, their executive officers, directors or
affiliates.
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COMPANY OPTION PLANS AND AGREEMENTS
The Merger Agreement provides that at or prior to the closing of the
transactions contemplated thereby, all outstanding employee and director options
to purchase Shares (individually, an "Option" and collectively, "Options") will
be adjusted so that each Option will thereafter be a right to receive the Offer
Price, in lieu of any Shares, upon the exercise of the Option and payment of the
exercise price thereof (with no other terms of the Options being affected by the
foregoing adjustment).
EMPLOYMENT AND SEVERANCE AGREEMENTS
Each of Michael D. Dunham (President and Chief Executive Officer of the
Company), Thomas M. Dykstra (Vice President, Secretary and Treasurer of the
Company) and Richard W. Grelck (Chief Operating Officer of the Company) entered
into an Employment, Confidentiality, Non-Competition and Severance Agreement,
dated as of March 19, 1999, with the Company that provides that while each such
individual remains employed with the Company (subject to either party
terminating the agreement), his base salary shall not be reduced (unless there
is a corporate-wide reduction applicable to all the Company's executives), he
will continue to perform the duties associated with his position with the
Company as of such date (i.e., President and Chief Executive Officer; Vice
President, Secretary and Treasurer; and Chief Operating Officer, respectively),
he will continue to receive benefits equivalent to those he received as of such
date and he remains eligible for bonuses and stock options as determined by the
Compensation Committee of the Company's Board of Directors.
Pursuant to the agreements, each of Messrs. Dunham, Dykstra and Grelck will
receive severance payments if (a) he voluntarily terminates his employment with
the Company following a material change by the Company in his duties as
President and Chief Executive Officer, Vice President, Secretary and Treasurer
or Chief Operating Officer, respectively, subject to certain restrictions
("Voluntarily Terminates") or (b) he is terminated without Cause (as defined in
the agreements). The period of time in which severance payments will be made,
which depends on the individual and circumstances surrounding the termination of
employment, is as follows: Mr. Dunham will receive severance payments for (i) 12
months if he Voluntarily Terminates or is terminated without Cause prior to a
change in control of the Company, (ii) 18 months if he Voluntarily Terminates or
is terminated without Cause following a change in control of the Company related
to the sale of the Company's assets or (iii) 15 months if he Voluntarily
Terminates or is terminated without Cause following a change in control of the
Company related to the sale of the Company's voting stock; Mr. Dykstra will
receive severance payments for nine months if he Voluntarily Terminates or is
terminated without Cause (regardless of whether such termination was prior to or
following a change in control of the Company), except in the event the assets of
the Company are sold to a certain specified corporation (unrelated to Parent or
the Purchaser), then the payment period is eight months and any personal debt
Mr. Dykstra owes to the Company is forgiven; and Mr. Grelck will receive
severance payments for (i) nine months if he Voluntarily Terminates or is
terminated without Cause prior to a change in control of the Company or (ii) 12
months if he Voluntarily Terminates or is terminated without Cause following a
change in control of the Company (regardless of whether such change in control
is related to the sale of the Company's assets or voting stock).
As part of the agreements, each of Messrs. Dunham, Dykstra and Grelck has
agreed to a noncompete following the termination of his employment with the
Company for a period of time equal to the severance payment periods identified
above (except, in Mr. Dykstra's case, if the assets of the Company are sold to a
certain specified corporation (unrelated to Parent or the Purchaser), then he
may work for that corporation) and a one-year (or, in Mr. Dunham's case, the
longer of one year or the severance payment period identified above) restriction
on soliciting any employee of the Company or its affiliates to leave the employ
of the Company. As a severance payment, each of Messrs. Dunham, Dykstra and
Grelck will receive his base salary (which will be paid monthly for nine months
with a lump sum payment in the tenth month equal to the remaining payments due,
if any), the continuation during the severance payment period of health, dental,
group life and disability insurance and the use for six months of a
Company-supplied car, an executive outplacement service and certain other
benefits. In addition, upon a termination of employment which results
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in the receipt of severance payments, all of the unvested options held by
Messrs. Dunham, Dykstra and Grelck shall immediately vest.
The acquisition of more than 25% of the Shares in the Offer, together with
an election of the Purchaser's designees to a majority of the seats on the Board
of Directors of the Company (see "Merger Agreement -- Directors" below), will
constitute a change in control of the Company related to the sale of the
Company's voting stock for purposes of the foregoing agreements.
Wayne T. Wedell (Vice President -- Services of the Company) entered into an
Employment and Separation Agreement, effective January 1, 1998, with the Company
that provides for his employment at the level of Vice President or higher
through December 31, 2006, subject to earlier termination by either party and
subject to future extension. Among other benefits, the agreement provides for an
initial annual base salary of $90,000, subject to upward adjustment, and annual
bonus opportunities. Mr. Wedell's agreement also provides for a termination
payment equal to 75% of his highest annual base salary since January 1, 1998, as
well as the continuation of insurance benefits and the use of a Company-supplied
car for one year following termination, in the event of (a) his termination by
the Company (whether with or without cause), (b) his termination by the Company
following a change in control of the Company or (c) his resignation within one
year after a change in control of the Company as a result of Mr. Wedell's good
faith determination that there has been a diminution in the level of his
responsibilities with the Company. Notwithstanding the foregoing, in the event
Mr. Wedell is terminated by the Company prior to a change in control, his
termination payment and other benefits will cease once he finds an acceptable
equivalent position in the Milwaukee, Wisconsin area.
The acquisition of more than 25% of the Shares in the Offer, together with
an election of the Purchaser's designees to a majority of the seats on the Board
of Directors of the Company (see "Merger Agreement -- Directors" below), will
constitute a change in control of the Company for purposes of Mr. Wedell's
agreement.
The foregoing are summaries of certain provisions of the Employment,
Confidentiality, Non-Competition and Severance Agreements with Messrs. Dunham,
Dykstra and Grelck and the Employment and Separation Agreement with Mr. Wedell.
These summaries are not complete descriptions of the terms and conditions of
these agreements and are qualified in their entirety by reference to the full
text of these agreements, which are incorporated herein by reference and copies
of which have been filed with the Securities and Exchange Commission (the "SEC")
as exhibits to this Schedule 14D-9.
MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement.
This summary is not a complete description of the terms and conditions of the
Merger Agreement and is qualified in its entirety by reference to the full text
of the Merger Agreement, which is incorporated herein by reference and a copy of
which has been filed with the SEC as an exhibit to this Schedule 14D-9.
Capitalized terms used but not defined in this summary of the Merger Agreement
have the meanings given to such terms in the Merger Agreement.
The Offer. The Merger Agreement provides that the Purchaser will, and
Parent will cause the Purchaser to, commence (within the meaning of Rule
14d-2(a) of the Exchange Act) the Offer as promptly as practicable, but in any
event not later than September 8, 1999. The initial expiration date for the
Offer is October 15, 1999 (the "Expiration Date"). The obligation of Parent and
the Purchaser to accept for payment or pay for any Shares tendered pursuant to
the Offer is subject only to (a) there being validly tendered and not withdrawn
prior to the expiration of the Offer, that number of Shares which represents at
least 75% of the Shares entitled to vote that are outstanding on a fully diluted
basis (without giving pro forma effect to the potential issuance of any Shares
issuable under the Stock Option Agreement (as hereinafter defined)) (the
"Minimum Condition") and (b) the satisfaction or waiver of the other conditions
set forth in the conditions set forth in Annex I to the Merger Agreement
(together with the Minimum Condition, the "Conditions of the
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Offer"). For a description of the Conditions of the Offer see "Conditions to the
Offer" below. Without the prior written consent of the Company, the Purchaser
will not (a) decrease the Offer Price or change the form of consideration
payable in the Offer, (b) decrease the number of Shares sought to be purchased
in the Offer, (c) amend or waive satisfaction of the Minimum Condition or (d)
amend any other term of the Offer in any manner adverse to the holders of any
Shares; provided, however, that if on the Expiration Date, all conditions to the
Offer shall not have been satisfied or waived, the Purchaser may, from time to
time in its sole discretion, extend the Expiration Date (each extension to be
for ten business days or less); provided, further, that the Expiration Date
shall in no event be extended past October 31, 1999 without the written consent
of the Company.
The Purchaser will, on the terms and subject to the prior satisfaction or
waiver of the conditions of the Offer, accept for payment and purchase, as soon
as practicable after the expiration of the Offer, all Shares validly tendered
and not withdrawn prior to the expiration of the Offer; provided, however, that
the Purchaser may extend the Expiration Date (including as it may be extended)
for up to ten business days in connection with an increase in the consideration
to be paid pursuant to the Offer so as to comply with applicable rules and
regulations of the SEC; and provided, further, that, if on the Expiration Date
(including as it may be extended) the sole condition remaining to be satisfied
is the expiration or termination of any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Purchaser shall, and Parent shall cause the Purchaser to, extend the
Offer from time to time, subject to the rights to terminate the Merger Agreement
provided therein, until two business days after the expiration or termination
date of the waiting period under the HSR Act.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof and in accordance with the applicable provisions of the
Wisconsin Business Corporation Law ("WBCL"), at the Effective Time, the
Purchaser will be merged with and into the Company. Following the Merger, the
separate corporate existence of the Purchaser will cease and the Company will
continue as the Surviving Corporation; provided, however, that upon the mutual
agreement of Parent and the Company, the Merger may be structured so that the
Company will be merged with and into the Purchaser, with the Purchaser
continuing as the Surviving Corporation. The Merger will be effected by the
filing at the time of Closing of appropriate articles of merger relating to the
Merger with the Department of Financial Institutions of the State of Wisconsin.
The Merger Agreement provides that, at the Effective Time, by virtue of the
Merger and without any action on the part of the holders thereof, each Share
issued and outstanding immediately prior to the Effective Time (other than any
Shares held by Parent, the Purchaser, any wholly-owned subsidiary of Parent or
the Purchaser, in the treasury of the Company or by any wholly-owned subsidiary
of the Company, which Shares, by virtue of the Merger and without any action on
the part of the holder thereof, shall be cancelled and retired and shall cease
to exist with no payment being made with respect thereto, and other than
Dissenting Shares) will be converted into the right to receive the Offer Price
in cash, without interest thereon, promptly upon surrender of the certificate
formerly representing such Shares. At the Effective Time, each share of common
stock, par value $.001 per share, of the Purchaser issued and outstanding
immediately prior to the Effective Time will, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into one
share of common stock of the Surviving Corporation. Notwithstanding the
foregoing, if Parent and the Company agree to restructure the Merger (as
described in the immediately preceding paragraph), then the outstanding shares
of the Purchaser's common stock will not be affected in any manner by virtue of
the Merger.
The Merger Agreement provides that the articles of incorporation of the
Purchaser, as in effect immediately prior to the Effective Time, will be the
articles of incorporation of the Surviving Corporation until thereafter amended
in accordance with the provisions thereof, the Merger Agreement and the WBCL.
The bylaws of the Purchaser, as in effect immediately prior to the Effective
Time, will be the bylaws of the Surviving Corporation until thereafter amended
in accordance with the provisions thereof, the Merger Agreement and the WBCL.
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Vote Required to Approve the Merger. The Merger Agreement provides that if
required by the Company's Restated Articles of Incorporation and/or applicable
law in order to consummate the Merger, the Company, acting through its Board of
Directors, will, in accordance with applicable law: (a) duly call, give notice
of, convene and hold a special meeting of the Company's shareholders as soon as
practicable following the date the Shares are purchased by Parent or the
Purchaser in the Offer (the "Acceptance Date"), which shall in no event be more
than 90 days after the Acceptance Date, for the purpose of considering and
taking action upon the Merger Agreement; (b) promptly prepare and file with the
SEC a preliminary information or proxy statement relating to the Merger and the
Merger Agreement and (i) obtain and furnish the information required to be
included by the SEC in the Proxy Statement (as hereinafter defined) and, after
consultation with Parent, respond promptly to any comments made by the SEC with
respect to the preliminary information or proxy statement and, subject to
compliance with SEC rules and regulations, cause a notice of a special meeting
and a definitive information or proxy statement (the "Proxy Statement") to be
mailed to the shareholders of the Company no later than the time required by
applicable law and the Restated Articles of Incorporation and the Bylaws of the
Company, and (ii) to obtain the necessary approvals of the Merger and the Merger
Agreement by the shareholders of the Company; and (c) subject to the provisions
of the Merger Agreement regarding the fiduciary requirements of applicable law,
include in the Proxy Statement the recommendation of the Board of Directors of
the Company that the shareholders of the Company vote in favor of the approval
of the Merger and the adoption of the Merger Agreement. At any meeting or
otherwise, Parent agrees that it will vote, or cause to be voted, all of the
Shares then owned by it, the Purchaser or any of its other subsidiaries in favor
of the approval of the Merger and the adoption of the Merger Agreement.
Consequently, if the Minimum Condition is satisfied (i.e., the Purchaser owns at
least 75% of the outstanding Shares on a fully diluted basis), approval of the
Merger can be obtained without the affirmative vote of any other shareholder of
the Company.
Pursuant to the Stock Option Agreement, if the Purchaser owns at least 75%
but less than 90% of the outstanding Shares, the Purchaser may exercise an
irrevocable option to purchase from the Company at the Offer Price newly issued
Shares in an amount equal to the number of Shares that, when added to the number
of Shares owned by the Purchaser and its affiliates immediately following
consummation of the Offer, shall constitute 90% of the Shares then outstanding
on a fully diluted basis (giving effect to the issuance of the Option Shares (as
hereinafter defined)). In the event that (a) Parent, the Purchaser or any other
subsidiary of Parent acquires in the aggregate at least 90% of the outstanding
Shares pursuant to the Offer (including as a result of the exercise of the
option under the Stock Option Agreement) and prior transactions and (b) Parent
and the Company agree to restructure the Merger so that the Company will be
merged with and into the Purchaser, the parties to the Merger Agreement will,
subject to certain conditions, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after the Acceptance
Date without the holding of a meeting and without a vote of the Company's
shareholders, in accordance with Section 180.1104 of the WBCL.
Conditions to the Merger. The respective obligations of Parent, the
Purchaser and the Company to consummate the Merger and the transactions
contemplated thereby, if the Offer shall have been consummated, are subject to
the satisfaction or waiver in writing, at or before the Effective Time, of
certain conditions, including: (a) to the extent required under the Company's
Restated Articles of Incorporation or applicable law, the shareholders of the
Company shall have duly approved and adopted the Merger Agreement and the
transactions contemplated thereby; (b) the Purchaser shall have accepted for
payment and paid for Shares pursuant to the Offer in accordance with the terms
of the Merger Agreement (however, this condition is not applicable to the
obligations of Parent or the Purchaser if the Purchaser fails to accept for
payment or pay for Shares tendered pursuant to the Offer in violation of the
terms of the Offer); and (c) the consummation of the Merger shall not be
restrained, enjoined or prohibited by any order, judgment, decree, injunction or
ruling of a court of competent jurisdiction or any Governmental Entity, and
there shall not have been any statute, rule or regulation enacted, promulgated
or deemed applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger.
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Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties. These include representations and
warranties by the Company with respect to, among other things, (a) organization
and qualification, (b) subsidiaries, (c) Restated Articles of Incorporation and
Bylaws, (d) capitalization, (e) authority, (f) no conflict; required filings and
consents, (g) SEC reports and financial statements, (h) information, (i) absence
of certain material adverse changes, (j) undisclosed liabilities, (k) tax
matters, (l) owned real property, (m) no litigation, (n) compliance with
applicable laws, (o) environmental matters (p) employee benefit plans; ERISA,
(q) intellectual property, (r) certain events, (s) certain approvals, (t)
contracts, (u) employees, (v) books and records, (w) fairness opinion, (x)
brokers, (y) vote required, (z) Underwriter Warrants, (aa) Series B Stock, (bb)
Public Warrants and (cc) options.
Parent and the Purchaser also have made certain representations and
warranties with respect to, among other things, (a) organization and
qualification, (b) authority, (c) no conflict; required filings and consents,
(d) information, (e) financing, (f) brokers, (g) the Purchaser and (h) share
ownership.
Directors. The Merger Agreement provides that promptly upon the payment by
the Purchaser for Shares pursuant to the Offer, and from time to time thereafter
as the Purchaser acquires Shares, the Purchaser will be entitled to designate
such number of directors, rounded up to the next whole number, on the Board of
Directors of the Company as is equal to the product of the total number of
directors on the Board of Directors of the Company (determined after giving
effect to the directors designated by the Purchaser pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by the Purchaser or its affiliates bears to the total number of Shares
entitled to vote then outstanding on a fully diluted basis, and the Company
will, subject to compliance with Section 14(f) of the Exchange Act, Rule 14f-1
promulgated thereunder and other applicable law (including applicable fiduciary
duties), upon request of the Purchaser, promptly take all actions necessary to
cause the Purchaser's designees to be so elected, including, if necessary,
promptly increasing the size of the Board of Directors of the Company or seeking
the resignations of one or more existing directors, or both; provided, however,
that prior to the Effective Time, the Board of Directors of the Company will
always have at least two members who are neither officers, directors,
shareholders or designees of the Purchaser or any of its affiliates ("Purchaser
Insiders"). If the number of directors who are not Purchaser Insiders is reduced
below two for any reason prior to the Effective Time, then the remaining
director who is not a Purchaser Insider will be entitled to designate a person
to fill such vacancy who is not a Purchaser Insider and who will be a director
not deemed to be a Purchaser Insider for all purposes of the Merger Agreement.
At such time, the Company will, if requested by the Purchaser, also cause
persons designated by the Purchaser to constitute at least the same percentage
(rounded up to the next whole number) as is on the Board of Directors of the
Company of each committee of the Board of Directors of the Company; provided,
however, that prior to the Effective Time each committee of the Board of
Directors of the Company shall have at least one member who is not a Purchaser
Insider. The Company's obligation to appoint the Purchaser's designees to the
Board of Directors of the Company is subject to Section 14(f) of the Exchange
Act, Rule 14f-1 thereunder and other applicable law (including applicable
fiduciary duties). The Company will promptly take all actions required pursuant
to such Section and Rule in order to fulfill its obligations. From and after the
election or appointment of the Purchaser's designees and prior to the Effective
Time, any amendment or termination of the Merger Agreement by the Company, any
extension by the Company of the time for the performance of any of the
obligations or other acts of Parent or the Purchaser or waiver of any of the
Company's rights under the Merger Agreement, or any other action taken by the
Board of Directors of the Company in connection with the Merger Agreement, will
require the concurrence of a majority of the directors of the Company then in
office who are not Purchaser Insiders.
In connection with the execution of the Merger Agreement, each of Helmut M.
Adam and Scott J. Mermel (current directors of the Company) entered into a
Non-competition Agreement, dated as of September 1, 1999, with the Company
pursuant to which each of Messrs. Adam and Mermel agreed, for a period of six
months following his termination as a director of the Company, not to serve as a
director of any business which develops, markets or services (or is planning or
considering doing the foregoing) enterprise resource planning software anywhere
in the United States in the mid-market segment. In addition, each of
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Messrs. Adam and Mermel agreed, for a period of one year following his
termination as a director of the Company, not to induce or attempt to induce any
employee of the Company or its affiliates to leave the employ of the Company. As
consideration for the foregoing agreements, Messrs. Adam and Mermel will each
receive $7,000.
Indemnification and Insurance. The Merger Agreement provides as follows:
(a) The Purchaser and Parent agree that for a period of six years from
the Effective Time, the Purchaser will maintain all rights to
indemnification now existing in favor of the current or former directors,
officers, employees, fiduciaries and agents of the Company as provided in
the Company's Restated Articles of Incorporation and Bylaws or otherwise in
effect under any agreement on September 1, 1999. In addition, the Purchaser
and Parent agree that the articles of incorporation and bylaws of the
Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Company's Restated Articles of
Incorporation and Bylaws on September 1, 1999, which provisions will not be
amended, repealed or otherwise modified for a period of six years after the
Acceptance Date in any manner that would adversely affect the rights
thereunder of individuals who at any time prior to the Effective Time were
directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including without limitation,
the transactions contemplated by the Merger Agreement), unless such
modification is required by law. Notwithstanding the six-year period
specified in the foregoing sentences, in the event any claim or claims are
asserted or made within such six-year period, all rights to indemnification
in respect of any such claim or claims shall continue until disposition of
any and all such claims.
(b) The Surviving Corporation will at all times exercise the powers
granted to it by its articles of incorporation, its bylaws, and by
applicable law to indemnify and hold harmless to the fullest extent
possible present or former directors, officers, employees, fiduciaries and
agents of the Company against any threatened or actual claim, action, suit,
proceeding or investigation made against them arising from their service in
such capacities (or service in such capacities for another enterprise at
the request of the Company) prior to and including the Effective Time,
including, without limitation, with respect to matters relating to the
Merger Agreement.
(c) In addition to the foregoing, Parent agrees that the Company and,
from and after the Effective Time, the Surviving Corporation, shall cause
to be maintained in effect for not less than six years from the Effective
Time, the current policies of the directors' and officers' liability
insurance, if any, maintained by the Company with respect to matters
occurring at or prior to the Effective Time (including, without limitation,
the transactions contemplated by the Merger Agreement); provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are no less advantageous and
provided that such substitution shall not result in any gaps or lapses in
coverage with respect to matters occurring prior to the Effective Time; and
provided, further, that the Surviving Corporation will not be required to
pay an annual premium in excess of 200% of the last annual premium paid by
the Company prior to September 1, 1999 and if the Surviving Corporation is
unable to obtain the insurance required by this paragraph it will obtain as
much comparable insurance as possible for an annual premium equal to such
maximum amount.
Conditions to the Offer. Pursuant to the Merger Agreement, the Purchaser
will not be obligated to accept for payment or pay for, subject to Rule 14e-1(c)
of the Exchange Act, any Shares not theretofore accepted for payment, and may
terminate or amend the Offer if (i) the Minimum Condition has not been
satisfied, (ii) any applicable waiting period under the HSR Act shall not have
expired or been terminated prior to the expiration of the Offer or (iii) at any
time on or after the date of commencement of the Offer and before the acceptance
of such Shares for payment or the payment therefor, any of the following
conditions exist or shall occur:
(a) there is instituted an injunction or other order, decree, judgment
or final ruling by a court of competent jurisdiction whereby a
governmental, regulatory or administrative agency or commission of
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competent jurisdiction or a statute, rule, regulation, executive order or
other action is promulgated, or enacted, by a Governmental Entity or a
governmental, regulatory or administrative agency or commission of
competent jurisdiction which in any such case (i) restrains or prohibits
the making or consummation of the Offer or the consummation of the Merger;
(ii) prohibits or restricts the ownership or operation by Parent (or any of
its affiliates or subsidiaries including the Purchaser) of all or a
material portion of the Company's business or assets; or (iii) imposes
material limitations on the ability of the Purchaser effectively to acquire
or to hold or to exercise rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by the Purchaser
on all matters properly presented to the shareholders of the Company;
(b) the Company enters into an agreement concerning any Superior
Proposal (as hereinafter defined), or the Board of Directors of the Company
or any committee thereof resolves to enter into such an agreement;
(c) any Person or group (as defined in Section 13(d)(3) of the
Exchange Act) (other than Parent, the Purchaser or any affiliate thereof)
becomes the beneficial owner (as defined in Rule 13d-3 promulgated under
the Exchange Act) of Shares representing a majority of the total votes
represented by all the Shares then outstanding on a fully diluted basis;
(d) the Merger Agreement shall have been terminated in accordance with
its terms;
(e) there occurs any event which would reasonably be expected to have
a Material Adverse Effect on the Company, except for general economic
changes, changes that affect the industry of the Company or any Subsidiary
generally and changes in the Company's business attributable solely to
actions taken by Parent or the Purchaser;
(f) the Company breaches or fails to perform in any material respect
any of its obligations, covenants or agreements under the Merger Agreement
and such breach or failure to perform is not curable, or if curable, is not
cured within ten business days after written notice of such breach or
failure is given by Parent to the Company; or
(g) any of the representations and warranties of the Company set forth
in the Merger Agreement are not materially true and correct at September 1,
1999 and at the scheduled expiration of the Offer (as though made as of
such date, except that those representations and warranties that address
matters only as of a particular date will remain materially true and
correct as of such date);
which, in the reasonable judgment of Parent and regardless of the circumstances
giving rise to any such condition, makes it inadvisable to proceed with the
Offer or with such acceptance for payment, purchase of, or payment for Shares.
Neither the Offer nor the Merger is subject to a financing contingency and
the parent corporation of Parent, Industrial & Financial Systems, IFS AB ("IFS
AB"), has agreed to provide to Parent and the Purchaser the funds necessary to
timely effectuate the Offer and the Merger.
Covenants. The Merger Agreement contains various covenants of the parties
thereto, including covenants as to, among other things, the conduct of the
business of the Company (as described in further detail below) and the following
matters:
(a) The Purchaser agreed to continue to make available to the Company
a $2,000,000 line of credit providing for borrowings by the Company
($350,000 of which the Purchaser had provided to the Company as of
September 1, 1999) and, as necessary and in the Purchaser's sole
discretion, to increase the line of credit.
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(b) The Company agreed to provide each holder of the warrants to
purchase shares of Common Stock issued by the Company in October 1998 to
designees of Taglich Brothers, D'Amadeo, Wagner & Company, Incorporated
(the "Underwriter Warrants"), which have an exercise price of $3.60 per
Share, notice sufficient to enable each holder to have a reasonable
opportunity to exercise the holder's Underwriter Warrants and receive the
Offer Price for each Share underlying the Underwriter Warrants (which, as
of August 31, 1999, was 54,714 Shares). Pursuant to the Merger Agreement,
the Purchaser agreed to assume the obligations of the Company under the
Underwriter Warrants, if required thereby.
(c) The Company agreed to take all actions necessary, including
providing any notice required by the Company's Restated Articles of
Incorporation, to force the conversion of each outstanding share of its
Series B 8% Convertible Redeemable Preferred Stock (the "Series B Stock")
into Shares prior to the Acceptance Date.
(d) The Company agreed to (i) provide each holder of the 401,440
Common Stock warrants issued under the September 1995 warrant agreement
with American Stock Transfer & Trust Company, as warrant agent (the "Public
Warrants"), each of which is exercisable for one share of Common Stock at a
exercise price of $6.75 per Share, notice sufficient to enable each holder
to exercise the holder's Public Warrants and participate in the Offer (the
holders are not entitled to participate in the Offer unless they so
exercise their Public Warrants) and (ii) provide the warrant agent notice
of the Merger so that the warrant agent can provide each holder of Public
Warrants notice sufficient to enable each holder to exercise the holder's
Public Warrants and participate in the Merger. In addition, the Company
will execute a supplemental warrant agreement with the warrant agent to
ensure that each holder of Public Warrants will have the right following
the Merger to exercise the holder's Public Warrants and receive the Offer
Price.
Conduct of Business of the Company. Except as required by the Merger
Agreement or with the prior written consent of Parent, during the period from
September 1, 1999 to the Acceptance Date, the Company covenanted and agreed with
Parent and the Purchaser that the Company will and will cause each of its
subsidiaries to conduct its operations only in the ordinary course of business.
Without limiting the generality of the foregoing, and except as otherwise
required or contemplated by the Merger Agreement, the Company will not, and will
not permit any of its subsidiaries to, prior to the Acceptance Date, without the
prior written consent of Parent (not to be unreasonably withheld): (a) adopt any
amendment to its charter or bylaws or comparable organizational documents; (b)
issue, reissue or sell or authorize the issuance, reissuance or sale of
additional shares (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) of
capital stock of any class, or shares convertible into capital stock of any
class, or any rights, warrants or options to acquire any convertible shares or
capital stock, other than the issuance of Shares pursuant to the conversion or
exercise of Options, warrants or the Series B Stock outstanding on September 1,
1999 or pursuant to the Stock Option Agreement; (c) declare, set aside or pay
any dividend or other distribution (whether in cash, shares or property or any
combination thereof) in respect of any class or series of its capital stock,
except for (i) regular quarterly dividends payable on the Series B Stock with
usual record and payment dates for such dividends and (ii) dividends between the
Company and any subsidiary which is wholly-owned by the Company; (d) split,
combine, subdivide, reclassify or directly or indirectly redeem, purchase or
otherwise acquire, recapitalize or reclassify, or propose to redeem or purchase
or otherwise acquire, any shares of its capital stock, or any of its other
shares or liquidate in whole or in part; (e) enter into, adopt or amend any
employee benefit plan or any employment or severance agreement or arrangement or
increase in any manner the compensation or fringe benefits of, or modify the
employment terms of, its directors, officers or employees, generally or
individually, or pay any benefit not required by the terms in effect on
September 1, 1999 of any existing employee benefit plan, other than in the
ordinary course of business consistent with past practice make normal merit
increases to employees of the Company; (f) create, incur or assume any debt not
outstanding as of September 1, 1999 (including obligations in respect of capital
leases), assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
person or entity, or make any loans, advances or capital contributions to or
investments in, any other person or entity, except, in each case, in the
ordinary
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course of business; (g) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a change in
generally accepted accounting principles; (h) make any material tax election or
settle or compromise any material income tax liability; (i) acquire, sell,
lease, encumber or dispose of any assets or property (including without
limitation any shares or other equity interests in or securities of any
subsidiary or any corporation, partnership, association or other business
organization or division thereof), other than purchases and sales of assets in
the ordinary course of business; (j) discharge or satisfy any security interest
or pay any obligation or liability other than in the ordinary course of
business; (k) mortgage or pledge any of its property or assets or subject any
such assets to any security interest other than in the ordinary course of
business; (l) sell, assign, transfer or license any intellectual property, other
than in the ordinary course of business; (m) enter into, amend, terminate, take
or omit to take any action that would constitute a material violation of or
default under, or waive, release or assign any material rights under, any
material contract or agreement; (n) make or commit to make any capital
expenditure in excess of $20,000 per item or in an aggregate in excess of
$50,000; (o) willfully take any action or willfully fail to take any action
required or permitted by the Merger Agreement with the intent that such action
or failure to take action could result in (i) any of the representations and
warranties of the Company set forth in the Merger Agreement becoming untrue or
(ii) any of the conditions to the Merger set forth in the Merger Agreement (see
"Conditions to the Merger" above) not being satisfied; (p) hire, terminate or
discharge any key employee or engage or terminate any key consultant; provided,
however, that any such employee or consultant may himself or herself terminate
his or her relationship with the Company in accordance with the terms of any
applicable employment, consulting or similar agreement; (q) commence after
September 1, 1999 any offerings of securities to employees pursuant to any new
employee stock purchase plans; or (r) agree in writing or otherwise to take any
of the foregoing actions.
No Solicitation. Pursuant to the Merger Agreement, the Company covenanted
and agreed with Parent and the Purchaser that the Company will, will cause its
subsidiaries to, and will use its commercially reasonable efforts to cause the
officers, directors, employees, investment bankers, attorneys and other agents
and representatives of the Company and its subsidiaries to, immediately cease
any existing activities, information exchanges, discussions or negotiations with
any person (including a "person" as defined in Section 13(d)(3) of the Exchange
Act) other than Parent or the Purchaser (a "Third Party") heretofore conducted
with respect to any Acquisition Transaction (as defined below). The Company also
agreed that it will not, will cause its subsidiaries not to, and will use its
commercially reasonable efforts to cause the officers, directors, employees,
investment bankers, attorneys and other agents and representatives of the
Company and its subsidiaries not to, directly or indirectly, (a) solicit,
initiate, continue or encourage (including by way of furnishing or disclosing
non-public information) any inquiries, proposals or offers from any Third Party
with respect to any acquisition or purchase of all or a material portion of the
assets or business of, or any significant equity interest in (including by way
of a tender offer), or any merger, consolidation or business combination with,
or any similar transaction involving, the Company (the foregoing being referred
to collectively as an "Acquisition Transaction"), or (b) negotiate or otherwise
communicate in any way with any Third Party with respect to any Acquisition
Transaction or enter into, approve or recommend any agreement, arrangement or
understanding requiring the Company to abandon, terminate or fail to consummate
the Offer and/or the Merger or any other transaction contemplated thereby.
Additionally, the Company agreed to terminate all letters of intent or
agreements with respect to any Acquisition Transaction outstanding as of
September 1, 1999 and provide evidence of such termination to Parent.
Notwithstanding anything to the contrary in the foregoing, the Company may in
response to an unsolicited proposal with respect to an Acquisition Transaction
with a Third Party furnish or disclose non-public information to such Third
Party and negotiate or otherwise communicate with such Third Party, in each case
only if (i) the Board of Directors of the Company (after consultation with its
outside legal counsel and independent financial advisors) reasonably determines
in good faith that such proposal would be likely to be more favorable to the
Company and its shareholders than the transaction contemplated by the Merger
Agreement (the proposal with respect to an Acquisition Transaction meeting the
requirements of clause (i), a "Superior Proposal"); and (ii) prior to furnishing
or disclosing any non-public information to, or entering into discussions or
negotiations with, such Third Party, the Company receives from such Third Party
a customary confidentiality agreement similar in all material respects to the
confidentiality agreement between Parent and the Company; provided, however,
that the Company shall not
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enter into a definitive agreement with respect to a Superior Proposal unless the
Company concurrently terminates the Merger Agreement in accordance with the
terms thereof.
The Merger Agreement also provides that the Company will notify Parent and
the Purchaser, no later than 24 hours after receipt by the Company (or its
advisors), of any proposal with respect to an Acquisition Transaction or any
request for nonpublic information in connection with a proposed Acquisition
Transaction or for access to the properties, books or records of the Company by
any person or entity that informs the Company that it is considering making, or
has made, an Acquisition Transaction (the "Acquisition Proposal"). Such notice
to Parent and the Purchaser must be made orally and in writing and must indicate
in reasonable detail the identity of the person making the Acquisition Proposal
and the terms and conditions of such proposal, inquiry or contact. The Company
will give Parent and the Purchaser at least seven business days' advance notice
of any definitive agreement proposed to be entered into by the Company with any
person making a Superior Proposal.
Termination. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time prior to the Effective Time
(notwithstanding approval thereof by the shareholders of the Company):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Offer has not been
consummated by December 31, 1999 and the terminating party is not in
material breach of its obligations under the Merger Agreement;
(c) by either the Company or Parent, if there will be any law or
regulation that makes consummation of the Offer or the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining Parent or the Company from consummating the Offer or the Merger
is entered and such judgment, injunction, order or decree shall become
final and unappealable;
(d) by Parent and the Purchaser, if the Company is in breach, and by
the Company, if Parent or the Purchaser is in breach, of any material
representation, warranty or covenant contained in the Merger Agreement and
such breach is not remedied within ten days of delivery of written notice
thereof;
(e) by either the Company or Parent, if the Board of Directors of the
Company has (i) withdrawn or modified in a manner adverse to Parent and the
Purchaser its approval or recommendation of the Offer or the Merger, (ii)
approved or recommended any Acquisition Transaction in respect of the
Company in compliance with the provisions of the Merger Agreement (see "No
Solicitation" above) and making the payments referred to under "Fees and
Expenses" below or (iii) resolved to take any of the foregoing actions.
Fees and Expenses. The Merger Agreement provides that, except as described
below, whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Offer, the Merger Agreement, the Stock Option Agreement
and the transactions contemplated by the Merger Agreement and the Stock Option
Agreement will be paid by the party incurring such expenses.
Pursuant to the terms of the Merger Agreement, (a) in the event the Merger
Agreement is terminated by Parent pursuant to subsection (e) under "Termination"
above or (b) by the Company pursuant to subsection (e) under "Termination"
above, the Company will pay, in cash in immediately available funds, to Parent a
termination fee equal to $1,000,000 (the "Company Termination Fee"). Half of the
Company Termination Fee shall be paid prior to and as a condition precedent to
the effectiveness of the termination of the Merger Agreement and the other half
will be paid upon consummation of the Superior Proposal or termination or
withdrawal of the Superior Proposal; provided, however, that in no event will
the Company be required to pay Parent any Company Termination Fee, if,
immediately prior to the applicable termination of the Merger Agreement, Parent
was in material breach of any of its material obligations under the Merger
Agreement.
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STOCK OPTION AGREEMENT
The following is a summary of certain provisions of the Stock Option
Agreement, dated as of September 1, 1999, by and among Parent, the Purchaser and
the Company (the "Stock Option Agreement"). This summary is not a complete
description of the terms and conditions of the Stock Option Agreement and is
qualified in its entirety by reference to the full text of the Stock Option
Agreement, which is incorporated herein by reference and a copy of which has
been filed with the SEC as an exhibit to this Schedule 14D-9.
Grant of Stock Option. Subject to the terms and conditions set forth in
the Stock Option Agreement, the Company granted to the Purchaser an irrevocable
option (the "Stock Option") to purchase that number of newly issued Shares (the
"Option Shares") equal to the number of Shares that, when added to the number of
Shares owned by the Purchaser and its affiliates immediately following the
consummation of the Offer, constitutes 90% of the outstanding Shares on a
fully-diluted basis (giving effect to the issuance of the Option Shares), at a
per share purchase price equal to the Offer Price.
Exercise of Stock Option. Subject to the conditions set forth in the Stock
Option Agreement (which are described below), the Stock Option may be exercised
by the Purchaser, in whole but not in part, at any one time after the
Purchaser's acceptance for payment pursuant to the Offer of Shares constituting
at least 75% but less than 90% of the Shares then outstanding on a fully diluted
basis (not giving effect to the issuance of the Option Shares) (the "Exercise
Event") but prior to the earliest to occur of (a) the Effective Time, (b) ten
business days after the occurrence of the Exercise Event and (c) the termination
of the Merger Agreement in accordance with the terms and conditions thereof.
Conditions to Closing. The obligation of the Company to deliver the Option
Shares upon the exercise of the Stock Option is subject to the following
conditions: (a) all waiting periods under the HSR Act applicable to the issuance
and delivery of the Option Shares pursuant to the Stock Option Agreement shall
have expired or been terminated and (b) there shall be no preliminary or
permanent injunction or other final, nonappealable judgment by any court of
competent jurisdiction preventing or prohibiting the exercise of the Stock
Option or the issuance and delivery of the Option Shares.
Covenants of the Company. Pursuant to the Stock Option Agreement, the
Company covenanted and agreed to use its commercially reasonable efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws to
consummate and make effective the transactions contemplated thereunder,
including, without limitation, using all reasonable efforts to obtain all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities.
Certain Representations and Warranties. In connection with the Stock
Option Agreement, the Company made certain customary representations and
warranties to Parent and the Purchaser, including with respect to (a)
authorization, reservation and validity of the issuance of the Option Shares
pursuant to such agreement and the absence of encumbrances on and in respect of
such Shares and (b) the Company's valid existence and requisite corporate
powers. In connection with the Stock Option Agreement, Parent and the Purchaser
made certain customary representations and warranties to the Company, including
with respect to (a) authority to enter into and perform their obligations under
the Stock Option Agreement, (b) due organization, valid existence and requisite
corporate powers and (c) the investment intent of Parent and the Purchaser.
STOCKHOLDER AGREEMENTS
The following is a summary of certain terms of the Stockholder Agreements,
each dated as of September 1, 1999 (the "Stockholder Agreements"), by and among
Parent, the Purchaser and each of Michael D. Dunham, Thomas M. Dykstra, Donald
W. Vahlsing and Robert E. Weisenberg (the "Selling Stockholders"). This summary
is not a complete description of the Stockholder Agreements and is qualified in
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its entirety by reference to the full text of the Stockholder Agreements, which
are incorporated herein by reference and copies of which have been filed with
the SEC as exhibits to this Schedule 14D-9.
Concurrently with the execution of the Merger Agreement, Parent and the
Purchaser entered into Stockholder Agreements with each of the Selling
Stockholders with respect to, in the aggregate, 1,670,400 Shares (excluding
Shares issuable upon the exercise of any stock options) currently beneficially
owned by such Selling Stockholders, representing approximately 40% of the Shares
outstanding on August 31, 1999 (and approximately 25% of the Shares outstanding
on a fully diluted basis). Pursuant to the Stockholder Agreements, each of the
Selling Stockholders agreed to validly tender (or cause the record owner of such
Shares to validly tender) in the Offer and not withdraw all Shares currently
beneficially owned by the Selling Stockholder and any additional Shares with
respect to which he becomes the beneficial owner (whether by purchase, dividend,
distribution, exercise of options or other rights to acquire Shares).
Pursuant to the Stockholder Agreements, each of the Selling Stockholders
agreed, solely in the capacity as a shareholder of the Company, that neither the
Selling Stockholder nor any affiliates, representatives or agents of the Selling
Stockholder will, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
the Purchaser or any of their respective affiliates or representatives)
concerning any proposal relating to an Acquisition Transaction. The Selling
Stockholders also agreed to notify Parent and the Purchaser within 24 hours
after receipt by the Selling Stockholders (or their advisors) of any proposal
relating to an Acquisition Transaction or any request for non-public information
in connection with a proposed Acquisition Transaction or for access to the
properties, books or records of the Company by any person or entity that informs
the Company that it is considering making, or has made, an Acquisition
Transaction (with such notice indicating the identity of the person making the
Acquisition Proposal and the terms and conditions thereof).
Except as necessary to exercise a Selling Stockholder's fiduciary duties as
a director of the Company with respect to a Superior Proposal and except as
contemplated by the Stockholder Agreements and the Merger Agreement, each of the
Selling Stockholders agreed not to (a) transfer, or consent to any transfer of,
any or all of the Shares subject to his Stockholder Agreement or any interest
therein, (b) enter into any contract, option or other agreement or understanding
with respect to any transfer of any or all of the Shares subject to his
Stockholder Agreement or any interest therein, (c) grant any proxy, power-of
attorney or other authorization in or with respect to the Shares subject to his
Stockholder Agreement, (d) deposit the Shares subject to his Stockholder
Agreement into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares subject to his Stockholder Agreement or (e) take any
other action that would in any way restrict, limit or interfere with the
performance of his obligations under the Stockholder Agreement or the
transactions contemplated by the Merger Agreement or the Stock Option Agreement.
The covenant and agreements contained in the Stockholder Agreements will
terminate upon the earlier of (a) the Effective Time, (b) September 1, 2000 or
(c) the termination of the Merger Agreement in certain circumstances.
In connection with the execution of the Stockholder Agreements, Michael D.
Dunham and Thomas M. Dykstra agreed to (a) use $1,000,000 and $815,000,
respectively, of the proceeds they receive from the sale of their Shares in the
Offer to purchase in the open market shares of stock of IFS AB and (b) retain
the shares of IFS AB stock they purchase for a minimum of six months. The
Company has agreed to reimburse (including with respect to the taxes incurred as
a result of such reimbursement) Messrs. Dunham and Dykstra for any brokerage
commissions they incur in connection with both the purchase and subsequent sale
of the shares of IFS AB stock.
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INDEMNIFICATION
Pursuant to the WBCL and the Company's Bylaws, directors and officers of
the Company are entitled to mandatory indemnification from the Company against
certain liabilities and expenses (a) to the extent such officers or directors
are successful in the defense of a proceeding and (b) in proceedings in which
the director or officer is not successful in defense thereof, unless (in the
later case only) it is determined that the director or officer breached or
failed to perform his or her duties to the Company and such breach or failure
constituted: (i) a willful failure to deal fairly with the Company or its
shareholders in connection with a matter in which the director or officer had a
material conflict of interest; (ii) a violation of the criminal law unless the
director or officer had reasonable cause to believe his or her conduct was
lawful or had no reasonable cause to believe his or her conduct was unlawful;
(iii) a transaction from which the director or officer derived an improper
personal profit; or (iv) willful misconduct. The WBCL specifically states that
it is the public policy of Wisconsin to require or permit indemnification,
allowance of expenses and insurance in connection with a proceeding involving
securities regulation, as described therein, to the extent required or permitted
as described above. Additionally, under the WBCL, directors of the Company are
not subject to personal liability to the Company, its shareholders or any person
asserting rights on behalf thereof for certain breaches or failures to perform
any duty resulting solely from their status as directors, except in
circumstances paralleling those in subparagraphs (i) through (iv) outlined
above.
In addition to the indemnification provisions under the WBCL and the
Company's Bylaws, the Merger Agreement also provides for certain indemnification
rights as well as the provision of directors' and officers' insurance. See
"Merger Agreement -- Indemnification and Insurance" above.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
The Board of Directors of the Company has unanimously approved the Merger
Agreement, the Stock Option Agreement, the Offer and the Merger and the other
transactions contemplated thereby and determined that the consideration to be
received for each Share in the Offer and the Merger is fair to the Company's
shareholders. Accordingly, the Board of Directors of the Company unanimously
recommends that the shareholders of the Company accept the Offer and tender
their Shares pursuant thereto.
(b) Background of the Offer; Reasons for the Recommendation.
Background. During the last several years, there has been substantial
consolidation in the manufacturing software systems industry. By mid-1997, the
Company had received several inquiries from potential business combination
partners. Although still focused on growing the Company as an independent public
corporation, the Board of Directors, in light of the consolidation trend in the
industry and the Company's financial position, determined that it would be in
the best interests of the Company's shareholders if the Company considered all
strategic alternatives, including a potential business combination. As part of
this process, in September 1997, the Company engaged Ascent Partners, Inc.
("Ascent Partners") to assist the Company in reviewing its strategic
alternatives.
Through early 1998 while the Company was considering various potential
business combination partners, it became more apparent that "economies of scale"
were becoming increasingly important to the research and development
expenditures required to offer a competitive product in the marketplace for the
Company's software products. During this period, the Company continued to
experience financial difficulties and had a shortage of working capital. For
the year ended November 30, 1997 and the quarter ended February 28, 1998, the
Company incurred net losses of $2.2 million and $1.2 million, respectively.
Due to its financial situation, the Company seriously began considering a
strategic relationship with the Baan Corporation. The Company believed such a
relationship would be valuable because it would allow the
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Company, in addition to the Company's Enterprise Resource Planning ("ERP")
product, to sell Baan's ERP product. The Company believed this would provide it
with a well-financed, technologically-advanced product from a top tier ERP
provider plus market pull within the industry, which would facilitate the
Company's ability to provide software systems to mid-market corporations. In
April 1998, the Company entered into an agreement with the Baan Corporation to
add Baan's ERP product line to the Company's product line and focused selling
this product in a nineteen state territory. At the same time, the Company went
through a major restructuring which limited its markets and reduced its
expenses. In the restructuring, the Company incurred a charge of $6.8 million.
By late 1998, entities in the manufacturing software industry experienced
the beginning of a significant downturn for sales related to ERP products in the
United States. This downturn heightened the Company's financial difficulties and
put increased pressure on the Company to enter into a business combination or
sell assets. Throughout this period, the Company considered and pursued various
transactions focused on enhancing shareholder value.
As part of this process, Ascent Partners set up an introductory meeting
between IFS AB and the Company at IFS AB's offices in Schaumburg, Illinois on
May 24, 1999. The parties discovered that both companies focused on "operations
oriented" ERP software with the majority of their customer base in companies
which make products "to customer order." A confidentiality agreement was signed
and preliminary discussions regarding a potential business combination began
between the parties.
During the next month, representatives of IFS AB and the Company continued
discussions regarding a potential business combination. IFS AB proposed
purchasing all of the Shares for cash at a price of $4.00 per Share, subject to
the negotiation of a definitive acquisition agreement. On June 29, 1999, the
Company's Board of Directors met to discuss the offer made by IFS AB as well as
other alternatives available to the Company. At the conclusion of this meeting,
the Board directed management to communicate to IFS AB that it would consider an
offer at a higher price per Share for the Company.
On July 5, 1999, the Board of Directors of the Company received and
considered IFS AB's revised offer to purchase all of the Shares at a per Share
price of $4.50. At the meeting, the directors reviewed their fiduciary duties in
connection with the consideration of a business combination such as the one
proposed by IFS AB. At the conclusion of the meeting, the Board of Directors
authorized management to pursue a negotiated transaction with IFS AB and
directed the Company's outside counsel, Foley & Lardner, to prepare a draft
merger agreement for transmittal to IFS AB's legal counsel. A draft of such an
agreement was subsequently provided to IFS AB's legal counsel and to the members
of the Company's Board of Directors.
The Board of Directors also authorized the Company to retain Tucker Anthony
Cleary Gull ("Tucker Cleary") to prepare a fairness opinion regarding the
consideration to be received by the Company's shareholders pursuant to the
proposed business combination.
Thereafter, representatives of IFS AB and representatives of the Company,
as well as IFS AB's and the Company's respective legal and financial advisors,
continued to discuss a possible business combination and negotiate the terms of
a definitive merger agreement and stock option agreement. As part of the
negotiations, the Company, among other things, insisted that the proposed tender
offer not be subject to any financing contingency. During this period, the
Company's management kept the Board of Directors of the Company informed of the
ongoing discussions, including at the Board meeting held on July 12, 1999.
During the course of the negotiations, IFS AB agreed to extend a $350,000 line
of credit to the Company to provide additional working capital. The line was
subsequently increased to $2,000,000.
On September 1, 1999, the Company completed negotiating the Merger
Agreement and the Stock Option Agreement and presented them to the Board of
Directors. The Board of Directors of the Company received reports from the
senior management of the Company and reviewed with counsel the final terms of
the Merger Agreement and the Stock Option Agreement. Counsel also reviewed with
the directors their fiduciary obligations in connection with the consideration
of a transaction such as the one proposed with Parent. At this
15
<PAGE> 17
meeting, Tucker Cleary delivered its written opinion to the Company's Board of
Directors to the effect that, as of such date and based upon and subject to the
various considerations set forth in such opinion, the proposed cash purchase
price of $4.50 per share to be received by the shareholders of the Company in
the Offer and the Merger was fair to such shareholders from a financial point of
view. The Board of Directors then discussed the presentations it had received at
this and other Board meetings and unanimously approved the Merger Agreement and
the Stock Option Agreement and the transactions contemplated thereby, and
authorized their execution.
On September 1, 1999, the Merger Agreement, the Stock Option Agreement and
various other transaction documents were executed. Following execution of the
foregoing documents, a joint press release announcing the execution of the
definitive agreements was issued by Parent and the Company.
Factors Considered by the Board. Prior to approving the Merger Agreement,
the Stock Option Agreement, the Offer, the Merger and the other transactions
contemplated thereby, the Board of Directors of the Company held various
meetings, including meetings on June 29, 1999, July 5, 1999, July 12, 1999 and
September 1, 1999. At its meeting on September 1, 1999, the Board of Directors
of the Company received final reports from senior management, legal counsel and
Tucker Cleary and approved the Merger Agreement, the Stock Option Agreement and
the transactions contemplated thereby. In approving the Merger Agreement, the
Stock Option Agreement and the transactions contemplated thereby and
recommending that the shareholders of the Company tender their Shares pursuant
to the Offer, the Board of Directors of the Company considered a number of
factors, including (without limitation):
(1) the financial and other terms of the Offer, the Merger, the Merger
Agreement, the Stock Option Agreement and the Stockholder Agreements;
(2) the trading price of the Shares over the last five years and that
the $4.50 per Share Offer Price represents a premium of 31% over the
closing price of the Shares on the OTC Bulletin Board on September 1, 1999,
the last full trading day prior to the public announcement of the execution
of the Merger Agreement;
(3) presentations by senior management (at such meeting and at
previous meetings of the Board of Directors) regarding the financial
condition, results of operations, business and prospects of the Company;
(4) the results of the process undertaken to identify and solicit
indications of interest from other third parties regarding a potential
business combination transaction;
(5) the terms and conditions of the Merger Agreement, including
provisions that (i) although prohibiting the Company and its
representatives from soliciting or initiating any Acquisition Transaction,
permit the Company and its representatives to furnish information to, and
negotiate and otherwise engage in discussions with, any third party in
response to an unsolicited Superior Proposal and (ii) permit the Company to
terminate the Merger Agreement to enter into a definitive agreement with
respect to a Superior Proposal, subject to payment of a termination fee of
$1,000,000;
(6) IFS AB's financial condition, the ability of Parent to cause the
Purchaser to meet its obligations under the Merger Agreement and the fact
that IFS AB had agreed to provide Parent and the Purchaser with the funding
necessary to complete on a timely basis the transactions contemplated by
the Merger Agreement;
(7) the alternatives available to the Company in light of the
consideration proposed to be received for the Shares pursuant to the Offer
and the Merger, including continuing to maintain the Company as an
independent company or engaging in an extraordinary transaction;
16
<PAGE> 18
(8) legal matters relating to the Offer and the Merger, including the
review provided for under the HSR Act with respect to the antitrust
implications of the Offer, and the terms of the Offer and the Merger
Agreement related thereto;
(9) the familiarity of the Board of Directors with the business,
results of operations, properties and financial condition of the Company
and the nature of the industry in which it operates;
(10) the Company's lack of adequate working capital, which has
hindered the ability of the Company to fund research and development needed
for continued growth;
(11) the written opinion of Tucker Cleary to the effect that, as of
the date of the opinion, the $4.50 per Share cash consideration to be
received by the shareholders of the Company in the Offer and the Merger is
fair to such shareholders from a financial point of view. The full text of
the written opinion of Tucker Cleary dated September 1, 1999, which sets
forth the factors considered, assumptions made and limitations on the
review conducted by Tucker Cleary, is attached as Annex A hereto, and is
incorporated herein by reference. SHAREHOLDERS ARE ENCOURAGED TO READ THE
OPINION OF TUCKER CLEARY CAREFULLY AND IN ITS ENTIRETY; and
(12) the proposed structure of the Offer and the Merger involving an
immediate cash tender offer followed by a merger for the same consideration
and the fact that there is no financing or due diligence contingency to the
Offer. In this connection, the Board of Directors of the Company also
considered the likelihood that the proposed acquisition would be
consummated, including the likelihood of satisfaction of the conditions to
the Offer and the Merger contained in the Merger Agreement, and the risks
to the Company if the acquisition was not consummated.
The Board of Directors of the Company evaluated the factors listed above in
light of the directors' knowledge of the business and operations of the Company
and in their business judgment. In view of the variety of factors considered in
connection with its evaluation of the Merger Agreement and the Offer, the Board
of Directors did not find it practicable to, and did not, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. In addition, individual members of the Board of Directors may
have given different weights to different factors. The foregoing discussion of
the information and factors considered and given weight by the Board of
Directors is not intended to be exhaustive.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement, dated August 26, 1999 (the "Tucker Cleary
Engagement Letter"), between the Company and Tucker Cleary, the Company engaged
Tucker Cleary to render an opinion as to the fairness, from a financial point of
view, of the consideration to be received by the public holders of Shares in the
Offer and the Merger. Pursuant to the Tucker Cleary Engagement Letter, the
Company will pay Tucker Cleary for its services in connection with the Offer and
the Merger a fee of $100,000. In addition, the Company agreed to reimburse
Tucker Cleary up to a maximum of $5,000 (unless a higher amount is approved in
writing by the Company) for its properly documented expenses, including
reasonable fees and expenses of its legal counsel, incurred by Tucker Cleary in
connection with providing its services pursuant to the Tucker Cleary Engagement
Letter and to indemnify Tucker Cleary against certain liabilities, including
liabilities arising under federal securities laws.
The Company retained Tucker Cleary based on its experience and expertise.
Tucker Cleary, as part of its investment banking business, is continuously
engaged in the evaluation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate purposes. In the ordinary course of its business,
Tucker Cleary and its affiliates may from time to time trade the securities of
the Company for its own account or the accounts of its customers and,
accordingly, may at any time hold long or short positions in such securities.
17
<PAGE> 19
The opinion of Tucker Cleary was delivered to the Company's Board of
Directors for its use in connection with its consideration of the Offer and the
Merger and is not intended to be, and does not constitute, a recommendation to
any shareholder of the Company as to whether such shareholder should tender his
Shares in the Offer or vote in favor of the Merger, if such a vote occurs. The
fairness opinion does not address the Company's underlying business decision to
pursue the acquisition.
Pursuant to a letter agreement, dated as of September 12, 1997, as amended
(the "Ascent Partners Engagement Letter"), between the Company and Ascent
Partners, the Company engaged Ascent Partners to act as its exclusive financial
advisor to explore strategic alternatives for the Company. Pursuant to the
Ascent Partners Engagement Letter, the Company paid Ascent Partners a retainer
advisory fee of $24,000 (to be credited against the transaction fee payable to
Ascent Partners) and will pay Ascent Partners a transaction fee of approximately
$357,000 in connection with the Offer and the Merger. In addition, the Company
agreed (a) that Ascent Partners will be entitled, under certain circumstances,
to a 1.5% transaction fee if the Intercim division of the Company is spun-off by
Parent within six months following the acquisition of the Company, (b) to
reimburse Ascent Partners for its reasonable out-of-pocket expenses and (c)
indemnify Ascent Partners against certain liabilities.
The Company retained Ascent Partners based on its expertise and experience
in advising corporate clients engaged in the manufacturing software industry.
Ascent Partners is involved on an ongoing basis in advising clients in merger
and acquisition and related business combination transactions.
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the shareholders of the Company on its
behalf with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) During the past sixty 60 days, no transactions in the Shares have been
effected by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company, except on
August 2, 1999, the Company granted, as part of its standard retention policy
under the Company's 1993 Stock Option Plan, 1,998 stock options at an exercise
price of $2.65 per Share to certain employees of the Company.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, all of the Company's executive
officers, directors and affiliates who own Shares presently intend to tender all
of their Shares to the Purchaser pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer which relates to or would
result in (i) an extraordinary transaction such as a merger or reorganization,
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth herein, there are no transactions, Board of
Directors resolutions, agreements in principle or signed contracts in response
to the Offer that relate to or would result in one or more of the events
referred to in Item 7(a) above.
18
<PAGE> 20
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Short Form Merger. Under the WBCL, if (a) Purchaser acquires, pursuant to
the Offer, the Stock Option or otherwise, at least 90% of the outstanding Shares
and (b) Parent and the Company mutually agree that the Merger will be structured
so that the Company will be merged with and into the Purchaser, with the
Purchaser continuing as the Surviving Corporation, the Purchaser will be able to
effect the Merger after consummation of the Offer without a vote of the
Company's shareholders. However, if either (a) the Purchaser does not acquire at
least 90% of the Shares pursuant to the Offer, the Stock Option or otherwise or
(b) the Purchaser acquires at least 90% of the Shares but Parent and the Company
decide not to restructure the Merger as specified above, then a vote of the
Company's shareholders will be required under the WBCL and a significantly
longer period of time will be required to effect the Merger.
Wisconsin Business Corporation Law. Sections 180.1140 through 180.1144 of
the WBCL (the "Wisconsin Business Combination Statute") prohibit certain
business combinations between a resident domestic corporation (such as the
Company) and an "interested stockholder" (defined generally as any person who
beneficially owns, directly or indirectly, 10% or more of the outstanding voting
stock of a domestic corporation or who is an affiliate or associate of the
corporation and beneficially owned 10% or more of the voting stock within the
last three years) for a period of three years after the date on which the person
became an interested stockholder unless, among other exceptions, the acquisition
of the shares or the business combination has been approved by the board of
directors of the resident domestic corporation prior to the date on which the
interested stockholder became an interested stockholder. Although the
acquisition of the Shares pursuant to the Merger after the purchase of Shares in
the Offer would involve a business combination between a resident domestic
corporation and an interested stockholder, the Company's execution of the Merger
Agreement (which provides for the Offer and the Merger) and the Stock Option
Agreement were unanimously approved by the Board of Directors of the Company
prior to the date on which the Purchaser will become an interested stockholder.
Accordingly, the Wisconsin Business Combination Statute is inapplicable to the
Offer, the Merger and the exercise of the option under the Stock Option
Agreement.
Section 180.1150 of the WBCL contains "Control Share" provisions limiting,
under certain circumstances, the voting power of a shareholder that holds in
excess of 20% of the voting power of certain corporations. As a result, Shares
purchased by the Purchaser from shareholders that constitute in excess of 20% of
the voting power in the election of directors of the Company will be limited to
10% of the full voting power of such Shares (Shares acquired directly from the
Company are not so limited). However, since the Minimum Condition is 75% of the
Shares outstanding on a fully diluted basis, if the Minimum Condition is met,
the Control Share provision of the WBCL will not affect the Purchaser's ability
to approve the Merger.
Sections 180.1130 through 180.1134 of the WBCL (the "Wisconsin Fair Price
Law") generally provide, with certain exceptions, that "business combinations"
involving a resident domestic corporation that has a class of voting stock
registered or traded on a national securities exchange or that is registered
under Section 12(g) of the Exchange Act (such as the Company) and a "significant
shareholder" (defined generally as any person that is the beneficial owner,
either directly or indirectly, of 10% or more of the voting power of the
outstanding voting shares of the resident domestic corporation) be approved by
the affirmative vote of at least 80% of the voting power of the resident
domestic corporation's stock and at least 66 2/3% of the voting power of the
corporation's stock not beneficially owned by the significant shareholder, in
each case voting together as a group, unless certain "fair price" conditions set
forth in Section 180.1132 of the WBCL are satisfied. The amount to be paid for
each Share in both the Offer and pursuant to the Merger currently satisfies each
of the conditions of Section 180.1132 of the WBCL. Accordingly, the
restrictions contained in the Wisconsin Fair Price Law are not currently
applicable to the Merger. Further, if the Merger is consummated as a short-form
merger, the Merger will not be a "business combination" under, and will not be
subject to the provisions of, the Wisconsin Fair Price Law.
19
<PAGE> 21
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
(a)(1)* Letter to Shareholders of Effective Management Systems,
Inc., dated September 8, 1999.
(a)(2) Joint Press Release issued on September 1, 1999.
(a)(3)* Fairness opinion of Tucker Anthony Cleary Gull, dated
September 1, 1999.
(b) Not applicable.
(c)(1) Agreement and Plan of Merger, dated as of September 1, 1999,
by and among IFS Americas, Inc., IFS Acquisition, Inc. and
Effective Management Systems, Inc.
(c)(2) Stock Option Agreement, dated as of September 1, 1999, by
and between IFS Americas, Inc., IFS Acquisition, Inc. and
Effective Management Systems, Inc.
(c)(3) Stockholder Agreement, dated as of September 1, 1999, by and
among IFS Americas, Inc., IFS Acquisition, Inc. and Michael
D. Dunham.
(c)(4) Stockholder Agreement, dated as of September 1, 1999, by and
among IFS Americas, Inc., IFS Acquisition, Inc. and Thomas
M. Dykstra.
(c)(5) Stockholder Agreement, dated as of September 1, 1999, by and
among IFS Americas, Inc., IFS Acquisition, Inc. and Donald
W. Vahlsing.
(c)(6) Stockholder Agreement, dated as of September 1, 1999, by and
among IFS Americas, Inc., IFS Acquisition, Inc. and Robert
E. Weisenberg.
(c)(7) Employment, Confidentiality, Non-Competition and Severance
Agreement by and between Effective Management Systems, Inc.
and Michael D. Dunham effective March 19, 1999.
[Incorporated by reference to Exhibit 10.1 to Effective
Management Systems, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended May 31, 1999]
(c)(8) Employment, Confidentiality, Non-Competition and Severance
Agreement by and between Effective Management Systems, Inc.
and Thomas M. Dykstra effective March 19, 1999.
[Incorporated by reference to Exhibit 10.2 to Effective
Management Systems, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended May 31, 1999]
(c)(9) Employment, Confidentiality, Non-Competition and Severance
Agreement by and between Effective Management Systems, Inc.
and Richard W. Grelck effective March 19, 1999.
[Incorporated by reference to Exhibit 10.3 to Effective
Management Systems, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended May 31, 1999]
(c)(10) Employment and Separation Agreement by and between Effective
Management Systems, Inc. and Wayne T. Wedell effective
January 1, 1998. [Incorporated by reference to Exhibit 10.4
to Effective Management Systems, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended August 31, 1998]
(c)(11) Stock Option Agreement by and between Helmut M. Adam and
Effective Management Systems, Inc., dated December 17, 1993.
[Incorporated by reference to Exhibit 10.13 to Effective
Management Systems, Inc.'s Registration Statement on Form
SB-2 (Registration No. 33-73354)]
(c)(12) Stock Option Agreement by and between Scott J. Mermel and
Effective Management Systems, Inc., dated December 17, 1993.
[Incorporated by reference to Exhibit 10.14 to Effective
Management Systems, Inc.'s Registration Statement on Form
SB-2 (Registration No. 33-73354)]
</TABLE>
20
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
(c)(13) Effective Management Systems, Inc. 1993 Stock Option Plan,
as amended. [Incorporated by reference to Exhibit 10.3 to
Effective Management Systems, Inc.'s Quarterly Report on
Form 10-Q for the quarter ended May 31, 1998]
(c)(14) Form of Nonstatutory Stock Option Agreement for non-employee
directors, dated February 1, 1999. [Incorporated by
reference to Exhibit 10.1 to Effective Management Systems,
Inc.'s Quarterly Report on Form 10-Q for the quarter ended
February 28, 1999]
(c)(15) Mutual Nondisclosure Agreement, executed on or about May 24,
1999, by and between Effective Management Systems, Inc. and
IFS Americas, Inc.
(c)(16) Letter of Industrial & Financial Systems, IFS AB to
Effective Management Systems, Inc., dated September 1, 1999,
regarding funding for the Offer and the Merger.
(c)(17) Letter of Michael D. Dunham to IFS, Inc., dated August 31,
1999, regarding the purchase of shares of stock of
Industrial and Financial Systems, IFS AB.
(c)(18) Letter of Thomas M. Dykstra to IFS, Inc., dated August 31,
1999, regarding the purchase of shares of stock of
Industrial and Financial Systems, IFS AB.
(c)(19) Non-competition Agreement by and between Effective
Management Systems, Inc. and Helmut M. Adam, dated September
1, 1999.
(c)(20) Non-competition Agreement by and between Effective
Management Systems, Inc. and Scott J. Mermel, dated
September 1, 1999.
</TABLE>
- ---------------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
21
<PAGE> 23
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.
EFFECTIVE MANAGEMENT SYSTEMS, INC.
By: /s/ MICHAEL D. DUNHAM
------------------------------------
Michael D. Dunham
President and Chief Executive
Officer
Dated: September 8, 1999
22
<PAGE> 24
SCHEDULE I
EFFECTIVE MANAGEMENT SYSTEMS, INC.
12000 WEST PARK PLACE
MILWAUKEE, WISCONSIN 53224
------------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement (the "Information Statement") is being mailed on
or about September 8, 1999 as part of the Solicitation/Recommendation Statement
on Schedule 14D-9 (the "Schedule 14D-9") to the holders of the Common Stock and
Series B 8% Convertible Redeemable Preferred Stock of Effective Management
Systems, Inc. (the "Company"). Capitalized terms used and not otherwise defined
herein shall have the meaning set forth in the Schedule 14D-9. You are receiving
this Information Statement in connection with the possible election of persons
designated by the Purchaser to a majority of the seats on the Board of Directors
of the Company (the "Board"). The Merger Agreement requires the Company to cause
the Purchaser's designees to be elected to the Board under the circumstances
described therein. This Information Statement is required by Section 14(f) of
the Exchange Act and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
September 8, 1999. The Offer is scheduled to expire at 5:00 p.m., New York City
time, on Friday, October 15, 1999, unless the Offer is extended.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent, the Purchaser and the
Purchaser Designees (as defined below) has been furnished to the Company by
either Parent or the Purchaser and the Company assumes no responsibility for the
accuracy or completeness of such information.
I-1
<PAGE> 25
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The Shares and the Series B Stock are the only classes of voting securities
of the Company outstanding. Each Share and each Share that is deemed to be
outstanding by reason of conversion of the Series B Stock (which is determined
by assuming conversion of the Series B Stock into Shares at the record date for
a meeting of shareholders) has one vote. As of the close of business on August
31, 1999, there were 4,130,986 Shares issued and outstanding, 1,936.63 shares of
the Series B Stock issued and outstanding and 2,494,760 Shares reserved for
issuance upon the exercise of certain outstanding options and warrants and upon
conversion of the Series B Stock. The Board currently consists of six members,
divided into three classes. Each director holds office for a three-year term and
until such director's successor is duly elected and qualified or until such
director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the payment by the
Purchaser for Shares pursuant to the Offer, and from time to time thereafter,
the Purchaser will be entitled to designate such number of directors, rounded up
to the next whole number, on the Board (the "Purchaser Designees"), equal to the
product of the total number of directors on the Board (determined after giving
effect to the directors designated by the Purchaser pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by the Purchaser or its affiliates bears to the total number of Shares
then outstanding on a fully diluted basis. In furtherance thereof, the Company
has agreed, upon the request of the Purchaser, either to increase the size of
the Board or seek the resignations of such number of incumbent directors, or
both, as is necessary to enable the Purchaser Designees to be so elected to the
Board. At such time, the Company has also agreed, upon the request of the
Purchaser, to cause persons designated by the Purchaser to constitute at least
the same percentage (rounded up to the next whole number) as is on the Board of
each committee of the Board. The Company's obligation to appoint the Purchaser
Designees is subject to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and other applicable laws (including applicable
fiduciary duties). The Company is required to take all action necessary to
effect any such election and to include in this Information Statement the
information required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The foregoing notwithstanding, the Merger Agreement
further provides that at least two directors who are neither officers,
directors, shareholders or designees of the Purchaser or any of its affiliates
("Purchaser Insiders") shall continue to serve on the Board until the
effectiveness of the Merger and each committee of the Board shall have at least
one member who is not a Purchaser Insider.
The Purchaser has informed the Company that it will choose the Purchaser
Designees from the directors and executive officers listed in Schedule I to the
Offer to Purchase, a copy of which is being mailed to the Company's shareholders
together with the Schedule 14D-9. The Purchaser has informed the Company that
each of directors and executive officers listed in Schedule I to the Offer to
Purchase has consented to act as a director, if so designated. The information
on such Schedule I is incorporated herein by reference.
I-2
<PAGE> 26
The Purchaser has advised the Company that to the best knowledge of the
Purchaser, none of the Purchaser Designees currently is a director of, or holds
any position with the Company, and except as disclosed in the Offer to Purchase,
none of the Purchaser Designees beneficially owns any securities (or rights to
acquire any securities) of the Company or has been involved in any transactions
with the Company or any of its directors, executive officers or affiliates that
are required to be disclosed pursuant to the rules of the Securities and
Exchange Commission (the "SEC"), except as may be disclosed in the Offer to
Purchase. The Purchaser has also informed the Company that certain Purchaser
Designees and/or their respective associates may also be directors or officers
of other companies and organizations that have engaged in transactions with the
Company or its subsidiaries in the ordinary course of business since December 1,
1997, and that the Purchaser believes that the interest of such persons in such
transactions is not of material significance. None of the Purchaser Designees
has any family relationship with any director or executive officer of the
Company.
The Purchaser has advised the Company that each of the persons listed in
the table above has consented to act as a director, and that none of such
persons has during the last five years been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was, or is, subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws or is
involved in any other legal proceeding which is required to be disclosed under
Item 401(f) of Regulation S-K promulgated by the SEC.
I-3
<PAGE> 27
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
CURRENT MEMBERS OF THE BOARD OF DIRECTORS
The names of the Company's current directors, their ages as of March 10,
1999 and certain other information about them are set forth below. As indicated
above, some of the current directors may resign effective immediately following
the purchase of Shares by the Purchaser pursuant to the Offer.
MICHAEL D. DUNHAM, 53, a co-founder of the Company, has served as President
and Chief Executive Officer of the Company since its inception in 1978. Mr.
Dunham has over 25 years of experience in management, sales, consulting,
software design and development in the manufacturing and distribution software
industry. Mr. Dunham has a B.S. degree in electrical engineering from the
University of Denver and a Masters of Management Science degree from the Stevens
Institute of Technology. Mr. Dunham is a Fellow of the American Production and
Inventory Control Society.
Director since: 1978
THOMAS M. DYKSTRA, 57, a co-founder of the Company, has served as a Vice
President and as Secretary and Treasurer of the Company since its incorporation
in 1978. During his tenure with the Company, Mr. Dykstra has managed several
different functions including product development, marketing, affiliate sales,
finance, and administration and support. Mr. Dykstra has a degree in mathematics
from Hope College and an M.B.A. degree from the University of Chicago. Mr.
Dykstra is a Fellow of the American Production and Inventory Control Society.
Director since: 1978
HELMUT M. ADAM, 48, has served as President of Olympus Flag & Banner, Inc.,
a manufacturer of banners, flags and display products, since 1992. Prior
thereto, Mr. Adam was President of Ransomes Inc., a manufacturer of commercial
grass mowing equipment. Mr. Adam is a Certified Public Accountant. Mr. Adam has
both B.B.A. and M.B.A. degrees from the University of Wisconsin and an M.S.
degree in Accounting from the University of Wisconsin-Milwaukee.
Director since: 1987
SCOTT J. MERMEL, 51, is Director of Field Service Operations for
Alternative Resources Corporation, a provider of outsourced information
technology services. From August 1998 to February 1999, he was a private
investor. From April 1997 to July 1998, Mr. Mermel served as Vice President,
Marketing of Metrix, Inc., a developer and marketer of customer service and
product support software. From 1980 to April 1997, Mr. Mermel was a floor
trading member of the Chicago Mercantile Exchange. Prior to that, he held
several managerial positions with Xerox Computer Services, a developer and
marketer of software systems for manufacturing companies. Mr. Mermel has a B.S.
degree and an M.S. degree in Industrial Management from Massachusetts Institute
of Technology.
Director since: 1987
ELLIOT WASSARMAN, 59, is an independent consultant to the high technology
market. In 1998, Mr. Wassarman served as President, Chief Executive Officer, and
a Director of Mitek Systems, Inc., a developer of neural networked
intelligent-character-recognition and advanced forms processing software. From
1996 to 1997, he served as President, Chief Executive Officer and Director of
Electric Classifieds, Inc. (k/n/a InstantObjects, Inc.), an internet e-commerce
products and services startup. During 1996, Mr. Wassarman also served as
President, Chief Operating Officer, and a Director of Teralinx Communications
Corp. From 1990 to 1996, Mr. Wassarman served as President, Chief Executive
Officer, and a Director of Promis Systems Corp., a software company. Mr.
Wassarman has a B.A. degree from Suffolk University.
Director since: 1999
ROBERT E. WEISENBERG, 49, is President of Northwoods Software Development,
Inc., a software development firm. From December 1989 to December 1997, Mr.
Weisenberg was Vice President -- Operations and General Manager of the Company.
Mr. Weisenberg also served as Assistant Secretary of the
I-4
<PAGE> 28
Company from December 1993 until December 1997. Mr. Weisenberg has a B.A. degree
from Stanford University and is a Certified Public Accountant.
Director since: 1993
INFORMATION CONCERNING THE BOARD OF DIRECTORS
The Board has standing Audit and Compensation Committees. The Audit
Committee is responsible for recommending to the Board the appointment of
independent auditors, approving the scope of the annual audit activities of the
auditors, approving the audit fee payable to the auditors and reviewing audit
results. Messrs. Dunham, Wassarman and Weisenberg are members of the Audit
Committee. The Audit Committee held one meeting in fiscal 1998.
The Compensation Committee (a) reviews and recommends to the Board the
compensation structure for the Company's directors, officers and other
managerial personnel, including salary rates, participation in any incentive
bonus plans, fringe benefits, non-cash perquisites and other forms of
compensation, and (b) administers the Company's 1993 Stock Option Plan (the
"1993 Plan") and the 1998 Employee Stock Purchase Plan. Messrs. Adam and Mermel
are members of the Compensation Committee. The Compensation Committee held five
meetings in fiscal 1998.
The Board has no standing nominating committee. The Board selects the
director nominees to stand for election at the Company's annual meetings of
shareholders and to fill vacancies occurring on the Board. The Board will
consider nominees recommended by shareholders, but has no established procedures
which shareholders must follow to make a recommendation. The Company's Bylaws
also provide for shareholder nominations of candidates for election as
directors. These provisions require such nominations to be made pursuant to
timely notice (as specified in the Bylaws) in writing to the Secretary of the
Company. The shareholder's notice of nomination must contain information
relating to the nominee which is required to be disclosed by the Company's
Bylaws and the Exchange Act.
The Board held ten meetings in fiscal 1998. Other than Mr. Adam, who missed
one meeting of the Board, each director attended (a) all of the meetings of the
Board and (b) all of the meetings held by all committees of the Board on which
such director served during the year.
Directors who are officers or employees of the Company receive no
compensation as such for service as members of either the Board or committees
thereof. In fiscal 1998, the non-employee directors received a cash retainer fee
of $3,500. In addition, non-employee directors of the Company are entitled to
receive grants of options to purchase the Common Stock under the 1993 Plan.
Under the 1993 Plan, each person who is first elected as a non-employee director
automatically receives on the date of his or her election an option to purchase
2,030 shares of the Common Stock. On the day following the annual meeting of
shareholders in each year, each non-employee director is also entitled to
receive an option to purchase 1,500 shares of the Common Stock for serving on
the Board and an option to purchase 1,000 shares of the Common Stock for each
Board committee on which the director serves. Options granted to non-employee
directors have a per share exercise price of 100% of the fair market value of a
share of the Common Stock on the date of grant. Non-employee director options
under the 1993 Plan vest as to 10% of the shares subject thereto on the first
anniversary of the grant date, an additional 20% on the second anniversary of
the grant date, an additional 30% on the third anniversary of the grant date,
and the final 40% on the fourth anniversary of the grant date, except that if
the non-employee director ceases to be a director by reason of death, disability
or retirement during such period, or in the event of a change in control of the
Company, the option will become immediately exercisable in full. Options granted
to non-employee directors will terminate on the earlier of (a) ten years after
the date of grant, (b) six months after the non-employee director ceases to be a
director of the Company by reason of death, or (c) three months after the
non-employee director ceases to be a director of the Company for any reason
other than death. Under the terms of the 1993 Plan, Messrs. Adam and Mermel each
received in fiscal 1998 an option to purchase 3,500 shares of, and Mr.
Weisenberg received an option to purchase 1,500 shares of, Common Stock at a per
share exercise price of $3 7/16. No options were exercised by the non-employee
directors during fiscal 1998.
I-5
<PAGE> 29
Mr. Wassarman, when he was first elected as a non-employee director
effective February 1, 1999, received under the terms of the 1993 Plan an option
to purchase 2,030 shares of Common Stock at a per share exercise price of
$1 7/16. In addition, on February 1, 1999, (i) Mr. Wassarman was granted an
option to purchase 20,000 shares of Common Stock and (ii) Messrs. Adam, Mermel
and Weisenberg were each granted an option to purchase 10,000 shares of Common
Stock. All of these options were granted outside of the 1993 Plan and are
exercisable at a price of $1 7/16 and have a ten-year term. These options vest
and become exercisable (i) as to 30% of the shares of Common Stock subject
thereto immediately, (ii) as to an additional 30% of the shares of Common Stock
subject thereto after one year has elapsed from the date of grant and (iii) as
to the remaining 40% of the shares of Common Stock subject thereto after two
years has elapsed from the date of grant.
EXECUTIVE OFFICERS OF THE COMPANY
The following paragraphs set forth certain information, as of March 10,
1999, about the other current executive officers of the Company who are not
directors. Such officers serve at the pleasure of the Board.
RICHARD W. GRELCK, 56, has served as Chief Operating Officer of the Company
since April 1998. From June 1997 to April 1998, Mr. Grelck served as Vice
President of Technology Development and from February 1995 to June 1997 he
served as Vice President of Manufacturing Technology. Also from February 1995 to
June 1997 he served as Vice President and General Manager of a wholly-owned
subsidiary of the Company that sells and services the Company's software
products in Illinois and Indiana. Prior to February 1995, such subsidiary was a
50% owned joint venture of the Company in which Mr. Grelck held the position of
Chief Executive Officer. Mr. Grelck has a B.S. degree in Electrical Engineering
from Northwestern University.
WAYNE T. WEDELL, 40, joined the Company in 1981 and has held positions of
Account Manager, Senior Account Manager, Group Manager as well as Professional
Services Manager, and was promoted to Vice President-Services in 1992. Mr.
Wedell holds a B.A. degree in business administration from the University of
Wisconsin-Milwaukee.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION INFORMATION
The following table sets forth certain information concerning compensation
paid for the last three fiscal years to (i) the Company's Chief Executive
Officer and (ii) each of the Company's four most highly compensated executive
officers who earned cash compensation in excess of $100,000 for the fiscal year
ended November 30, 1998. The persons named in the table are sometimes referred
to herein as the "Named Executive Officers."
I-6
<PAGE> 30
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL SECURITIES
COMPENSATION(1) UNDERLYING
-------------------- STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION(2)
- --------------------------- ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Michael D. Dunham........................ 1998 $185,819 $ -- -- $ --
President and Chief 1997 185,586 -- -- --
Executive Officer 1996 175,148 -- -- --
Thomas M. Dykstra........................ 1998 176,439 -- -- --
Vice President, Secretary 1997 176,308 -- -- --
and Treasurer 1996 164,739 -- -- --
Richard W. Grelck........................ 1998 171,087 -- 43,000 --
Chief Operating Officer 1997 122,191 125,000 -- --
1996 122,929 58,000 -- --
Wayne T. Wedell.......................... 1998 107,550 27,225 5,000 3,273
Vice President -- Services 1997 71,520 35,500 4,500 --
1996 67,008 6,120 10,000 --
Jeffrey J. Fossum........................ 1998 104,544 5,000 -- 3,160
Chief Financial Officer(3) 1997 95,460 5,000 -- --
1996 90,832 -- 10,000 --
</TABLE>
- ---------------
(1) Certain personal benefits provided by the Company and its subsidiaries to
the Named Executive Officers are not included in the table. Such benefits
consisted of Company-provided automobiles and reimbursement of certain
medical expenses. The aggregate amount of such benefits for each Named
Executive Officer in each year reflected in the table did not exceed 10% of
the sum of such officer's salary and bonus in each respective year.
(2) Consists of matching contributions made by the Company under its 401(k)
plan.
(3) Mr. Fossum's title was Chief Financial Officer until July 1999 when he
transferred and became a Pre-Sales Consultant in the Baan Sales & Marketing
Group of the Company. Subsequent thereto, Mr. Fossum resigned.
I-7
<PAGE> 31
STOCK OPTIONS
The Company has in effect the 1993 Plan pursuant to which options to
purchase Common Stock may be granted to employees (including executive officers)
of the Company and its subsidiaries. The following table presents certain
information as to grants of stock options made during fiscal 1998 to the Named
Executive Officers. Messrs. Dunham, Dykstra and Fossum were not granted options
in the 1998 fiscal year.
OPTION GRANTS IN 1998 FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR
- ------------------------------------------------------------------------------------------- OPTION
PERCENTAGE OF TERM(2)
TOTAL ---------------------
NUMBER OF OPTIONS AT 5% AT 10%
SECURITIES GRANTED TO EXERCISE OR ANNUAL ANNUAL
UNDERLYING EMPLOYEES IN BASE PRICE EXPIRATION GROWTH GROWTH
NAME OPTIONS GRANTED(1) FISCAL YEAR ($/SHARE) DATE RATE RATE
- ---- ------------------ ------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Grelck........... 43,000 11% $1.4375 10/13/08 $38,872 $98,513
Wayne T. Wedell............. 5,000 1.3% $1.4375 10/13/08 $ 4,520 $11,455
</TABLE>
- ---------------
(1) The options reflected in the table (which are non-qualified options for
purposes of the Internal Revenue Code) were granted under the 1993 Plan and
vest and become exercisable (i) as to 30% of the shares of Common Stock
subject thereto immediately, (ii) as to an additional 30% of the shares of
Common Stock subject thereto after one year has elapsed from the date of
grant and (iii) as to the remaining 40% of the shares of Common Stock
subject thereto after two years has elapsed from the date of grant.
(2) This presentation is intended to disclose a potential value which would
accrue to the optionee if the option were exercised the day before it would
expire and if the per share value had appreciated at the compounded annual
rate indicated in each column. The assumed rates of appreciation of 5% and
10% are prescribed by the rules of the SEC regarding disclosure of executive
compensation. The assumed annual rates of appreciation are not intended to
forecast possible future appreciation, if any, with respect to the price of
the Common Stock.
The following table sets forth information regarding the exercise of stock
options by the Named Executive Officers during the 1998 fiscal year and the
fiscal year-end value of unexercised options held by the Named Executive
Officers. Messrs. Dunham and Dykstra do not hold any stock options.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ON VALUE YEAR-END(#) FISCAL YEAR-END($)(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard W. Grelck............... -- -- 202,704 30,100 -- --
Wayne T. Wedell................. 3,500 $312.50 12,105 10,650 -- --
Jeffrey J. Fossum............... -- -- 12,265 4,000 -- --
</TABLE>
- ---------------
(1) The dollar values are calculated by determining the difference between the
fair market value of the underlying Common Stock and the exercise price of
the options at exercise or fiscal year-end, as the case may be.
I-8
<PAGE> 32
EMPLOYMENT ARRANGEMENTS
The Company has existing employment and severance agreements with Messrs.
Dunham, Dykstra, Grelck and Wedell. Each of these agreements is described in
Item 3(b) of the Schedule 14D-9 accompanying this Information Statement and is
incorporated herein by reference.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board is responsible for all aspects of
the Company's compensation package offered to its executive officers, including
the Named Executive Officers. The Compensation Committee determines the
compensation package (including the grant of stock options pursuant to the 1993
Plan) to be paid to each executive officer.
Executive Compensation Policies. The Company's executive compensation
program is intended to establish a relationship between compensation and the
Company's business strategies as well as the Company's goal of maintaining and
improving profitability and maximizing long-term shareholder value. The focus
of compensation decisions is on the achievement of long-term performance
objectives as opposed to the attainment of short-term, narrowly-defined goals.
The focus on long-term performance objectives is intended to avoid unwarranted
adjustments in executive compensation based solely on short-term swings (either
up or down) in the Company's markets.
In recommending and establishing levels of executive compensation, it is
the policy of the Compensation Committee to (a) offer competitive compensation
packages in order to attract and retain key executive officers crucial to the
Company's long-term success; (b) provide, on a limited basis, performance-based
compensation opportunities (including equity-based awards) which allow executive
officers to earn rewards for long-term strategic management and the enhancement
of shareholder value; (c) establish a relationship between executive
compensation and the Company's annual and long-term strategic goals; and (d)
provide compensation programs which recognize and reward individual initiative
and achievement.
Executive Compensation Package. As reflected under the section entitled
"Executive Compensation," the Company's executive compensation package consists
primarily of salary and, to a limited extent, bonus awards and stock option
grants, as well as benefits under the employee benefits plans offered by the
Company.
In setting and adjusting executive salaries, including the salaries of the
Chief Executive Officer and the other Named Executive Officers, the Compensation
Committee has historically compared the base salaries paid or proposed to be
paid by the Company with the ranges of salaries paid by corporations of similar
size relative to the Company and operating in comparable industries (the
"Comparison Group"). It is the judgment of the Compensation Committee that a
review of the compensation practices of companies within the Comparison Group is
appropriate in establishing competitive salary ranges for the Company's
executive officers. The relative financial performance of companies within the
Comparison Group was considered by the Compensation Committee in setting base
salaries for the Company's executive officers for the fiscal year ended November
30, 1998.
Based on the criteria enumerated above, the Compensation Committee awarded
no base salary increase to the Company's Chief Executive Officer and base salary
increases to the other Named Executive Officers for the fiscal year ended
November 30, 1998. As noted above, Messrs. Grelck and Wedell were granted
options under the 1993 Plan during fiscal 1998. By tying a portion of an
executive officer's overall compensation to stock price through the grant of
options, the Compensation Committee seeks to enhance its objective of providing
a further incentive to maximize long-term shareholder value.
I-9
<PAGE> 33
Under Section 162(m) of the Internal Revenue Code, the tax deduction by
corporate taxpayers, such as the Company, is limited with respect to the
compensation of certain executive officers unless such compensation is based
upon performance objectives meeting certain regulatory criteria or is otherwise
excluded from the limitation. The Compensation Committee currently intends to
qualify compensation paid to the Company's executive officers for deductibility
by the Company under Section 162(m) of the Internal Revenue Code.
Effective Management Systems, Inc. Compensation Committee
Helmut M. Adam
Scott J. Mermel
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Adam and Mermel. Mr.
Mermel, on July 31, 1998, resigned as an executive officer of Metrix, Inc. Mr.
Dunham serves as a director of Metrix, Inc.
RELATED PARTY TRANSACTIONS
Michael D. Dunham, the Company's President and Chief Executive Officer,
Thomas M. Dykstra, the Company's Vice President, Secretary and Treasurer, Robert
E. Weisenberg, a director of the Company, and Donald W. Vahlsing, an employee of
the Company until his resignation on March 1, 1999, own all of the outstanding
common stock of EMS Solutions, Inc. ("EMS Solutions"). EMS Solutions develops
and sells computer software and related hardware to the food vending and food
distribution industry. EMS Solutions employs 18 people, including a full-time
Vice President and General Manager. Although Messrs. Dunham and Dykstra are
shareholders and directors and Messrs. Weisenberg and Vahlsing are shareholders
of EMS Solutions, they are not involved in the daily management of its
operations.
In September 1998, EMS Solutions paid in full debt outstanding to the
Company, having a balance at the time of approximately $312,000. Prior to the
repayment of such debt, EMS Solutions paid interest thereon at a rate equal to
the Company's cost of funds under its revolving line of credit. The Company
continues to provide administrative services to EMS Solutions. Fees received
for these services amounted to approximately $75,000 for the fiscal year ended
November 30, 1998. The Company believes that the fees charged for these
services are comparable to fees that would be charged to unaffiliated third
parties.
I-10
<PAGE> 34
PRINCIPAL SHAREHOLDERS
MANAGEMENT
The following table sets forth information, as of March 10, 1999, regarding
beneficial ownership of the Common Stock by each director and nominee, each of
the persons named in the Summary Compensation Table set forth below, and all of
the directors and executive officers as a group. Except as otherwise noted,
each of the persons listed has sole voting and investment power over the shares
beneficially owned. None of the persons listed below own any shares of Series B
Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(2) OF CLASS
- --------------------------- ----------------------- --------
<S> <C> <C>
Helmut M. Adam.............................................. 28,835 *
Michael D. Dunham........................................... 640,300 15.5%
Thomas M. Dykstra........................................... 575,000(3) 14.0%
Jeffrey J. Fossum........................................... 20,821 *
Richard W. Grelck........................................... 229,204 5.3%
Scott J. Mermel............................................. 28,835 *
Elliot Wassarman............................................ 6,000 *
Wayne T. Wedell............................................. 29,110 *
Robert E. Weisenberg........................................ 246,200 6.0%
All directors and executive officers as a group (9
persons).................................................. 1,804,305(4) 40.9%
</TABLE>
- ---------------
* Less than one percent (1%).
(1) The address of each person who holds in excess of 5% of the Common Stock
identified in this table is 12000 West Park Place, Milwaukee, Wisconsin
53224.
(2) Includes the following shares subject to stock options or warrants which
were exercisable as of or within 60 days of March 10, 1999: Mr. Adam,
26,835; Mr. Dunham, 3,000 shares; Mr. Grelck, 202,704 shares; Mr. Mermel,
26,835 shares; Mr. Wassarman, 6,000 shares; Mr. Weisenberg, 3,000 shares;
and all directors and executive officers as a group, 292,744 shares. Other
than Mr. Dunham who holds warrants, all of the foregoing shares relate to
outstanding options.
(3) Consists of (a) 165,000 shares held by the Dykstra Family Limited
Partnership for which Mr. Dykstra acts as managing general partner and (b)
410,000 shares held by a family trust for which Mr. Dykstra serves as
trustee.
(4) Assumes the exercise of all options and warrants held by the group which
were exercisable as of or within 60 days of March 10, 1999.
OTHER BENEFICIAL OWNERS
The following table sets forth information, as of December 31, 1998,
regarding beneficial ownership by the only other persons known to the Company to
own beneficially more than 5% of the outstanding Common Stock as of December 31,
1998. The beneficial ownership set forth below has been reported on filings made
by such beneficial owners on Schedule 13G with the SEC.
I-11
<PAGE> 35
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP
--------------------------------------
VOTING POWER INVESTMENT POWER
NAME AND ADDRESS ----------------- ----------------- PERCENT
OF BENEFICIAL OWNERS SOLE SHARED SOLE SHARED AGGREGATE OF CLASS
- -------------------- ------- ------ ------- ------ --------- --------
<S> <C> <C> <C> <C> <C> <C>
Heartland Advisors, Inc.(1)........ 378,200 0 826,200 0 826,200 20.1%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
Donald W. Vahlsing................. 229,900 0 229,900 0 229,900 5.6%
12000 West Park Place
Milwaukee, Wisconsin 53224
</TABLE>
- ---------------
(1) The filing made by Heartland Advisors, Inc. indicates that the Common Stock
as to which it is deemed to be beneficial owner is held in various
investment advisory accounts.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and more than 10% beneficial owners to file reports of
ownership and changes in ownership with the SEC. The regulations of the SEC
require such persons to furnish the Company with copies of all Section 16(a)
forms they file. As follows, there were several late filings on the part of
several officers and directors: (i) in February 1998, Mr. Dykstra inadvertently
failed to report the January 30, 1998 sale of stock by a trust (for which he
serves as trustee and of which he and his spouse are beneficiaries) until March
5, 1998; (ii) in April 1998, Mr. Grelck was seven days late in filing his
Initial Statement of Beneficial Ownership; and (iii) in January 1999, Messrs.
Adam, Mermel, and Wassarman were five days late in filing their Annual
Statements of Changes in Beneficial Ownership. The Company believes that, in
all other respects, the officers, directors and more than 10% beneficial owners
have timely complied with the Section 16(a) filing requirements.
I-12
<PAGE> 36
PERFORMANCE INFORMATION
The following graph compares on a cumulative basis changes since February
25, 1994 (the date on which the Common Stock was first publicly traded) in (a)
the total shareholder return on the Common Stock, (b) the total return of
companies in the Nasdaq Stock Market Index ("Nasdaq U.S."), and (c) the total
shareholder return of companies in the Nasdaq Computer and Data Processing Stock
Market Index ("Nasdaq CDPSM") consisting of a peer group of publicly-traded
software companies. The total return information presented in the graph assumes
the reinvestment of dividends. The graph assumes $100 was invested on February
25, 1994 in Common Stock, the Nasdaq U.S. and the Nasdaq CDPSM.
COMMON STOCK PERFORMANCE GRAPH
<TABLE>
<CAPTION>
EFFECTIVE MANAGEMENT
SYSTEMS, INC. NASDAQ U.S. NASDAQ CDPSM
-------------------- ----------- ------------
<S> <C> <C> <C>
02/25/94 100.00 100.00 100.00
11/30/94 80.00 113.00 95.00
11/30/95 59.00 136.00 176.00
11/30/96 77.00 168.00 217.00
11/30/97 54.00 208.00 281.00
11/30/98 25.00 254.00 410.00
</TABLE>
<TABLE>
<CAPTION>
2/25/94 11/30/94 11/30/95 11/30/96 11/30/97 11/30/98
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Effective Management
Systems, Inc. ................ $100 $ 80 $ 59 $ 77 $ 54 $ 25
Nasdaq U.S. .................... $100 $113 $136 $168 $208 $254
Nasdaq CDPSM.................... $100 $ 95 $176 $217 $281 $410
</TABLE>
The Offer Price, when viewed in perspective of the above chart, raises the
Company's cumulative return to $56.25.
I-13
<PAGE> 1
EMS letterhead
September 8, 1999
Dear Shareholders:
On behalf of the Board of Directors of Effective Management Systems, Inc.
(the "Company"), I am pleased to inform you that on September 1, 1999 the
Company entered into a definitive Agreement and Plan of Merger (the "Merger
Agreement") with IFS Americas, Inc. ("Parent") and IFS Acquisition, Inc., a
wholly-owned subsidiary of Parent (the "Purchaser"), pursuant to which the
Purchaser has today commenced a tender offer to purchase all of the outstanding
Shares (the "Shares") of the common stock of the Company at $4.50 per Share in
cash (the "Offer").
Following the successful completion of the Offer, upon approval by a
shareholder vote, if required, the Purchaser and the Company will be merged (the
"Merger"), and all Shares not purchased pursuant to the Offer will be converted
into the right to receive $4.50 per Share in cash without interest (except any
Shares as to which the holder has properly exercised dissenter's rights).
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER
AND DETERMINED THAT THE CONSIDERATION TO BE RECEIVED FOR EACH SHARE IN THE OFFER
AND THE MERGER IS FAIR TO THE COMPANY'S SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS
THAT THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER ALL OF THEIR
SHARES.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the enclosed
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being filed with the Securities and Exchange Commission, including,
among other things, the opinion, dated September 1, 1999, of Tucker Anthony
Cleary Gull, the Company's financial advisor, that, as of such date, the $4.50
per Share cash consideration to be received by the holders of Shares in the
Offer and the Merger is fair to such holders from a financial point of view.
Please note that if you are a holder of the Company's Series B 8%
Convertible Redeemable Preferred Stock (the "Series B Stock") you must convert
your Series B Stock into Shares before you will be entitled to tender into the
Offer. Pursuant to the terms of the Series B Stock and by action of the
Company's Board of Directors, shares of Series B Stock not converted into Shares
by action of the holder thereof will be automatically converted into Shares
immediately prior to the closing of the Offer. Shares of Series B Stock which
are automatically converted into Shares will not be entitled to be tendered into
the Offer and will be converted into the right to receive cash following such
conversion in connection with the Merger at a rate of $4.50 per Share.
In addition to the attached Schedule 14D-9, also enclosed is the Offer to
Purchase, dated September 8, 1999, together with related materials, including a
Letter of Transmittal, to be used for tendering your Shares in the Offer. These
documents state the terms and conditions of the Offer and the Merger and provide
instructions as to how to tender your Shares. I urge you to read these documents
carefully in making your decision with respect to tendering your Shares pursuant
to the Offer.
Sincerely,
/s/ Michael D. Dunham
Michael D. Dunham
President and Chief Executive Officer
<PAGE> 1
EXHIBIT (a)(2)
P R E S S R E L E A S E
FOR IMMEDIATE RELEASE
IFS Americas, Inc. Signs Definitive Agreement to Acquire
Effective Management Systems, Inc.
IFS Americas, Inc. to Commence Tender Offer at $4.50 Per Share In Cash
TUCSON, ARIZONA, AND MILWAUKEE, WISCONSIN, SEPTEMBER 1, 1999 - IFS Americas,
Inc. ("IFS") (a Delaware Corporation) and Effective Management Systems, Inc.
(OTC:EMSI) ("EMS" or the "Company") today announced a definitive merger
agreement for IFS to acquire all of the outstanding common stock of EMS at $4.50
per share.
Under the terms of the merger agreement, IFS will promptly commence a cash
tender offer for all outstanding EMS shares at a price of $4.50 per share, net
in cash. Shares not purchased in the tender offer will be acquired in a
subsequent merger at the same price as soon as practicable after completion of
the tender offer. The tender offer is subject to a number of conditions
including customary regulatory approvals and IFS getting control over at least
75% of the shares of EMS. The transaction has been approved by the Boards of
Directors of both companies. The merger agreement is not subject to a financing
contingency.
IFS also entered into agreements with the founders and key members of executive
management of EMS who agreed to tender their shares in EMS.
The merger with EMS, a leader in enterprise software, strengthens IFS' position
in the U.S. with a strong sales and service staff, experienced in supporting
manufacturing companies, while providing IFS with the additional infrastructure
necessary to keep pace with its rapid growth. In addition, EMS' strength in shop
floor business solutions, further extends the IFS product offering to more
diverse markets.
Terje Vangbo, president and CEO of IFS, Inc., commented, "IFS is experiencing
record growth this year, and our future growth plans are even more aggressive.
Since the U.S. market is critical to maintaining our momentum, we believe
strategic acquisitions are necessary. It might have taken years to build an
experienced pool of industry-knowledgeable professionals who know and understand
our U.S. target market - mid-size manufacturers. The EMS acquisition gives us
immediate access to some of the finest manufacturing software talent in the
industry."
EMS president and CEO, Michael D. Dunham, stated, "Our customers will now have
the support and stability of a large, global organization that can provide a
greater level of product development and support. Another plus is the strong
cultural fit between the two companies, since, like IFS, we have built a large,
satisfied customer base by establishing long-term relationships one by one. This
acquisition is a great marriage that will increase the overall level of service
to both EMS and IFS customers."
<PAGE> 2
Page 2
ABOUT EFFECTIVE MANAGEMENT SYSTEMS
Effective Management Systems, Inc. (EMS), with headquarters in Milwaukee,
Wisconsin, is a provider of Enterprise Resource Planning (ERP) and Manufacturing
Execution System (MES) software that helps companies optimize their
manufacturing operations and coordinate those operations with all aspects of
their business. EMS customers quickly and affordably integrate their entire
enterprises to reduce lead times, increase throughput, improve customer service,
and maintain their competitive positions. From small, single-location companies
to mid-size manufacturing companies with multiple plants and relatively complex
business management needs, over 21 years, EMS has delivered pre-integrated,
comprehensive solutions within its TCM(TM) (Time Critical Manufacturing)
software suite to over 800 discrete manufacturing facilities in the U.S.,
Canada, Europe and Asia.
EMS's Intercim Division, based in Minneapolis, specializes in providing
factory-floor manufacturing-software solutions to Fortune 500 companies,
including Boeing Co. and Eastman Kodak Co., with complex production challenges.
Intercim has been providing information-management solutions for more than 15
years and has over 700 installations worldwide.
ABOUT IFS AND IFS APPLICATIONS
Industrial & Financial Systems, IFS AB, develops and supplies IFS
Applications(TM), which is a complete Enterprise Resource Planning (ERP) system
for business processes in medium-to large-sized companies. It covers
manufacturing, distribution, financials, maintenance management, resource
management, engineering and the front office.
The IFS business concept is to increase the freedom of action and
competitiveness of companies by offering standardized business systems based on
leading technologies.
IFS Applications is one of the first business systems in the market developed
entirely using a component-based architecture, which means that it can be
readily adapted to the needs of individual customers. This comprehensive,
web-enabled solution ties front and back offices together, creating a true
backbone for e-commerce.
IFS is the world's fastest-growing company in the ERP and maintenance software
market. The company has 2,500 employees and its products are sold in 34
countries around the world. Some of the more than 1,600 major customers include
Volvo, NEC, Akzo Nobel, Caterpillar, Saab, Nikon, Kimball, AlliedSignal,
Ericsson, International Paper, Sundstrand Corporation and Rover Group.
# # #
This news release does not constitute an offer to purchase any securities, nor a
solicitation of a proxy, consent, authorization or agent designation with
respect to a meeting of the EMS stockholders. The tender offer will be made only
pursuant to separate materials in compliance with the requirements of applicable
federal and state law. IFS has retained MacKenzie Partners, Inc. as Information
Agent for the Offer.
<PAGE> 3
Page 3
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release, including, without
limitation, statements containing the words "believes," "expects," and words of
similar import, constitute "forward-looking" statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
the Company or industry results to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among others, the following;
recent poor financial results, financial covenants and limitations, lack of
liquidity, recent restructuring of the Company, dependence on principal
products, the Company's relationship with Baan, dependence on third party
software, dependence on key employees, new products and technical change,
intellectual property and property rights, variability of quarterly operating
results, limited back log, competition, expansion plans, and control by
management. Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such forward-looking statements. IFS and EMS disclaim
any obligation to update any such factors or to publicly announce the results of
any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.
IFS Applications (TM) is a trademark of IFS Industrial and Financial Systems.
EMS, TCM, and FACTORYnet are trademarks or registered trademarks of Effective
Management Systems, Inc. or its subsidiaries. All other referenced company or
product names are trademarks or registered trademarks of their respective
owners.
<PAGE> 4
Page 4
FOR ADDITIONAL INFORMATION, CONTACT:
TERJE VANGBO, PRESIDENT & CEO
IFS, INC.
847/995-9600 phone
847/995-9607 fax
[email protected]
http://www.ifsab.com
MICHAEL D. DUNHAM, PRESIDENT & CEO
EMS
414/359-9800 phone
414/359-9801 fax
[email protected]
http://www.ems.com
<PAGE> 1
ANNEX A
[TUCKER CLEARY LETTERHEAD]
September 1, 1999
Board of Directors
Effective Management Systems, Inc.
12000 West Park Place
Milwaukee, Wisconsin 53224
Gentlemen:
You have requested our opinion as to the fairness, from a financial point
of view, to the holders (the "Stockholders") of shares of common stock, par
value $0.01 per share (the "Common Stock") of Effective Management Systems, Inc.
(the "Company") of the consideration to be received by the Stockholders pursuant
to the terms of the draft Agreement and Plan of Merger dated as of August 30,
1999 (the "Merger Agreement") by and among the Company, IFS Americas, Inc.
("Parent") and IFS Acquisition, Inc., a wholly-owned subsidiary of Parent
("Purchaser"). Pursuant to the Merger Agreement, Purchaser will offer to
purchase all of the issued and outstanding Common Stock in a cash tender offer
(the "Tender Offer") and, following completion of the Tender Offer, Purchaser
will be merged (the "Merger") with and into the Company and the Company will
become a wholly-owned subsidiary of Parent. The Tender Offer and the Merger are
collectively referred to herein as the "Acquisition".
Under the Merger Agreement, Purchaser will offer to purchase all of the
issued and outstanding shares of the Common Stock in the Tender Offer for $4.50
per share, net to the seller in cash (the "Offer Consideration"). Upon
consummation of the Merger, any shares of the Common Stock not acquired in the
Tender Offer will be converted into the right to receive the Offer
Consideration.
In arriving at our opinion, we have reviewed, among other things, the
Merger Agreement and certain business and financial information relating to the
Company, including certain financial projections, estimates and analyses
provided to us by the Company. We have also reviewed and discussed with
representatives of the Company's management the business and prospects of the
Company, the history of the discussions between the Company and Industrial &
Financial Systems, IFS AB, the parent corporation of Parent, which led to the
negotiation of the Acquisition, the alternatives to the Acquisition which were
considered by the Company and the Company's efforts to effectuate such
alternatives. In arriving at our opinion, we have considered (a) the recent
operating performance and financial condition and current cash position of the
Company; (b) certain projections by the Company's management of its operating
performance, financial position and weekly cash flow for the period July 1, 1999
to August 30, 1999; (c) a historical review of the Company's stock market price
and trading history; (d) certain financial and stock market data relating to the
Company in comparison to similar data for other publicly held companies
considered by Tucker Anthony Cleary Gull to be generally comparable to the
Company; (e) a comparison of the purchase price premium to be paid for the
Common Stock based on the Offer Consideration to certain other similar
transactions; (f) certain publicly available information concerning the nature
and terms of certain transactions that Tucker Anthony Cleary Gull believed to be
relevant to the Acquisition on a comparative basis; (g) an unleveraged,
after-tax discounted cash flow analysis of the Company; and (h) such other
information, financial studies and analyses and financial, economic and market
data as we deemed relevant and appropriate.
In connection with our review, we have not independently verified any of
the foregoing information and have relied on its being complete and accurate in
all material respects. We have not made an independent
<PAGE> 2
Effective Management Systems, Inc.
Fairness Opinion Letter
September 1, 1999
Page 2
evaluation or appraisal of any assets or liabilities (contingent or otherwise)
of the Company, nor have we been furnished with any such evaluation or
appraisal. With respect to the financial projections, estimates and analyses
provided to us by the Company, we have assumed, with your permission, that all
such information was reasonably prepared on bases reflecting the best currently
available estimates and judgments of management of the Company as to future
financial performance and was based upon the historical performance of the
Company and estimates and assumptions which were reasonable at the time made and
which remain reasonable for the date hereof. Finally, we have assumed that the
executed Merger Agreement will be in the same form as the draft Merger Agreement
reviewed by us, and that the Tender Offer and the Merger will be consummated on
the terms described in the Merger Agreement, without any waiver of any material
term or condition, and that obtaining any necessary regulatory or third party
approval for the Tender Offer and the Merger will not have an adverse effect on
any of the parties. Our opinion is based on economic, monetary and market
conditions existing on the date hereof.
We have not been requested to evaluate the reasonableness, adequacy, or
feasibility of Parent's plans for financing the Acquisition and this opinion
assumes that Parent has, or at closing will have, financing adequate to complete
the Acquisition in accordance with the Merger Agreement. We note that the
obligations of Parent to consummate the Acquisition pursuant to the Merger
Agreement are subject to several conditions. We have not been asked to evaluate
the likelihood that any such conditions will be satisfied and this opinion
assumes that none of such conditions will adversely affect Parent's willingness
or ability to consummate the Acquisition in accordance with the terms of the
Merger Agreement.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Offer Consideration to be received by the Stockholders in the
Tender Offer and the subsequent Merger pursuant to the Merger Agreement is fair,
from a financial point of view, to the Stockholders.
We are acting as financial advisor to the Board of Directors of the Company
in this transaction pursuant to an engagement letter dated August 26, 1999.
Under the engagement letter we will receive a fee for our services, payable when
this opinion is delivered to the Company's Board of Directors, which is not
contingent upon the contents of this opinion or the approval or consummation of
the Acquisition. In addition, the Company has agreed to indemnify us for certain
liabilities that may arise out of the rendering of this opinion. The Company has
agreed to reimburse Tucker Anthony Cleary Gull for its reasonable and properly
documented expenses incurred in connection with the performance of its services
under the engagement letter.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors of the Company in connection
with its consideration of the Acquisition. We are not making any recommendation
regarding whether or not it is advisable for Stockholders to tender their shares
of the Common Stock in the Tender Offer. We have not been requested to opine as
to, and our opinion does not in any manner address, the Company's underlying
business decision to proceed with or consummate the Acquisition, or whether
stockholders should vote in favor of the Merger.
Very Truly Yours,
TUCKER ANTHONY CLEARY GULL
<PAGE> 1
Exhibit (c)(1)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
IFS AMERICAS, INC.,
IFS ACQUISITION, INC.
AND
EFFECTIVE MANAGEMENT SYSTEMS, INC.
SEPTEMBER 1, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I. THE OFFER.................................................................................... 2
SECTION 1.01 The Offer..................................................................... 2
SECTION 1.02 Company Actions............................................................... 3
SECTION 1.03 Directors..................................................................... 4
SECTION 2.01 The Merger.................................................................... 6
SECTION 2.02 Effective Time; Closing....................................................... 6
SECTION 2.03 Effects of the Merger......................................................... 6
SECTION 2.04 Additional Action............................................................. 6
SECTION 2.05 Articles of Incorporation and By-Laws of the Surviving Corporation ........... 6
SECTION 2.06 Directors..................................................................... 6
SECTION 2.07 Officers...................................................................... 7
SECTION 2.08 Conversion of Shares.......................................................... 7
SECTION 2.09 Purchaser Common Stock........................................................ 7
SECTION 2.10 Company Options............................................................... 7
SECTION 2.11 Shareholders' Meeting......................................................... 7
SECTION 2.12 Merger Without Meeting of Shareholders........................................ 8
SECTION 2.13 Earliest Consummation......................................................... 9
ARTICLE III. DISSENTING SHARES; PAYMENT FOR SHARES....................................................... 9
SECTION 3.01 Dissenting Shares............................................................. 9
SECTION 3.02 Payment for Shares............................................................ 9
SECTION 3.03 No Further Rights or Transfers; Cancellation of Treasury Shares............... 11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................... 11
SECTION 4.01 Organization and Qualification................................................ 11
SECTION 4.02 Subsidiaries.................................................................. 12
SECTION 4.03 Articles of Incorporation and By-Laws......................................... 12
SECTION 4.04 Capitalization................................................................ 13
SECTION 4.05 Authority..................................................................... 13
SECTION 4.06 No Conflict; Required Filings and Consents.................................... 14
SECTION 4.07 SEC Reports and Financial Statements.......................................... 15
SECTION 4.08 Information................................................................... 15
SECTION 4.09 Absence of Certain Material Adverse Changes................................... 15
SECTION 4.10 Undisclosed Liabilities....................................................... 15
SECTION 4.11 Tax Matters................................................................... 16
SECTION 4.12 Owned Real Property........................................................... 17
SECTION 4.13 No Litigation................................................................. 17
SECTION 4.14 Compliance With Applicable Laws............................................... 17
SECTION 4.15 Environmental Matters......................................................... 17
SECTION 4.16 Benefit Plans; ERISA.......................................................... 18
SECTION 4.17 Intellectual Property......................................................... 20
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 4.18 Certain Events................................................................ 22
SECTION 4.19 Certain Approvals............................................................. 23
SECTION 4.20 Contracts..................................................................... 23
SECTION 4.21 Employees..................................................................... 23
SECTION 4.22 Books and Records............................................................. 24
SECTION 4.23 Fairness Opinion.............................................................. 24
SECTION 4.24 Brokers....................................................................... 24
SECTION 4.25 Vote Required................................................................. 24
SECTION 4.26 Underwriter Warrants.......................................................... 24
SECTION 4.27 Series B Stock................................................................ 25
SECTION 4.28 Public Warrants............................................................... 25
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER ................................. 26
SECTION 5.01 Organization and Qualification................................................ 26
SECTION 5.02 Authority..................................................................... 26
SECTION 5.03 No Conflict; Required Filings and Consents.................................... 26
SECTION 5.04 Information................................................................... 27
SECTION 5.05 Financing..................................................................... 27
SECTION 5.06 Brokers....................................................................... 27
SECTION 5.07 Purchaser..................................................................... 27
SECTION 5.08 Share Ownership............................................................... 28
ARTICLE VI. COVENANTS................................................................................... 28
SECTION 6.01 Conduct of Business of the Company............................................ 28
SECTION 6.02 Access to Information......................................................... 30
SECTION 6.03 Commercially Reasonable Efforts............................................... 31
SECTION 6.04 Consents...................................................................... 31
SECTION 6.05 Public Announcements.......................................................... 32
SECTION 6.06 Disclosure Statements......................................................... 32
SECTION 6.07 No Solicitation............................................................... 32
SECTION 6.08 Notification of Certain Matters............................................... 33
SECTION 6.09 Indemnification and Insurance................................................. 33
SECTION 6.10 Performance by the Purchaser.................................................. 34
SECTION 6.12 Deliveries of Information..................................................... 35
SECTION 6.13 Underwriter Warrants.......................................................... 35
SECTION 6.14 Series B Stock................................................................ 35
SECTION 6.15 Public Warrants............................................................... 35
ARTICLE VII. CONDITIONS TO CONSUMMATION OF THE MERGER................................................... 35
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger if the
Offer Shall Have Been Consummated............................................. 36
SECTION 7.02 Conditions to Obligation of Parent and the Purchaser to Effect the
Merger........................................................................ 36
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII. TERMINATION; AMENDMENTS; WAIVER........................................................... 36
SECTION 8.01 Termination................................................................... 36
SECTION 8.02 Effect of Termination......................................................... 37
SECTION 8.03 Amendment..................................................................... 38
SECTION 8.04 Extension; Waiver............................................................. 38
SECTION 8.05 Procedure for Termination, Extension or Waiver................................ 38
ARTICLE IX. MISCELLANEOUS............................................................................... 38
SECTION 9.01 Non-Survival of Representations and Warranties................................ 38
SECTION 9.02 Entire Agreement; Assignment.................................................. 38
SECTION 9.03 Validity...................................................................... 39
SECTION 9.04 Notices....................................................................... 39
SECTION 9.05 Governing Law................................................................. 39
SECTION 9.06 Descriptive Headings.......................................................... 40
SECTION 9.07 Counterparts.................................................................. 40
SECTION 9.08 Obligation of Parent.......................................................... 40
SECTION 9.09 Fees and Expenses............................................................. 40
SECTION 9.10 Certain Definitions........................................................... 40
SECTION 9.11 Specific Performance.......................................................... 41
SECTION 9.12 Interpretation................................................................ 41
SECTION 9.13 No Third Party Beneficiary.................................................... 41
</TABLE>
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 1, 1999 (this
"Agreement"), by and among IFS AMERICAS, INC., a Delaware corporation
("Parent"), IFS ACQUISITION, INC., a Wisconsin corporation and a wholly-owned
subsidiary of Parent (the "Purchaser"), and EFFECTIVE MANAGEMENT SYSTEMS, INC.,
a Wisconsin corporation (the "Company").
WHEREAS, as a condition and inducement to Parent's willingness to enter
into this Agreement, Parent has entered into Stockholder Agreements, dated the
date hereof, with certain holders of capital stock of the Company (the
"Stockholder Agreements"); and
WHEREAS, the respective Boards of Directors of Parent, the Purchaser
and the Company have approved the acquisition of the Company by the Purchaser on
the terms and subject to the conditions set forth in this Agreement; and
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
the Purchaser to commence a cash tender offer (as it may be amended or
supplemented as permitted under this Agreement, the "Offer") to purchase all of
the issued and outstanding shares of the common stock, $.01 par value per share,
of the Company (the "Shares"), at a price per Share of Four Dollars and 50/100
Dollars ($4.50) net to each seller in cash (such price, or any higher price per
Share paid in the Offer, the "Offer Price"); in each case, upon the terms and
subject to the conditions set forth in this Agreement and the Offer; and
WHEREAS, the Board of Directors of the Company has approved this
Agreement, the Offer and the Merger (as hereinafter defined), has determined
that the consideration to be paid for each share in the Offer and the Merger is
fair to the Company's shareholders, and has resolved to recommend that the
shareholders of the Company accept the Offer and tender all their Shares
pursuant to the Offer and approve and adopt this Agreement and the Merger upon
the terms and subject to the conditions set forth herein; and
WHEREAS, the respective Boards of Directors of Parent, the Purchaser
and the Company have approved the merger of the Purchaser with and into the
Company, subject to the Purchaser purchasing the Shares tendered in response to
the Offer and as further set forth below (the "Merger"), in accordance with the
Wisconsin Business Corporation Law ("WBC") and upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
Share not owned directly or indirectly by Parent, the Purchaser or the Company
will be converted into the right to receive the Offer Price in cash; and
WHEREAS, as a further inducement to the parties to enter into this
Agreement, Parent, the Purchaser and the Company have entered into a Stock
Option Agreement, dated as the date hereof (the "Stock Option Agreement"),
pursuant to which the Company has granted to the Purchaser an option to purchase
newly issued Shares under certain circumstances; and
<PAGE> 6
WHEREAS, Parent, the Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Parent,
the Purchaser and the Company hereby agree as follows:
ARTICLE I.
THE OFFER
SECTION 1.01 The Offer.
(a) Provided that this Agreement shall not have been
terminated in accordance with Section 8.01 hereof and none of the events set
forth in clauses (a) through (g) of Annex I hereto shall have occurred or exist,
the Purchaser shall, and Parent shall cause the Purchaser to, commence (within
the meaning of Rule 14d-2(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) the Offer as promptly as practicable after the date
hereof, but in any event not later than five (5) business days following the
date hereof. The initial expiration date for the Offer shall be October 15, 1999
(the "Expiration Date"). As promptly as practicable, the Purchaser shall file
with the Securities and Exchange Commission (the "SEC") the Purchaser's Tender
Offer Statement on Schedule 14D-1 (the "Schedule 14D-1" and together with the
documents therein pursuant to which the Offer will be made, and with any
supplements or amendments thereto, the "Offer Documents"), which shall contain
(as an exhibit thereto) the Purchaser's Offer to Purchase (the "Offer to
Purchase") that shall be mailed to the holders of Shares with respect to the
Offer. The obligation of Parent and the Purchaser to accept for payment or pay
for any Shares tendered pursuant to the Offer will be subject only to there
being validly tendered and not withdrawn prior to the expiration of the Offer,
that number of Shares which represents at least seventy-five percent of the
Shares entitled to vote that are outstanding on a fully diluted basis (without
giving pro forma effect to the potential issuance of any Shares issuable under
the Stock Option Agreement) (the "Minimum Condition"), and to the satisfaction
or waiver of each condition set forth in Annex I hereto (the term "fully diluted
basis" in reference to the Shares means all outstanding securities entitled
generally to vote in the election of directors of the Company on a fully diluted
basis, after giving effect to the exercise or conversion of all options,
warrants, rights and securities exercisable or convertible into such voting
securities). Without the prior written consent of the Company, the Purchaser
shall not (i) decrease the Offer Price or change the form of consideration
payable in the Offer, (ii) decrease the number of Shares sought to be purchased
in the Offer; (iii) amend or waive satisfaction of the Minimum Condition; or
(iv) amend any other term of the Offer in any manner adverse to the holders of
any Shares; provided, however, that if on the Expiration Date all conditions to
the Offer shall not have been satisfied or waived, the Purchaser may, from time
to time in its sole discretion, extend the Expiration Date (each extension to be
for ten business days or less); provided, further, that the Expiration Date
shall in no event be extended past October 31, 1999 without the written consent
of the Company. The Purchaser shall, on the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, accept for payment and
purchase, as soon as practicable after the expiration of the Offer, all Shares
validly tendered and not withdrawn prior to the expiration of the
2
<PAGE> 7
Offer; provided, however, that the Purchaser may extend the Expiration Date
(including as it may be extended) for up to ten (10) business days in connection
with an increase in the consideration to be paid pursuant to the Offer so as to
comply with applicable rules and regulations of the SEC; and provided further
that, if on the Expiration Date (including as it may be extended) the sole
condition remaining to be satisfied is the expiration or termination of any
applicable waiting period under the HSR Act (as defined herein), the Purchaser
shall, and Parent shall cause the Purchaser to, extend the Offer from time to
time, subject to the rights to terminate this Agreement provided in Section
8.01, until two (2) business days after the expiration or termination date of
the waiting period under the HSR Act.
(b) The Offer Documents will comply in all material respects
with the provisions of applicable federal securities laws and, on the date filed
with the SEC and on the date first published, sent or given to the Company's
shareholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading. No representation, warranty or covenant is made
or shall be made herein by the Company with respect to information contained in
the Offer Documents other than information supplied by the Company in writing
expressly for inclusion in the Offer Documents. Each of Parent and the
Purchaser, on the one hand, and the Company, on the other hand, agrees promptly
to correct any information provided by it for use in the Offer Documents if and
to the extent that it shall have become false or misleading in any material
respect and the Purchaser further agrees to take all steps necessary to cause
the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to the Company's shareholders, in each case as and to the extent
required by applicable federal securities laws. Each of Parent and the Purchaser
agrees to give the Company a reasonable opportunity to review and comment upon
any Offer Document to be filed with the SEC prior to any such filing and to
provide in writing any comments each may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt of such comments.
SECTION 1.02 Company Actions.
(a) Concurrently with the commencement of the Offer, the
Company shall file with the SEC and mail to the holders of Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 with respect to the
Offer (together with any amendments or supplements thereto, the "Schedule
14D-9"). The Schedule 14D-9 will set forth, and the Company hereby represents,
that the Board of Directors of the Company, at a meeting duly called and held,
has unanimously (i) determined that the consideration to be paid for each Share
in the Offer and the Merger is fair to the Company's shareholders; (ii) approved
this Agreement, the Stock Option Agreement and the transactions contemplated
hereby and thereby, including the Offer and the Merger, in accordance with the
applicable provisions of the WBC; and (iii) resolved to recommend that the
Company's shareholders accept the Offer, tender their Shares thereunder to the
Purchaser and approve and adopt this Agreement and the Merger; provided,
however, that such recommendation may be withdrawn, modified or amended to the
extent that the Board of Directors of the Company determines in good faith,
after consultation with outside counsel, that such action is consistent with its
fiduciary obligations under applicable laws, ordinances, rules or regulations
(collectively, "Laws").
3
<PAGE> 8
(b) The Schedule 14D-9 will comply in all material respects
with the provisions of applicable federal securities laws and, on the date filed
with the SEC and on the date first published, sent or given to the Company's
shareholders, shall not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements made therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by the
Company with respect to information supplied by Parent or the Purchaser in
writing for inclusion in the Schedule 14D-9. No representation, warranty or
covenant is made or shall be made herein by Parent or the Purchaser with respect
to information contained in the Schedule 14D-9 other than information supplied
by Parent and/or the Purchaser in writing expressly for inclusion in the
Schedule 14D-9. Each of the Company, on the one hand, and Parent and the
Purchaser, on the other hand, agree promptly to correct any information provided
by either of them for use in the Schedule 14D-9 if and to the extent that it
shall have become false or misleading, and the Company further agrees to take
all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with
the SEC and to be disseminated to the shareholders, in each case as and to the
extent required by applicable federal securities laws. The Company agrees to
give each of Parent and the Purchaser a reasonable opportunity to review and
comment upon the Schedule 14D-9 to be filed with the SEC prior to such filing
and to provide in writing any comments the Company may receive from the SEC or
its staff with respect to the Schedule 14D-9 promptly upon receipt of such
comments.
(c) In connection with the Offer, the Company will promptly
furnish the Purchaser with such information and assistance as the Purchaser or
its agents or representatives may reasonably request in connection with
communicating the Offer to the record and beneficial holders of the Shares,
including, without limitation, mailing labels, its shareholders list, security
position listings and non-objecting beneficial owners list, if any, or a
computer file containing the names and addresses of all record holders of Shares
as of a recent date, and shall furnish the Purchaser with such additional
information (including, but not limited to, updated lists of holders of Shares
and their addresses, mailing labels and lists of security positions). Subject to
the requirements of applicable Law, and except for such actions as are necessary
to disseminate the Offer Documents and any other documents necessary to
consummate the Offer and the Merger, Parent and the Purchaser and each of their
affiliates, associates, partners, employees, agents and advisors shall hold in
confidence the information contained in such labels, shareholders list, security
position listings, non-objecting beneficial owners list and the information
referred to in the preceding sentence, shall use such information only in
connection with the Offer and the Merger, and, if this Agreement is terminated
in accordance with its terms, shall deliver promptly to the Company all copies
of such information (and any copies, compilations or extracts thereof or based
thereon) then in their possession or under their control.
SECTION 1.03 Directors.
(a) Promptly upon the Purchaser's payment for Shares pursuant
to the Offer, and from time to time thereafter as the Purchaser acquires Shares,
the Purchaser shall be entitled to designate such number of directors, rounded
up to the next whole number, on the Board of Directors of the Company as is
equal to the product of the total number of directors on the Board of Directors
of the Company (determined after giving effect to the directors designated by
the Purchaser pursuant
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to this sentence) multiplied by the percentage that the aggregate number of
Shares beneficially owned by the Purchaser or its affiliates bears to the total
number of Shares entitled to vote then outstanding on a fully diluted basis, and
the Company shall, subject to compliance with Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder and other applicable Law (including
applicable fiduciary duties), upon request of the Purchaser, promptly take all
actions necessary to cause the Purchaser's designees to be so elected,
including, if necessary, promptly increasing the size of the Board of Directors
of the Company or seeking the resignations of one or more existing directors, or
both; provided, however, that prior to the Effective Time (as defined in Section
2.02) the Board of Directors of the Company shall always have at least two (2)
members who are neither officers, directors, shareholders or designees of the
Purchaser or any of its affiliates ("Purchaser Insiders"). If the number of
directors who are not Purchaser Insiders is reduced below two (2) for any reason
prior to the Effective Time, then the remaining director who is not a Purchaser
Insider shall be entitled to designate a person to fill such vacancy who is not
a Purchaser Insider and who shall be a director not deemed to be a Purchaser
Insider for all purposes of this Agreement. At such time, the Company shall, if
requested by the Purchaser, also cause persons designated by the Purchaser to
constitute at least the same percentage (rounded up to the next whole number) as
is on the Board of Directors of the Company of each committee of the Board of
Directors of the Company; provided, however, that prior to the Effective Time
each committee of the Board of Directors of the Company shall have at least one
(1) member who is not a Purchaser Insider.
(b) The Company's obligation to appoint the Purchaser's
designees to the Board of Directors of the Company shall be subject to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder and other applicable Law
(including applicable fiduciary duties). The Company shall promptly take all
actions required pursuant to such Section and Rule in order to fulfill its
obligations under this Section 1.03, including mailing to the shareholders of
the Company the information required by Section 14(f) and Rule 14f-1 as is
necessary to enable the Purchaser's designees to be elected to the Board of
Directors of the Company, and shall include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under such Section and Rule in order to fulfill its obligations under
this Section 1.03. Parent will supply in writing any information with respect to
itself and its officers, directors and affiliates required by such Section and
Rule to the Company.
(c) From and after the election or appointment of the
Purchaser's designees pursuant to this Section 1.03 and prior to the Effective
Time, any amendment or termination of this Agreement by the Company, any
extension by the Company of the time for the performance of any of the
obligations or other acts of Parent or the Purchaser or waiver of any of the
Company's rights hereunder, or any other action taken by the Board of Directors
of the Company in connection with this Agreement, will require the concurrence
of a majority of the directors of the Company then in office who are not
Purchaser Insiders.
ARTICLE II.
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the satisfaction
or waiver of the conditions hereof, and in accordance with the applicable
provisions of this Agreement and the
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WBC, at the Effective Time, the Purchaser shall be merged with and into the
Company. Following the Merger, the separate corporate existence of the Purchaser
shall cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation"). Upon the mutual agreement of Parent and the Company,
the Merger may be structured so that the Company shall be merged with and into
the Purchaser, with the Purchaser continuing as the Surviving Corporation;
provided, however, that the Company shall be deemed not to have breached any of
its representations, warranties or covenants herein if and to the extent such
breach would have been attributable to such agreement.
SECTION 2.02 Effective Time; Closing. As soon as practicable after the
satisfaction or waiver of the conditions set forth in Article VII hereof, the
appropriate parties hereto shall execute in the manner required by the WBC and
file with the Wisconsin Department of Financial Institutions appropriate
articles of merger relating to the Merger, and the parties shall take such other
and further actions as may be required by Law to make the Merger effective. The
time the Merger becomes effective in accordance with applicable Law is referred
to as the "Effective Time." On the business day immediately preceding such
filing, a closing (the "Closing") shall be held at the offices of Streich Lang,
Two North Central Avenue, Phoenix, Arizona 85004, unless another date or place
is agreed to in writing by the parties hereto, for the purpose of confirming the
satisfaction or waiver, as the case may be, of the conditions set forth in
Article VII.
SECTION 2.03 Effects of the Merger. The Merger shall have the effects
set forth in Section 180.1106 of the WBC.
SECTION 2.04 Additional Action. The Surviving Corporation may, at any
time after the Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either the Company or the
Purchaser, in order to consummate the transactions contemplated by this
Agreement.
SECTION 2.05 Articles of Incorporation and By-Laws of the Surviving
Corporation.
(a) Subject to Section 6.09(a) hereof, the articles of
incorporation of the Purchaser, as in effect immediately prior to the Effective
Time, shall be the articles of incorporation of the Surviving Corporation until
thereafter amended in accordance with the provisions thereof and hereof and
applicable Law.
(b) Subject to Section 6.09(a) hereof, the by-laws of the
Purchaser, as in effect immediately prior to the Effective Time, shall be the
by-laws of the Surviving Corporation until thereafter amended in accordance with
the provisions thereof and hereof and applicable Law.
SECTION 2.06 Directors. Subject to applicable Law, the directors of the
Purchaser immediately prior to the Effective Time, shall be the initial
directors of the Surviving Corporation and shall hold office until their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal.
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SECTION 2.07 Officers. The officers of the Company immediately prior to
the Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office until their respective successors are duly elected and
qualified, or their earlier death, resignation or removal.
SECTION 2.08 Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of the holders thereof, each Share
issued and outstanding immediately prior to the Effective Time (other than any
Shares held by Parent, the Purchaser, any wholly-owned subsidiary of Parent or
the Purchaser, in the treasury of the Company or by any wholly-owned subsidiary
of the Company, which Shares, by virtue of the Merger and without any action on
the part of the holder thereof, shall be canceled and retired and shall cease to
exist with no payment being made with respect thereto, and other than Dissenting
Shares (as defined in Section 3.01)) shall be converted into the right to
receive in cash the Offer Price (the "Merger Price"), payable to the holder
thereof, without interest thereon, in accordance with Article III.
SECTION 2.09 Purchaser Common Stock. Each share of common stock, par
value $.001 per share, of the Purchaser issued and outstanding immediately prior
to the Effective Time shall, by virtue of the Merger and without any action on
the part of the holder thereof, be converted into one share of common stock of
the Surviving Corporation. Each certificate evidencing ownership of any such
shares shall, following the Merger, evidence ownership of the same number of
shares of common stock of the Surviving Corporation. Notwithstanding the
foregoing, if Parent and the Company agree to restructure the Merger as provided
in Section 2.01 hereof, then the Purchaser's common stock shall not be affected
in any manner by virtue of the Merger.
SECTION 2.10 Company Options. At or prior to the Closing, all
outstanding stock options of the Company (the "Options") shall be adjusted to
provide that each Option will thereafter be a right to receive the Merger Price
in lieu of any shares of Common Stock upon the exercise of the Option and
payment of the required exercise price of the Option. No other terms of the
Options shall be affected by the foregoing adjustment.
SECTION 2.11 shareholders' Meeting.
(a) If required by the Company's articles of incorporation
and/or applicable Law in order to consummate the Merger, the Company, acting
through its Board of Directors, shall, in accordance with applicable Law:
(i) duly call, give notice of, convene and hold a
special meeting of the Company's shareholders (the "shareholders'
Meeting") as soon as practicable following the acceptance of and
payment for Shares by the Purchaser pursuant to the Offer, which shall
in no event be more than ninety (90) days after such acceptance and
payment, for the purpose of considering and taking action upon this
Agreement;
(ii) promptly prepare and file with the SEC a
preliminary information or proxy statement relating to the Merger and
this Agreement and (x) obtain and furnish the information required to
be included by the SEC in the Proxy Statement (as hereinafter
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<PAGE> 12
defined) and, after consultation with Parent, respond promptly to any
comments made by the SEC with respect to the preliminary information or
proxy statement and, subject to compliance with SEC rules and
regulations, cause a notice of a special meeting and a definitive
information or proxy statement (the "Proxy Statement") to be mailed to
the shareholders of the Company no later than the time required by
applicable Law and the articles of incorporation and the by-laws of the
Company, and (y) to obtain the necessary approvals of the Merger and
this Agreement by the shareholders of the Company; and
(iii) subject to Section 1.02(a), include in the
Proxy Statement the recommendation of the Board of Directors of the
Company that the shareholders of the Company vote in favor of the
approval of the Merger and the adoption of this Agreement.
(b) Parent and the Purchaser will furnish to the Company the
information relating to Parent and the Purchaser required under the Exchange Act
and the rules and regulations thereunder to be set forth in the Proxy Statement.
(c) The Company shall consult with Parent and the Purchaser
with respect to the Proxy Statement (and any amendments or supplements thereto)
and shall afford Parent and the Purchaser reasonable opportunity to comment
thereon prior to its finalization. If, at any time prior to the Shareholder's
Meeting, any event shall occur relating to the Company or the transactions
contemplated by this Agreement which should be set forth in an amendment or a
supplement to the Proxy Statement, the Company will promptly notify in writing
Parent and the Purchaser of such event. In such case, the Company, with the
cooperation of Parent and the Purchaser, will promptly prepare and mail such
amendment or supplement and the Company shall consult with Parent and the
Purchaser with respect to such amendment or supplement and shall afford Parent
and the Purchaser reasonable opportunity to comment thereon prior to such
mailing. The Company agrees to notify Parent and the Purchaser at least three
(3) days prior to the mailing of the Proxy Statement (or any amendment or
supplement thereto) to the shareholders of the Company.
(d) Parent agrees that it will (i) vote, or cause to be voted,
all of the Shares then owned by it, the Purchaser or any of its other
subsidiaries in favor of the approval of the Merger and the adoption of this
Agreement and (ii) take or cause to be taken all additional corporate actions
necessary for the Purchaser to adopt and approve this Agreement and the
transactions contemplated hereby.
SECTION 2.12 Merger Without Meeting of Shareholders. Notwithstanding
Section 2.11, in the event that (i) Parent, the Purchaser or any other
subsidiary of Parent shall have acquired in the aggregate at least 90% of the
outstanding Shares pursuant to the Offer (including as a result of the exercise
of the Stock Option Agreement) and prior transactions and (ii) Parent and the
Company agree to restructure the Merger as provided in Section 2.01, the parties
hereto agree, subject to Article VII, to take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
acceptance for payment of and payment for Shares by the Purchaser pursuant to
the Offer without a meeting of the Company's shareholders, in accordance with
Section 180.1104 of the WBC.
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SECTION 2.13 Earliest Consummation. Each party hereto shall use its
commercially reasonable efforts to consummate the Merger as soon as practicable.
ARTICLE III.
DISSENTING SHARES; PAYMENT FOR SHARES
SECTION 3.01 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time that are held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded payment for such Shares in
accordance with Sections 180.1301 to 180.1331 of the WBC ("Dissenting Shares"),
shall not be converted into the right to receive the Merger Price as provided in
Section 2.08, unless and until such holder fails to perfect or withdraws or
otherwise loses his or her right to dissent and demand payment under the WBC.
If, after the Effective Time, any such holder fails to perfect or withdraws or
loses his or her right to demand payment, then such Dissenting Shares shall
thereupon be treated as if they had been converted as of the Effective Time into
the right to receive the Merger Price, if any, to which such holder is entitled,
without interest or dividends thereon, and such Shares shall no longer be
Dissenting Shares. The Company shall give Parent prompt notice of any demands
received by the Company for payment of Shares and, prior to the Effective Time,
Parent shall have the right to participate in all negotiations and proceedings
with respect to such demands. Prior to the Effective Time, the Company shall
not, except with the prior written consent of Parent, make any payment with
respect to or settle or offer to settle, any such demands.
SECTION 3.02 Payment for Shares.
(a) Prior to the commencement of the Offer, the Purchaser
shall appoint a United States bank, company or other entity mutually acceptable
to the Company and Parent to act as paying agent (the "Paying Agent") for the
payment of the Offer Price and the Merger Price. Prior to the payment time
thereof, Parent shall deposit or shall cause to be deposited with the Paying
Agent in a separate fund established for the benefit of the holders of Shares,
for payment upon surrender of the certificates for exchange in accordance with
this Article III, through the Paying Agent (the "Payment Fund"), immediately
available funds in amounts necessary to make the payments pursuant to the Offer,
Section 2.08 and this Section 3.02 to holders (other than Shares held by the
Company or any subsidiary of the Company or Parent, the Purchaser or any other
subsidiary of Parent, or holders of Dissenting Shares). The Paying Agent shall
pay the Offer Price and the Merger Price out of the Payment Fund.
(b) From time to time at or after the Effective Time, Parent
shall take all lawful action necessary to make the appropriate cash payments, if
any, to holders of Dissenting Shares. Prior to the Effective Time, Parent shall
enter into appropriate commercial arrangements to ensure effectuation of the
immediately preceding sentence. The Paying Agent shall invest the Payment Fund
as directed by Parent or the Purchaser in obligations of, or guaranteed by, the
United States of America, in commercial paper obligations rated A-1 or P-1 or
better by Moody's Investor Services or Standard & Poor's Corporation,
respectively, or in certificates of deposit, bank repurchase agreements or
bankers' acceptances of commercial banks with capital exceeding $300 million, in
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each case with maturities not exceeding seven days. Parent shall cause the
Payment Fund to be promptly replenished to the extent of any losses incurred as
a result of the aforementioned investments. All earnings thereon shall inure to
the benefit of Parent. If for any reason (including losses) the Payment Fund is
inadequate to pay the amounts to which holders of Shares shall be entitled under
Section 2.08 and this Section 3.02, Parent shall in any event be liable for
payment thereof. The Payment Fund shall not be used for any purpose except as
expressly provided in this Agreement.
(c) Promptly after the Effective Time, the Paying Agent shall
mail to each record holder of certificates (the "Certificates") that immediately
prior to the Effective Time represented Shares entitled to payment of the Merger
Price pursuant to Section 2.08 (other than Certificates representing Dissenting
Shares and Certificates representing Shares held by Parent or the Purchaser, any
wholly-owned subsidiary of Parent or the Purchaser, in the treasury of the
Company or by any wholly-owned subsidiary of the Company) (i) a form of letter
of transmittal which shall (x) specify that delivery shall be effected, and risk
of loss and title to the Certificates shall pass, only upon proper delivery of
the Certificates to the Paying Agent; (y) contain a representation in a form
reasonably satisfactory to Parent as to the good and marketable title of the
Shares held by such holder free and clear of liens, claims, options, charges,
security interests, limitations, encumbrances and restrictions of any kind
("Liens"); and (z) contain such other customary provisions as the Company and
Parent may reasonably specify; and (ii) instructions for use in surrendering
such Certificates and receiving the aggregate Merger Price, in respect thereof.
Upon the surrender of each such Certificate and subject to applicable
withholding, the Paying Agent shall (subject to applicable abandoned property,
escheat and similar Laws) pay the holder of such Certificate in respect of
Shares, the Merger Price multiplied by the number of Shares formerly represented
by such Certificate, and such Certificate shall forthwith be canceled. Until so
surrendered, each such Certificate (other than Certificates representing
Dissenting Shares and Certificates representing Shares held by Parent or the
Purchaser, any wholly-owned subsidiary of Parent or the Purchaser, in the
treasury of the Company or by any wholly-owned subsidiary of the Company) shall
represent solely the right to receive the aggregate Merger Price relating
thereto. No interest or dividends shall be paid or accrued on the Merger Price.
If the Merger Price (or any portion thereof) is to be delivered to any person
other than the person in whose name the Certificate formerly representing such
Shares is registered, it shall be a condition to such right to receive such
Merger Price, as applicable, that the Certificate so surrendered shall be
properly endorsed or otherwise be in proper form for transfer and that the
person surrendering such Certificates shall pay to the Paying Agent any transfer
or other taxes required by reason of the payment of the Merger Price to a person
other than the registered holder of the Certificate surrendered, or shall
establish to the satisfaction of the Paying Agent that such tax has been paid or
is not applicable.
(d) Promptly following the first anniversary of the Effective
Time, the Paying Agent shall deliver to the Surviving Corporation all cash,
Certificates and other documents in its possession relating to the transactions
described in this Agreement, and the Paying Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing a Share may
surrender such Certificate to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefor the aggregate Merger Price, without any interest or
dividends thereon.
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(e) After the Effective Time, there shall be no transfers on
the stock transfer books of the Surviving Corporation of any Shares that were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates formerly representing Shares are presented to the Surviving
Corporation or the Paying Agent, they shall be surrendered and canceled in
return for the payment of the aggregate Merger Price relating thereto, as
provided in this Article III, subject to applicable Law in the case of
Dissenting Shares.
(f) Neither the Paying Agent nor any party to this Agreement
shall be liable to any shareholder or warrant holder of the Company or Option
holder for any Shares, any Options, the Merger Price or cash delivered to a
public official pursuant to and in accordance with any abandoned property,
escheat or similar Law.
(g) The Paying Agent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
shareholder of the Company or Option holder such amounts as the Company
reasonably and in good faith determines are required to be deducted and withheld
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or any provision of state, local or foreign tax
Law. To the extent that amounts are so withheld by the Paying Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the shareholder or Option holder in respect of which such deduction
and withholding was made by the Paying Agent.
SECTION 3.03 No Further Rights or Transfers; Cancellation of Treasury
Shares. Except for the surrender of the Certificate(s) or the perfection of
dissenters' rights with respect to the Dissenting Shares, at and after the
Effective Time, the holder of Shares shall cease to have any rights as a
shareholder of the Company, and no transfer of Shares shall thereafter be made
on the stork transfer books of the Surviving Corporation. Each Share held in the
Company's treasury immediately prior to the Effective Time shall, by virtue of
the Merger, be canceled and retired and cease to exist without any conversion
thereof.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser
as follows (with such exceptions thereto as are set forth in the disclosure
statement delivered by the Company to Parent on the date hereof (the "Company
Disclosure Statement")):
SECTION 4.01 Organization and Qualification. The Company is a
corporation duly organized and validly existing under the laws of the State of
Wisconsin. The Company has the requisite corporate power and authority to own,
operate or lease its properties and to carry on its business as it is now being
conducted, and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction in which the nature of its business or the
properties owned, operated or leased by it makes such qualification, licensing
or good standing necessary except where the failures to have such power or
authority, or the failures to be so qualified, licensed or in good standing,
individually, and in the aggregate, would not have a Material Adverse Effect on
the Company. The term "Material Adverse Effect on the Company," as used in this
Agreement, means
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any change in or effect on the business, results of operations, assets or
condition of the Company or any of the Subsidiaries that would be materially
adverse to the Company and its Subsidiaries taken as a whole, except for any
change or effect resulting from general economic or financial market conditions.
SECTION 4.02 Subsidiaries. Except as disclosed by the Company in its
most recent Annual Report on Form 10-K as required by Item 601 of Regulation
S-K, and except as set forth in Section 4.02 of the Company Disclosure
Statement, the Company does not have the power, directly or indirectly, to vote
or direct the voting of, securities sufficient to elect the majority of the
directors of any corporation (a "Subsidiary") and does not control, directly or
indirectly, or have any direct or indirect controlling equity interest, or any
commitment to acquire any such direct or indirect controlling equity interest,
in any corporation, partnership, joint venture, association, trust, or other
business organization. Except as set forth in Section 4.02 of the Company
Disclosure Schedule, each Subsidiary is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorporation. Each
Subsidiary has the requisite corporate power and authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and is duly qualified or licensed to do business, and is in good standing, in
each jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary, except where the failures to have such power or authority, or the
failures to be so qualified, licensed or in good standing, individually, and in
the aggregate, would not have a Material Adverse Effect on the Company. The
Company has delivered or made available to the Purchaser correct and complete
copies of the charter of each Subsidiary, as amended to date, and prior to
Closing will deliver or make available to the Purchaser correct and complete
copies of the bylaws of each Subsidiary, as amended to date. No Subsidiary is in
default under or in violation of any provision of its charter or by-laws. All of
the issued and outstanding shares of capital stock of each Subsidiary are duly
authorized, validly issued, fully paid, nonassessable (except as otherwise
provided in Section 108.0622(2)(b) of the WBC) and free of preemptive rights.
Except as disclosed in Section 4.02 of the Company Disclosure Statement, all
shares of each Subsidiary that are held of record or owned beneficially by
either the Company or any Subsidiary or any nominee are held or owned free and
clear of any restrictions on transfer (other than restrictions under the
Securities Act, state securities laws or foreign securities laws), written
claims, Security Interests (as hereinafter defined), options, warrants, rights,
contracts and calls. There are no outstanding or authorized options, warrants,
rights, agreements or commitments to which the Company or any Subsidiary is a
party or which are binding on any of them providing for the issuance,
disposition or acquisition of any capital stock of any Subsidiary. There are no
outstanding stock appreciation, phantom stock or similar rights with respect to
any Subsidiary.
SECTION 4.03 Articles of Incorporation and By-Laws. The Company has
heretofore made available to Parent and the Purchaser a complete and correct
copy of the Company's articles of incorporation and the by-laws, each as amended
to the date hereof and a copy of which is set forth in Section 4.03 of the
Company Disclosure Statement. The Company is not in violation of any provision
of its articles of incorporation or by-laws.
SECTION 4.04 Capitalization. The authorized capital stock of the
Company consists of 20,000,000 shares of common stock and 3,000,000 shares of
preferred stock. As of the close of
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business on August 31, 1999, there were 4,130,986 shares of the Company's common
stock, $.01 par value per share (the "Common Stock"), outstanding and 1,936.63
shares of the Company's Series B 8% Convertible Redeemable Preferred Stock (the
"Series B Stock") outstanding. The Company has no shares of capital stock
reserved for issuance, except that, as of August 31, 1999, there were 2,494,760
shares of the Common Stock reserved for issuance pursuant to (i) Options granted
pursuant to the Company's employee stock purchase and stock option plans, (ii)
nonstatutory stock option agreements, (iii) Public Warrants (as defined below)
and Underwriter Warrants (as defined below) and (iv) the Series B Stock. Except
as set forth in Section 4.04 of the Company Disclosure Statement, no Shares are
held by the Company as treasury shares and no Shares have been acquired by the
Company that are subject to outstanding pledges to secure future payment of the
purchase price therefor. All outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
non-assessable (except as otherwise provided in Section 180.0622(2)(b) of the
WBC). Except as set forth in this Section 4.04 or in Section 4.04 of the Company
Disclosure Statement and except for changes since May 31, 1999 resulting from
the exercise of Options, nonstatutory stock options or warrants, the conversion
of the Series B Stock outstanding on such date, or the Company's obligations
under the Stock Option Agreement, there are outstanding (a) no shares of capital
stock or other voting securities of the Company, (b) no securities of the
Company convertible into or exchangeable for shares of capital stock or voting
securities of the Company, and (c) no options or other rights to acquire from
the Company, and no obligation of the Company to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company (the items in clauses (a), (b) and (c)
being referred to collectively as the "Company Securities"). There are no
outstanding obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any Company Securities. To the knowledge of the Company,
other than the Stockholder Agreements, there are no voting trusts, proxies or
other agreements or understandings with respect to the voting of the capital
stock of the Company.
SECTION 4.05 Authority. The Company has all necessary corporate power
and authority to execute and deliver this Agreement and the Stock Option
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the Stock Option Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly and validly authorized and approved by the
Board of Directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize or approve this Agreement or the Stock
Option Agreement or to consummate the transactions contemplated hereby and
thereby (other than, with respect to the Merger, the approval and adoption of
the Merger and this Agreement by holders of the Shares and the Series B Stock to
the extent required by the Company's articles of incorporation and by applicable
Law). This Agreement and the Stock Option Agreement have been duly and validly
executed and delivered by the Company and, assuming the due and valid
authorization, execution and delivery of this Agreement and the Stock Option
Agreement by Parent and the Purchaser, constitute valid and binding obligations
of the Company enforceable against the Company in accordance with their
respective terms, except as such enforceability (a) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors' rights generally and (b) is subject to general
principles of equity. The Board of Directors of the Company has, at a meeting of
such Board duly held on September 1, 1999,
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unanimously approved and adopted this Agreement, the Stock Option Agreement, the
Offer and the Merger and the other transactions contemplated hereby and thereby,
determined that the Offer Price to be received by the holders of Shares pursuant
to the Offer and the Merger is fair to the holders of the Shares and recommends
that the holders of Shares tender their Shares pursuant to the Offer and approve
and adopt this Agreement and the Merger, subject to the Board's rights under
Section 6.07 hereof.
SECTION 4.06 No Conflict; Required Filings and Consents.
(a) Except as disclosed in Section 4.06 of the Company
Disclosure Statement, none of the execution and delivery of this Agreement by
the Company, the consummation by the Company of the transactions contemplated
hereby or the compliance by the Company with any of the provisions hereof will
(i) conflict with or violate the articles of incorporation or by-laws of the
Company or the comparable organizational documents of any of the Subsidiaries;
(ii) conflict with or violate any statute, ordinance, rule, regulation, order,
judgment or decree applicable to the Company or the Subsidiaries, or by which
any of them or any of their respective properties or assets may be bound or
affected, or (iii) result in a violation or breach of or constitute a default
(or an event which with notice or lapse of time or both would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in any loss of any material benefit, or the creation
of any Lien on any of the property or assets of the Company or any of the
Subsidiaries (any of the foregoing referred to in clause (ii) or this clause
(iii) being a "Violation") 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 the Subsidiaries is a party or by
which the Company or any of the Subsidiaries or any of their respective
properties may be bound or affected, except in the case of the foregoing clauses
(ii) or (iii) for any Violation which, individually and in the aggregate, would
not have a Material Adverse Effect on the Company.
(b) Except as disclosed in Section 4.06 of the Company
Disclosure Statement, none of the execution and delivery of this Agreement by
the Company, the consummation by the Company of the transactions contemplated
hereby or the compliance by the Company with any of the provisions hereof will
require any consent, waiver, approval, authorization or permit of, or
registration or filing with or notification to (any of the foregoing being a
"Consent"), any government or subdivision thereof, or any administrative,
governmental or regulatory authority, agency, commission, tribunal or body,
domestic, foreign or supranational (a "Governmental Entity"), except for (i)
compliance with any applicable requirements of the Exchange Act; (ii) the filing
of articles of merger pursuant to the WBC; (iii) compliance with the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); and (iv) such filings and approvals as may be required by any foreign
jurisdiction or under applicable state securities, "blue sky" or takeover Laws;
and (v) other Consents or filings the failure of which to obtain or make,
individually and in the aggregate, would not have a Material Adverse Effect on
the Company.
SECTION 4.07 SEC Reports and Financial Statements. The Company has
filed with the SEC all forms, reports, schedules, registration statements and
definitive proxy statements required to be filed by the Company with the SEC
from November 30, 1997 until the date hereof (the "SEC Reports"). As of their
respective dates or, if amended, as of the date of the last such
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amendment, the SEC Reports, including, without limitation, any financial
statements or schedules included therein, complied in all material respects with
the requirements of the Exchange Act or the Securities Act of 1933, as amended
(the "Securities Act"), and the rules and regulations of the SEC promulgated
thereunder applicable, as the case may be, to such SEC Reports, and none of the
SEC Reports (as of the date of filing or effectiveness, as the case may be)
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The audited financial statements and unaudited interim financial
statements of the Company included in the SEC Reports comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present the consolidated financial condition of the
Company and the Subsidiaries as of the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended (subject,
in the case of unaudited statements, to normal year-end audit adjustments).
SECTION 4.08 Information. None of the information supplied by the
Company in writing specifically for inclusion or incorporation by reference in
(i) the Offer Documents; (ii) the Schedule 14D-9; (iii) the Proxy Statement; or
(iv) any other document to be filed with the SEC or any other Governmental
Entity in connection with the transactions contemplated by this Agreement (the
"Other Filings") will, at the respective times filed with the SEC or other
Governmental Entity and, in addition, in the case of the Proxy Statement, at the
date it or any amendment or supplement is mailed to the shareholders of the
Company, at the time of the Shareholders' Meeting and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
SECTION 4.09 Absence of Certain Material Adverse Changes. Since May 31,
1999, there has not been any change in the assets, business, financial condition
or results of operations of the Company and its Subsidiaries (taken as a whole)
that would have a Material Adverse Effect on the Company, nor has there occurred
any event which should reasonably be foreseen to result in such a Material
Adverse Effect on the Company.
SECTION 4.10 Undisclosed Liabilities. Except where any such
liabilities, individually or in the aggregate, would not have a Material Adverse
Effect on the Company, neither the Company nor its Subsidiaries has any
liability (whether known or unknown, whether absolute or contingent, whether
liquidated or unliquidated and whether due or to become due), except for (a)
liabilities accrued or reserved against the May 31, 1999 unaudited consolidated
balance sheet of the Company and its Subsidiaries ("Company Most Recent Balance
Sheet") or incurred in the ordinary course of business since May 31, 1999, (b)
contractual or statutory liabilities incurred in the ordinary course of business
which are not required by GAAP to be reflected on a balance sheet, (c)
liabilities disclosed in Section 4.10 of the Company Disclosure Statement, and
(d) liabilities adequately reserved against or disclosed in writing.
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SECTION 4.11 Tax Matters.
(a) Except as set forth in Section 4.11 of the Company
Disclosure Statement, for all years where the statute of limitations has not
expired, the Company and its Subsidiaries have filed all Tax Returns (as defined
below) that each was required to file and all such Tax Returns were correct and
complete in all material respects, except where the failure to file such Tax
Returns, individually or in the aggregate, would not have a Material Adverse
Effect on the Company. Each of the Company and its Subsidiaries has paid or will
pay all Taxes (as defined below) that are due on or before the Closing Date,
whether or not shown on any such Tax Returns, except such as are being contested
in good faith by appropriate proceedings (to the extent any such proceedings are
required) and with respect to which the Company is maintaining reserves adequate
for their payment and except where the failure to pay such Taxes, individually
or in the aggregate, would not have a Material Adverse Effect on the Company.
The accrued but unpaid Taxes of the Company and its Subsidiaries for Tax Periods
through the date of the Company Most Recent Balance Sheet do not exceed the
accruals and reserves for Taxes (other than deferred Taxes) set forth on the
Company Most Recent Balance Sheet. Neither the Company nor any of its
Subsidiaries has any actual or, to their knowledge, potential liability for any
Tax obligation of any taxpayer (including without limitation any affiliated
group or corporations or other entities that included the Company during a prior
period) other than the Company. All Taxes that the Company or any of its
Subsidiaries is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Entity, except where the failure to withhold or collect Taxes,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company.
(i) For purposes of this Agreement, "Taxes" means all
taxes, charges, levies or other similar assessments or liabilities,
including without limitation income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales,
use, transfer, withholding, employment, payroll and franchise taxes
imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of
the United States or any such government, and any interest, fines,
penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute
thereof and any amounts of Taxes of another person that the Company or
any of its Subsidiaries is liable to pay by Law.
(ii) For purposes of this Agreement, "Tax Returns"
means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection
with Taxes.
(iii) For purposes of determining the amount of Taxes
attributable to a specified period (e.g., the period from the date of
the Company Most Recent Balance Sheet through the Closing) other than a
Tax Period, each Tax shall be computed as if the specified period were
a Tax Period. For purposes of this paragraph (iii), a Tax Period means
a period for which a Tax is required to be computed under applicable
statutes and regulations.
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(b) No examination or audit of any Tax Returns of the Company
or any of its Subsidiaries by any Governmental Entity that would have a Material
Adverse Effect on the Company is currently in progress or, to the knowledge of
the Company, threatened or contemplated. The Company has not waived any statute
of limitations with respect to taxes or agreed to an extension of time with
respect to a tax assessment or deficiency.
SECTION 4.12 Owned Real Property. Neither the Company nor any of its
Subsidiaries owns any real property.
SECTION 4.13 No Litigation. Except as disclosed in Section 4.13 of the
Company Disclosure Statement or in the SEC Reports, there is no (i) unsatisfied
judgment, order, decree, award, stipulation or injunction or (ii) private or
governmental claims, complaint, action, suit, arbitration, proceeding, hearing,
rule, law, regulation or investigation affecting the Company to which the
Company, or its Subsidiaries, or to the Company's knowledge, any officer,
director, employee or agent of the Company or any of its Subsidiaries is or was
a party or is threatened to be made a party that would have a Material Adverse
Effect on the Company. Other than as set forth in Section 4.13 of the Company
Disclosure Statement, none of the complaints, actions, suits, arbitrations,
proceedings, hearings, rules, laws, regulations or investigations set forth in
Section 4.13 of the Company Disclosure Statement, if determined adversely to the
Company or any of its Subsidiaries, could have a Material Adverse Effect on the
Company.
SECTION 4.14 Compliance With Applicable Laws. Except as set forth in
Section 4.14 of the Company Disclosure Statement, the Company and the
Subsidiaries are in material compliance with all applicable Laws and orders,
writs, injunctions, judgments, plans or decrees (collectively, "Orders")
(except, in each case, with respect to environmental matters which are governed
by Section 4.15 hereof) of any Governmental Entity, including any COBRA and any
applicable employee wage and hour requirements, except where failure to be in
compliance would not have a Material Adverse Effect on the Company.
SECTION 4.15 Environmental Matters.
(a) Each of the Company and its Subsidiaries has complied in
all material respects with all applicable Environmental Laws (as defined below).
Except as disclosed in the Company SEC Reports and since May 31, 1999, there is
no pending or, to the knowledge of the Company, threatened civil or criminal
litigation, written notice of violation, formal administrative proceeding, or
investigation, inquiry or information request by any Governmental Entity,
relating to any Environmental Law involving the Company or any of its
Subsidiaries. For purposes of this Agreement, "Environmental Law" means any
federal, state or local law, statute, rule or regulation or the common law
relating to the environment or occupational health and safety, including without
limitation any statute, regulation or order pertaining to (i) treatment,
storage, disposal, generation and transportation of toxic or hazardous
substances or solid or hazardous waste; (ii) air, water and noise pollution;
(iii) groundwater and soil contamination; (iv) the release or threatened release
into the environment of toxic or hazardous substances, or solid or hazardous
waste, including without limitation emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wild life, marine sanctuaries and wetlands, including without
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limitation all endangered and threatened species; (vi) storage tanks, vessels
and containers; (vii) underground and other storage tanks or vessels, abandoned,
disposed or discarded barrels, containers and other closed receptacles; (viii)
health and safety of employees and other persons; and (ix) manufacture,
processing, use, distribution, treatment, storage, disposal, transportation or
handling of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or oil or petroleum products or solid or hazardous waste.
As used above, the terms "release" and "environment" shall have the meaning set
forth in the federal Comprehensive Environmental Compensation, Liability and
Response Act of 1980 ("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern (as defined below) into the environment (i) at any parcel
of real property or any facility when owned, operated or controlled by the
Company or any of its Subsidiaries for which the Company or any of its
Subsidiaries should have material liability under the Environmental Laws or,
(ii) to the Company's knowledge, with respect to any property at or to which
Materials of Environmental Concern were generated, manufactured, refined,
transferred, improved, used or processed by the Company. The Company is not
aware of any other releases of Materials of Environmental Concern that could
reasonably be expected to have a material impact on the real property or
facilities owned, operated or controlled by the Company or a Subsidiary. For
purposes of this Agreement, "Materials of Environmental Concern" means any
chemicals, pollutants or contaminants, hazardous substances (as such term is
defined under CERCLA), solid wastes and hazardous wastes (as such terms are
defined under the federal Resources Conservation and Recovery Act), toxic
materials, oil or petroleum and petroleum products, or any other material
subject to regulation under any Environmental Law.
SECTION 4.16 Benefit Plans; ERISA.
(a) Section 4.16 of the Company Disclosure Statement contains
a complete and accurate list of all Employee Benefit Plans maintained, or
contributed to, by the Company or any Subsidiary. Complete and accurate copies
of (i) all Employee Benefit Plans which have been reduced to writing, (ii)
written summaries of all unwritten Employee Benefit Plans, if any, (iii) all
related trust agreements, insurance contracts and summary plan descriptions, and
(iv) all annual reports filed on IRS Form 5500, 5500C or 5500R for the last two
plan years for each Employee Benefit Plan, have been delivered or made available
to the Purchaser. Each Employee Benefit plan has been administered in all
material respects in accordance with its terms and each of the Company and the
Subsidiaries has met its obligations with respect to such Employee Benefit Plan
and has made all required contributions thereto. The Company and all Employee
Benefit Plans are in all material respects in compliance with the currently
applicable provisions of ERISA and the Code and the regulations thereunder.
(b) Except as disclosed on Section 4.16 of the Company
Disclosure Statement, there are no investigations by a Governmental Entity,
termination proceedings or other claims (except claims for benefits payable in
the normal operation of the Employee Benefit Plans and proceedings with respect
to qualified domestic relations orders), suits or proceedings against or
involving any Employee Benefit Plan or asserting any rights or claims to
benefits under any Employee Benefit Plan that could give rise to any liability.
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(c) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination, opinion
or notification letters from the Internal Revenue Service to the effect that
such Employee Benefit Plans are qualified and the plans and the trust related
thereto are exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code, no such determination, opinion or notification letter
has been revoked and revocation has not been threatened, and no such Employee
Benefit Plan has been amended since the date of its most recent determination,
opinion or notification letter or application therefor in any respect, and no
act or omission has occurred, that would adversely affect its qualification or
increase its cost.
(d) Neither the Company nor any Subsidiary has ever maintained
an Employee Benefit Plan subject to Section 412 of the Code or Title IV of
ERISA.
(e) At no time has the Company or any Subsidiary been
obligated to contribute to any "multi-employer plan" (as defined in Section
4001(a)(3) of ERISA).
(f) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to any employee
of the Company (or to any beneficiary of any such employee), including but not
limited to retiree health coverage and deferred compensation, but excluding
continuation of health coverage required to be continued under Section 4980B of
the Code, any applicable state health insurance continuation law and any state
insurance conversion privileges law.
(g) No act or omission has occurred and no condition exists
with respect to any Employee Benefit Plan maintained by the Company or any
Subsidiary that would subject the Company or any Subsidiary to any fine,
penalty, tax or liability of any kind imposed under ERISA or the Code.
(h) No Employee Benefit Plan is funded by, associated with, or
related to "voluntary employee's beneficiary association" within the meaning of
Section 501(c)(9) of the Code.
(i) No Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Employee Benefit Plan.
(j) Except as set forth in Section 4.16 of the Company's
Disclosure Statement, there is no: (i) written agreement with any director,
executive officer or other key employee of the Company or any of its
Subsidiaries which has not been terminated in accordance with its terms (A) the
benefits of which are contingent, or the terms of which are altered, upon
occurrence of a transaction involving the Company or any of its Subsidiaries of
the nature of any of the transactions contemplated by this Agreement, (B)
providing any term of employment or compensation guarantee or (C) providing
severance benefits or other benefits after the termination of employment of such
director, executive officer or key employee; (ii) agreement, plan or arrangement
under which any person may receive payments from the Company or any of its
Subsidiaries that may be subject to the tax imposed by Section 4999 of the Code
or included in the determination of such person's
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"excess parachute payment" under Section 280G of the Code; and (iii) agreement
or plan binding the Company or any of its Subsidiaries, including without
limitation any stock option plan, stock appreciation right plan, restricted
stock plan, stock purchase plan, severance benefit plan, or any Employee Benefit
Plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
SECTION 4.17 Intellectual Property.
(a) Each of the Company and its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use, all patents,
trademarks, trade names, service marks, copyrights, and any applications for
such patents, trademarks, trade names, service marks, and copyrights, and all
trade secrets, schematics, technology, know-how, computer software and tangible
or intangible proprietary information or material (collectively, "Intellectual
Property") that are necessary or used to conduct their businesses as currently
conducted, except where any failure to own, license or otherwise possess any
such Intellectual Property, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. The Company and its Subsidiaries have
taken all reasonable measures necessary to protect the proprietary nature of
each item of Intellectual Property that they and each of them consider
confidential, and to maintain in confidence all trade secrets and confidential
information that they and each of them presently own or use.
(i) Section 4.17 (a)(i) of the Company Disclosure
Statement lists all patents and patent applications and all trademarks,
registered copyrights, know-how, technology, schematics, computer
software or tangible or intangible proprietary information or material,
trade names and service marks owned by the Company or any Subsidiary
and which are currently necessary or used in connection with the
businesses of the Company and its Subsidiaries, including the
jurisdictions in which each such Intellectual Property right has been
created, recognized, issued or registered or in which any such
application for such creation, recognition, issuance or registration
has been filed.
(ii) Section 4.17(a)(ii) of the Company Disclosure
Statement lists all written licenses, sublicenses and other agreements
to which the Company or any of its Subsidiaries is a party and pursuant
to which any person is authorized to use any Intellectual Property
rights.
(iii) Section 4.17(a)(iii) of the Company Disclosure
Statement lists all written licenses, sublicenses and other agreements
to which the Company or any of its Subsidiaries is a party and pursuant
to which the Company is authorized to use any third party patents,
patent applications, trademarks, service marks, trade names, know-how,
schematics, technology trade secrets or copyrights, including all
software ("Third Party Intellectual Property Rights") which are
incorporated in, or used in the development or operation of, any
existing product or service of the Company.
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(iv) Section 4.17(a)(iv) of the Company Disclosure
Statement lists all written agreements or other arrangements under
which the Company or any of its Subsidiaries has provided or agreed to
provide source code of any Company or Subsidiary product to any third
party, except for software development kits provided to agent
integration providers.
The Company and each of its Subsidiaries has made available to
Purchaser correct and complete copies of all such patents, registrations,
applications (owned by the Company or any of its Subsidiaries), and all
licenses, sublicenses and agreements referred to above and as amended to date.
Except for retail purchases of software, neither the Company nor any of its
Subsidiaries is a party to any oral license, sublicense or agreement which, if
reduced to written form, would be required to be listed in Section 4.17(a)(i)
through (iv) of the Company Disclosure Statement under the terms of this Section
4.17.
(b) With respect to each item of Intellectual Property that
the Company or any of its Subsidiaries owns: (i) other than Intellectual
Property subject to joint development rights or other rights that will not
materially interfere with the conduct of the business of the Company or any of
its Subsidiaries, and subject to such rights as have been granted by the Company
or any of its Subsidiaries under license agreements entered into by the Company
or any of its Subsidiaries, (which have been identified in Section 4.17(a)(i)
through (iv) of the Company Disclosure Statement and copies of which have
previously been made available, or the contents of which have been disclosed in
writing to the Purchaser), the Company or its Subsidiaries possesses all right,
title and interest in and to each such item; and (ii) each such item is not
subject to any outstanding judgment, order, decree, stipulation or injunction
that materially interferes with the conduct of the Company's or any of its
Subsidiaries' business as currently conducted, except where any instance of
non-compliance with subsections (i) and/or (ii) above, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. With respect
to each item of Third Party Intellectual Property Rights: (i) the license,
sublicense or other agreement covering such item is legal, valid, binding,
enforceable and in full force and effect with respect to the Company or its
Subsidiaries, and to the Company's knowledge is legal, valid, binding,
enforceable and in full force and effect with respect to each other party
thereto; (ii) neither the Company nor any of its Subsidiaries is in breach or
default thereunder, and to the Company's knowledge no other party to such
license, sublicense or other agreement is in breach or default thereunder, and
no event has occurred which with notice or lapse of time would constitute a
breach or default by the Company or any of its Subsidiaries or permit
termination, modification or acceleration thereunder by any party thereto; and
(iii) the underlying item of Third Party Intellectual Property is not subject to
any outstanding judgment, order, arbitration award, decree, stipulation,
injunction or governmental rule, law or regulation to which the Company or any
of its Subsidiaries is a part or has been specifically named that materially
interferes with the conduct of the Company's business or the business of any of
its Subsidiaries as currently conducted, nor subject to any other outstanding
judgment, order, decree, arbitration award, stipulation, injunction or
governmental rule, law or regulation that materially interferes with the conduct
of the Company's business or the business of any of its Subsidiaries as
currently conducted, except where any instance of non-compliance with
subsections (i), (ii) and/or (iii) above, individually or in the aggregate,
would not have a Material Adverse Effect on the Company.
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(c) Except as set forth in Section 4.17 of the Company
Disclosure Statement, neither the Company nor any of its Subsidiaries (i) has
been named in any suit, action, arbitration or other proceeding which involves a
claim of infringement or misappropriation of any patent, trademark, service
mark, trade name, copyright, trade secret, schematic, technology, know-how,
computer software, tangible or intangible proprietary information of any third
party or breach of any license, sublicense or other agreement relating to such
intellectual property or (ii) has received any written notice alleging any such
claim of infringement, breach or misappropriation where the events described in
subsections (i) and (ii) would have a Material Adverse Effect on the Company.
The Company has made available to the Purchaser correct and complete copies of
all pleadings and papers from such suits, actions, arbitrations, or proceedings
and written notices to the extent the Company is not prohibited from disclosing
the same under applicable court orders. The manufacturing, marketing, licensing
or sale of the products or performance of the service offerings of the Company
and its Subsidiaries do not currently infringe and have not, within the six
years prior to the date of this Agreement, infringed any patent, trademark,
service mark, trade name, copyright, trade secret, schematic, technology,
know-how, computer software, tangible or intangible proprietary information or
material right of any third party, except where such infringement would not have
a Material Adverse Effect on the Company; and to the knowledge of the Company,
the Intellectual Property rights of the Company and its Subsidiaries are not
being materially infringed by activities, products or services of any third
party.
SECTION 4.18 Certain Events. Except as disclosed in Section 4.18 of the
Company Disclosure Statement or the SEC Reports or as contemplated by this
Agreement, since May 31, 1999 until the commencement of the Offer, there has not
been any event, occurrence or development which has had or would be reasonably
likely to result in a Material Adverse Effect on the Company, except for general
economic changes, changes that affect the industry of the Company or any
Subsidiary generally, and changes in the Company's business after the date
hereof attributable solely to actions taken by Parent or the Purchaser. Except
as disclosed in the SEC Reports, or as provided for in this Agreement, since May
31, 1999, there has not been (a) any declaration, setting aside or payment of
any dividend or other distribution in respect of the capital stock of the
Company or any redemption or other acquisition by the Company of any Shares; (b)
any split, combination or reclassification of the Company's capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock; (c) (i) any
granting by the Company or any of the Subsidiaries to any officer or key
employee of the Company or any of the Subsidiaries of any increase in
compensation, except in the ordinary course of business or as was required under
employment agreements in effect as of the date of the most recent financial
statements included in the SEC Reports or (ii) any entry by the Company or any
Subsidiary into any employment, severance or termination agreement with any such
officer or key employee or granting by the Company or any Subsidiary to any such
officer or key employee of any increase in severance or termination pay, except
as was required under employment, severance or termination agreements in effect
as of the date of the most recent financial statements included in the SEC
Reports; (d) any damage, destruction or loss, whether or not covered by
insurance, that has or would be reasonably likely to have a Material Adverse
Effect on the Company; (e) any change in accounting methods, principles or
practices by the Company or any Subsidiary materially affecting its assets,
liabilities or business, except insofar as may have been required by a change in
generally accepted accounting principles; or (f) any adoption or increase in
payments to or benefits
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under any Company Benefit Plan; or (g) any agreement or commitment to do any of
the things described in the preceding clauses (a) through (f).
SECTION 4.19 Certain Approvals. The Board of Directors of the Company
has taken appropriate action such that, assuming the accuracy of Parent's and
the Purchaser's representations in Sections 5.08 of this Agreement, the
provisions of Section 180.1140 to 180.1144 of the WBC will not apply to any of
the transactions contemplated by this Agreement and the Stock Option Agreement.
SECTION 4.20 Contracts. Since May 31, 1999, neither the Company nor any
of its Subsidiaries has breached, or received in writing any claim or threat
that it has breached, any of the terms or conditions of any material agreement,
contract or commitment to which it is a party or by which any of its assets are
bound ("Company Material Contracts") in such a manner as would permit any other
party to cancel or terminate the same prior to its stated term or would permit
any other party to collect material damages from the Company under any Company
Material Contract, other than those Company Material Contracts that if
terminated prior to the stated term, or that if material damages were collected
under such Company Material Contracts such damages, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. Each Company
Material Contract that has not expired or been terminated, is in full force and
effect, and is not subject to any material default thereunder by any party
obligated to the Company pursuant to such Company Material Contract, other than
those Company Material Contracts the failure of which to be in full force and
effect or not subject to any material default, individually or in the aggregate,
would not have a Material Adverse Effect on the Company. There are no
outstanding powers of attorney executed on behalf of the Company or any of its
Subsidiaries.
SECTION 4.21 Employees. Except as disclosed in Section 4.21 of the
Company Disclosure Statement, each employee who performs work on the development
of Company Intellectual Property or has access to material confidential
information of the Company or any of its Subsidiaries entered into a
confidentiality/ assignment of inventions agreement with the Company or such
Subsidiary, a copy of which has previously been delivered or made available to
the Purchaser. To the knowledge of the Company, no key employee or group of
employees has any current plans to terminate employment with the Company or any
of its Subsidiaries, except where any such termination, individually or in the
aggregate, would not have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries is a party to or bound by any collective
bargaining agreement, nor has any of them experienced any strikes, formal
grievances, claims of unfair labor practices or other collective bargaining
disputes. The Company has no knowledge of any organizational effect made or
threatened, either currently or within the past two years, by or on behalf of
any labor union with respect to employees of the Company or its Subsidiaries.
SECTION 4.22 Books and Records. The minute books of the Company and
each of its Subsidiaries contain true and complete records of all actions taken
at any meetings of the Company's or such Subsidiary's shareholders, Board of
Directors or any committee thereof and of all written consents executed in lieu
of the holding of any such meeting. The financial books and records of the
Company and each of its Subsidiaries accurately reflect in all material respects
the
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assets, liabilities, business, financial condition and results of operations of
the Company or such Subsidiary.
SECTION 4.23 Fairness Opinion. The Company has received a written
fairness opinion from Tucker Anthony Cleary Gull, its financial advisor, to the
effect that the Offer Price and the Merger Price is fair to the shareholders
from a financial point of view, and the Company has delivered a true and
complete copy of such opinion to the Parent.
SECTION 4.24 Brokers. Except for Ascent Partners, none of the Company,
the Subsidiaries, or any of their respective officers, directors or employees
has employed any broker or finder or incurred any liability for any brokerage
fees, commission or finder's fees in connection with the transactions
contemplated by this Agreement.
SECTION 4.25 Vote Required. Assuming the accuracy of Parent's and the
Purchaser's representations in Section 5.08 of this Agreement and subject to
Sections 180.1130- 180.1133 of the WBC and assuming the forced conversion of the
Series B Stock as contemplated by Section 4.27 hereof, the affirmative vote of
the holders of a majority of the voting power of the outstanding Common Stock
entitled to vote with respect to the Merger is the only vote of the holders of
any class or series of the Company's capital stock necessary to approve the
Merger, this Agreement and the transactions contemplated hereby.
SECTION 4.26 Underwriter Warrants. The Company issued Common Stock
Purchase Warrants (the "Underwriter Warrants") to designees of Taglich Brothers,
D'Amadeo, Wagner & Company, Incorporated on October 27, 1998 and October 30,
1998. The Underwriter Warrants will expire on October 31, 2003 and, as of August
31, 1999, the exercise price of each such Underwriter Warrant is $3.60 per
Share, subject to adjustment. As of August 31, 1999, the Underwriter Warrants
are exercisable for 54,714 shares of Common Stock. Upon the Effective Time and
provided that the Company is the surviving corporation in the Merger, holders of
Underwriter Warrants will be entitled to, with respect to each Underwriter
Warrant and upon exercise and the payment of the $3.60 exercise price to the
Company, only the Merger Price. In compliance with the terms of the Underwriter
Warrants, the Company must give each holder of Underwriter Warrants a reasonable
opportunity to exercise such holder's Underwriter Warrants and receive the
Merger Price for each Underwriter Warrant. Other than as set forth in this
Section 4.26, under the terms of the Underwriter Warrants and assuming that the
Company is the surviving corporation in the Merger, the Company will have no
further obligations to the holders of the Underwriter Warrants.
SECTION 4.27 Series B Stock. There are 5,000 authorized shares of
Series B Stock, of which 1,936,63 shares are issued and outstanding as of the
date of this Agreement. The Company has made each dividend payment since January
2, 1999 in compliance with, and as required by, the Company's articles of
incorporation and there are no accrued and unpaid dividends due holders of the
Series B Stock, other than for dividends accrued since the last dividend payment
date. Under the terms of the Company's articles of incorporation, the Company
has, subject to compliance with the terms of such articles, the right to force
conversion of the Series B Stock into Shares effective immediately prior to the
date that the Shares are purchased by Parent or the Purchaser in the Offer (the
"Acceptance Date"). Pursuant to the terms of the Company's articles of
incorporation and
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assuming compliance with the provisions governing a forced conversion of the
Series B Stock thereunder, holders of Series B Stock do not have the right to
vote on whether to approve the Offer or the Merger and, in the event that the
provisions of said articles are not sufficient to eliminate the voting rights of
holders of the Series B Stock, such holders will be deemed to have granted an
irrevocable proxy to the President and Secretary of the Company with respect to
the approval of the Offer or the Merger as specified in the Company's articles
of incorporation.
SECTION 4.28 Public Warrants. On September 6, 1995, the Company entered
into a Warrant Agreement (the "Warrant Agreement") with American Stock Transfer
& Trust Company, as Warrant Agent under which the Company issued 401,440 Common
Stock Warrants (the "Public Warrants"). The Public Warrants will expire on
September 5, 2005 and as of August 31, 1999, the exercise price of each Public
Warrant is $6.75. Each Public Warrant is exercisable for one share of Common
Stock. Other than the adjustment necessary so that each holder of a Public
Warrant will be entitled to the Offer Price upon the Effective Time, neither the
Offer, the Merger nor the issuance of shares under the Stock Option Agreement
will require an adjustment to the exercise price or the number of shares of
Common Stock issuable upon the exercise of each Public Warrant. Pursuant to the
Warrant Agreement, following commencement of the Offer, the Company must give
the holders of the Public Warrants notice of the Offer, as soon as practicable,
by (i) mailing notice of the Offer by first class mail, postage prepaid, to each
holder and (ii) publishing a notice of such Offer on at least two consecutive
business days in at least two newspapers of general circulation distributed at
least daily, one of which shall be The Wall Street Journal, and shall state that
the holder shall not be entitled to participate in the Offer unless they
exercise their Public Warrants in advance of or within the period specified in
the Offer. Pursuant to the terms of the Public Warrants, the Company is required
to provide notice in writing of the Merger to the Warrant Agent sufficient to
allow the Warrant Agent to notify the warrant holders of the Merger and enable
the warrant holders to participate in the Merger. Such notice to the Warrant
Agent is to be completed at least forty (40) days prior to, and notice to the
warrant holders to be completed at least thirty (30) days prior to, the record
date for the determination of shareholders entitled to vote on the Merger. In
addition, pursuant to the terms of the Public Warrants, the Company shall
execute a supplemental warrant agreement with the Warrant Agent (the
"Supplemental Warrant Agreement") and mail by first class mail, postage prepaid,
to each warrant holder, notice of the execution of the Supplemental Warrant
Agreement. Other than as set forth in this Section 4.28, under the terms of the
Warrant Agreement, the Company has no further obligations to the holders of the
Public Warrants.
SECTION 4.29 Options. Except as listed on Schedule 4.29, there are, and
as of the Closing Date there will be, no outstanding options, warrants, rights,
calls, commitments, conversion rights, plans or other agreements of any
character providing for the purchase, issuance or sale of, or any securities
convertible into, capital stock of the Company, whether issued, unissued or held
in its treasury.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser jointly and severally represent and warrant to
the Company as follows:
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SECTION 5.01 Organization and Qualification. Parent is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. The Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Wisconsin. Each of Parent and the
Purchaser has the requisite corporate power and authority to own, operate or
lease its properties and to carry on its business as it is now being conducted,
and is duly qualified or licensed to do business, and is in good standing, in
each jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary except where the failures to have such power or authority, or the
failures to be so qualified, licensed or in good standing, individually, and in
the aggregate, would not have a Material Adverse Effect on Parent. The term
"Material Adverse Effect on Parent," as used in this Agreement, means any change
in or effect on the business, results of operations, assets or condition of
Parent or any of its subsidiaries taken as a whole, that would be materially
adverse to Parent and its subsidiaries taken as a whole, except for any change
or effect resulting from general economic or financial market conditions.
SECTION 5.02 Authority. Each of Parent and the Purchaser has all
necessary corporate power and authority to execute and deliver this Agreement
and the Stock Option Agreement and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the Stock
Option Agreement by Parent and the Purchaser and the consummation by Parent and
the Purchaser of the transactions contemplated hereby and thereby have been duly
and validly authorized and approved by the Boards of Directors of Parent and the
Purchaser and by the sole shareholder of the Purchaser and no other corporate
proceedings on the part of Parent or the Purchaser are necessary to authorize or
approve this Agreement or the Stock Option Agreement or to consummate the
transactions contemplated hereby or thereby. Each of this Agreement and the
Stock Option Agreement has been duly executed and delivered by each of Parent
and the Purchaser and, assuming the due and valid authorization, execution and
delivery by the Company, constitutes a valid and binding obligation of each of
Parent and the Purchaser enforceable against each of them in accordance with its
respective terms, except that such enforceability (i) may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to the enforcement of creditors, rights generally and (ii) is subject to general
principles of equity.
SECTION 5.03 No Conflict; Required Filings and Consents.
(a) Except as disclosed in Section 5.03 of the Purchaser
Disclosure Statement, none of the execution and delivery of this Agreement by
Parent or the Purchaser, the consummation by Parent or the Purchaser of the
transactions contemplated hereby or the compliance by Parent or the Purchaser
with any of the provisions hereof will (i) conflict with or violate the
organizational, documents of Parent or the Purchaser; (ii) conflict with or
violate any statute, ordinance, rule, regulation, order, judgment or decree
applicable to Parent or the Purchaser, or any of their subsidiaries, or by which
any of them or any of their respective properties or assets may be bound or
affected; or (iii) result in a Violation pursuant to any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Parent or the Purchaser, or any of their
respective subsidiaries, is a party or by which any of their respective
properties or assets may be bound or affected, except in the case of the
foregoing clauses (ii) and (iii)
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for any such Violation which, individually and in the aggregate, would not have
a Material Adverse Effect on Parent.
(b) Except as disclosed in Section 5.03 of the Purchaser
Disclosure Statement, none of the execution and delivery of this Agreement by
Parent and the Purchaser, the consummation by Parent and the Purchaser of the
transactions contemplated hereby or the compliance by Parent and the Purchaser
with any of the provisions hereof will require any Consent of any Governmental
Entity, except for (i) compliance with any applicable requirements of the
Exchange Act; (ii) the filing of articles of merger pursuant to the WBC; (iii)
compliance with the HSR Act; and (iv) such filings and approvals as may be
required by any applicable state securities, "blue sky" or takeover Laws, and
(v) other Consents or filings the failure of which to obtain or make,
individually and in the aggregate, would not have a Material Adverse Effect on
Parent.
SECTION 5.04 Information. None of the information supplied or to be
supplied by Parent and the Purchaser in writing specifically for inclusion in
(i) the Offer Documents; (ii) the Schedule 14D-9; (iii) the Proxy Statement; or
(iv) the Other Filings will, at the respective times filed with the SEC or such
other Governmental Entity and, in addition, in the case of the Proxy Statement,
at the date it or any amendment or supplement is mailed to shareholders of the
Company, at the time of the Shareholders' Meeting and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
SECTION 5.05 Financing. Parent or the Purchaser will have available at
the Acceptance Date, the funds necessary to consummate the Offer and the Merger
and the transactions contemplated hereby.
SECTION 5.06 Brokers. None of Parent, the Purchaser, or any of their
respective subsidiaries, officers, directors or employees, has employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the transactions contemplated by this
Agreement for or with respect to which the Company is or might be liable.
SECTION 5.07 Purchaser.
(a) Parent owns all of the outstanding capital stock of the
Purchaser. At all times prior to the Merger, no person other than Parent has
owned, or will own, any of the outstanding capital stock of the Purchaser. The
Purchaser was formed by Parent solely for the purpose of engaging in the
transactions contemplated by this Agreement. Parent is a wholly owned subsidiary
of Industrial and Financial Systems, Inc., a corporation incorporated under the
laws of Sweden ("IFS").
(b) There are not as of the date of this Agreement, and there
will not be at the Effective Time, any outstanding or authorized options,
warrants, calls, rights, commitments or any other agreements of any character
which the Purchaser is a party to, or may be bound by, requiring it to issue,
transfer, sell, purchase, redeem or acquire any shares of its capital stock or
any securities
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or rights convertible into, exchangeable for, or evidencing the right to
subscribe for or acquire, any shares of its capital stock.
(c) As of the date of this Agreement and the Effective Time,
except for obligations incurred in connection with this Agreement or the
transactions contemplated hereby, the Purchaser has not and will not have
incurred, directly or indirectly through any other corporation, any obligations
or liabilities of any kind or engaged in any activities of any type or kind
whatsoever or entered into any arrangement or arrangements with any person or
entity.
SECTION 5.08 Share Ownership. During the period from September 10, 1987
to the date hereof, neither Parent, the Purchaser nor any of their subsidiaries
was an "interested shareholder" as such term is defined in Section 180.1141 of
the WBC.
ARTICLE VI.
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as required by
this Agreement or with the prior written consent of Parent, during the period
from the date of this Agreement to the Acceptance Date, the Company will and
will cause each of the Subsidiaries to conduct its operations only in the
ordinary course of business. Without limiting the generality to the foregoing,
and except as otherwise required or contemplated by this Agreement or as set
forth in Section 6.01 of the Company Disclosure Statement, the Company will not,
and will not permit any of the Subsidiaries to, prior to the Acceptance Date,
without the prior written consent of Parent, not to be unreasonably withheld:
(a) adopt any amendment to its charter or by-laws or
comparable organizational documents;
(b) issue, reissue or sell or authorize the issuance,
reissuance or sale of additional shares (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) of capital stock of any class, or shares convertible into capital
stock of any class, or any rights, warrants or options to acquire any
convertible shares or capital stock, other than the issuance of Shares pursuant
to the conversion or exercise of Options, nonstatutory stock options, warrants
or the Series B Stock outstanding on the date of this Agreement or pursuant to
the Stock Option Agreement;
(c) declare, set aside or pay any dividend or other
distribution (whether in cash, shares or property or any combination thereof) in
respect of any class or series of its capital stock, except for (i) regular
quarterly dividends payable on the Series B Stock with usual record and payment
dates for such dividends and (ii) dividends between the Company and any
Subsidiary which is wholly-owned by the Company;
(d) split, combine, subdivide, reclassify or directly or
indirectly redeem, purchase or otherwise acquire, recapitalize or reclassify, or
propose to redeem or purchase or otherwise acquire, any shares of its capital
stock, or any of its other shares or liquidate in whole or in part;
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(e) enter into, adopt or amend any Employee Benefit Plan or
any employment or severance agreement or arrangement or increase in any manner
the compensation or fringe benefits of, or modify the employment terms of, its
directors, officers or employees, generally or individually, or pay any benefit
not required by the terms in effect on the date hereof of any existing Employee
Benefit Plan, other than in the ordinary course of business consistent with past
practice make normal merit increases to employees of the Company;
(f) create, incur or assume any debt not currently outstanding
(including obligations in respect of capital leases); assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to or investments in, any other person or
entity, except, in each case, in the ordinary course of business;
(g) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a change in
generally accepted accounting principles,
(h) make any material tax election or settle or compromise any
material income tax liability;
(i) acquire, sell, lease, encumber or dispose of any assets or
property (including without limitation any shares or other equity interests in
or securities of any Subsidiary or any corporation, partnership, association or
other business organization or division thereof), other than purchases and sales
of assets in the ordinary course of business;
(j) discharge or satisfy any Security Interest or pay any
obligation or liability other than in the ordinary course of business;
(k) mortgage or pledge any of its property or assets or
subject any such assets to any Security Interest other than in the ordinary
course of business;
(l) sell, assign, transfer or license any Intellectual
Property, other than in the ordinary course of business;
(m) enter into, amend, terminate, take or omit to take any
action that would constitute a material violation of or default under, or waive,
release or assign any material rights under, any material contract or agreement;
(n) make or commit to make any capital expenditure in excess
of $20,000 per item or in an aggregate in excess of $50,000;
(o) willfully take any action, or willfully fail to take any
action required or permitted by this Agreement with the intent that such action
or failure to take action could result in (i) any of the representations and
warranties of the Company set forth in this Agreement becoming untrue or (ii)
any of the conditions to the Merger set forth in Article VII not being
satisfied;
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(p) hire, terminate or discharge any key employee or engage or
terminate any key consultant, provided however that any such employee or
consultant may himself or herself terminate his or her relationship with the
Company in accordance with the terms of any applicable employment, consulting or
similar agreement;
(q) commence after the date hereof any offerings of securities
to employees pursuant to any new employee stock purchase plans; or
(r) agree in writing or otherwise to take any of the foregoing
actions.
SECTION 6.02 Access to Information. From the date hereof until the
Effective Time and subject to applicable Law, the Company will, and will cause
the Subsidiaries, and each of its and their respective officers, directors,
employees, counsel, advisors and representatives (collectively, the "Company
Representatives") to (i) provide Parent and the Purchaser and their respective
officers, employees, counsel, advisors and representatives (collectively, the
"Parent Representatives") access, during normal business hours and upon
reasonable notice, to the offices and other facilities and to the books,
records, financial statements and other documents and materials relating to the
financial condition, assets and liabilities of the Company and the Subsidiaries,
and will permit Parent and the Purchaser to make inspections of such as either
of them may reasonably require; (ii) cause the Company Representatives and the
Subsidiaries to furnish Parent, the Purchaser and the Parent Representatives to
the extent available with such other information with respect to the business of
the Company and the Subsidiaries as Parent and the Purchaser may from time to
time reasonably request; and (iii) confer and consult with the Parent
Representatives, as Parent may reasonably request, to report on operational
matters, financial matters and the general status of ongoing business operations
of the Company; provided, however, that all requests for such access,
inspection, information or consultations pursuant to this Section 6.02 shall be
made through Michael D. Dunham of the Company or such other person as he shall
designate in writing to Parent. Unless otherwise required by Law and except as
is necessary to disseminate the Offer Documents, Parent and the Purchaser will,
and will cause the Parent Representatives to hold any such information in
confidence until such time as such information otherwise becomes publicly
available through no wrongful act of Parent, the Purchaser or the Parent
Representative, all as specifically provided in the Confidentiality Agreement,
executed on or about May 24, 1999, between Parent and the Company (the
"Confidentiality Agreement").
SECTION 6.03 Commercially Reasonable Efforts. Subject to the term and
conditions herein provided and to applicable legal requirements, so long as this
Agreement has not been terminated according to its terms, each of the parties
hereto agrees to use its commercially reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, consistent with the fiduciary
duties of such party's respective Board of Directors, and to assist and
cooperate with the other parties hereto in doing, as promptly as practicable,
all things necessary, proper or advisable under applicable Laws and regulations
to ensure that the conditions set forth in Annex I and Article VII are satisfied
and to consummate and make effective the transactions contemplated by the Offer,
the Merger and this Agreement, including, without limitation, to make promptly
their respective filings and thereafter to make any other submissions required
under applicable Laws. In addition, if at any time prior to the Effective Time
any event or circumstance relating to either the
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Company or Parent or the Purchaser or any of their respective subsidiaries
should be discovered by the Company or Parent, as the case may be, and which
should be set forth in an amendment to the Offer Documents or Schedule 14D-9,
the discovering party will promptly inform the other party of such event or
circumstance and promptly take all steps necessary to cause the Offer Documents
or the Schedule 14D-9, as the case may be, as so corrected to be filed with the
SEC and to be disseminated to the shareholders of the Company, in each case as
to the extent required by applicable Law. If at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, including the execution of additional instruments, the proper
officers and directors of each party to this Agreement, as the case may be,
shall take all such necessary action.
SECTION 6.04 Consents.
(a) Each of the parties will use its commercially reasonable
efforts to obtain as promptly as practicable all Consents of any Governmental
Entity or any other person required in connection with the consummation of the
transactions contemplated by the Offer, the Merger, this Agreement and the Stock
Option Agreement.
(b) Any party hereto shall promptly inform the others of any
material communication from the United States Federal Trade Commission, the
Department of Justice or any other domestic or foreign government or
governmental authority regarding any of the transactions contemplated by this
Agreement or the Stock Option Agreement. If any party or any affiliate thereof
receives a request for additional information or documentary material from any
such government or authority with respect to the transactions contemplated by
this Agreement or the Stock Option Agreement, then such party will endeavor in
good faith to make, or cause to be made, as soon as reasonably practicable and
after consultation with the other party, an appropriate response in compliance
with such request. Parent will advise the Company promptly in respect of any
understandings, undertakings or agreements (oral or written) which Parent
proposes to make or enter into with the Federal Trade Commission, the Department
of Justice or any other domestic or foreign government or governmental or
multinational authority in connection with the transactions contemplated by this
Agreement or the Stock Option Agreement.
SECTION 6.05 Public Announcements. Subject to applicable Law, so long
as this Agreement is in effect, Parent, the Purchaser and the Company agree to
consult with each other before issuing any press release or otherwise making any
public statement (including any statements included in any filing with the SEC)
with respect to the Offer, the Merger and the other transactions contemplated by
this Agreement.
SECTION 6.06 Disclosure Statements. Each of the Company and the
Purchaser has delivered to the other party its Disclosure Statement which shall
be accompanied by a certificate stating that its Disclosure Statement was
delivered pursuant to this Agreement and is the Disclosure Statement referred to
in this Agreement. The Disclosure Statements are deemed to constitute an
integral part of this Agreement and to modify the representations, warranties,
covenants or agreements of the Company, the Parent and the Purchaser contained
in this Agreement.
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SECTION 6.07 No Solicitation.
(a) The Company shall, shall cause the Subsidiaries to, and
shall use its commercially reasonable efforts to cause the officers, directors,
employees, investment bankers, attorneys and other agents and representatives of
the Company and the Subsidiaries to, immediately cease any existing activities,
information exchanges, discussions or negotiations with any person (including a
"person" as defined in Section 13(d)(3) of the Exchange Act) other than Parent
or the Purchaser (a "Third Party") heretofore conducted with respect to any
Acquisition Transaction (as hereinafter defined). The Company shall not, shall
cause the Subsidiaries not to, and shall use its commercially reasonable efforts
to cause the officers, directors, employees, investment bankers, attorneys and
other agents and representatives of the Company and the Subsidiaries not to,
directly or indirectly, (i) solicit, initiate, continue, or encourage (including
by way of furnishing or disclosing non-public information) any inquiries,
proposals or offers from any Third Party with respect to any acquisition or
purchase of all or a material portion of the assets or business of, or any
significant equity interest in (including by way of a tender offer), or any
merger, consolidation or business combination with, or any similar transaction
involving, the Company (the foregoing being referred to collectively as an
"Acquisition Transaction"), or (ii) negotiate or otherwise communicate in any
way with any Third Party with respect to any Acquisition Transaction or enter
into, approve or recommend any agreement, arrangement or understanding requiring
the Company to abandon, terminate or fail to consummate the Offer and/or the
Merger or any other transaction contemplated hereby. Additionally, the Company
shall terminate all letters of intent or agreements with respect to any
Acquisition Transaction outstanding as of the date hereof and shall provide
evidence of such termination to Parent. Notwithstanding anything to the contrary
in the foregoing, the Company may in response to an unsolicited proposal with
respect to an Acquisition Transaction with a Third Party furnish or disclose
non-public information to such Third Party and negotiate or otherwise
communicate with such Third Party, in each case only if (A) the Board of
Directors of the Company (after consultation with its outside legal counsel and
independent financial advisors) reasonably determines in good faith that such
proposal would be likely to be more favorable to the Company and its
shareholders than the transactions contemplated hereby (the proposal with
respect to an Acquisition Transaction meeting the requirements of clause (A), a
"Superior Proposal"); and (B) prior to furnishing or disclosing any non-public
information to, or entering into discussions or negotiations with, such Third
Party, the Company receives from such Third Party a customary confidentiality
agreement similar in all material respects to the Confidentiality Agreement;
provided, however, that the Company shall not enter into a definitive agreement
with respect to a Superior Proposal unless the Company concurrently terminates
this Agreement in accordance with the terms hereof.
(b) Nothing contained in this Section 6.07 shall prohibit the
Company from disclosing to its shareholders a position contemplated by Rules
14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to its shareholders if, in the good faith judgment of its Board of
Directors, after consultation with outside legal counsel, failure to so disclose
may result in a violation of applicable Law,
(c) The Company shall notify the Parent and the Purchaser no
later than 24 hours after receipt by the Company (or its advisors), of any
proposal with respect to an Acquisition
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Transaction or any request for nonpublic information in connection with a
proposed Acquisition Transaction or for access to the properties, books or
records of the Company by any person or entity that informs the Company that it
is considering making, or has made, an Acquisition Transaction (the "Acquisition
Proposal"). Such notice to the Parent and Purchaser shall be made orally and in
writing and shall indicate in reasonable detail the identity of the person
making the Acquisition Proposal and the terms and conditions of such proposal,
inquiry or contact. The Company shall give the Parent and the Purchaser at least
seven business days advance notice of any definitive agreement proposed to be
entered into by the Company with any person making a Superior Proposal.
SECTION 6.08 Notification of Certain Matters. Parent and the Company
shall promptly notify each other of (a) the occurrence or non-occurrence of any
fact or event which would be reasonably likely (i) to cause any representation
or warranty contained in this Agreement or the Stock Option Agreement to be
untrue or inaccurate in any material respect at any time from the date hereof to
the Effective Time or (ii) to cause any covenant, condition or agreement
hereunder not to be compiled with or satisfied in all material respects; and (b)
any failure of the Company, Parent or the Purchaser, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder in any material respect; provided, however, that no
such notification shall affect the representations or warranties of any party or
the conditions to the obligations of any party hereunder.
SECTION 6.09 Indemnification and Insurance.
(a) The Purchaser and Parent agree that for a period of six
years from the Effective Time, the Purchaser will maintain all rights to
indemnification now existing in favor of the current or former directors,
officers, employees, fiduciaries and agents of the Company as provided in the
Company's articles of incorporation and by-laws or otherwise in effect under any
agreement on the date of this Agreement. In addition, the Purchaser and Parent
agree that the articles of incorporation and by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the Company's articles of incorporation and by-laws on the date hereof,
which provisions shall not be amended, repealed or otherwise modified for a
period of six years after the Acceptance Date in any manner that would adversely
affect the rights thereunder of individuals who at any time prior to the
Effective Time were directors or officers of the Company in respect of actions
or omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement), unless such
modification is required by Law. Notwithstanding the six-year period specified
in the foregoing sentences, in the event any claim or claims arc asserted or
made within such six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until disposition of any and all such
claims.
(b) The Surviving Corporation will at all times exercise the
powers granted to it by its articles of incorporation, its by-laws, and by
applicable Law to indemnify and hold harmless to the fullest extent possible
present or former directors, officers, employees, fiduciaries and agents of the
Company against any threatened or actual claim, action, suit, proceeding or
investigation made against them arising from their service in such capacities
(or service in such capacities for another enterprise at the request of the
Company) prior to and including the Effective Time, including, without
limitation, with respect to matters relating to this Agreement.
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<PAGE> 38
(c) Parent agrees that the Company and, from and after the
Effective Time, the Surviving Corporation, shall cause to be maintained in
effect for not less than six years from the Effective Time the current policies
of the directors' and officers' liability insurance, if any, maintained by the
Company with respect to matters occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by this
Agreement); provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous and provided that such substitution shall not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time; and provided, further, that the Surviving Corporation shall not
be required to pay an annual premium in excess of 200% of the last annual
premium paid by the Company prior to the date hereof and if the Surviving
Corporation is unable to obtain the insurance required by this Section 6.09(c)
it shall obtain as much comparable insurance as possible for an annual premium
equal to such maximum amount.
(d) This Section 6.09 is intended to benefit the current and
former directors, officers, employees, fiduciaries and agents of the Company and
shall be binding on all successors and assigns of Parent, the Purchaser, the
Company and the Surviving Corporation.
SECTION 6.10 Performance by the Purchaser. Parent hereby agrees to
cause the Purchaser to comply with its obligations hereunder and under the Offer
and to cause the Purchaser to consummate the Merger as contemplated herein.
SECTION 6.11 Line of Credit. Purchaser has extended to the Company a
$2,000,000 line of credit (the "Line of Credit") providing for borrowings by the
Company. As of the date of this Agreement, the Purchaser has provided the
Company with $350,000 under the Line of Credit. This Line of Credit will
continue to be available to the Company, and, as necessary, will be increased
above the $2,000,000 limit at the Purchaser's sole discretion.
SECTION 6.12 Deliveries of Information. From time to time after the
date of this Agreement and prior to the Effective Time (unless this Agreement is
terminated), the Company shall furnish promptly to Parent:
(a) a copy of each report, schedule and other document filed
by the Company or received by the Company after the date of this Agreement
pursuant to the requirements of federal or state securities Laws promptly after
such documents are available, and
(b) the monthly consolidated financial statements of the
Company (as prepared by the Company in accordance with its normal accounting
procedures) promptly after such financial statements are available.
SECTION 6.13 Underwriter Warrants. Following commencement of the Offer,
and in compliance with its obligations pursuant to the terms of the Underwriter
Warrants, the Company shall provide each holder of Underwriter Warrants
appropriate notice so that each holder shall have a reasonable opportunity to
exercise such holder's Underwriter Warrants and receive the Offer Price for each
Underwriter Warrant. To the extent required by the Underwriter Warrants,
Purchaser agrees
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<PAGE> 39
to assume the obligations of the Company under the Underwriter Warrants as
contemplated by Section 4(iv) of the Underwriter Warrants.
SECTION 6.14 Series B Stock. The Company shall take all action
necessary to force the conversion of each issued and outstanding share of Series
B Stock into shares of Common Stock prior to the Acceptance Date, including
providing any notice to the holders of Series B Stock as required by the
Company's articles of incorporation.
SECTION 6.15 Public Warrants. As soon as practicable following
commencement of the Offer, the Company shall give the holders of the Public
Warrants notice of the Offer by (i) mailing notice of the Offer by first class
mail, postage prepaid, to each holder and (ii) publishing a notice of such Offer
on at least two consecutive business days in at least two newspapers of general
circulation distributed at least daily, one of which shall be The Wall Street
Journal, and shall state that the holder shall not be entitled to participate in
the Offer unless they exercise their Public Warrants in advance of or within the
period specified in the Offer.
SECTION 6.16 Options. The Company shall take all action necessary to
adjust the Options to provide that upon the exercise of each such Option and
payment of the required exercise price, each holder shall have the right to
receive the Merger Price in lieu of any shares of Common Stock.
ARTICLE VII.
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger
if the Offer Shall Have Been Consummated. The respective obligations of Parent,
the Purchaser and the Company to consummate the Merger if the Offer shall have
been consummated are subject to the satisfaction or waiver in writing by each
Party hereto at or before the Effective Time of each of the following
conditions:
(a) Shareholder Approval. The shareholders of the Company
shall have duly approved and adopted this Agreement and the transactions
contemplated hereby to the extent required pursuant to the requirements of the
Company's articles of incorporation and applicable Law.
(b) Purchase of Shares. The Purchaser shall have accepted for
payment and paid for Shares pursuant to the Offer in accordance with the terms
hereof, provided, that this condition shall be deemed to have been satisfied
with respect to Parent and the Purchaser if the Purchaser fails to accept for
payment or pay for Shares pursuant to the Offer in violation of the terms of the
Offer.
(c) Injunctions; Illegality. The consummation of the Merger
shall not be restrained, enjoined or prohibited by any order, judgment, decree,
injunction or ruling of a court of competent jurisdiction or any Governmental
Entity, and there shall not have been any statute, rule or regulation enacted,
promulgated or deemed applicable to the Merger by any Governmental Entity that
prevents the consummation of the Merger.
35
<PAGE> 40
SECTION 7.02 Conditions to Obligation of Parent and the Purchaser to
Effect the Merger. The obligations of the Parent and the Purchaser to consummate
the Merger are further subject to the fulfillment of the condition that all
actions contemplated by Section 2.11 hereto shall have been taken, which may be
waived in whole or in part by Parent or the Purchaser.
ARTICLE VIII.
TERMINATION; AMENDMENTS; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time (notwithstanding approval thereof by the shareholders of the Company):
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent, if the Offer has not been
consummated by December 31, 1999 and the terminating party is not in material
breach of its obligations hereunder;
(c) by either the Company or Parent, if there shall be any Law
or regulation that makes consummation of the Offer or the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree enjoining
Parent or the Company from consummating the Offer or the Merger is entered and
such judgment, injunction, order or decree shall become final and unappealable;
(d) Parent and the Purchaser may terminate this Agreement by
giving written notice to the Company if the Company is in breach, and the
Company may terminate this Agreement by giving written notice to Parent and the
Purchaser in the event that Parent or the Purchaser in breach, of any material
representation, warranty, or covenant contained in this Agreement, and such
breach is not remedied within ten days of delivery of written notice thereof;
(e) by either the Company or Parent, if the Board of Directors
of the Company shall have (i) withdrawn or modified in a manner adverse to
Parent and the Purchaser its approval or recommendation of the Offer or the
Merger; (ii) approved or recommended any Acquisition Transaction in respect of
the Company in compliance with the provisions contained in Section 6.07 and
making the payments referred to in Section 8.02(c) hereof; or (iii) resolved to
take any of the foregoing actions.
SECTION 8.02 Effect of Termination.
(a) Subject to Section 8.02(c), whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Offer, this
Agreement, the Stock Option Agreement and the transactions contemplated by this
Agreement and the Stock Option Agreement shall be paid by the party incurring
such expenses.
(b) In the event of termination of this Agreement by either
Parent or the Company as provided in Section 8.01, this Agreement shall
forthwith become void and have no effect, without
36
<PAGE> 41
any liability on the part of any party or its directors, officers or
shareholders, other than the provisions of this Section 8.02, Section 9.09 and
the Confidentiality Agreement, which provisions will survive such termination.
(c) If this Agreement is terminated (i) by Parent pursuant to
Section 8.01(e), or (ii) by the Company pursuant to Section 8.01(e), the Company
shall pay in cash to Parent a termination fee equal to $1,000,000 (the "Company
Termination Fee"), to be paid as set forth below.
(d) The Company Termination Fee shall be paid in cash in
immediately available funds. Half of such fee shall be paid prior to and as a
condition precedent to the effectiveness of termination of this Agreement, and
the other half shall be paid upon consummation of the Superior Proposal or
termination or withdrawal of the Superior Proposal.
(e) In no event shall the Company be required to pay Parent
any Company Termination Fee, if, immediately prior to the applicable termination
of this Agreement, Parent was in material breach of any of its material
obligations under this Agreement.
(f) If the Company fails to promptly pay any fee or expense
due hereunder, the Company shall pay the costs and expenses (including
reasonable documented legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Citibank, N.A. from the date such fee was required to be
paid.
SECTION 8.03 Amendment. To the extent permitted by applicable Law, this
Agreement may be amended by the parties at any time before or after approval of
this Agreement by the shareholders of the Company; provided, however, that after
any such shareholder approval, no amendment shall be made which by law requires
further approval of the Company's shareholders without the approval of such
shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
SECTION 8.04 Extension; Waiver. At any time prior to the Effective
Time, a party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto by any other party or (c) subject to Section
8.03, waive compliance by any other party with any of the agreements or
conditions contained herein. Any agreement on the part of any party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement to
assert any of its rights under this Agreement or otherwise shall not constitute
a waiver of such rights.
SECTION 8.05 Procedure for Termination, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.01, an amendment of this
Agreement pursuant to Section 8.03 or an extension or waiver pursuant to Section
8.04 in order to be effective shall require, in the case of Parent or the
Company, action by its Board of Directors or, with respect to any amendment of
this Agreement, a duly authorized committee of its Board of Directors.
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<PAGE> 42
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01 Non-Survival of Representations and Warranties. None of
the representations and warranties made in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 9.01 shall not limit any covenant or agreement of the parties hereto
which by its terms contemplates performance after the Effective Time.
SECTION 9.02 Entire Agreement; Assignment.
(a) This Agreement (including the Stock Option Agreement, the
Stockholder Agreements and the other documents and the instruments referred to
herein) and the Confidentiality Agreement constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof and thereof.
(b) Neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns. This Agreement is not intended to confer upon any person
other than Parent, the Purchaser and the Company any rights or remedies
hereunder.
SECTION 9.03 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, each of which shall remain in full force
and effect.
SECTION 9.04 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, by overnight courier or facsimile to the
respective parties as follows:
If to Parent or the Purchaser: IFS Americas, Inc.
1900 East Golf Road, Suite 900
Schaumburg, Illinois 60173
Attention: Terje Vangbo, President and Chief
Executive Officer
Fax: (847) 995-9607
with a copy to: Streich Lang, PA
Two North Central Avenue
Phoenix, Arizona 85004
Attention: Christian J. Hoffmann, III, Esq.
Fax: (602) 420-5008
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<PAGE> 43
If to the Company: Effective Management Systems, Inc.
1200 West Park Place
Milwaukee, Wisconsin 53224-3026
Attention: Michael D. Dunham, President and
Chief Executive Officer
Fax: (414) 359-9011
with a copy to: Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Phillip J. Hanrahan
Jay O. Rothman
Fax: (414) 297-4900
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
SECTION 9.05 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Wisconsin, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.06 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.07 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
SECTION 9.08 Obligation of Parent. Whenever this Agreement requires the
Purchaser or the Surviving Corporation to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent to cause the
Purchaser or the Surviving Corporation to take such action and a guarantee of
the performance thereof.
SECTION 9.09 Fees and Expenses. Except as provided in Section 8.02, all
fees, costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such fees
and expenses, whether or not the Offer or the Merger is consummated.
SECTION 9.10 Certain Definitions. As used in this Agreement:
(a) the term "affiliate," as applied to any person shall mean
any other person directly or indirectly controlling, controlled by, or under
common control with, that person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling,"
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<PAGE> 44
"controlled by" and "under common control with"), as applied to any person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that person, whether through the
ownership of voting shares, by contract or otherwise;
(b) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act);
(c) the term "subsidiary" or "subsidiaries" means, with
respect to Parent, the Company or any other person, any corporation,
partnership, joint venture or other legal entity of which Parent, the Company or
such other person, as the case may be (either alone or through or together with
any other subsidiary), owns, directly or indirectly, stock or other equity
interests the holders of which are generally entitled to more than 50% of the
vote for the election of the board of directors or other governing body of such
corporation or other legal entity; and
(d) the term "knowledge" shall mean the actual knowledge of
the executive officers of the Company after reasonable investigation, including
consultation with the principal executive officers of each of the operating
Subsidiaries.
(e) the term "Security Interests," as used in this Agreement,
means interests in personal property or fixtures which secure payment or
performance of an obligation.
SECTION 9.11 Specific Performance. THE PARTIES HERETO AGREE THAT
IRREPARABLE DAMAGE WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS
AGREEMENT WERE NOT PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE
OTHERWISE BREACHED. IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED
TO AN INJUNCTION OR INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO
ENFORCE SPECIFICALLY THE TERMS AND PROVISIONS HEREOF IN ANY COURT OF THE UNITED
STATES OR ANY STATE HAVING JURISDICTION, THIS BEING IN ADDITION TO ANY OTHER
REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.
SECTION 9.12 Interpretation. Unless the context requires otherwise, all
words used in this Agreement in the singular number shall extend to and include
the plural, all words in the plural number shall extend to and include the
singular, and all words in any gender shall extend to and include all genders.
SECTION 9.13 No Third Party Beneficiary. Except as provided pursuant to
Section 6.09 hereof, the terms and provisions of this Agreement are intended
solely for the benefit of the parties hereto and their respective successors and
assigns and it is not the intention of the parties to confer third-party
beneficiary rights upon any other person.
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<PAGE> 45
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officer thereunto duly authorized, all
as of the day and year first above written.
IFS AMERICAS, INC.
("Parent")
By:/s/ Terje Vangbo
________________________________
Name: Terje Vangbo
______________________________
Title: President
_____________________________
IFS ACQUISITION, INC.
(the "Purchaser")
By: /s/ Terje Vangbo
________________________________
Name: Terje Vangbo
______________________________
Title: President
_____________________________
EFFECTIVE MANAGEMENT SYSTEMS, INC.
(the "Company")
By: /s/ Michael D. Dunham
________________________________
Name: Michael D. Dunham
______________________________
Title: President
_____________________________
41
<PAGE> 46
ANNEX I
CONDITIONS TO THE OFFER
Capitalized terms used in this Annex which are not otherwise defined
herein shall have the meanings assigned to them in the Agreement.
Notwithstanding any other provision of the Offer, the Purchaser shall not be
obligated to accept for payment or pay for, subject to Rule 14e-l(c) of the
Exchange Act, any Shares not theretofore accepted for payment, and may terminate
or amend the Offer if (i) that number of Shares which would represent at least
seventy-five percent (75%) of the voting power represented by the Shares and
other securities entitled generally to vote in the election of directors of the
Company outstanding on a fully diluted basis after giving effect to the exercise
or conversion of all options, rights and securities exercisable or convertible
into or exchangeable for Shares or such voting securities shall not have been
validly tendered and not withdrawn immediately prior to the expiration of the
Offer (the "Minimum Condition"), (ii) any applicable waiting period under the
HSR Act shall not have expired or been terminated prior to the expiration of the
Offer or (iii) at any time on or after the date of commencement of the Offer and
before the acceptance of such Shares for payment or the payment therefor, any of
the following conditions exist or shall occur:
(a) there shall have been instituted an injunction or other
order, decree, judgment or final ruling by a court of competent jurisdiction or
by a governmental, regulatory or administrative agency or commission of
competent jurisdiction or a statute, rule, regulation, executive order or other
action shall have been promulgated, or enacted, by a Governmental Entity or a
governmental, regulatory or administrative agency or commission of competent
jurisdiction which in any such case (i) restrains or prohibits the making or
consummation of the Offer or the consummation of the Merger; (ii) prohibits or
restricts the ownership or operation by Parent (or any of its affiliates or
subsidiaries including the Purchaser) of all or a material portion of the
Company's business or assets; or (iii) imposes material limitations on the
ability of the Purchaser effectively to acquire or to hold or to exercise rights
of ownership of the Shares, including, without limitation, the right to vote the
Shares purchased by the Purchaser on all matters properly presented to the
shareholders of the Company;
(b) the Company shall have entered into an agreement
concerning any Superior Proposal, or the Board of Directors of the Company or
any committee thereof shall have resolved to enter into such an agreement;
(c) any Person or group (as defined in Section 13(d)(3) of the
Exchange Act) (other than Parent, the Purchaser or any affiliate thereof) shall
have become the beneficial owner (as defined in Rule 13d-3 promulgated under the
Exchange Act) of Shares representing a majority of the total votes represented
by all the Shares then outstanding on a fully diluted basis;
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<PAGE> 47
(d) the Merger Agreement shall have been terminated in
accordance with its terms;
(e) there shall have occurred any event which would reasonably
be expected to have a Material Adverse Effect on the Company, except for general
economic changes, changes that affect the industry of the Company or any
Subsidiary generally and changes in the Company's business attributable solely
to actions taken by Parent or the Purchaser;
(f) the Company shall have breached or failed to perform in
any material respect any of its obligations, covenants or agreements under the
Merger Agreement and such breach or failure to perform is not curable, or if
curable, is not cured within ten (10) business days after written notice of such
breach or failure is given by Parent to the Company; or
(g) any of the representations and warranties of the Company
set forth in the Merger Agreement are not materially true and correct at the
date of the Merger Agreement and at the scheduled expiration of the Offer (as
though made as of such date, except that those representations and warranties
that address matters only as of a particular date shall remain materially true
and correct as of such date);
which, in the reasonable judgment of Parent and regardless of the circumstances
giving rise to any such condition, makes it inadvisable to proceed with the
Offer or with such acceptance for payment, purchase of, or payment for Shares.
2
<PAGE> 1
Exhibit (c)(2)
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 1, 1999 (this
"Agreement"), by and among IFS AMERICAS, INC., a Delaware corporation
("Parent"), IFS ACQUISITION, INC., a Wisconsin corporation and a wholly-owned
subsidiary of Parent (the "Purchaser"), and EFFECTIVE MANAGEMENT SYSTEMS, INC.,
a Wisconsin corporation (the "Company").
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and the Company are entering into an Agreement
and Plan of Merger (as such agreement may hereafter be amended from time to
time, the "Merger Agreement"; capitalized terms used but not defined in this
Agreement shall have the meanings ascribed to them in the Merger Agreement),
which provides, upon the terms and subject to the conditions thereof, for (i)
the commencement by the Purchaser of a tender offer (the "Offer") to purchase,
among other things, all of the issued and outstanding shares of the common
stock, $.01 par value, of the Company ("Common Stock"), at a price per share
equal to the Offer Price and (ii) the subsequent merger of the Purchaser and the
Company (the "Merger"), whereby each share of Common Stock, other than shares
owned directly or indirectly by Parent, the Purchaser or the Company and other
than Dissenting Shares, will be converted into the right to receive in cash the
Offer Price applicable thereto; and
WHEREAS, as a condition to the willingness of the parties to enter into
the Merger Agreement, Parent and the Purchaser have required that the Company
agree, and in order to induce Parent and the Purchaser to enter into the Merger
Agreement, the Company has agreed, to grant the Purchaser an option to purchase
shares of Common Stock, upon the terms and subject to the conditions of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and in the Merger Agreement, the parties hereto agree as follows:
ARTICLE I
THE STOCK OPTION
SECTION 1.1 Grant of Stock Option. Subject to the terms and conditions
set forth herein, the Company hereby grants to the Purchaser an irrevocable
option (the "Stock Option") to purchase that number of newly issued shares of
Common Stock (the "Option Shares") equal to the number of shares of Common Stock
that, when added to the number of shares of Common Stock owned by the Purchaser
and its affiliates immediately following consummation of the Offer, shall
constitute 90% of the shares of Common Stock then outstanding on a fully diluted
basis (giving effect to the issuance of the Option Shares) at a purchase price
per Option Share equal to the Offer Price.
<PAGE> 2
SECTION 1.2 Exercise of Stock Option.
(a) Subject to the conditions set forth in Section 2.1, the
Stock Option may be exercised by the Purchaser, in whole but not in part, at any
one time after the occurrence of the Exercise Event (as defined below) and prior
to the Termination Date (as defined below).
(b) The "Exercise Event" shall occur for purposes of this
Agreement upon the Purchaser's acceptance for payment pursuant to the Offer of
shares of Common Stock constituting at least 75% but less than 90% of the shares
of Common Stock then outstanding on a fully diluted basis (not giving effect to
the Stock Option).
(c) Except as provided in the last sentence of this Section
1.2(c), the "Termination Date" shall occur for purposes of this Agreement upon
the earliest to occur of:
(i) the Effective Time;
(ii) the date that is ten (10) business days after
the occurrence of the Exercise Event; or
(iii) the termination of the Merger Agreement in
accordance with the terms and conditions thereof.
Notwithstanding the occurrence of the Termination Date, the Purchaser shall be
entitled to purchase the Option Shares if it has exercised the Stock Option in
accordance with the terms hereof prior to such occurrence, and the occurrence of
the Termination Date shall not affect any rights hereunder which by their terms
do not terminate or expire prior to or as of such date.
(d) In the event the Purchaser wishes to exercise the Stock
Option, the Purchaser shall send to the Company a written notice (an "Exercise
Notice," the date of which notice is referred to herein as the "Notice Date")
specifying the denominations of the certificate or certificates evidencing the
Option Shares which the Purchaser wishes to receive, the place for the closing
of the purchase and sale pursuant to the Stock Option (the "Closing") and a date
not earlier then three (3) business days nor later then ten (10) business days
from the Notice Date for the Closing (the "Closing Date"); provided, however,
that (i) if the Closing cannot be consummated by reason of any applicable Laws
or orders, the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which such restriction on consummation has
expired or been terminated and (ii) without limiting the foregoing, if prior
notification to or approval of any Governmental Entity is required in connection
with such purchase, the Purchaser and the Company shall promptly file the
required notice or application for approval and shall cooperate in the
expeditious filing of such notice or application, and the period of time that
otherwise would run pursuant to this sentence shall run instead from the date on
which, as the case may be, (A) any required notification period has expired or
been terminated or (B) any required approval has been obtained, and in either
event, any requisite waiting period has expired or been terminated. The Company
shall, within two (2)
-2-
<PAGE> 3
business days after receipt of the Exercise Notice, deliver written notice to
the Purchaser specifying the number of Option Shares and the aggregate purchase
price therefor.
ARTICLE II
CLOSING
SECTION 2.1 Conditions to Closing. The obligation of the Company to
deliver Option Shares upon the exercise of the Stock Option is subject to the
following conditions:
(a) All waiting periods, if any, under the HSR Act applicable
to the issuance and delivery of the Option Shares hereunder shall have
expired or have been terminated; and
(b) There shall be no preliminary or permanent injunction or
other final, non-appealable judgment by a court of competent
jurisdiction preventing or prohibiting the exercise of the Stock Option
or the issuance and delivery of the Option Shares in respect of such
exercise.
SECTION 2.2 Closing.
(a) At the Closing, (i) the Company shall deliver to the
Purchaser a certificate or certificates evidencing the applicable number of
Option Shares (in the denominations specified in the Exercise Notice), each such
certificate or certificates being duly executed by the Company and registered in
the name of the Purchaser, and (ii) the Purchaser shall purchase each such
Option Share from the Company at the Offer Price. Payment by the Purchaser of
the Offer Price for each of the Option Shares shall be made by wire transfer of
immediately available funds to an account designated by the Company, in an
amount equal to the sum of the product of (i) the Offer Price and (ii) the total
number of Option Shares delivered at the Closing.
(b) The Company shall pay all expenses, and any and all
Federal, state and local taxes and other charges, that may be payable in
connection with the preparation, issuance and delivery of stock certificates
under this Section 2.2.
(c) Certificates evidencing Option Shares delivered hereunder
may include legends legally required including the legend in substantially the
following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
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<PAGE> 4
It is understood and agreed that the foregoing legend shall be removed by
delivery of substitute certificate(s) without such legend upon the sale of the
Option Shares pursuant to a registered public offering or Rule 144 under the
Securities Act of 1933, as amended (the "Securities Act"), or any other sale as
a result of which such legend is no longer required.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the Purchaser
(except as otherwise disclosed in writing on the date hereof) as follows:
SECTION 3.1 Organization; Authority Relative to this Agreement. The
Company is a corporation validly existing under the laws of the State of
Wisconsin. The Company has all requisite corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company. This Agreement has been
duly and validly executed and delivered by the Company and, assuming the due and
valid authorization, execution and delivery by Parent and the Purchaser,
constitutes a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally, and by general
equitable principles.
SECTION 3.2 Authority to Issue Shares. The Company has taken all
necessary corporate action to authorize and reserve and permit it to issue, and
at all times from the date hereof through the Termination Date shall have
reserved, all the Option Shares issuable pursuant to this Agreement. All of the
shares of Common Stock issuable under the Stock Option, upon their issuance and
delivery in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable (except as otherwise
provided in Section 180.0622(2)(b) of the WBC), will be delivered free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on the Purchaser's voting rights, charges,
adverse rights and other encumbrances of any nature whatsoever (other than this
Agreement) and will not be subject to any preemptive rights. Upon the delivery
to the Purchaser by the Company of a certificate or certificates evidencing the
Option Shares, the Purchaser will receive good, valid and marketable title to
the Option Shares.
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<PAGE> 5
ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.1 Further Action. The Company shall use its commercially
reasonable efforts to take, or cause to be taken, all appropriate action, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable Laws to consummate and make effective the transactions contemplated
hereunder, including, without limitation, using all reasonable efforts to obtain
all licenses, permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities.
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser hereby represent and warrant to the Company as
follows:
SECTION 5.1 Organization; Authority Relative to this Agreement. Each of
Parent and the Purchaser is a corporation duly organized and validly existing
under the laws of the jurisdiction of its incorporation. Each of Parent and the
Purchaser has all requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and the Purchaser and the consummation by Parent and the Purchaser of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Parent and the Purchaser. This
Agreement has been duly and validly executed and delivered by Parent and the
Purchaser and, assuming the due and valid authorization, execution and delivery
by the Company, constitutes a valid and binding obligation of Parent and the
Purchaser, enforceable against each of Parent and the Purchaser in accordance
with its terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, and by general equitable principles.
SECTION 5.2 Distribution. Any Option Shares the Purchaser purchases
pursuant to this Agreement are being purchased for investment purposes only and
not with a view to any public distribution thereof.
ARTICLE VI
MISCELLANEOUS
SECTION 6.1 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
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<PAGE> 6
SECTION 6.2 Waiver. Any party hereto may (a) extend the time for or
waive compliance with the performance of any obligation or other act of any
other party hereto or (b) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
SECTION 6.3 Fees and Expenses. Except as otherwise provided herein or
in Section 8.02 of the Merger Agreement, all costs, fees and expenses incurred
in connection with this Agreement shall be paid by the party incurring such
expenses.
SECTION 6.4 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or sent by telecopy or by overnight courier (providing
proof of delivery) to the respective parties at their addresses as specified in
Section 9.04 of the Merger Agreement.
SECTION 6.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner to the fullest extent permitted by applicable Law in order that the
transactions contemplated hereby may be consummated as originally contemplated
to the fullest extent possible.
SECTION 6.6 Assignment; Binding Effect; Benefit. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned, in
whole or in part, by operation of law or otherwise, by any of the parties hereto
without the prior written consent of the other parties. This Agreement shall be
binding upon, inure to the benefit of, and be enforceable by, the parties hereto
and their respective successors and permitted assigns. Notwithstanding anything
contained in this Agreement to the contrary, nothing in this Agreement, express
or implied, is intended to confer on any person other than the parties hereto or
their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
SECTION 6.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Wisconsin, without giving
effect to the principles of conflicts of laws thereof.
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<PAGE> 7
SECTION 6.8 Enforcement. THE PARTIES AGREE THAT IRREPARABLE DAMAGE
WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT
PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED. IT
IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR
INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY
THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY COURT OF THE UNITED STATES OR
ANY STATE HAVING JURISDICTION, THIS BEING IN ADDITION TO ANY OTHER REMEDY TO
WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY.
SECTION 6.9 Headings. The descriptive headings contained in this
Agreement are included for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
SECTION 6.10 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
SECTION 6.11 Entire Agreement. This Agreement constitutes the entire
agreement, and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this
Agreement.
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, all as of the
date first written above.
IFS AMERICAS, INC.
("Parent")
By: /s/ Terje Vangbo
------------------------------------
Name: Terje Vangbo
Title: President
IFS ACQUISITION, INC.
(the "Purchaser")
By: /s/ Terje Vangbo
------------------------------------
Name: Terje Vangbo
Title: President
EFFECTIVE MANAGEMENT SYSTEMS, INC.
(the "Company")
By: /s/ Michael D. Dunham
------------------------------------
Name: Michael D. Dunham
Title: President
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<PAGE> 1
Exhibit (c)(3)
STOCKHOLDER AGREEMENT
AGREEMENT, dated September 1, 1999, among IFS Americas, Inc., a
Delaware corporation ("Parent"), IFS Acquisition, Inc., a Wisconsin corporation
and a wholly-owned subsidiary of Parent (the "Purchaser"), and Michael D. Dunham
(the "Stockholder").
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and Effective Management Systems, Inc., a
Wisconsin corporation (the "Company"), have entered into an Agreement and Plan
of Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which the Purchaser will be merged with and
into the Company (the "Merger"); and
WHEREAS, in furtherance of the Merger, Parent and the Company desire
that as soon as practicable (and not later than five business days) after the
announcement of the execution of the Merger Agreement, the Purchaser shall
commence a cash tender offer (the "Offer") to purchase at the Offer Price all
outstanding shares of Common Stock (each as defined in Section 1 hereof),
including all of the Securities (as defined in Section 2 hereof) beneficially
owned by the Stockholder; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Owned" or "Beneficial Ownership" with
respect to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person (as hereinafter defined) shall include securities
Beneficially Owned by all other Persons with whom such Person would constitute a
"group" within the meaning of Section 13(d)(3) of the Exchange Act.
(b) "Common Stock" shall mean the Common Stock, $.01 par value
per share, of the Company.
(c) "Offer Price" shall mean cash in the amount of $4.50 per
share of Common Stock or, if greater, the price per share paid by the Purchaser
in the Offer.
<PAGE> 2
(d) "Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(e) Capitalized terms used and not defined herein shall have
the respective meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into
the Merger Agreement, the Stockholder hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
tenth business day after commencement of the Offer pursuant to Section 1.01 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of shares
of Common Stock set forth opposite the Stockholder's name on Schedule I hereto
(the "Existing Securities," and together with any shares of Common Stock
acquired by the Stockholder in any capacity after the date hereof and prior to
the termination of this Agreement by means of purchase, dividend, distribution,
exercise of options or other rights to acquire Common Stock or in any other way,
the "Securities"), all of which are Beneficially Owned by the Stockholder. The
Stockholder hereby acknowledges and agrees that Parent's and the Purchaser's
obligation to accept for payment and pay for the Securities in the Offer,
including the Securities Beneficially Owned by the Stockholder, is subject to
the terms and conditions of the Offer.
(b) The Stockholder hereby permits Parent and the Purchaser to
publish and disclose in the Offer Documents and, if approval of the Company's
stockholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) its identity and ownership of
the Securities and the nature of its commitments, arrangements and
understandings under this Agreement; provided that the Stockholder shall have a
right to review and comment on such disclosure a reasonable time before it is
publicly disclosed.
3. Additional Agreements.
(a) No Inconsistent Arrangements. Except as necessary to
exercise Stockholder's fiduciary duties as a director of the Company with
respect to a Superior Proposal, the Stockholder hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not (i) transfer (which term shall include, without limitation, any sale,
gift, pledge (other than a pledge which does not impair the Stockholder's
ability to perform under this Agreement) or other disposition), or consent to
any transfer of, any or all of the Securities or any interest therein, (ii)
enter into any contract, option or other agreement or understanding with respect
to any transfer of any or all of the Securities or any interest therein, (iii)
grant any proxy, power-of-attorney or other authorization in or with respect to
the Securities, (iv) deposit the Securities into a voting trust or enter into a
voting agreement or arrangement with respect to the Securities or (v) take any
other action that would in any way restrict, limit or interfere with the
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<PAGE> 3
performance of its obligations hereunder or the transactions contemplated hereby
or by the Merger Agreement or the Stock Option Agreement.
(b) No Solicitation. The Stockholder hereby agrees, in the
capacity as a stockholder of the Company, that neither the Stockholder nor any
affiliates, representatives or agents shall (and, if the Stockholder is a
corporation, partnership, trust or other entity, the Stockholder shall cause its
officers, directors, partners, and employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
the Purchaser or any of their respective affiliates or representatives)
concerning any proposal relating to an Acquisition Transaction. The Stockholder
shall notify the Parent and the Purchaser no later than 24 hours after receipt
by the Stockholder (or its advisors), of any proposal with respect to an
Acquisition Transaction or any request for non-public information in connection
with a proposed Acquisition Transaction or for access to the properties, books
or records of the Company by any person or entity that informs the Company that
it is considering making, or has made, an Acquisition Transaction (as defined in
Section 6.07 of the Merger Agreement). Such notice to the Parent and Purchaser
shall be made orally and in writing and shall indicate in reasonable detail the
identity of the person making the Acquisition Proposal (as defined in Section
6.07 of the Merger Agreement) and the terms and conditions of such proposal,
inquiry or contact. Any action taken by the Company or any member of the Board
of Directors of the Company in accordance with Section 6.07 of the Merger
Agreement shall be deemed not to violate this Section 3(b).
(c) Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated by this Agreement. Each party shall
promptly consult with the other and provide any necessary information and
material with respect to all filings made by such party with any Governmental
Entity in connection with this Agreement and the transactions contemplated
hereby.
(d) Waiver of Appraisal Rights. The Stockholder hereby waives
any rights of appraisal or rights to dissent from the Merger that it may have.
4. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Parent and the Purchaser as follows:
(a) Ownership of Securities. The Stockholder is the record and
Beneficial Owner of the Existing Securities, as set forth on Schedule I. On the
date hereof, the Existing Securities constitute all of the Securities owned of
record or Beneficially Owned by the Stockholder. Except as set forth on Schedule
I, the Stockholder has sole voting power and sole power to issue instructions
with respect to the matters set forth in Sections 2 and 3 hereof, sole power of
disposition, sole power to demand appraisal rights and sole power to agree to
all of the matters set forth in this Agreement,
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<PAGE> 4
in each case with respect to all of the Existing Securities with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the power
and authority to enter into and perform all of the Stockholder's obligations
under this Agreement. The execution, delivery and performance of this Agreement
by the Stockholder will not violate any other agreement to which the Stockholder
is a party including, without limitation, any voting agreement, proxy
arrangement, pledge agreement, stockholders agreement or voting trust. This
Agreement has been duly and validly executed and delivered by the Stockholder
and constitutes a valid and binding agreement of the Stockholder, enforceable
against the Stockholder in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity. There is no
beneficiary or holder of a voting trust certificate or other interest of any
trust of which the Stockholder is a trustee, or any party to any other agreement
or arrangement, whose consent is required for the execution and delivery of this
Agreement or the consummation by the Stockholder of the transactions
contemplated hereby.
(c) No Conflicts. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery of this Agreement by the Stockholder,
the consummation by the Stockholder of the transactions contemplated hereby and
the compliance by the Stockholder with the provisions hereof and (ii) none of
the execution and delivery of this Agreement by the Stockholder, the
consummation by the Stockholder of the transactions contemplated hereby or
compliance by the Stockholder with any of the provisions hereof, except in cases
in which any conflict, breach, default or violation described below would not
interfere with the ability of such Stockholder to perform such Stockholder's
obligations hereunder, shall (A) conflict with or result in any breach of any
organizational documents applicable to the Stockholder, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, modification or acceleration) under, any of the terms, conditions
or provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of its properties or assets may be bound, or (C) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of such Stockholder's properties or assets.
(d) No Liens. Except as permitted by this Agreement, the
Existing Securities and the certificates representing such securities are now,
and at all times during the term hereof will be, held by the Stockholder, or by
a nominee or custodian for the benefit of the Stockholder, free and clear of all
Liens, proxies, voting trusts or agreements, understandings or arrangements or
any other rights whatsoever, except for any such Liens or proxies arising
hereunder.
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<PAGE> 5
(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.
(f) Reliance by Parent. The Stockholder understands and
acknowledges that Parent is entering into, and causing the Purchaser to enter
into, the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement.
5. Representations and Warranties of Parent and the Purchaser. Each of
Parent and the Purchaser hereby represents and warrants to the Stockholder as
follows:
(a) Power; Binding Agreement. Parent and the Purchaser each
has the corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by each of Parent and the Purchaser will not violate any other
agreement to which either of them is a party. This Agreement has been duly and
validly executed and delivered by each of Parent and the Purchaser and
constitutes a valid and binding agreement of each of Parent and the Purchaser,
enforceable against each of Parent and the Purchaser in accordance with its
terms, except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
(b) No Conflicts. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act, (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution of this Agreement by each of Parent and the
Purchaser, the consummation by each of Parent and the Purchaser of the
transactions contemplated hereby and the compliance by Parent and the Purchaser
with the provisions hereof and (ii) none of the execution and delivery of this
Agreement by each of Parent and the Purchaser, the consummation by each of
Parent and the Purchaser of the transactions contemplated hereby or compliance
by each of Parent and the Purchaser with any of the provisions hereof, except in
cases in which any conflict, breach, default or violation described below would
not interfere with the ability of Parent or the Purchaser to perform their
respective obligations hereunder, shall (A) conflict with or result in any
breach of any organizational documents applicable to either of Parent or the
Purchaser, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, modification or acceleration) under,
any of the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which either of
Parent or the Purchaser is a party or by which either of Parent or the Purchaser
or any of their properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to either of Parent or the Purchaser or any of their properties or
assets.
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<PAGE> 6
6. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
7. Stop Transfer. The Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Securities, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the like, the
term "Securities" shall refer to and include the Securities as well as all such
stock dividends and distributions and any shares into which or for which any and
all of the Securities may be changed or exchanged.
8. Termination. The covenant and agreements contained herein with
respect to the Securities shall terminate upon the earlier of (a) the Effective
Time, (b) the first anniversary of the date hereof, or (c) the termination of
the Merger Agreement pursuant to (i) Section 8.01(a), (ii) Section 8.01(b),
(iii) Section 8.01(c), (iv) by the Company pursuant to Section 8.01(d) thereof
or (v) Section 8.01(e).
9. No Limitation. Nothing in this Agreement shall be construed to
prohibit the Stockholder who is a member of the Board of Directors of the
Company from exercising his fiduciary duties as a member of such Board of
Directors.
10. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations
hereunder shall attach to the Securities and shall be binding upon any person or
entity to which legal or beneficial ownership of the Securities shall pass,
whether by operation of law or otherwise, including, without limitation, the
Stockholder's administrators or successors. Notwithstanding any transfer of
Securities, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the
Stockholder or Parent and the Purchaser, as the case may be, provided that
Parent or the Purchaser may assign, in its respective sole discretion, its
rights and obligations hereunder to any direct or indirect subsidiary of Parent,
but no such assignment shall relieve Parent or the Purchaser of its obligations
hereunder if such assignee does not perform such obligations.
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<PAGE> 7
(d) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Stockholder:
Michael D. Dunham
c/o Effective Management Systems, Inc.
1200 West Park Place
Milwaukee, Wisconsin 53224-3026
Telephone No.: (414) 359-9800
Telecopy No.: (414) 359-9011
Copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Phillip J. Hanrahan
Jay O. Rothman
Telephone No.: (414) 271-2400
Telecopy No.: (414) 297-4900
If to Parent or the Purchaser:
IFS Americas, Inc.
1900 East Golf Road, Suite 900
Schaumburg, Illinois 60173
Attention: Terje Vangbo, Chief Executive
Officer and President
Telephone No.: (847) 995-9600
Telecopy No.: (847) 995-9607
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Copy to:
Streich Lang, PA
Two North Central Avenue
Phoenix, Arizona 85004
Attention: Christian J. Hoffmann, III, Esq.
Telephone No.: (602) 229-5336
Telecopy No.: (602) 420-5008
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein. Notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor the Purchaser shall be deemed to be the owner, nor
shall Parent or the Purchaser have the power to vote for the election of
directors, with respect to some or all of the Securities for purposes of the WBC
until the purchase of, and payment for, such Securities is actually consummated.
The rights of Parent and the Purchaser hereunder shall be limited as provided in
the preceding sentence.
(g) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore in the event of any such breach the aggrieved party shall be entitled
to the remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any
rights, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
8
<PAGE> 9
(j) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Wisconsin, without giving
effect to the principles of conflicts of law thereof.
(l) Waiver of Jury Trial. Each party hereto hereby waives any
right to a trial by jury in connection with any action, suit or proceeding
brought in connection with this Agreement.
(m) Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
IFS AMERICAS, INC.
By: /s/ Terje Vangbo
------------------------------------
Name: Terje Vangbo
----------------------------------
Its: President
-----------------------------------
IFS ACQUISITION, INC.
By: /s/ Terje Vangbo
------------------------------------
Name: Terje Vangbo
----------------------------------
Its: President
-----------------------------------
STOCKHOLDER
/s/ Michael D. Dunham
---------------------------------------
MICHAEL D. DUNHAM
10
<PAGE> 11
SCHEDULE I
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED
<S> <C>
Michael D. Dunham 637,300
</TABLE>
<PAGE> 1
Exhibit (c)(4)
STOCKHOLDER AGREEMENT
AGREEMENT, dated September 1, 1999, among IFS Americas, Inc., a
Delaware corporation ("Parent"), IFS Acquisition, Inc., a Wisconsin corporation
and a wholly-owned subsidiary of Parent (the "Purchaser"), and Thomas M. Dykstra
(the "Stockholder").
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and Effective Management Systems, Inc., a
Wisconsin corporation (the "Company"), have entered into an Agreement and Plan
of Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which the Purchaser will be merged with and
into the Company (the "Merger"); and
WHEREAS, in furtherance of the Merger, Parent and the Company desire
that as soon as practicable (and not later than five business days) after the
announcement of the execution of the Merger Agreement, the Purchaser shall
commence a cash tender offer (the "Offer") to purchase at the Offer Price all
outstanding shares of Common Stock (each as defined in Section 1 hereof),
including all of the Securities (as defined in Section 2 hereof) beneficially
owned by the Stockholder; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Owned" or "Beneficial Ownership" with
respect to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person (as hereinafter defined) shall include securities
Beneficially Owned by all other Persons with whom such Person would constitute a
"group" within the meaning of Section 13(d)(3) of the Exchange Act.
(b) "Common Stock" shall mean the Common Stock, $.01 par value
per share, of the Company.
(c) "Offer Price" shall mean cash in the amount of $4.50 per
share of Common Stock or, if greater, the price per share paid by the Purchaser
in the Offer.
<PAGE> 2
(d) "Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(e) Capitalized terms used and not defined herein shall have
the respective meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into
the Merger Agreement, the Stockholder hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
tenth business day after commencement of the Offer pursuant to Section 1.01 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of shares
of Common Stock set forth opposite the Stockholder's name on Schedule I hereto
(the "Existing Securities," and together with any shares of Common Stock
acquired by the Stockholder in any capacity after the date hereof and prior to
the termination of this Agreement by means of purchase, dividend, distribution,
exercise of options or other rights to acquire Common Stock or in any other way,
the "Securities"), all of which are Beneficially Owned by the Stockholder. The
Stockholder hereby acknowledges and agrees that Parent's and the Purchaser's
obligation to accept for payment and pay for the Securities in the Offer,
including the Securities Beneficially Owned by the Stockholder, is subject to
the terms and conditions of the Offer.
(b) The Stockholder hereby permits Parent and the Purchaser to
publish and disclose in the Offer Documents and, if approval of the Company's
stockholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) its identity and ownership of
the Securities and the nature of its commitments, arrangements and
understandings under this Agreement; provided that the Stockholder shall have a
right to review and comment on such disclosure a reasonable time before it is
publicly disclosed.
3. Additional Agreements.
(a) No Inconsistent Arrangements. Except as necessary to
exercise Stockholder's fiduciary duties as a director of the Company with
respect to a Superior Proposal, the Stockholder hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not (i) transfer (which term shall include, without limitation, any sale,
gift, pledge (other than a pledge which does not impair the Stockholder's
ability to perform under this Agreement) or other disposition), or consent to
any transfer of, any or all of the Securities or any interest therein, (ii)
enter into any contract, option or other agreement or understanding with respect
to any transfer of any or all of the Securities or any interest therein, (iii)
grant any proxy, power-of-attorney or other authorization in or with respect to
the Securities, (iv) deposit the Securities into a voting trust or enter into a
voting agreement or arrangement with respect to the Securities or (v) take any
other action that would in any way restrict, limit or interfere with the
2
<PAGE> 3
performance of its obligations hereunder or the transactions contemplated hereby
or by the Merger Agreement or the Stock Option Agreement.
(b) No Solicitation. The Stockholder hereby agrees, in the
capacity as a stockholder of the Company, that neither the Stockholder nor any
affiliates, representatives or agents shall (and, if the Stockholder is a
corporation, partnership, trust or other entity, the Stockholder shall cause its
officers, directors, partners, and employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
the Purchaser or any of their respective affiliates or representatives)
concerning any proposal relating to an Acquisition Transaction. The Stockholder
shall notify the Parent and the Purchaser no later than 24 hours after receipt
by the Stockholder (or its advisors), of any proposal with respect to an
Acquisition Transaction or any request for non-public information in connection
with a proposed Acquisition Transaction or for access to the properties, books
or records of the Company by any person or entity that informs the Company that
it is considering making, or has made, an Acquisition Transaction (as defined in
Section 6.07 of the Merger Agreement). Such notice to the Parent and Purchaser
shall be made orally and in writing and shall indicate in reasonable detail the
identity of the person making the Acquisition Proposal (as defined in Section
6.07 of the Merger Agreement) and the terms and conditions of such proposal,
inquiry or contact. Any action taken by the Company or any member of the Board
of Directors of the Company in accordance with Section 6.07 of the Merger
Agreement shall be deemed not to violate this Section 3(b).
(c) Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated by this Agreement. Each party shall
promptly consult with the other and provide any necessary information and
material with respect to all filings made by such party with any Governmental
Entity in connection with this Agreement and the transactions contemplated
hereby.
(d) Waiver of Appraisal Rights. The Stockholder hereby waives
any rights of appraisal or rights to dissent from the Merger that it may have.
4. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Parent and the Purchaser as follows:
(a) Ownership of Securities. The Stockholder is the record and
Beneficial Owner of the Existing Securities, as set forth on Schedule I. On the
date hereof, the Existing Securities constitute all of the Securities owned of
record or Beneficially Owned by the Stockholder. Except as set forth on Schedule
I, the Stockholder has sole voting power and sole power to issue instructions
with respect to the matters set forth in Sections 2 and 3 hereof, sole power of
disposition, sole power to demand appraisal rights and sole power to agree to
all of the matters set forth in this Agreement,
3
<PAGE> 4
in each case with respect to all of the Existing Securities with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the power
and authority to enter into and perform all of the Stockholder's obligations
under this Agreement. The execution, delivery and performance of this Agreement
by the Stockholder will not violate any other agreement to which the Stockholder
is a party including, without limitation, any voting agreement, proxy
arrangement, pledge agreement, stockholders agreement or voting trust. This
Agreement has been duly and validly executed and delivered by the Stockholder
and constitutes a valid and binding agreement of the Stockholder, enforceable
against the Stockholder in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity. There is no
beneficiary or holder of a voting trust certificate or other interest of any
trust of which the Stockholder is a trustee, or any party to any other agreement
or arrangement, whose consent is required for the execution and delivery of this
Agreement or the consummation by the Stockholder of the transactions
contemplated hereby.
(c) No Conflicts. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery of this Agreement by the Stockholder,
the consummation by the Stockholder of the transactions contemplated hereby and
the compliance by the Stockholder with the provisions hereof and (ii) none of
the execution and delivery of this Agreement by the Stockholder, the
consummation by the Stockholder of the transactions contemplated hereby or
compliance by the Stockholder with any of the provisions hereof, except in cases
in which any conflict, breach, default or violation described below would not
interfere with the ability of such Stockholder to perform such Stockholder's
obligations hereunder, shall (A) conflict with or result in any breach of any
organizational documents applicable to the Stockholder, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, modification or acceleration) under, any of the terms, conditions
or provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of its properties or assets may be bound, or (C) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of such Stockholder's properties or assets.
(d) No Liens. Except as permitted by this Agreement, the
Existing Securities and the certificates representing such securities are now,
and at all times during the term hereof will be, held by the Stockholder, or by
a nominee or custodian for the benefit of the Stockholder, free and clear of all
Liens, proxies, voting trusts or agreements, understandings or arrangements or
any other rights whatsoever, except for any such Liens or proxies arising
hereunder.
4
<PAGE> 5
(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.
(f) Reliance by Parent. The Stockholder understands and
acknowledges that Parent is entering into, and causing the Purchaser to enter
into, the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement.
5. Representations and Warranties of Parent and the Purchaser. Each of
Parent and the Purchaser hereby represents and warrants to the Stockholder as
follows:
(a) Power; Binding Agreement. Parent and the Purchaser each
has the corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by each of Parent and the Purchaser will not violate any other
agreement to which either of them is a party. This Agreement has been duly and
validly executed and delivered by each of Parent and the Purchaser and
constitutes a valid and binding agreement of each of Parent and the Purchaser,
enforceable against each of Parent and the Purchaser in accordance with its
terms, except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
(b) No Conflicts. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act, (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution of this Agreement by each of Parent and the
Purchaser, the consummation by each of Parent and the Purchaser of the
transactions contemplated hereby and the compliance by Parent and the Purchaser
with the provisions hereof and (ii) none of the execution and delivery of this
Agreement by each of Parent and the Purchaser, the consummation by each of
Parent and the Purchaser of the transactions contemplated hereby or compliance
by each of Parent and the Purchaser with any of the provisions hereof, except in
cases in which any conflict, breach, default or violation described below would
not interfere with the ability of Parent or the Purchaser to perform their
respective obligations hereunder, shall (A) conflict with or result in any
breach of any organizational documents applicable to either of Parent or the
Purchaser, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, modification or acceleration) under,
any of the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which either of
Parent or the Purchaser is a party or by which either of Parent or the Purchaser
or any of their properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to either of Parent or the Purchaser or any of their properties or
assets.
5
<PAGE> 6
6. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
7. Stop Transfer. The Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Securities, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the like, the
term "Securities" shall refer to and include the Securities as well as all such
stock dividends and distributions and any shares into which or for which any and
all of the Securities may be changed or exchanged.
8. Termination. The covenant and agreements contained herein with
respect to the Securities shall terminate upon the earlier of (a) the Effective
Time, (b) the first anniversary of the date hereof, or (c) the termination of
the Merger Agreement pursuant to (i) Section 8.01(a), (ii) Section 8.01(b),
(iii) Section 8.01(c), (iv) by the Company pursuant to Section 8.01(d) thereof
or (v) Section 8.01(e).
9. No Limitation. Nothing in this Agreement shall be construed to
prohibit the Stockholder who is a member of the Board of Directors of the
Company from exercising his fiduciary duties as a member of such Board of
Directors.
10. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations
hereunder shall attach to the Securities and shall be binding upon any person or
entity to which legal or beneficial ownership of the Securities shall pass,
whether by operation of law or otherwise, including, without limitation, the
Stockholder's administrators or successors. Notwithstanding any transfer of
Securities, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the
Stockholder or Parent and the Purchaser, as the case may be, provided that
Parent or the Purchaser may assign, in its respective sole discretion, its
rights and obligations hereunder to any direct or indirect subsidiary of Parent,
but no such assignment shall relieve Parent or the Purchaser of its obligations
hereunder if such assignee does not perform such obligations.
6
<PAGE> 7
(d) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Stockholder:
Thomas M. Dykstra
c/o Effective Management Systems, Inc.
1200 West Park Place
Milwaukee, Wisconsin 53224-3026
Telephone No.: (414) 359-9800
Telecopy No.: (414) 359-9011
Copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Phillip J. Hanrahan
Jay O. Rothman
Telephone No.: (414) 271-2400
Telecopy No.: (414) 297-4900
If to Parent or the Purchaser:
IFS Americas, Inc.
1900 East Golf Road, Suite 900
Schaumburg, Illinois 60173
Attention: Terje Vangbo, Chief Executive Officer and
President
Telephone No.: (847) 995-9600
Telecopy No.: (847) 995-9607
7
<PAGE> 8
Copy to:
Streich Lang, PA
Two North Central Avenue
Phoenix, Arizona 85004
Attention: Christian J. Hoffmann, III, Esq.
Telephone No.: (602) 229-5336
Telecopy No.: (602) 420-5008
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein. Notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor the Purchaser shall be deemed to be the owner, nor
shall Parent or the Purchaser have the power to vote for the election of
directors, with respect to some or all of the Securities for purposes of the WBC
until the purchase of, and payment for, such Securities is actually consummated.
The rights of Parent and the Purchaser hereunder shall be limited as provided in
the preceding sentence.
(g) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore in the event of any such breach the aggrieved party shall be entitled
to the remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any
rights, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
8
<PAGE> 9
(j) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Wisconsin, without giving
effect to the principles of conflicts of law thereof.
(l) Waiver of Jury Trial. Each party hereto hereby waives any
right to a trial by jury in connection with any action, suit or proceeding
brought in connection with this Agreement.
(m) Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
IFS AMERICAS, INC.
By: /s/ Terje Vangbo
------------------------------------
Name: Terje Vangbo
----------------------------------
Its: President
-----------------------------------
IFS ACQUISITION, INC.
By: /s/ Terje Vangbo
------------------------------------
Name: Terje Vangbo
----------------------------------
Its: President
-----------------------------------
STOCKHOLDER
/s/ Thomas M. Dykstra
---------------------------------------
THOMAS M. DYKSTRA
10
<PAGE> 11
SCHEDULE I
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED
<S> <C>
Thomas M. Dykstra - 410,000 shares owned through the
Thomas M. and Lorna J. Dykstra
Trust. Mr. Dykstra has sole voting
and dispositive power with respect
to the shares held by the Trust.
- 150,000 shares owned through the
Dykstra Family Limited Partnership.
Mr. Dykstra is the sole managing
partner of the Partnership. Mr.
Dykstra and his wife, Lorna J.
Dykstra, have voting and
dispositive power with respect to
the shares held by the Partnership.
</TABLE>
<PAGE> 1
Exhibit (c)(5)
STOCKHOLDER AGREEMENT
AGREEMENT, dated September 1, 1999, among IFS Americas, Inc., a
Delaware corporation ("Parent"), IFS Acquisition, Inc., a Wisconsin corporation
and a wholly-owned subsidiary of Parent (the "Purchaser"), and Donald W.
Vahlsing (the "Stockholder").
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and Effective Management Systems, Inc., a
Wisconsin corporation (the "Company"), have entered into an Agreement and Plan
of Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which the Purchaser will be merged with and
into the Company (the "Merger"); and
WHEREAS, in furtherance of the Merger, Parent and the Company desire
that as soon as practicable (and not later than five business days) after the
announcement of the execution of the Merger Agreement, the Purchaser shall
commence a cash tender offer (the "Offer") to purchase at the Offer Price all
outstanding shares of Common Stock (each as defined in Section 1 hereof),
including all of the Securities (as defined in Section 2 hereof) beneficially
owned by the Stockholder; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Owned" or "Beneficial Ownership" with
respect to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person (as hereinafter defined) shall include securities
Beneficially Owned by all other Persons with whom such Person would constitute a
"group" within the meaning of Section 13(d)(3) of the Exchange Act.
(b) "Common Stock" shall mean the Common Stock, $.01 par value
per share, of the Company.
<PAGE> 2
(c) "Offer Price" shall mean cash in the amount of $4.50 per
share of Common Stock or, if greater, the price per share paid by the Purchaser
in the Offer.
(d) "Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(e) Capitalized terms used and not defined herein shall have
the respective meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into
the Merger Agreement, the Stockholder hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
tenth business day after commencement of the Offer pursuant to Section 1.01 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of shares
of Common Stock set forth opposite the Stockholder's name on Schedule I hereto
(the "Existing Securities," and together with any shares of Common Stock
acquired by the Stockholder in any capacity after the date hereof and prior to
the termination of this Agreement by means of purchase, dividend, distribution,
exercise of options or other rights to acquire Common Stock or in any other way,
the "Securities"), all of which are Beneficially Owned by the Stockholder. The
Stockholder hereby acknowledges and agrees that Parent's and the Purchaser's
obligation to accept for payment and pay for the Securities in the Offer,
including the Securities Beneficially Owned by the Stockholder, is subject to
the terms and conditions of the Offer.
(b) The Stockholder hereby permits Parent and the Purchaser to
publish and disclose in the Offer Documents and, if approval of the Company's
stockholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) its identity and ownership of
the Securities and the nature of its commitments, arrangements and
understandings under this Agreement; provided that the Stockholder shall have a
right to review and comment on such disclosure a reasonable time before it is
publicly disclosed.
3. Additional Agreements.
(a) No Inconsistent Arrangements. Except as necessary to
exercise Stockholder's fiduciary duties as a director of the Company with
respect to a Superior Proposal, the Stockholder hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not (i) transfer (which term shall include, without limitation, any sale,
gift, pledge (other than a pledge which does not impair the Stockholder's
ability to perform under this Agreement) or other disposition), or consent to
any transfer of, any or all of the Securities or any interest therein, (ii)
enter into any contract, option or other agreement or understanding with respect
to any transfer of any or all of the Securities or any interest therein, (iii)
grant any proxy, power-of-attorney or other authorization in or with respect to
the Securities, (iv) deposit the
2
<PAGE> 3
Securities into a voting trust or enter into a voting agreement or arrangement
with respect to the Securities or (v) take any other action that would in any
way restrict, limit or interfere with the performance of its obligations
hereunder or the transactions contemplated hereby or by the Merger Agreement or
the Stock Option Agreement.
(b) No Solicitation. The Stockholder hereby agrees, in the
capacity as a stockholder of the Company, that neither the Stockholder nor any
affiliates, representatives or agents shall (and, if the Stockholder is a
corporation, partnership, trust or other entity, the Stockholder shall cause its
officers, directors, partners, and employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
the Purchaser or any of their respective affiliates or representatives)
concerning any proposal relating to an Acquisition Transaction. The Stockholder
shall notify the Parent and the Purchaser no later than 24 hours after receipt
by the Stockholder (or its advisors), of any proposal with respect to an
Acquisition Transaction or any request for non-public information in connection
with a proposed Acquisition Transaction or for access to the properties, books
or records of the Company by any person or entity that informs the Company that
it is considering making, or has made, an Acquisition Transaction (as defined in
Section 6.07 of the Merger Agreement). Such notice to the Parent and Purchaser
shall be made orally and in writing and shall indicate in reasonable detail the
identity of the person making the Acquisition Proposal (as defined in Section
6.07 of the Merger Agreement) and the terms and conditions of such proposal,
inquiry or contact. Any action taken by the Company or any member of the Board
of Directors of the Company in accordance with Section 6.07 of the Merger
Agreement shall be deemed not to violate this Section 3(b).
(c) Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated by this Agreement. Each party shall
promptly consult with the other and provide any necessary information and
material with respect to all filings made by such party with any Governmental
Entity in connection with this Agreement and the transactions contemplated
hereby.
(d) Waiver of Appraisal Rights. The Stockholder hereby waives
any rights of appraisal or rights to dissent from the Merger that it may have.
4. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Parent and the Purchaser as follows:
(a) Ownership of Securities. The Stockholder is the record and
Beneficial Owner of the Existing Securities, as set forth on Schedule I. On the
date hereof, the Existing Securities constitute all of the Securities owned of
record or Beneficially Owned by the Stockholder. Except as set forth on Schedule
I, the Stockholder has sole voting power and sole power to issue instructions
3
<PAGE> 4
with respect to the matters set forth in Sections 2 and 3 hereof, sole power of
disposition, sole power to demand appraisal rights and sole power to agree to
all of the matters set forth in this Agreement, in each case with respect to all
of the Existing Securities with no limitations, qualifications or restrictions
on such rights, subject to applicable securities laws and the terms of this
Agreement.
(b) Power; Binding Agreement. The Stockholder has the power
and authority to enter into and perform all of the Stockholder's obligations
under this Agreement. The execution, delivery and performance of this Agreement
by the Stockholder will not violate any other agreement to which the Stockholder
is a party including, without limitation, any voting agreement, proxy
arrangement, pledge agreement, stockholders agreement or voting trust. This
Agreement has been duly and validly executed and delivered by the Stockholder
and constitutes a valid and binding agreement of the Stockholder, enforceable
against the Stockholder in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity. There is no
beneficiary or holder of a voting trust certificate or other interest of any
trust of which the Stockholder is a trustee, or any party to any other agreement
or arrangement, whose consent is required for the execution and delivery of this
Agreement or the consummation by the Stockholder of the transactions
contemplated hereby.
(c) No Conflicts. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery of this Agreement by the Stockholder,
the consummation by the Stockholder of the transactions contemplated hereby and
the compliance by the Stockholder with the provisions hereof and (ii) none of
the execution and delivery of this Agreement by the Stockholder, the
consummation by the Stockholder of the transactions contemplated hereby or
compliance by the Stockholder with any of the provisions hereof, except in cases
in which any conflict, breach, default or violation described below would not
interfere with the ability of such Stockholder to perform such Stockholder's
obligations hereunder, shall (A) conflict with or result in any breach of any
organizational documents applicable to the Stockholder, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, modification or acceleration) under, any of the terms, conditions
or provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of its properties or assets may be bound, or (C) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of such Stockholder's properties or assets.
(d) No Liens. Except as permitted by this Agreement, the
Existing Securities and the certificates representing such securities are now,
and at all times during the term hereof will be, held by the Stockholder, or by
a nominee or custodian for the benefit of the Stockholder, free and clear of all
Liens, proxies, voting trusts or agreements, understandings or arrangements or
any other rights whatsoever, except for any such Liens or proxies arising
hereunder.
4
<PAGE> 5
(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.
(f) Reliance by Parent. The Stockholder understands and
acknowledges that Parent is entering into, and causing the Purchaser to enter
into, the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement.
5. Representations and Warranties of Parent and the Purchaser. Each of
Parent and the Purchaser hereby represents and warrants to the Stockholder as
follows:
(a) Power; Binding Agreement. Parent and the Purchaser each
has the corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by each of Parent and the Purchaser will not violate any other
agreement to which either of them is a party. This Agreement has been duly and
validly executed and delivered by each of Parent and the Purchaser and
constitutes a valid and binding agreement of each of Parent and the Purchaser,
enforceable against each of Parent and the Purchaser in accordance with its
terms, except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
(b) No Conflicts. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act, (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution of this Agreement by each of Parent and the
Purchaser, the consummation by each of Parent and the Purchaser of the
transactions contemplated hereby and the compliance by Parent and the Purchaser
with the provisions hereof and (ii) none of the execution and delivery of this
Agreement by each of Parent and the Purchaser, the consummation by each of
Parent and the Purchaser of the transactions contemplated hereby or compliance
by each of Parent and the Purchaser with any of the provisions hereof, except in
cases in which any conflict, breach, default or violation described below would
not interfere with the ability of Parent or the Purchaser to perform their
respective obligations hereunder, shall (A) conflict with or result in any
breach of any organizational documents applicable to either of Parent or the
Purchaser, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, modification or acceleration) under,
any of the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which either of
Parent or the Purchaser is a party or by which either of Parent or the Purchaser
or any of their properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to either of Parent or the Purchaser or any of their properties or
assets.
5
<PAGE> 6
6. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
7. Stop Transfer. The Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Securities, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the like, the
term "Securities" shall refer to and include the Securities as well as all such
stock dividends and distributions and any shares into which or for which any and
all of the Securities may be changed or exchanged.
8. Termination. The covenant and agreements contained herein with
respect to the Securities shall terminate upon the earlier of (a) the Effective
Time, (b) the first anniversary of the date hereof, or (c) the termination of
the Merger Agreement pursuant to (i) Section 8.01(a), (ii) Section 8.01(b),
(iii) Section 8.01(c), (iv) by the Company pursuant to Section 8.01(d) thereof
or (v) Section 8.01(e).
9. No Limitation. Nothing in this Agreement shall be construed to
prohibit the Stockholder who is a member of the Board of Directors of the
Company from exercising his fiduciary duties as a member of such Board of
Directors.
10. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations
hereunder shall attach to the Securities and shall be binding upon any person or
entity to which legal or beneficial ownership of the Securities shall pass,
whether by operation of law or otherwise, including, without limitation, the
Stockholder's administrators or successors. Notwithstanding any transfer of
Securities, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the
Stockholder or Parent and the Purchaser, as the case may be, provided that
Parent or the Purchaser may assign, in its respective sole discretion, its
rights and obligations hereunder to any direct or indirect subsidiary of Parent,
but no such assignment shall relieve Parent or the Purchaser of its obligations
hereunder if such assignee does not perform such obligations.
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<PAGE> 7
(d) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Stockholder:
Donald W. Vahlsing
c/o Effective Management Systems, Inc.
1200 West Park Place
Milwaukee, Wisconsin 53224-3026
Telephone No.: (414) 359-9800
Telecopy No.: (414) 359-9011
Copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Phillip J. Hanrahan
Jay O. Rothman
Telephone No.: (414) 271-2400
Telecopy No.: (414) 297-4900
If to Parent or the Purchaser:
IFS Americas, Inc.
1900 East Golf Road, Suite 900
Schaumburg, Illinois 60173
Attention: Terje Vangbo, Chief Executive
Officer and President
Telephone No.: (847) 995-9600
Telecopy No.: (847) 995-9607
7
<PAGE> 8
Copy to:
Streich Lang, PA
Two North Central Avenue
Phoenix, Arizona 85004
Attention: Christian J. Hoffmann, III, Esq.
Telephone No.: (602) 229-5336
Telecopy No.: (602) 420-5008
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein. Notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor the Purchaser shall be deemed to be the owner, nor
shall Parent or the Purchaser have the power to vote for the election of
directors, with respect to some or all of the Securities for purposes of the WBC
until the purchase of, and payment for, such Securities is actually consummated.
The rights of Parent and the Purchaser hereunder shall be limited as provided in
the preceding sentence.
(g) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore in the event of any such breach the aggrieved party shall be entitled
to the remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any
rights, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
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<PAGE> 9
(j) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Wisconsin, without giving
effect to the principles of conflicts of law thereof.
(l) Waiver of Jury Trial. Each party hereto hereby waives any
right to a trial by jury in connection with any action, suit or proceeding
brought in connection with this Agreement.
(m) Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
IFS AMERICAS, INC.
By: /s/ Terje Vangbo
------------------------------------
Name: Terje Vangbo
----------------------------------
Its: President
-----------------------------------
IFS ACQUISITION, INC.
By: /s/ Terje Vangbo
------------------------------------
Name: Terje Vangbo
----------------------------------
Its: President
-----------------------------------
STOCKHOLDER
/s/ Donald W. Vahlsing
---------------------------------------
Donald W. Vahlsing
10
<PAGE> 11
SCHEDULE I
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED
<S> <C>
Donald W. Vahlsing 229,900
</TABLE>
<PAGE> 1
Exhibit (c)(6)
STOCKHOLDER AGREEMENT
AGREEMENT, dated September 1, 1999, among IFS Americas, Inc., a
Delaware corporation ("Parent"), IFS Acquisition, Inc., a Wisconsin corporation
and a wholly-owned subsidiary of Parent (the "Purchaser"), and Robert E.
Weisenberg (the "Stockholder").
WITNESSETH:
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and Effective Management Systems, Inc., a
Wisconsin corporation (the "Company"), have entered into an Agreement and Plan
of Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which the Purchaser will be merged with and
into the Company (the "Merger"); and
WHEREAS, in furtherance of the Merger, Parent and the Company desire
that as soon as practicable (and not later than five business days) after the
announcement of the execution of the Merger Agreement, the Purchaser shall
commence a cash tender offer (the "Offer") to purchase at the Offer Price all
outstanding shares of Common Stock (each as defined in Section 1 hereof),
including all of the Securities (as defined in Section 2 hereof) beneficially
owned by the Stockholder; and
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholder agree, and the Stockholder
has agreed, to enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Owned" or "Beneficial Ownership" with
respect to any securities shall mean having "beneficial ownership" of such
securities (as determined pursuant to Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")), including pursuant to any
agreement, arrangement or understanding, whether or not in writing. Without
duplicative counting of the same securities by the same holder, securities
Beneficially Owned by a Person (as hereinafter defined) shall include securities
Beneficially Owned by all other Persons with whom such Person would constitute a
"group" within the meaning of Section 13(d)(3) of the Exchange Act.
(b) "Common Stock" shall mean the Common Stock, $.01 par value
per share, of the Company.
(c) "Offer Price" shall mean cash in the amount of $4.50 per
share of Common Stock or, if greater, the price per share paid by the Purchaser
in the Offer.
<PAGE> 2
(d) "Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association, trust,
unincorporated organization or other entity.
(e) Capitalized terms used and not defined herein shall have
the respective meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into
the Merger Agreement, the Stockholder hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
tenth business day after commencement of the Offer pursuant to Section 1.01 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of shares
of Common Stock set forth opposite the Stockholder's name on Schedule I hereto
(the "Existing Securities," and together with any shares of Common Stock
acquired by the Stockholder in any capacity after the date hereof and prior to
the termination of this Agreement by means of purchase, dividend, distribution,
exercise of options or other rights to acquire Common Stock or in any other way,
the "Securities"), all of which are Beneficially Owned by the Stockholder. The
Stockholder hereby acknowledges and agrees that Parent's and the Purchaser's
obligation to accept for payment and pay for the Securities in the Offer,
including the Securities Beneficially Owned by the Stockholder, is subject to
the terms and conditions of the Offer.
(b) The Stockholder hereby permits Parent and the Purchaser to
publish and disclose in the Offer Documents and, if approval of the Company's
stockholders is required under applicable law, the Proxy Statement (including
all documents and schedules filed with the SEC) its identity and ownership of
the Securities and the nature of its commitments, arrangements and
understandings under this Agreement; provided that the Stockholder shall have a
right to review and comment on such disclosure a reasonable time before it is
publicly disclosed.
3. Additional Agreements.
(a) No Inconsistent Arrangements . Except as necessary to
exercise Stockholder's fiduciary duties as a director of the Company with
respect to a Superior Proposal, the Stockholder hereby covenants and agrees
that, except as contemplated by this Agreement and the Merger Agreement, it
shall not (i) transfer (which term shall include, without limitation, any sale,
gift, pledge (other than a pledge which does not impair the Stockholder's
ability to perform under this Agreement) or other disposition), or consent to
any transfer of, any or all of the Securities or any interest therein, (ii)
enter into any contract, option or other agreement or understanding with respect
to any transfer of any or all of the Securities or any interest therein, (iii)
grant any proxy, power-of-attorney or other authorization in or with respect to
the Securities, (iv) deposit the Securities into a voting trust or enter into a
voting agreement or arrangement with respect to the Securities or (v) take any
other action that would in any way restrict, limit or interfere with the
2
<PAGE> 3
performance of its obligations hereunder or the transactions contemplated hereby
or by the Merger Agreement or the Stock Option Agreement.
(b) No Solicitation. The Stockholder hereby agrees, in the
capacity as a stockholder of the Company, that neither the Stockholder nor any
affiliates, representatives or agents shall (and, if the Stockholder is a
corporation, partnership, trust or other entity, the Stockholder shall cause its
officers, directors, partners, and employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
the Purchaser or any of their respective affiliates or representatives)
concerning any proposal relating to an Acquisition Transaction. The Stockholder
shall notify the Parent and the Purchaser no later than 24 hours after receipt
by the Stockholder (or its advisors), of any proposal with respect to an
Acquisition Transaction or any request for non-public information in connection
with a proposed Acquisition Transaction or for access to the properties, books
or records of the Company by any person or entity that informs the Company that
it is considering making, or has made, an Acquisition Transaction (as defined in
Section 6.07 of the Merger Agreement). Such notice to the Parent and Purchaser
shall be made orally and in writing and shall indicate in reasonable detail the
identity of the person making the Acquisition Proposal (as defined in Section
6.07 of the Merger Agreement) and the terms and conditions of such proposal,
inquiry or contact. Any action taken by the Company or any member of the Board
of Directors of the Company in accordance with Section 6.07 of the Merger
Agreement shall be deemed not to violate this Section 3(b).
(c) Reasonable Efforts. Subject to the terms and conditions of
this Agreement, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws to consummate and
make effective the transactions contemplated by this Agreement. Each party shall
promptly consult with the other and provide any necessary information and
material with respect to all filings made by such party with any Governmental
Entity in connection with this Agreement and the transactions contemplated
hereby.
(d) Waiver of Appraisal Rights. The Stockholder hereby waives
any rights of appraisal or rights to dissent from the Merger that it may have.
4. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Parent and the Purchaser as follows:
(a) Ownership of Securities. The Stockholder is the record and
Beneficial Owner of the Existing Securities, as set forth on Schedule I. On the
date hereof, the Existing Securities constitute all of the Securities owned of
record or Beneficially Owned by the Stockholder. Except as set forth on Schedule
I, the Stockholder has sole voting power and sole power to issue instructions
with respect to the matters set forth in Sections 2 and 3 hereof, sole power of
disposition, sole power to demand appraisal rights and sole power to agree to
all of the matters set forth in this Agreement,
3
<PAGE> 4
in each case with respect to all of the Existing Securities with no limitations,
qualifications or restrictions on such rights, subject to applicable securities
laws and the terms of this Agreement.
(b) Power; Binding Agreement. The Stockholder has the power
and authority to enter into and perform all of the Stockholder's obligations
under this Agreement. The execution, delivery and performance of this Agreement
by the Stockholder will not violate any other agreement to which the Stockholder
is a party including, without limitation, any voting agreement, proxy
arrangement, pledge agreement, stockholders agreement or voting trust. This
Agreement has been duly and validly executed and delivered by the Stockholder
and constitutes a valid and binding agreement of the Stockholder, enforceable
against the Stockholder in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity. There is no
beneficiary or holder of a voting trust certificate or other interest of any
trust of which the Stockholder is a trustee, or any party to any other agreement
or arrangement, whose consent is required for the execution and delivery of this
Agreement or the consummation by the Stockholder of the transactions
contemplated hereby.
(c) No Conflicts. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution and delivery of this Agreement by the Stockholder,
the consummation by the Stockholder of the transactions contemplated hereby and
the compliance by the Stockholder with the provisions hereof and (ii) none of
the execution and delivery of this Agreement by the Stockholder, the
consummation by the Stockholder of the transactions contemplated hereby or
compliance by the Stockholder with any of the provisions hereof, except in cases
in which any conflict, breach, default or violation described below would not
interfere with the ability of such Stockholder to perform such Stockholder's
obligations hereunder, shall (A) conflict with or result in any breach of any
organizational documents applicable to the Stockholder, (B) result in a
violation or breach of, or constitute (with or without notice or lapse of time
or both) a default (or give rise to any third party right of termination,
cancellation, modification or acceleration) under, any of the terms, conditions
or provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which the Stockholder is a party or by which the
Stockholder or any of its properties or assets may be bound, or (C) violate any
order, writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to the Stockholder or any of such Stockholder's properties or assets.
(d) No Liens. Except as permitted by this Agreement, the
Existing Securities and the certificates representing such securities are now,
and at all times during the term hereof will be, held by the Stockholder, or by
a nominee or custodian for the benefit of the Stockholder, free and clear of all
Liens, proxies, voting trusts or agreements, understandings or arrangements or
any other rights whatsoever, except for any such Liens or proxies arising
hereunder.
4
<PAGE> 5
(e) No Finder's Fees. No broker, investment banker, financial
advisor or other person is entitled to any broker's, finder's, financial
adviser's or other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of the
Stockholder.
(f) Reliance by Parent. The Stockholder understands and
acknowledges that Parent is entering into, and causing the Purchaser to enter
into, the Merger Agreement in reliance upon the Stockholder's execution and
delivery of this Agreement.
5. Representations and Warranties of Parent and the Purchaser. Each of
Parent and the Purchaser hereby represents and warrants to the Stockholder as
follows:
(a) Power; Binding Agreement. Parent and the Purchaser each
has the corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement by each of Parent and the Purchaser will not violate any other
agreement to which either of them is a party. This Agreement has been duly and
validly executed and delivered by each of Parent and the Purchaser and
constitutes a valid and binding agreement of each of Parent and the Purchaser,
enforceable against each of Parent and the Purchaser in accordance with its
terms, except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
(b) No Conflicts. Except for filings under the HSR Act, other
applicable Antitrust Laws and the Exchange Act, (i) no filing with, and no
permit, authorization, consent or approval of, any Governmental Entity is
necessary for the execution of this Agreement by each of Parent and the
Purchaser, the consummation by each of Parent and the Purchaser of the
transactions contemplated hereby and the compliance by Parent and the Purchaser
with the provisions hereof and (ii) none of the execution and delivery of this
Agreement by each of Parent and the Purchaser, the consummation by each of
Parent and the Purchaser of the transactions contemplated hereby or compliance
by each of Parent and the Purchaser with any of the provisions hereof, except in
cases in which any conflict, breach, default or violation described below would
not interfere with the ability of Parent or the Purchaser to perform their
respective obligations hereunder, shall (A) conflict with or result in any
breach of any organizational documents applicable to either of Parent or the
Purchaser, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, modification or acceleration) under,
any of the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which either of
Parent or the Purchaser is a party or by which either of Parent or the Purchaser
or any of their properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to either of Parent or the Purchaser or any of their properties or
assets.
5
<PAGE> 6
6. Further Assurances. From time to time, at the other party's request
and without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
7. Stop Transfer. The Stockholder shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Securities, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Common Stock by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or the like, the
term "Securities" shall refer to and include the Securities as well as all such
stock dividends and distributions and any shares into which or for which any and
all of the Securities may be changed or exchanged.
8. Termination. The covenant and agreements contained herein with
respect to the Securities shall terminate upon the earlier of (a) the Effective
Time, (b) the first anniversary of the date hereof, or (c) the termination of
the Merger Agreement pursuant to (i) Section 8.01(a), (ii) Section 8.01(b),
(iii) Section 8.01(c), (iv) by the Company pursuant to Section 8.01(d) thereof
or (v) Section 8.01(e).
9. No Limitation. Nothing in this Agreement shall be construed to
prohibit the Stockholder who is a member of the Board of Directors of the
Company from exercising his fiduciary duties as a member of such Board of
Directors.
10. Miscellaneous.
(a) Entire Agreement. This Agreement and the Merger Agreement
constitute the entire agreement between the parties with respect to the subject
matter hereof and supersede all other prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations
hereunder shall attach to the Securities and shall be binding upon any person or
entity to which legal or beneficial ownership of the Securities shall pass,
whether by operation of law or otherwise, including, without limitation, the
Stockholder's administrators or successors. Notwithstanding any transfer of
Securities, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by
operation of law or otherwise without the prior written consent of the
Stockholder or Parent and the Purchaser, as the case may be, provided that
Parent or the Purchaser may assign, in its respective sole discretion, its
rights and obligations hereunder to any direct or indirect subsidiary of Parent,
but no such assignment shall relieve Parent or the Purchaser of its obligations
hereunder if such assignee does not perform such obligations.
6
<PAGE> 7
(d) Amendments, Waivers, Etc. This Agreement may not be
amended, changed, supplemented, waived or otherwise modified or terminated,
except upon the execution and delivery of a written agreement executed by the
parties hereto.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if given) by hand delivery or telecopy (with a
confirmation copy sent for next day delivery via courier service, such as
Federal Express), or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to the Stockholder:
Robert E. Weisenberg
c/o Effective Management Systems, Inc.
1200 West Park Place
Milwaukee, Wisconsin 53224-3026
Telephone No.: (414) 359-9800
Telecopy No.: (414) 359-9011
Copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Phillip J. Hanrahan
Jay O. Rothman
Telephone No.: (414) 271-2400
Telecopy No.: (414) 297-4900
If to Parent or the Purchaser:
IFS Americas, Inc.
1900 East Golf Road, Suite 900
Schaumburg, Illinois 60173
Attention: Terje Vangbo, Chief Executive
Officer and President
Telephone No.: (847) 995-9600
Telecopy No.: (847) 995-9607
7
<PAGE> 8
Copy to:
Streich Lang, PA
Two North Central Avenue
Phoenix, Arizona 85004
Attention: Christian J. Hoffmann, III, Esq.
Telephone No.: (602) 229-5336
Telecopy No.: (602) 420-5008
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion
of any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein. Notwithstanding anything to the contrary contained in this
Agreement, neither Parent nor the Purchaser shall be deemed to be the owner, nor
shall Parent or the Purchaser have the power to vote for the election of
directors, with respect to some or all of the Securities for purposes of the WBC
until the purchase of, and payment for, such Securities is actually consummated.
The rights of Parent and the Purchaser hereunder shall be limited as provided in
the preceding sentence.
(g) Specific Performance. Each of the parties hereto
recognizes and acknowledges that a breach by it of any covenants or agreements
contained in this Agreement will cause the other party to sustain damages for
which it would not have an adequate remedy at law for money damages, and
therefore in the event of any such breach the aggrieved party shall be entitled
to the remedy of specific performance of such covenants and agreements and
injunctive and other equitable relief in addition to any other remedy to which
it may be entitled, at law or in equity.
(h) Remedies Cumulative. All rights, powers and remedies
provided under this Agreement or otherwise available in respect hereof at law or
in equity shall be cumulative and not alternative, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party.
(i) No Waiver. The failure of any party hereto to exercise any
rights, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
8
<PAGE> 9
(j) No Third Party Beneficiaries. This Agreement is not
intended to be for the benefit of, and shall not be enforceable by, any person
or entity who or which is not a party hereto.
(k) Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Wisconsin, without giving
effect to the principles of conflicts of law thereof.
(l) Waiver of Jury Trial. Each party hereto hereby waives any
right to a trial by jury in connection with any action, suit or proceeding
brought in connection with this Agreement.
(m) Descriptive Headings. The descriptive headings used herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
(n) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which,
taken together, shall constitute one and the same agreement.
9
<PAGE> 10
IN WITNESS WHEREOF, Parent, the Purchaser and the Stockholder have
caused this Agreement to be duly executed as of the day and year first above
written.
IFS AMERICAS, INC.
By: /s/ Terje Vangbo
------------------------------------
Name: Terje Vangbo
----------------------------------
Its: President
-----------------------------------
IFS ACQUISITION, INC.
By: /s/ Terje Vangbo
------------------------------------
Name: Terje Vangbo
----------------------------------
Its: President
-----------------------------------
STOCKHOLDER
/s/ Robert E. Weisenberg
---------------------------------------
ROBERT E. WEISENBERG
10
<PAGE> 11
SCHEDULE I
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES OF COMMON STOCK
BENEFICIALLY OWNED
<S> <C>
Robert E. Weisenberg 243,200
</TABLE>
<PAGE> 1
EXHIBIT (c)(15)
MUTUAL NONDISCLOSURE AGREEMENT
THIS IS AN AGREEMENT made by and between Effective Management Systems, Inc.
("EMS") and Industrial Financial Systems, Inc. ("IFS") relating to disclosure,
orally and/or in tangible form, of certain confidential and proprietary
information by each party to the other for the purpose of furthering a mutual
business relationship.
1. Each party understands that the confidential information received from
the disclosing party is regarded by the disclosing party as valuable,
and in consideration of the disclosure of such information by the
disclosing party and of the mutual promises herein, the receiving party
agrees:
(a) to use such information only for the purpose of furthering its
business relationship between the parties and to limit access
to such information to those of its employees who have a need
to know for such purpose;
(b) to take all reasonable precautions to maintain the
confidentiality of such information for a period of five (5)
years from the date of receipt, using at least the same degree
of care as the undersigned employs with respect to its own
confidential and proprietary information of like nature, and
to take appropriate action, by instruction, agreement or
otherwise, with any person permitted access to such
information to ensure that the undersigned will be able to
satisfy its obligations under this Agreement; and
(c) not to copy such information and, at the request of the
disclosing party, promptly to destroy or return any media
containing such information.
For the purpose of this Agreement, the term "confidential information"
shall mean any financial, technical, commercial or other information,
verbal, visual or written, disclosed to the receiving party or any of
its directors, officers, employees, advisors or representatives on or
after the date hereof and in accordance with this Agreement by the
disclosing party that was originated by the disclosing party and
relates to the disclosing party's business and affairs (including
information concerning any business or assets of any third party), and
is not generally available to others. "Confidential information" shall
be deemed to include the fact that any investigations, discussions or
negotiations are taking or have taken place regarding a possible
transaction or that either party has requested or received confidential
information from the other party, or any of the terms, conditions or
other facts with respect to any proposed transaction, including the
status thereof or make any public statement concerning a proposed
transaction.
2. The undersigned shall have no obligation under Paragraph 1 with respect
to information which is:
(a) previously and legally in the possession of or independently
developed by the receiving party, generally available to the
public, or disclosed to the undersigned by a third party
having no obligation of confidentiality with respect thereto;
or
(b) not identified by the disclosing party in writing as
proprietary and confidential and which is not otherwise
reasonably understood to be proprietary and confidential by
its nature.
<PAGE> 2
3. For a period of eighteen (18) months from the date of this Agreement,
IFS, or any of its subsidiaries, will not initiate any discussions with
respect to the prospective employment of EMS' employees with whom it
has had contact or who became known to it in connection with its
consideration of a possible transaction with IFS; provided, however,
that the foregoing provision will not prohibit a general, non-targeted
solicitation of employment in the ordinary course of business or
prevent IFS from employing any employee of EMS who contacts such party
at his or her own initiative without any direct or indirect
solicitation by or encouragement from such party.
4. Neither the confidential information nor the act of disclosure thereof
shall constitute a grant of any license under any trademark, patent or
copyright or application for same, nor shall they constitute any
representation or warranty by the disclosing party with respect to the
infringement of any right of third persons.
5. A breach of this Agreement would cause irreparable harm to either party
which may not be adequately compensated for by monetary damages alone.
The undersigned therefore agrees that, in the event of such breach or
threatened breach of this Agreement, the non-defaulting party shall be
entitled to injunctive and/or other preliminary or equitable relief, in
addition to any other remedies available at law.
6. Nothing contained in this Agreement or any discussions undertaken or
disclosures made pursuant hereto shall either be deemed a commitment to
engage in any business relationship, contract, or future dealing with
the other party, or limit either party's right to conduct similar
discussions or perform similar work to that undertaken pursuant hereto,
so long as said discussions or work do not violate this agreement.
7. This Agreement shall be binding on the undersigned and its successors
and assigns. In the event of a disagreement between the two parties
arising out of this Agreement, such dispute shall be settled by
arbitration held in a neutral location mutually agreed upon in
accordance with the commercial rules or the American Arbitration
Association. This Agreement shall remain effective with respect to any
confidential and proprietary information which is disclosed to the
undersigned within one (1) year of the date of execution.
IFS Inc. Effective Management Systems, Inc.
----------------------------- ----------------------------------
Company Company
/s/ Terje Vangbo /s/ Michael D. Dunham
----------------------------- ----------------------------------
Authorized Signature Authorized Signature
Terje Vangbo, President & CEO Michael D. Dunham, President & CEO
----------------------------- ----------------------------------
Name, Title (Printed) Name, Title (Printed)
-2-
<PAGE> 1
EXHIBIT (c)(16)
September 1, 1999
Effective Management Systems, Inc.
12000 West Park Place
Milwaukee, WI 53224
Re: Agreement and Plan of Merger, dated September 1, 1999, by and among
IFS Americas, Inc., IFS Acquisition, Inc. and Effective Management
Systems, Inc. (the "Merger Agreement")
Gentlemen:
As consideration for Effective Management Systems, Inc. entering into the Merger
Agreement, we hereby agree to transfer to our affiliates, IFS Americas, Inc. and
IFS Acquisition, Inc., the funds necessary to complete on a timely basis the
transactions contemplated by the Merger Agreement. We understand that Effective
Management Systems, Inc. intends to rely on this agreement and that the
foregoing is binding upon us and will be enforceable by Effective Management
Systems, Inc.
Very truly yours,
Industrial and Financial Systems, IFS AB
By: /s/ Bengt Nilsson
-------------------------------
CEO
<PAGE> 1
EXHIBIT (c)(17)
August 31, 1999
VIA FACSIMILE
Mr. Terje Vangbo
President and CEO
IFS, Inc.
1900 East Golf Road, Suite 900
Schaumburg, Illinois 60173
Mr. Carl-Johan Pousette
Alfred Berg Fondkommission, AB
Re: IFS Americas, Inc. and IFS Acquisition, Inc. (the "Companies")
Dear Sirs:
In order to help induce Alfred Berg Fondkommission, AB ("Alfred Berg")
to underwrite a certain rights issue of Industrial and Financial Systems, IFS AB
("IFS"), the proceeds of which will be used to finance, in part, the acquisition
of Effective Management Systems, Inc. ("EMS") by the Companies, I agree to the
following matters.
1. I will allocate $1,000,000 of the proceeds I receive from any
purchase of my shares of EMS by the Companies to purchase shares of IFS through
Alfred Berg in open market transactions, at the prevailing prices for IFS stock,
within five business days of my receipt of such proceeds or within a
commercially reasonable period of time but not later than thirty (30) days.
2. I will pay reasonable commissions to Alfred Berg in connection with
such purchase.
3. I will retain the IFS shares I purchase for a minimum of six months.
Sincerely yours,
/s/ Michael D. Dunham
---------------------
Michael D. Dunham
<PAGE> 1
EXHIBIT (c)(18)
August 31, 1999
VIA FACSIMILE
Mr. Terje Vangbo
President and CEO
IFS, Inc.
1900 East Golf Road, Suite 900
Schaumburg, Illinois 60173
Mr. Carl-Johan Pousette
Alfred Berg Fondkommission, AB
Re: IFS Americas, Inc. and IFS Acquisition, Inc. (the "Companies")
Dear Sirs:
In order to help induce Alfred Berg Fondkommission, AB ("Alfred Berg")
to underwrite a certain rights issue of Industrial and Financial Systems, IFS AB
("IFS"), the proceeds of which will be used to finance, in part, the acquisition
of Effective Management Systems, Inc. ("EMS") by the Companies, I agree to the
following matters.
1. I or my affiliates will allocate $815,000 of the proceeds I or my
affiliates receive from any purchase of my or their shares of EMS by the
Companies to purchase shares of IFS through Alfred Berg in open market
transactions, at the prevailing prices for IFS stock, within five business days
of my or their receipt of such proceeds or within a commercially reasonable
period of time but not later than thirty (30) days.
2. I will pay reasonable commissions to Alfred Berg in connection with
such purchase.
3. I will retain the IFS shares I purchase for a minimum of six months.
Sincerely yours,
/s/ Thomas M. Dykstra
---------------------
Thomas M. Dykstra
<PAGE> 1
EXHIBIT (c)(19)
Non-competition Agreement
(AGREEMENT)
1. Recitations and Date. This Agreement is entered into as of the 1st day of
September, 1999 by and between Effective Management Systems, Inc. (EMS) and
Helmut M. Adam, a member of its Board of Directors (Director) effective
upon the termination of his position as a director of EMS for any reason
(Separation) following completion of a transaction contemplated with IFS
Industrial and Financial Systems, Inc. (IFS).
2. Compensation. In consideration for Director's agreement as set forth
herein, he shall be paid a lump sum fee of $7,000 within 10 days of
Termination.
3. Confidentiality Commitment. Director acknowledges the ongoing obligation
he has to EMS to maintain the confidentiality of proprietary and sensitive
business information.
4. No Prior Agreements. The parties acknowledge that this is the sole
agreement between them with respect to this subject matter and, to the
extent any such prior agreements exist, whether verbal or written, they are
hereby revoked.
5. Non-Solicitation of Employees. For a period equal to the longer of one
year from the Separation date, regardless of cause or initiating party,
Director shall not, directly or indirectly, induce or attempt to induce any
employee of EMS, including its presently existing Affiliates (at least 50%
of the voting stock owned by EMS), to leave the employ of EMS.
6. Non-competition Period. Following Separation, and for a period of six
months thereafter, Director shall not directly or indirectly, serve as a
member of the Board of Directors of any business which is planning,
considering, or does develop, market, or service ERP software anywhere in
the United States in the mid-market segment (businesses with up to $100
million in annual revenue).
7. Legal Interpretation. If any provision of this Agreement is found to be in
conflict with provisions of any applicable law, the parties desire that
such conflict not invalidate the entire Agreement and that it be construed
to invalidate only the conflicting provisions and, where possible, to
reduce the duration or scope of a conflicting provision to the maximum
permitted by law. This Agreement shall be governed by the laws of the
State of Wisconsin without giving effect to any choice of law or conflict
of law rules or provisions.
8. Other Terms. Both parties agree that any public announcement of any
Separation, shall require their mutual consent as to the content, subject
only to SEC or equivalent requirements. The parties also agree not to, at
any time, make any comments concerning the other to media, prospective or
actual employers, employees, customers, or prospects which could be
reasonably construed as being in any way derogatory or negative of the
other.
9. Costs of Enforcement. In an enforcement action relating to this Agreement,
the prevailing party, whether claimant or respondent, following a final
non-appealable decision, shall be immediately reimbursed by the other party
for all its reasonable out-of-pocket costs incurred during such action
including attorneys' fees.
10. Successors. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns, heirs, executors, and administrators of
the parties except that Director may not assign or delegate his duties
hereunder.
11. Termination. This Agreement may be terminated only upon mutual written
agreement of the parties.
Signed at Milwaukee, WI upon the date set forth above.
Effective Management Systems, Inc. Director: Helmut M. Adam
By: /s/ Michael D. Dunham, President By: /s/ Helmut M. Adam
-------------------------------- --------------------------
Title an individual
Witness: /s/ R T Koenings Witness: /s/ Thomas M. Dykstra
--------------------------- ---------------------
<PAGE> 1
EXHIBIT (c)(20)
Non-competition Agreement
(AGREEMENT)
1. Recitations and Date. This Agreement is entered into as of the 1st day of
September, 1999 by and between Effective Management Systems, Inc. (EMS) and
Scott J. Mermel, a member of its Board of Directors (Director) effective
upon the termination of his position as a director of EMS for any reason
(Separation) following completion of a transaction contemplated with IFS
Industrial and Financial Systems, Inc. (IFS).
2. Compensation. In consideration for Director's agreement as set forth
herein, he shall be paid a lump sum fee of $7,000 within 10 days of
Termination.
3. Confidentiality Commitment. Director acknowledges the ongoing obligation
he has to EMS to maintain the confidentiality of proprietary and sensitive
business information.
4. No Prior Agreements. The parties acknowledge that this is the sole
agreement between them with respect to this subject matter and, to the
extent any such prior agreements exist, whether verbal or written, they are
hereby revoked.
5. Non-Solicitation of Employees. For a period equal to the longer of one
year from the Separation date, regardless of cause or initiating party,
Director shall not, directly or indirectly, induce or attempt to induce any
employee of EMS, including its presently existing Affiliates (at least 50%
of the voting stock owned by EMS), to leave the employ of EMS.
6. Non-competition Period. Following Separation, and for a period of six
months thereafter, Director shall not directly or indirectly, serve as a
member of the Board of Directors of any business which is planning,
considering, or does develop, market, or service ERP software anywhere in
the United States in the mid-market segment (businesses with up to $100
million in annual revenue).
7. Legal Interpretation. If any provision of this Agreement is found to be in
conflict with provisions of any applicable law, the parties desire that
such conflict not invalidate the entire Agreement and that it be construed
to invalidate only the conflicting provisions and, where possible, to
reduce the duration or scope of a conflicting provision to the maximum
permitted by law. This Agreement shall be governed by the laws of the
State of Wisconsin without giving effect to any choice of law or conflict
of law rules or provisions.
8. Other Terms. Both parties agree that any public announcement of any
Separation, shall require their mutual consent as to the content, subject
only to SEC or equivalent requirements. The parties also agree not to, at
any time, make any comments concerning the other to media, prospective or
actual employers, employees, customers, or prospects which could be
reasonably construed as being in any way derogatory or negative of the
other.
9. Costs of Enforcement. In an enforcement action relating to this Agreement,
the prevailing party, whether claimant or respondent, following a final
non-appealable decision, shall be immediately reimbursed by the other party
for all its reasonable out-of-pocket costs incurred during such action
including attorneys' fees.
10. Successors. This Agreement shall inure to the benefit of and be binding
upon the successors and assigns, heirs, executors, and administrators of
the parties except that Director may not assign or delegate his duties
hereunder.
11. Termination. This Agreement may be terminated only upon mutual written
agreement of the parties.
Signed at Milwaukee, WI upon the date set forth above.
Effective Management Systems, Inc. Director: Scott J. Mermel
By: /s/ Michael D. Dunham, President By: /s/ Scott J. Mermel
-------------------------------- --------------------------
Title an individual
Witness: /s/ R T Koenings Witness: /s/ Thomas M. Dykstra
--------------------------- ---------------------
