<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
MDL INFORMATION SYSTEMS, INC.
(NAME OF SUBJECT COMPANY)
----------------
GOLDEN GATE ACQUISITION CORP.
ELSEVIER SCIENCE INC.
REED INTERNATIONAL P.L.C.
ELSEVIER NV
(BIDDERS)
----------------
COMMON STOCK, $.01 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
----------------
55267R102
(CUSIP NUMBER OF CLASS OF SECURITIES)
----------------
HENRY HORBACZEWSKI
REED ELSEVIER INC.
275 WASHINGTON STREET
NEWTON, MASSACHUSETTS 02158 617-558-4227
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDERS)
----------------
COPY TO:
LARRY W. SONSINI
MARTIN W. KORMAN
WILSON SONSINI GOODRICH & ROSATI
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304 415-493-9300
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CALCULATION OF FILING FEE
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TRANSACTION VALUATION AMOUNT OF FILING FEE
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$344,579,712 $68,915.94
</TABLE>
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* Note: The Transaction Value is calculated by multiplying $32, the per share
tender offer price, by 8,782,265, the sum of the number of shares of Common
Stock outstanding and the 1,985,851 shares of Common Stock subject to
options outstanding.
** 1/50 of 1% of Transaction Value.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
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Amount Previously Paid: Filing Party:
Form of Registration No. Date Filed:
</TABLE>
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<PAGE>
CUSIP NO. 55267R102
Name of Reporting Person S.S. or I.R.S. Identification
No. of Above Person
1.
Golden Gate Acquisition Corp.
- --------------------------------------------------------------------------------
2.
Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
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3.
SEC Use Only
- --------------------------------------------------------------------------------
Sources of Funds
4.
AF
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5.
Check if Disclosure of Legal Proceedings is Required Pursuant to [_]
Items 2(d) or 2(f)
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Citizenship or Place of Organization
6.
Delaware
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Aggregate Amount Beneficially Owned by Each Reporting
Person
7.
None
- --------------------------------------------------------------------------------
8.
Check if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
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Percent of Class Represented by Amount in Row (7)
9.
N/A
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10.
Type of Reporting Person
CO
2 of 9
<PAGE>
CUSIP NO. 55267R102
Name of Reporting Person S.S. or I.R.S. Identification
No. of Above Person
1.
Elsevier Science Inc.
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2.
Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
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3.
SEC Use Only
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Sources of Funds
4.
WC
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5.
Check if Disclosure of Legal Proceedings is Required Pursuant to [_]
Items 2(d) or 2(f)
- --------------------------------------------------------------------------------
Citizenship or Place of Organization
6.
New York
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Aggregate Amount Beneficially Owned by Each Reporting
Person
7.
None
- --------------------------------------------------------------------------------
8.
Check if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
- --------------------------------------------------------------------------------
Percent of Class Represented by Amount in Row (7)
9.
N/A
- --------------------------------------------------------------------------------
10.
Type of Reporting Person
CO
3 of 9
<PAGE>
CUSIP NO. 55267R102
Name of Reporting Person S.S. or I.R.S. Identification
No. of Above Person
1.
Reed International P.L.C
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2.
Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
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3.
SEC Use Only
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Sources of Funds
4.
WC
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5.
Check if Disclosure of Legal Proceedings is Required Pursuant to [_]
Items 2(d) or 2(f)
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Citizenship or Place of Organization
6.
England
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Aggregate Amount Beneficially Owned by Each Reporting
Person
7.
None
- --------------------------------------------------------------------------------
8.
Check if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
- --------------------------------------------------------------------------------
Percent of Class Represented by Amount in Row (7)
9.
N/A
- --------------------------------------------------------------------------------
10.
Type of Reporting Person
CO
4 of 9
<PAGE>
CUSIP NO. 55267R102
Name of Reporting Person S.S. or I.R.S. Identification
No. of Above Person
1.
Elsevier NV
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2.
Check the Appropriate Box if a Member of a Group (a) [_]
(b) [_]
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3.
SEC Use Only
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Sources of Funds
4.
WC
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5.
Check if Disclosure of Legal Proceedings is Required Pursuant to [_]
Items 2(d) or 2(f)
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Citizenship or Place of Organization
6.
The Netherlands
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Aggregate Amount Beneficially Owned by Each Reporting
Person
7.
None
- --------------------------------------------------------------------------------
8.
Check if the Aggregate Amount in Row (7) Excludes [_]
Certain Shares
- --------------------------------------------------------------------------------
Percent of Class Represented by Amount in Row (7)
9.
N/A
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10.
Type of Reporting Person
CO
5 of 9
<PAGE>
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Golden Gate Acquisition Corp., a Delaware corporation
("Purchaser"), a direct wholly owned subsidiary of Elsevier Science Inc., a
New York corporation ("ESI"), and an indirect wholly owned subsidiary of (i)
Reed International P.L.C., a corporation organized under the laws of England
("PLC") and (ii) Elsevier NV, a corporation organized under the laws of The
Netherlands ("NV") to purchase all outstanding shares of Common Stock, par
value $.01 per share (the "Shares"), of MDL Information Systems, Inc., a
Delaware corporation (the "Company") at a price of $32 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in
Purchaser's Offer to Purchase dated March 28, 1997 (the "Offer to Purchase")
and in the related Letter of Transmittal (which together constitute the
"Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2),
respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is MDL Information Systems, Inc., a
Delaware corporation (the "Company"), which has its principal executive
offices at 14600 Catalina Street, San Leandro, California 94577.
(b) The class of equity securities being sought is all the outstanding
shares of Common Stock, par value $.01 per share, of the Company. The
information set forth in the Introduction and Section 1 ("Terms of the Offer;
Expiration Date") of the Offer to Purchase is incorporated herein by
reference.
(c) The information concerning the principal market in which the Shares are
traded and certain high and low sales prices for the Shares in such principal
market set forth in Section 6 ("Price Range of Shares; Dividends") of the
Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by Purchaser, ESI, PLC and NV. The
information concerning the name, state or other place of organization,
principal business and address of the principal office of each of Purchaser,
ESI, PLC and NV and the information concerning the name, business address,
present principal occupation or employment and the name, principal business
and address of any corporation or other organization in which such employment
or occupation is conducted, material occupations, positions, offices or
employments during the last five years and citizenship of each of the
executive officers and directors of Purchaser, ESI, PLC and NV are set forth
in the Introduction, Section 8 ("Certain Information Concerning Purchaser,
ESI, PLC and NV") and Schedule I of the Offer to Purchase and are incorporated
herein by reference.
(e) and (f) During the last five years, none of Purchaser, ESI, PLC or NV
and, to the best knowledge of Purchaser, ESI, PLC and NV, none of the persons
listed in Schedule I of the Offer to Purchase has been (i) convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to
a judgment, decree or final order enjoining future violations of, or
prohibiting activities subject to, federal or state securities laws or finding
any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) The information set forth in Section 8 ("Certain Information Concerning
Purchaser, ESI, PLC and NV") and Section 10 ("Background of the Offer;
Contacts with the Company; the Merger Agreement") of the Offer to Purchase is
incorporated herein by reference.
(b) The information set forth in the Introduction, Section 7 ("Certain
Information Concerning the Company"), Section 8 ("Certain Information
Concerning Purchaser, ESI, PLC and NV"), Section 10 ("Background of the Offer;
Contacts with the Company; the Merger Agreement") and Section 11 ("Purpose of
the Offer; Plans for the Company After the Offer and the Merger") of the Offer
to Purchase is incorporated herein by reference.
6 of 9
<PAGE>
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 9 ("Financing of the Offer and
the Merger") of the Offer to Purchase is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDERS.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company; the Merger Agreement")
and Section 11 ("Purpose of the Offer; Plans for the Company After the Offer
and the Merger") of the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 13 ("Effect of the Offer on
the Market for Shares, Exchange Listing and Exchange Act Registration") of the
Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in Section 8 ("Certain Information
Concerning Purchaser, ESI, PLC and NV") of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 8 ("Certain
Information Concerning Purchaser, ESI, PLC and NV"), Section 10 ("Background
of the Offer; Contacts with the Company; the Merger Agreement") and Section 11
("Purpose of the Offer; Plans for the Company After the Offer and the Merger")
of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 ("Fees and
Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning
Purchaser, ESI, PLC and NV") of the Offer to Purchase is incorporated herein
by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 17 ("Employment Agreements") of the
Offer to Purchase is incorporated by reference.
(b) and (c) The information set forth in Section 15 ("Certain Legal Matters
and Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) Not applicable.
(e) The information set forth in Section 15 ("Certain Legal Matters and
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(f) The information set forth in the Offer to Purchase is incorporated
herein by reference.
7 of 9
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
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99(a)(1) Form of Offer to Purchase dated March 28, 1997.
99(a)(2) Form of Letter of Transmittal.
99(a)(3) Form of Notice of Guaranteed Delivery.
99(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
99(a)(5) Form of Letter to Clients.
99(a)(6) Form of Guidelines for Certification of Taxpayer Identification
number on Substitute Form W-9.
99(a)(7) Summary Advertisement as published in The Wall Street Journal on
March 28, 1997.
99(a)(8) Press Release issued by ESI and the Company on March 24, 1997.
(b) None.
99(c)(1) Agreement and Plan of Merger, dated as of March 23, 1997, among
ESI, Purchaser and the Company.
99(c)(2) Employment Agreements, dated as of March 23, 1997, between the
Company and each of Steven D. Goldby, Thomas D. Jones, John J.
Hanlon and Dan E. Kingman and Proposed Employment Agreement
between the Company and John Priestley.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
8 of 9
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this Statement is true, complete and correct.
March 28, 1997
Golden Gate Acquisition Corp.
By: /s/ Herman P. Spruijt
------------------------------
Name: Herman P. Spruijt
Title: Chairman
Elsevier Science Inc.
By: /s/ Herman P. Spruijt
------------------------------
Name: Herman P. Spruijt
Title: Chairman
Reed International P.L.C.
By: /s/ Herman J. Bruggink
------------------------------
Name: Herman J. Bruggink
Title: Director
Elsevier NV
By: /s/ Herman J. Bruggink
------------------------------
Name: Herman J. Bruggink
Title: Chairman
9 of 9
<PAGE>
EXHIBIT 99(A)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MDL INFORMATION SYSTEMS, INC.
AT
$32 NET PER SHARE
BY
GOLDEN GATE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ELSEVIER SCIENCE INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
REED INTERNATIONAL P.L.C.
AND
ELSEVIER NV
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME,
ON THURSDAY, APRIL 24, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT NUMBER OF SHARES
THAT SHALL CONSTITUTE A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY
DILUTED BASIS AND (II) THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS
IMPOSED UPON CONSUMMATION OF THE OFFER BY THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE REGULATIONS
THEREUNDER, AS WELL AS THE OTHER CONDITIONS DESCRIBED HEREIN.
THE BOARD OF DIRECTORS OF MDL INFORMATION SYSTEMS, INC. HAS DETERMINED THAT
EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF MDL INFORMATION SYSTEMS, INC., AND RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
---------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $.01 per share (the "Shares"), of MDL
Information Systems, Inc. should either (1) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in
the Letter of Transmittal and mail or deliver it together with the
certificate(s) evidencing tendered Shares, and any other required documents,
to the Depositary or tender such Shares pursuant to the procedure for book-
entry transfer set forth in Section 3 or (2) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Any stockholder whose Shares are registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee must contact such broker, dealer, commercial bank, trust company or
other nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in Section 3.
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth on the back cover of this
Offer to Purchase. Questions or requests for assistance may also be directed
to the Dealer Manager at their address on the back cover of this Offer to
Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from
the Information Agent or from brokers, dealers, commercial banks or trust
companies.
---------------
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
---------------
March 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
INTRODUCTION......................................................................................... 3
1. Terms of the Offer; Expiration Date.............................................................. 4
2. Acceptance for Payment and Payment for Shares.................................................... 5
3. Procedures for Accepting the Offer and Tendering Shares.......................................... 7
4. Withdrawal Rights................................................................................ 9
5. Certain Federal Income Tax Consequences.......................................................... 9
6. Price Range of Shares; Dividends................................................................. 10
7. Certain Information Concerning the Company....................................................... 10
8. Certain Information Concerning Purchaser, ESI, PLC and NV........................................ 13
9. Financing of the Offer and the Merger............................................................ 15
10. Background of the Offer; Contacts with the Company; The Merger Agreement......................... 15
11. Purpose of the Offer; Plans for the Company After the Offer and the Merger....................... 24
12. Dividends and Distributions...................................................................... 26
13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration. 26
14. Certain Conditions of the Offer.................................................................. 26
15. Certain Legal Matters and Regulatory Approvals................................................... 27
16. Fees and Expenses................................................................................ 29
17. Employment Agreements............................................................................ 29
18. Miscellaneous.................................................................................... 30
SCHEDULE I -- DIRECTORS AND EXECUTIVE OFFICERS OF PLC, NV, ESI AND PURCHASER
</TABLE>
2
<PAGE>
To the Holders of Common Stock of
MDL INFORMATION SYSTEMS, INC.
INTRODUCTION
Golden Gate Acquisition Corp. ("Purchaser"), a Delaware corporation, a
direct wholly owned subsidiary of Elsevier Science Inc. ("ESI"), a New York
corporation, and an indirect wholly owned subsidiary of (i) Reed International
P.L.C., a corporation organized under the laws of England ("PLC") and (ii)
Elsevier NV, a corporation organized under the laws of The Netherlands ("NV"),
hereby offers to purchase all outstanding shares of common stock, par value
$.01 per share (the "Common Stock"), of MDL Information Systems, Inc., a
Delaware corporation (the "Company"), at a price of $32 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses
of Lehman Brothers Inc. ("Lehman"), which is acting as Dealer Manager for the
Offer (in such capacity, the "Dealer Manager"), Citibank, N.A. (the
"Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred
in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") UNANIMOUSLY HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR
TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.
THE OFFER IS CONDITIONED UPON (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT NUMBER OF SHARES
THAT SHALL CONSTITUTE A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY
DILUTED BASIS (INCLUDING, WITHOUT LIMITATION, ALL SHARES ISSUABLE UPON THE
EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS (THE "MINIMUM CONDITION")) AND
(II) THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED UPON
CONSUMMATION OF THE OFFER BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT
OF 1976, AS AMENDED, AS WELL AS THE OTHER CONDITIONS DESCRIBED HEREIN. SEE
SECTION 14, WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 23, 1997 (the "Merger Agreement"), among ESI, Purchaser and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the General Corporation Law of the
State of Delaware ("Delaware Law"), Purchaser will be merged with and into the
Company (the "Merger"). Following consummation of the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and will
become a wholly owned subsidiary of ESI. At the effective time of the Merger
(the "Effective Time"), each Share issued and outstanding immediately prior to
the Effective
3
<PAGE>
Time (other than Shares held in the treasury of the Company, shares held by
Purchaser, or Shares held by stockholders who shall have demanded and
perfected appraisal rights, if any, under Delaware Law) will be canceled and
converted automatically into the right to receive $32 in cash, or any higher
price that may be paid per Share in the Offer, without interest (the "Merger
Consideration"). The Merger Agreement is more fully described in Section 10.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares satisfying the Minimum Condition, Purchaser shall be entitled to
designate a majority of the members of the Board, subject to compliance with
Section 14(f) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"). In the Merger Agreement, the Company has agreed to take all
actions necessary to cause Purchaser's designees to be elected as directors of
the Company, including increasing the size of the Board or securing the
resignations of incumbent directors or both.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger
Agreement by the requisite vote of the stockholders of the Company, if such
vote is required under Delaware Law. See Section 11. Under the Company's
Certificate of Incorporation and Delaware Law, the affirmative vote of the
holders of a majority of the outstanding Shares is required to approve and
adopt the Merger Agreement and the Merger. Consequently, if Purchaser acquires
(pursuant to the Offer or otherwise) at least a majority of the outstanding
Shares, Purchaser will have sufficient voting power to approve and adopt the
Merger Agreement and the Merger without the vote of any other stockholder.
Under Delaware Law, if Purchaser acquires, pursuant to the Offer or
otherwise, such number of Shares which, when added to the Shares owned of
record by Purchaser on such date, constitutes at least 90% of the then
outstanding Shares, Purchaser will be able to approve and adopt the Merger
Agreement and the Merger, without a vote of the Company's stockholders. In
such event, ESI, Purchaser and the Company have agreed to take, at the request
of Purchaser, all necessary and appropriate action to cause the Merger to
become effective as soon as reasonably practicable after such acquisition,
without a meeting of the Company's stockholders. If, however, Purchaser does
not acquire such number of Shares which, when added to the Shares owned of
record by Purchaser on such date, constitutes at least 90% of the then
outstanding Shares pursuant to the Offer or otherwise and a vote of the
Company's stockholders is required under Delaware Law, a significantly longer
period of time will be required to effect the Merger. See Section 11.
The Company has advised Purchaser that as of March 19, 1997, 8,782,265
Shares were issued and outstanding. The Company has advised Purchaser that as
of March 19, 1997, the Company had duly reserved a total of 2,764,000 Shares
for future issuance pursuant to outstanding employee stock options or stock
incentive rights granted pursuant to the Company's 1993 Stock Option and
Restricted Stock Plan (the "1993 Plan"), of which 1,985,851 Shares are subject
to outstanding grants.
The Securities and Exchange Commission (the "Commission") has adopted Rule
13e-3 under the Exchange Act, which is applicable to certain "going private"
transactions. Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such transaction be filed with the Commission and disclosed to
stockholders prior to consummation of the transaction. Purchaser believes that
Rule 13e-3 will not be applicable to the Offer or the Merger. However, no
assurances can be given that the Commission will not take the position that
Rule 13e-3 is applicable to the Offer or the Merger.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ IN ITS ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), Purchaser will accept
for payment and pay for all Shares validly tendered prior to the Expiration
Date (as
4
<PAGE>
hereinafter defined) and not withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 midnight, New York City time, on Thursday, April
24, 1997, unless and until Purchaser, in its sole discretion (but subject to
the terms and conditions of the Merger Agreement), shall have extended the
period during which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended
by Purchaser, shall expire.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from
time to time, to extend for any reason the period of time during which the
Offer is open, including the occurrence of any of the conditions specified in
Section 14, by giving oral or written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the rights of a
tendering stockholder to withdraw his, her or its Shares. See Section 4.
Subject to the applicable regulations of the Commission, Purchaser also
expressly reserves the right (but subject to the terms and conditions of the
Merger Agreement), (i) to increase the price per share payable in the Offer,
(ii) to terminate the Offer and not accept for payment any Shares if the
conditions to the Offer shall not be satisfied and (iii) to waive any
condition or otherwise amend the Offer in any respect (subject to the
limitations described below), by giving oral or written notice of such delay,
termination, waiver or amendment to the Depositary and by making a public
announcement thereof. However, the Merger Agreement provides that Purchaser
will not (i) decrease the price per Share payable pursuant to the Offer, (ii)
reduce the maximum number of Shares to be purchased in the Offer, (iii) impose
conditions to the Offer in addition to those set forth in Section 14, (iv)
amend any other terms of the Offer in a manner adverse to the Company's
stockholders. Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange
Act requires Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer and (ii)
Purchaser may not delay acceptance for payment of, or payment for (except as
specified in Section 14), any Shares upon the occurrence of any of the
conditions specified in Section 14(c) without extending the period of time
during which the Offer is open.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-
4(c) and 14d-6(d) under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to increase the consideration being offered in
the Offer, such increase in the consideration being offered will be applicable
to all stockholders whose Shares are accepted for payment pursuant to the
Offer and, if at the time notice of any such increase in the consideration
being offered is first published, sent or given to holders of such Shares, the
Offer is scheduled to expire at any time earlier than the period ending on the
tenth business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such ten business day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, New
York City time.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares whose names appear on
the Company's stockholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment),
Purchaser will accept for payment, and will pay for, all Shares validly
tendered prior to the Expiration Date and not properly withdrawn promptly
after the later to occur of (i) the Expiration Date, and (ii)
5
<PAGE>
the expiration or termination of any applicable waiting periods under the HSR
Act and any applicable foreign competition and antitrust statutes and
regulations. Subject to applicable rules of the Commission, Purchaser
expressly reserves the right to delay acceptance for payment of, or payment
for, Shares pending receipt of any regulatory approvals specified in Section
15 or in order to comply in whole or in part with any other applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company, or the
Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in Section 3, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined below) in connection
with a book-entry transfer and (iii) any other documents required by the
Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
On March 26, 1997, ESI filed with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division") a Pre-merger Notification and Report Form under the HSR Act with
respect to the Offer. Accordingly, it is anticipated that the waiting period
under the HSR Act applicable to the Offer will expire at 11:59 p.m., New York
City time, on April 10, 1997. Prior to the expiration or termination of such
waiting period, the FTC or the Antitrust Division may extend such waiting
period by requesting additional information from ESI with respect to the
Offer. Upon request, the waiting period under the HSR Act may be terminated
prior to its expiration by the FTC and the Antitrust Division. See Section 15.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to
the Offer. Upon the terms and subject to the conditions of the Offer, payment
for Shares accepted for payment pursuant to the Offer will be made by deposit
of the purchase price therefor with the Depositary, which will act as agent
for tendering stockholders for the purpose of receiving payments from
Purchaser and transmitting such payments to tendering stockholders whose
Shares have been accepted for payment. Under no circumstances will interest on
the purchase price for Shares be paid, regardless of any delay in making such
payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are
submitted evidencing more Shares than are tendered, Share Certificates
evidencing unpurchased Shares will be returned, without expense to the
tendering stockholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedure set forth in Section 3, such Shares will be credited
to an account maintained at such Book-Entry Transfer Facility), as promptly as
practicable following the expiration or termination of the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such
transfer or assignment will not relieve Purchaser of its obligations under the
Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant
to the Offer.
6
<PAGE>
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares validly to tender Shares pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Shares, and any other documents
required by the Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
either (i) the Share Certificates evidencing tendered Shares must be received
by the Depositary at such address or such Shares must be tendered pursuant to
the procedure for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary, in each case prior to the
Expiration Date, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after March 28, 1997. Any financial institution that
is a participant in the system of any Book-Entry Transfer Facility may make a
book-entry delivery of Shares by causing such Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at such Book- Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer at a Book-Entry Transfer Facility, the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's
Message in connection with a book-entry transfer, and any other required
documents, must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (a) if the Letter of Transmittal is signed by the registered
holder (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities' systems whose name appears on a
security position listing as the owner of the Shares) of Shares tendered
therewith and such registered holder has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (b) if such Shares are tendered
for the account of a financial institution (including most commercial banks,
savings and loan associations and brokerage houses) that is a participant in
the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(an "Eligible Institution"). In all other cases, all signatures on the Letter
of Transmittal must be guaranteed by an Eligible Institution. See Instructions
1 and 5 to the Letter of Transmittal. If Share Certificates are registered in
the name of a person other than the signer of the Letter of Transmittal, or if
payment is to be made or Share Certificates for Shares not tendered or not
accepted for payment are to be returned to a person other than the registered
holder of the Share Certificates surrendered, the tendered Share Certificates
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name or names of the registered holders appear on the
Share Certificates, with the signatures on the Share Certificates or stock
powers guaranteed as described above. See Instructions 1 and 5 to the Letter
of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates evidencing such Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such stockholder cannot complete the procedure for
delivery by book-entry transfer on a timely basis, such Shares may
nevertheless be tendered, provided that all the following conditions are
satisfied:
7
<PAGE>
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received prior to the Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message), and any other documents
required by the Letter of Transmittal are received by the Depositary within
three National Association of Securities Dealers Automated Quotation--
National Market System ("Nasdaq") trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, telex or facsimile transmission to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
the form of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message), and
any other documents required by the Letter of Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity in the tender of any
Shares of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of
Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived. None of Purchaser, ESI, the Dealer
Manager, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder
and accepted for payment by Purchaser (and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after March 23, 1997). All such proxies shall be considered coupled with an
interest in the tendered Shares. Such appointment will be effective when, and
only to the extent that, Purchaser accepts such Shares for payment. Upon such
acceptance for payment, all prior proxies given by such stockholder with
respect to such Shares (and such other Shares and securities) will be revoked
without further action, and no subsequent proxies may be given nor any
subsequent written consent executed by such stockholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. The
designees of Purchaser will, with respect to the Shares (and such other Shares
and securities) for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's payment for such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares (and such other Shares and
securities).
8
<PAGE>
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the
conditions of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH
STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE
INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that tendered Shares may be withdrawn by the tendering
stockholder at any time prior to the Expiration Date and, unless theretofore
accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn
by such stockholder at any time after May 27, 1997. If Purchaser extends the
Offer, is delayed in its acceptance for payment of Shares or is unable to
accept Shares for payment pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering stockholders are
entitled to withdrawal rights as described in this Section 4. Any such delay
will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn, the number of Shares to be withdrawn
and the name of the registered holder of such Shares, if different from that
of the person who tendered such Shares. If Share Certificates evidencing
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Share Certificates,
the serial numbers shown on such Share Certificates must be submitted to the
Depositary and the signature(s) on the notice of withdrawal must be guaranteed
by an Eligible Institution, unless such Shares have been tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to
the procedure for book-entry transfer as set forth in Section 3, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, ESI, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or in the Merger will be a taxable transaction for
federal income tax purposes and may also be a taxable transaction under
applicable state, local or foreign tax laws. In general, a stockholder will
recognize gain or loss for federal income tax purposes equal to the difference
between the amount of cash received in exchange for the Shares sold and such
stockholder's adjusted tax basis in such Shares. Assuming the Shares
constitute capital assets in the hands of the stockholder, such gain or loss
will be capital gain or loss. If, at the time of the Offer or the Merger, the
Shares then exchanged have been held for more than one year, such gain or loss
will be long-term
9
<PAGE>
capital gain or loss. Under current law, long-term capital gains of
individuals are, under certain circumstances, taxed at lower rates than items
of ordinary income and short-term capital gains.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS
WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND FOREIGN
CORPORATIONS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES
OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF
THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on The Nasdaq National Market. The following table sets forth, for the
quarters indicated, the high and low sales prices per Share on The Nasdaq
National Market as reported by the Dow Jones News Service.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal year ending March 31, 1995:
First Quarter............................................. $ 8.625 $ 6.375
Second Quarter............................................ 8.000 5.250
Third Quarter............................................. 9.000 6.625
Fourth Quarter............................................ 13.500 8.000
Fiscal year ending March 31, 1996:
First Quarter............................................. $15.125 $11.250
Second Quarter............................................ 18.875 14.250
Third Quarter............................................. 26.250 15.625
Fourth Quarter............................................ 23.750 17.875
Fiscal Year ending March 31, 1997:
First Quarter............................................. $32.250 $20.875
Second Quarter............................................ 33.250 26.250
Third Quarter............................................. 31.625 14.000
</TABLE>
The Company historically has not declared dividends.
On March 21, 1997, the last full trading day prior to the announcement of
the execution of the Merger Agreement and of Purchaser's intention to commence
the Offer, the closing price per Share as reported on The Nasdaq National
Market was $17.25.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth
herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company
or has been taken from or based upon publicly available documents and records
on file with the Commission and other public sources. Neither Purchaser, ESI,
nor any of their respective affiliates assumes any responsibility for the
accuracy or completeness of the information concerning the Company furnished
by the Company or contained in such documents and records or for any failure
by the Company to disclose events
10
<PAGE>
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Purchaser, ESI or their respective
affiliates.
General. The Company is a Delaware corporation with its principal executive
offices located at 14600 Catalina Street, San Leandro, California 94577. The
Company and its subsidiaries supply scientific information management
software, chemical information databases and related services to the
pharmaceutical, biotechnology, agrochemical and chemical industries. The
Company's software and database products are designed to enable its customers
to discover and develop new products more rapidly by allowing users to access
and use scientific information more effectively. The Company pioneered the
development of scientific information management software based upon the
standard graphical representation of chemical compounds and currently offers a
broad range of scientific information management software and chemical
information databases.
Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the audited financial Statements contained in
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1996 (the "Form 10-K") and the Company's Quarterly Reports on Form 10-Q for
the quarters ended December 31, 1996, 1995 and 1994 (the "10-Q's"). More
comprehensive financial information is included in the Form 10-K, the 10-Q's
and other documents filed by the Company with the Commission. The financial
information that follows is qualified in its entirety by reference to such
reports and other documents, including the financial Statements and related
notes contained therein. Such reports and other documents may be examined and
copies may be obtained from the offices of the Commission in the manner set
forth at the end of this Section 7.
11
<PAGE>
MDL INFORMATION SYSTEMS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH
31,
------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................................ $61,506 $50,951 $43,381
Gross profit........................................ 51,923 42,226 37,017
Operating income.................................... 10,339 4,280 3,377
Income before income taxes.......................... 10,982 4,660 723
Net income.......................................... 12,425 3,968 37
Average number of shares outstanding (as adjusted to
give effect to stock dividends or stock splits).... 9,239 8,317 8,200
Net income per share................................ $ 1.34 $ .48 $ .00
BALANCE SHEET DATA:
Current Assets...................................... $36,409 $24,966 $19,744
Deferred Income tax................................. (2,556) -- --
Total Assets........................................ 57,132 42,182 34,151
Current Liabilities................................. 20,547 18,128 15,984
Noncurrent Portion of Long-Term Debt................ -- 1,900 --
Stockholders' Equity................................ 36,585 22,154 18,167
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................................ $53,008 $44,601 $36,809
Gross profit........................................ 44,106 37,478 30,446
Operating income.................................... 7,932 7,430 2,686
Income before income taxes.......................... 9,156 7,953 2,864
Net income.......................................... 8,189 7,068 2,231
Average number of shares outstanding (as adjusted to
give effect to stock dividends or stock splits).... 9,593 9,172 8,200
Net income per share................................ $ .85 $ .77 $ .27
BALANCE SHEET DATA:
Current Assets...................................... $32,315 $27,587 14,765
Deferred Income tax................................. (2,556) -- --
Total Assets........................................ 58,554 44,891 32,418
Current Liabilities................................. 12,220 14,014 10,137
Noncurrent Portion of Long-Term Debt................ -- -- 1,900
Stockholders' Equity................................ 46,334 30,877 20,381
</TABLE>
12
<PAGE>
In connection with the Purchaser's and ESI's review of the Company and in
the course of the negotiations between the Company and the Purchaser and ESI
described in Section 10, the Company provided those parties with certain
business and financial information which ESI and Purchaser believe is not
publicly available. The Company provided the Purchaser and ESI with financial
forecasts in which the Company estimated its fiscal 1998 revenues could be
approximately $85 million and its fiscal 1998 operating income could be
approximately $14.8 million.
PROJECTED INFORMATION OF THIS TYPE IS BASED ON ESTIMATES AND ASSUMPTIONS
THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND
MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE PROJECTED RESULTS WOULD BE REALIZED OR THAT ACTUAL RESULTS
WOULD NOT BE SIGNIFICANTLY HIGHER OR LOWER THAN THOSE SET FORTH ABOVE. IN
ADDITION, THESE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE
OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE
GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC
ACCOUNTANTS REGARDING PROJECTIONS AND FORECASTS AND ARE INCLUDED IN THIS OFFER
TO PURCHASE ONLY BECAUSE SUCH INFORMATION WAS MADE AVAILABLE TO THE PURCHASER
AND ESI BY THE COMPANY. NONE OF ESI, PURCHASER, THE COMPANY, ANY OF THEIR
RESPECTIVE AFFILIATES OR ANY OTHER PARTY ASSUMES ANY RESPONSIBILITY FOR THE
ACCURACY OR VALIDITY OF THE FOREGOING PROJECTIONS.
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the Commission relating
to its business, financial condition and other matters. Information as of
particular dates concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is required to be disclosed in proxy statements distributed
to the Company's stockholders and filed with the Commission. Such reports,
proxy statements and other information should be available for inspection at
the public reference facilities maintained by the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, and also should be available for
inspection at the Commission's regional offices located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may also be obtained (i) by mail, upon payment of the Commission's customary
fees, by writing to its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, or (ii) at the Commission's world-wide web site
at http://www.sec.gov.
8. CERTAIN INFORMATION CONCERNING PURCHASER, ESI, PLC AND NV. Purchaser is a
newly incorporated Delaware corporation organized in connection with the Offer
and the Merger and has not carried on any activities other than in connection
with the Offer and the Merger. The principal offices of Purchaser are located
at 200 Park Avenue, 17th Floor, New York, NY 10166. Purchaser is a direct
wholly owned subsidiary of ESI.
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser is available.
ESI is a New York corporation, with its principal office at 655 Avenue of
the Americas, New York, NY 10010. ESI's principal business is the publication
of scientific journals and provision of information services.
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PLC is a corporation organized under the laws of England, with its principal
office at 6 Chesterfield Gardens, London W1A1EJ, England. PLC is a holding
company that holds a 50% interest in Reed Elsevier plc and a 46% interest in
Elsevier Reed Finance BV through which it is engaged in the principal business
of scientific, professional, business and consumer publishing. The remaining
interests in Reed Elsevier plc and Elsevier Reed Finance BV are held by NV.
NV is a corporation organized under the laws of The Netherlands, with its
principal office at Van de Sande Bakhuyzenstraat 4, 1061 AG Amsterdam, The
Netherlands. NV is a holding company that holds a 50% interest in Reed
Elsevier plc and a 54% interest in Elsevier Reed Finance BV through which it
is engaged in the principal business of scientific, professional, business and
consumer publishing. The remaining interests in Reed Elsevier plc and Elsevier
Reed Finance BV are held by PLC.
The combination of PLC, NV, their jointly owned subsidiaries Reed Elsevier
plc and Elsevier Reed Finance BV (together referred to as "Reed Elsevier")
form one of the world's largest publishing and information providers.
The name, citizenship, business address, principal occupation or employment,
and five-year employment history for each of the directors and executive
officers of Purchaser and ESI and certain other information are set forth in
Schedule I hereto.
Neither ESI, PLC, NV or Purchaser nor, to the best knowledge of Purchaser,
ESI, PLC, NV, any of the persons listed in Schedule I to this Offer to
Purchase or any associate or majority-owned subsidiary of Purchaser, ESI, PLC,
NV or any of the persons so listed beneficially owns or has any right to
acquire, directly or indirectly, any Shares and (ii) neither ESI or Purchaser
nor, to the best knowledge of Purchaser and ESI, any of the persons or
entities referred to above nor any director, executive officer or subsidiary
of ESI, PLC, NV or Purchaser has effected any transaction in the Shares during
the past 60 days.
Except as provided in the Merger Agreement and as otherwise described in
this Offer to Purchase, to the best of their knowledge, none of ESI, PLC, NV,
Purchaser or any of their respective subsidiaries or any of the persons listed
in Schedule I to this Offer to Purchase, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or voting
of such securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss,
guarantees of profits, division of profits or loss or the giving or
withholding of proxies. To the best of their knowledge and except as set forth
in this Offer to Purchase, none of Purchaser, PLC, NV and ESI, nor any of the
persons listed on Schedule I hereto, has had any business relationship or
transaction with the Company or any of its executive officers, directors or
affiliates that is required to be reported under the rules and regulations of
the Commission applicable to the Offer. Set forth below in Section 10 of this
Offer to Purchase and elsewhere herein is a summary description of the mutual
contacts, negotiations and transactions between any of Purchaser, PLC, NV,
ESI, or any of their respective subsidiaries or any of the persons listed in
Schedule I to this Offer to Purchase, on the one hand, and the Company or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
The Reed Elsevier combined audited balance sheet and the related combined
statements of income, total recognized gains and losses, changes in combined
shareholders' equity and cash flows for the three years ended December 31,
1996, 1995 and 1994 are contained in Item 19 of the combined Reed Elsevier
annual report for the year ended December 31, 1996 filed with the Commission
(the "Annual Report") and are hereby incorporated by reference. A copy of the
Annual Report may be obtained by: (i) writing to PLC at 6 Chesterfield
Gardens, London W1A 1EJ, England, attention: Company Secretary, (ii) writing
to NV at Van de Sande Bakhuyzenstraat 4, 10611 AG Amsterdam, The Netherlands,
attention: Company Secretary, (iii) mail, upon payment of the Commission's
customary fees, by writing to its principal office at Judiciary Plaza, 450
Fifth
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Street, N.W., Washington, D.C. 20549 or (iv) down-loading such report from the
Commission's world-wide web site at http://www.sec.gov. Summary financial
information can also be obtained from the Reed Elsevier world-wide web site at
http://www.reed-elsevier.com. Information obtained at such world-wide web site
shall not be deemed to be part of this Offer to Purchase. Additionally, the
Annual Report may be inspected at the Commission's offices.
9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds required
by Purchaser to consummate the Offer and the Merger is estimated to be
approximately $284 million, including approximately $3 million to pay related
fees and expenses but excluding amounts payable by the Company with respect to
options granted pursuant to the 1993 Plan (based on 8,782,265 Shares
outstanding and 1,985,851 options for Shares outstanding as of March 19,
1997). Purchaser will obtain all of such funds from ESI, PLC, NV or one of
their respective affiliates. ESI and its affiliates will provide such funds
from working capital.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER
AGREEMENT. In late 1994, Peter Shepherd, Managing Director of Elsevier Science
S.A., an affiliate of ESI, met with representatives of the Company at the
Company's principal offices in San Leandro, California, regarding a possible
collaboration between the Company and ESI in the area of database development.
No firm proposals resulted from this meeting.
In May 1996, ESI was contacted on behalf of the Company by Goldman who
indicated that the Company wished to explore the possibility of an acquisition
of the Company by ESI and that the Company was simultaneously approaching
other possible acquirors. On May 22, 1996, Edward Reiner of ESI and Mr.
Shepherd met with representatives of Goldman and Steven Goldby and John
Hanlon, the Company's Chief Executive Officer and Senior Vice President -
Finance, respectively, to discuss a potential transaction.
On June 14, 1996, Mr. Shepherd sent a letter to Goldman indicating that ESI
was interested in pursuing discussions with a view to acquiring a majority
stake in the Company. Goldman responded on June 18, 1996, acknowledging the
receipt of the expression of interest and indicating that ESI was to be
considered one of the prospective bidders for the acquisition of the Company.
Between June 18, 1996 and early July 1996, Mr. Reiner had several telephonic
conversations with Goldman concerning the bidding process and the desire of
the Company to obtain a bid that would represent a substantial premium to the
then-current trading price for the Shares.
ESI submitted an informal and non-binding proposal to acquire the Company
which was rejected by the Company. On July 29, 1996, a representative of
Goldman informed Mr. Reiner by telephone that the auction process was being
terminated because of the lack of an adequate bid, and that the Company was no
longer interested in a possible transaction unless an adequate bid was
submitted.
From September through November of 1996, Mr. Reiner maintained occasional
contact with Goldman regarding the Company. On November 25, 1996, Mr. Shepherd
and Mr. Goldby met at Mr. Shepherd's offices at Elsevier Science S.A. in
Switzerland to discuss ESI and the Company and the strategic fit between the
two companies.
In late January and early February, ESI held several meetings in New York
with Lehman to discuss the background surrounding the prior sale process
concerning the Company and engaged Lehman to provide advice in connection with
the reinitiation of discussions with the Company regarding a possible sale of
the Company to ESI.
On February 12, 1997, at the invitation of Mr. Shepherd, Messrs. Goldby and
Hanlon and Thomas Jones, the Company's President and Chief Operating Officer,
met in the San Francisco Bay Area with Mr. Shepherd, Messrs. Spruijt, Jobsis
and Nientker of Elsevier Science B.V., and Russell White, President of ESI, to
discuss a possible transaction between the Company and ESI. Following this
meeting, the Company and ESI scheduled
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due diligence meetings for the week of February 24, 1997.
Between February 24 and February 28, 1997, ESI conducted a due diligence
investigation of the Company. During this week, various representatives of ESI
and the Company, together with their respective legal and financial advisors,
met to discuss the business and financial condition of the Company.
On February 27, 1997, ESI's legal counsel, Wilson Sonsini Goodrich & Rosati
("WSGR") submitted to the Company for its review a draft term sheet outlining
the terms of a possible acquisition of the Company by ESI. The draft term
sheet did not set forth a price for the possible acquisition.
During the following week, representatives of ESI and the Company had
several telephone conversations. On March 5, 1997, several discussions took
place between Mr. Goldby and senior management of ESI. The discussions
initially focused on the prior week's due diligence and the strategic fit of
ESI and the Company and then focused on process, timing, and price for the
possible transaction. Mr. Spruijt indicated that subject to further due
diligence, and further subject to board approval, ESI was prepared to commence
an all cash tender offer for the Company at a price of $27 per Share. Mr.
Goldby initially suggested that ESI send a team back to California to commence
negotiations on March 8, 1997, but subsequently called ESI to say that a
second bidder was conducting due diligence and that the Company could not
commence negotiations until the other bidder had completed its due diligence
investigations.
Over the next several days, representatives of Lehman and Goldman discussed
the sale process and timing, and ESI's continuing level of interest in the
Company. On March 12, 1997, Mr. Goldby called Mr. Spruijt to inquire about
ESI's interest in the Company and indicated that the second bidder was
planning to submit a proposal to acquire the Company later that day and that
the Company's board would meet the following day to evaluate both proposals
with the intention of selecting one bidder for continued negotiations.
On March 14, 1997, Mr. Nientker called Mr. Goldby to inquire as to the
status of the process and Mr. Goldby said the Company's board had directed
Goldman to contact Lehman as well as advisors for the other bidder to discuss
process. Shortly thereafter, representatives of Goldman called representatives
of Lehman to request that ESI submit a final offer, accompanied with a draft
definitive agreement containing proposed terms and conditions, by March 16,
1997 at 5:00 p.m.
On March 15, 1997, Mr. Nientker called Mr. Goldby to discuss the process
outlined the previous day by Goldman. Mr. Goldby and Mr. Nientker discussed
the price and other terms of ESI's previous proposal. In discussing price, Mr.
Goldby stated that the second bidder had offered a higher amount for the
Company than ESI.
Subsequent to the discussion between Messrs. Nientker and Goldby, ESI and
representatives of Lehman and WSGR discussed the current status of the sale
process, ESI's current proposal, and bidding strategy. As a result of these
discussions, ESI directed WSGR to submit a revised bid to Goldman the
following day reflecting an increase in the offer price to $29 per share.
On March 16, WSGR delivered to Goldman, on ESI's behalf, a revised bid of
$29 per Share, together with a draft acquisition agreement.
On March 18, Mr. Nientker called Mr. Goldby to inquire as to the status of
ESI's bid. Mr. Goldby informed Mr. Nientker that the Company's board had
convened and instructed management to proceed with the offer presented by the
second bidder. On March 19, Mr. Goldby called Mr. Spruijt to discuss the
possibility of commercial arrangements between ESI and the Company. Mr.
Spruijt indicated that ESI was not interested in such a discussion at that
time.
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On March 20, Mr. Spruijt sent the following letter to the Company's board of
directors:
The Board of Directors of
MDL Information Systems, Inc.
14600 Catalina Street
San Leandro, CA 94577
U.S.A.
Amsterdam, March 20th, 1997
Dear Board Members,
We were disappointed that the Board of Directors of MDL Information Systems,
Inc. has elected to terminate the negotiation process regarding our proposal
to acquire the Company. As we have indicated to your advisors, we remain
flexible regarding all aspects of our previous fully-financed cash proposal.
Specifically, we are prepared to offer a price in excess of the range of $28-
31 per share that was previously discussed. In addition, we remain open to
discussing the terms and structure of our proposal, including the lock-up
option and conditions to closing. We believe that we can consummate a
transaction quickly and efficiently.
We would like very much to enter into immediate discussions with the Company
and its advisors. We stand ready to meet at any time, at any place to continue
our discussions. Our legal and financial advisors will also be available as
necessary.
We look forward to exploring ways to preserve the Company's culture and to
recognize the past and future contributions of your talented team who are key
to the Company's success. Obviously, we will want to work together with the
Company's management in formulating suitable compensation plans and targets.
As we believe that a negotiated transaction would be the best way for the
Company to maximize shareholder value, we ask that the Board of Directors
consider our request to meet promptly so that we may negotiate and announce
our transaction. We have considered with our advisors all legal and other
requirements relating to a transaction and do not foresee any difficulties in
completing the prompt acquisition of the Company.
We look forward to hearing from you soon.
Very truly yours,
/s/ Herman P. Spruijt
- -------------------------------------
Herman P. Spruijt
Chairman
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Subsequently, on March 20, 1997, Larry Sonsini of WSGR called the Company's
counsel and Paul Parker of Lehman called representatives of Goldman to discuss
the letter sent by ESI. A representative of Goldman then called Mr. Sonsini to
discuss the terms of ESI's revised offer. Later that day, WSGR submitted a
term sheet on behalf of ESI to Mr. Hachigian proposing an all cash tender
offer for the Company at a price of $32 per Share.
On March 21, 1997 Goldman informed WSGR and Lehman that the Company was
prepared to negotiate a definitive agreement with ESI the next day.
On Saturday, March 22, 1997 representatives of PLC, NV, ESI, WSGR, Lehman,
the Company and the Company's legal counsel negotiated a definitive agreement
and all ancillary documents. In the evening of March 22, the Company's board
of directors held a telephonic board meeting during which they reviewed and
unanimously approved the Offer and the Merger. The definitive agreements were
signed on behalf of ESI and the Company early in the morning of March 23,
1997.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as an Exhibit to the Tender Offer Statement on Schedule 14D-1 (the "Schedule
14D-1") filed by Purchaser and ESI with the Commission in connection with the
Offer. Such summary is qualified in its entirety by reference to the Merger
Agreement. Capitalized terms not otherwise defined in the following
description of the Merger Agreement have the respective meanings ascribed to
them in the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five
business days after the initial public announcement of Purchaser's intention
to commence the Offer. The obligation of Purchaser to accept for payment
Shares tendered pursuant to the Offer is subject to the satisfaction of the
Minimum Condition and certain other conditions that are described in Section
14 hereof. Purchaser and ESI have agreed that no change in the Offer may be
made which decreases the price per Share payable in the Offer, reduces the
maximum number of Shares to be purchased in the Offer, imposes conditions to
the Offer in addition to those set forth in Section 14 hereof, changes the
form of consideration payable in the Offer or amends any other material terms
of the Offer in a manner adverse to the Company's stockholders.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Delaware Law, at the
Effective Time, Purchaser shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Purchaser will cease
and the Company will continue as the Surviving Corporation (the "Surviving
Corporation") and will become a direct or indirect wholly owned subsidiary of
ESI. Upon consummation of the Merger, each issued and then outstanding Share
(other than any Shares held in the treasury of the Company, or owned by
Purchaser, ESI or any direct or indirect wholly owned subsidiary of ESI or of
the Company and any Shares which are held by stockholders who have not voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Delaware Law) shall be automatically converted into, and exchanged for, the
right to receive the Merger Consideration.
Pursuant to the Merger Agreement, each share of common stock, par value $.01
per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one share of common
stock, par value $.01 per share, of the Surviving Corporation.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of Purchaser immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement provides that the Certificate of Incorporation of the
Surviving Corporation shall be amended to contain the substantive provisions
of the Certificate of Incorporation of Purchaser as in effect at the Effective
Time.
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Agreements of ESI, Purchaser and the Company. Pursuant to the Merger
Agreement, the Company will, if required by applicable law in order to
consummate the Merger, duly call, give notice of, convene and hold an annual
or special meeting of its stockholders as soon as practicable following
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement, the Merger, and any other actions contemplated thereby
which require the approval of the Company's stockholders (the "Stockholders'
Meeting"). If Purchaser acquires a majority of the outstanding Shares,
Purchaser will have sufficient voting power to approve the Merger, even if no
other stockholder votes in favor of the Merger.
The Merger Agreement provides that the Company will, if necessary, as soon
as practicable at such time and place designated by Purchaser or ESI, file
with the Commission under the Exchange Act, and use its best efforts to have
cleared by the Commission, a proxy statement and related proxy materials (the
"Proxy Statement") with respect to the Stockholders' Meeting and will cause
the Proxy Statement to be mailed to stockholders of the Company at the
earliest practicable time. The Company has agreed, subject to its fiduciary
duties under applicable law as advised by counsel, to include in the Proxy
Statement the recommendation of the Board of Directors that the stockholders
of the Company approve and adopt the Merger Agreement and the Merger and to
use its best efforts to obtain such approval and adoption. The Merger
Agreement provides that, in the event that Purchaser shall acquire at least 90
percent of the then outstanding Shares, ESI, Purchaser and the Company agree,
at the request of Purchaser, to take all necessary and appropriate action to
cause the Merger to become effective as promptly as reasonably practicable
after such acquisition, without a meeting of the Company's stockholders, in
accordance with Delaware Law.
Pursuant to the Merger Agreement, the Company has covenanted and agreed to
carry on the businesses of the Company and its subsidiaries, between the date
of the Merger Agreement and the Effective Time or such time as ESI's designees
shall constitute a majority of the Board of Directors of the Company, unless
ESI shall otherwise agree diligently and in accordance with good commercial
practice, in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted and in compliance in all material respects with
all applicable laws and regulations, to pay its debts and taxes when due
subject to good faith disputes over such debts or taxes, to pay or perform in
all material respects other material obligations when due, and use its
commercially reasonable efforts consistent with past practices and policies to
preserve intact its present business organization, keep available the services
of its present officers and employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees and others with which
it has business dealings. The Merger Agreement provides that, except as
permitted by the terms of the Merger Agreement, neither the Company nor any
subsidiary will do any of the following, without the prior written consent of
ESI: (a) waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize
cash payments in exchange for any options granted under any of such plans; (b)
grant any severance or termination pay to any officer or employee except
payments in amounts consistent with policies and past practices or pursuant to
written agreements outstanding, or policies existing, on the date of the
Merger Agreement and as previously disclosed in writing, or adopt any new
severance plan; (c) transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to the Company's
intellectual property or other proprietary rights, or enter into grants to
future patent rights, other than in the ordinary course of business,
consistent with past practice; (d) declare or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any
capital stock or split, combine or reclassify any capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock; (e) repurchase or otherwise acquire,
directly or indirectly, any shares of capital stock except pursuant to rights
of repurchase of any such shares under any employee, consultant or director
stock plan existing on the date of the Merger Agreement; (f) issue, deliver,
sell, authorize or propose the issuance, delivery or sale of, any shares of
capital stock or any securities convertible into shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock, or any securities convertible into shares of capital stock, or enter
into other agreements or commitments of any character obligating it to issue
any such shares or convertible securities, other than the issuance of Shares,
pursuant to the exercise of stock options therefor outstanding as of the date
of the Merger Agreement; (g) cause, permit or propose any amendments to any
charter document or Bylaw; (h) acquire
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or agree to acquire by merging or consolidating with, or by purchasing an
equity interest in or a material portion of the assets of, or by any other
manner, any business or any corporation, partnership interest, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in the aggregate, to
the business of the Company, or enter into any joint ventures, strategic
partnerships or alliances; (i) sell, lease, license, encumber or otherwise
dispose of any properties or assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary course of
business consistent with past practice; (j) incur any indebtedness for
borrowed money (other than ordinary course trade payables or pursuant to
existing credit facilities in the ordinary course of business) or guarantee
any such indebtedness or issue or sell any debt securities or warrants or
rights to acquire debt securities, or guarantee any debt securities of others;
(k) adopt or amend any employee benefit or employee stock purchase or employee
option plan, or enter into any employment contract, pay any special bonus or
special remuneration to any director or employee, or increase the salaries or
wage rates of its officers or employees other than in the ordinary course of
business, consistent with past practice, or change in any material respect any
management policies or procedures; (l) pay, discharge or satisfy any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business; (m) make any grant of exclusive rights to any
third party; or (n) agree in writing or otherwise to take any of the actions
described in (a) through (m) above.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
pursuant to the Offer of such number of Shares which satisfies the Minimum
Condition, and from time to time thereafter, ESI will be entitled to designate
a majority of the members of the Company's Board of Directors. The Merger
Agreement also provides that the Company shall, upon request by ESI, promptly
increase the size of the Board of Directors to the extent permitted by its
Certificate of Incorporation and/or secure the resignations of such number of
directors as is necessary to enable ESI's designees to be elected to the Board
of Directors and shall cause ESI's designees to be so elected.
The Merger Agreement provides that following the election or appointment of
ESI's designees in accordance with the immediately preceding paragraph and
prior to the Effective Time, any amendment or termination of the Merger
Agreement by the Company or any extension by the Company of the time for the
performance of or waiver of any of the obligations or other acts of ESI or
Purchaser or waiver of any of the Company's rights thereunder, will require
the concurrence of a majority of those directors of the Company then in office
who were not designated by ESI.
Pursuant to the Merger Agreement, from the date of the Merger Agreement
until the Effective Time, the Company will, and will cause its subsidiaries,
officers, directors, employees and agents to, afford the officers, employees
and agents of ESI, Purchaser and their affiliates and the attorneys,
accountants, banks, other financial institutions and investment banks working
with ESI or Purchaser, and their respective officers, employees and agents,
complete access at all reasonable times to its officers, employees, agents,
properties, books, records and contracts, and shall furnish ESI, Purchaser and
their affiliates and the attorneys, banks, other financial institutions and
investment banks working with ESI or Purchaser, all financial, operating and
other data and information as they reasonably request.
The Company has agreed that, until the earlier of the Effective Time or
termination of the Merger Agreement, it and its subsidiaries will not, and
will instruct their respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly, (i) solicit or encourage submission of, any proposals or offers by
any person, entity or group (other than ESI and its affiliates, agents and
representatives), or (ii) participate in any discussions or negotiations with,
or disclose any non-public information concerning the Company or any of its
subsidiaries to, or afford any access to the properties, books or records of
the Company or any of its subsidiaries to, or otherwise assist or facilitate,
or enter into any agreement or understanding with, any person, entity or group
(other than ESI and its affiliates, agents and representatives), in connection
with any Acquisition Proposal with respect to the Company. Under the Merger
Agreement, an "Acquisition Proposal" with respect to an entity means any
proposal or offer relating to (i) any merger, consolidation, sale of
substantial assets or similar transactions involving the entity or any
subsidiaries of
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the entity (other than sales of assets or inventory in the ordinary course of
business or as permitted under the terms of the Merger Agreement), (ii) the
acquisition by any person of beneficial ownership or a right to acquire
beneficial ownership of, or the formation of any "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
which beneficially owns, or has the right to acquire beneficial ownership of,
10% or more of the then outstanding shares of capital stock of the entity
(except for acquisitions for passive investment purposes only in circumstances
where the person or group qualifies for and files a Schedule 13G with respect
thereto); or (iii) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing.
The Company has also agreed that it will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Pursuant to the Merger
Agreement, the Company will (i) notify ESI as promptly as practicable if any
inquiry or proposal is made or any information or access is requested in
connection with an Acquisition Proposal or potential Acquisition Proposal and
(ii) as promptly as practicable notify ESI of the terms and conditions of any
such Acquisition Proposal. In addition, from and after the date of this
Agreement until the earlier of the Effective Time and termination of this
Agreement pursuant to its terms, the Company and its subsidiaries will not,
and will instruct their respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal made by any person, entity
or group (other than ESI); provided, however, that nothing in the Merger
Agreement shall prohibit the Company' Board of Directors from taking and
disclosing to the Company' stockholders a position with respect to a tender
offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
Notwithstanding the foregoing, the Merger Agreement provides that, prior to
consummation of the Offer, the Company may, to the extent the Board of
Directors of the Company determines, in good faith, after consultation with
outside legal counsel, that the Board's fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with, and
furnish information to any person, entity or group after such person, entity
or group has delivered to the Company in writing, an unsolicited bona fide
Acquisition Proposal which the Board of Directors of the Company in its good
faith reasonable judgment determines, after consultation with its independent
financial advisors, would result in a transaction more favorable than the
Offer and the Merger to the stockholders of the Company from a financial point
of view and for which financing, to the extent required, is then committed or
which, in the good faith reasonable judgment of the Board of Directors of the
Company (based upon the advice of independent financial advisors), is
reasonably capable of being financed by such person, entity or group and which
is likely to be consummated (a "Superior Proposal"). In the event the Company
receives a Superior Proposal, nothing contained in this Agreement (but subject
to the terms hereof) will prevent the Board of Directors of the Company from
recommending such Superior Proposal to the Company's stockholders, if the
Board determines, in good faith, after consultation with outside legal
counsel, that such action is required by its fiduciary duties under applicable
law; provided, however, that the Company shall not recommend to its
stockholders a Superior Proposal for a period of not less than 48 hours after
ESI's receipt of a copy of such Superior Proposal (or a description of the
terms and conditions thereof, if not in writing). Notwithstanding anything to
the contrary in the Merger Agreement, the Company will not provide any non-
public information to a third party unless the Company provides such non-
public information pursuant to a nondisclosure agreement with terms regarding
the protection of confidential information at least as restrictive as such
terms in the Confidentiality Agreement and such non-public information has
been previously delivered to ESI.
Pursuant to the Merger Agreement, upon the Effective Time, each of the
options then outstanding under the 1993 Plan (the "Options") shall terminate
and be converted into a right to receive quarterly cash payments (the "Option
Payments") from the Surviving Corporation. With respect to each Option, the
amount of the Option Payment for each calendar quarter shall be equal to the
product of (a) the Merger Consideration minus the exercise price per Share of
such Option multiplied by (b) the number of shares for which such Option would
have become exercisable during such quarter if such Option had not been
terminated. The Option Payment for a quarter shall be made to the holder of
the Option (or his or her successors) not later than 15 days following the
close of such quarter. In the case of Options that are exercisable upon the
Effective Time, or would have become
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exercisable at the Effective Time as a result of the transactions contemplated
by the Merger Agreement (including, without limitation, all Options held by
the non-employee directors of the Company), the Option Payment shall be made
upon the Effective Time. The provisions of the 1993 Plan and the applicable
stock option agreement shall control in determining when an Option would have
become exercisable and to what extent an Option is forfeited in the event that
the holder's service with the Company terminates.
Pursuant to the Merger Agreement, the Purchaser and ESI have agreed that all
rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors or
officers (the "Indemnified Parties") of the Company and its subsidiaries as
provided in their respective certificates of incorporation or by-laws (or
similar organizational documents) or existing indemnification contracts as
filed with the Commission shall survive the Merger and shall continue in full
force and effect in accordance with their terms. For six years from the
Effective Time, ESI shall, unless ESI agrees in writing to guarantee the
indemnification obligations set forth in the Merger Agreement, maintain in
effect the Company's current directors' and officers' liability insurance
covering those persons who are currently covered by the Company's directors'
and officers' liability insurance policy (a copy of which has been heretofore
delivered to ESI); provided, however, that in no event shall ESI be required
to expend in any one year an amount in excess of 150% of the annual premiums
currently paid by the Company for such insurance which the Company represents
is not more than $250,000; and, provided, further, that if the annual premiums
of such insurance coverage exceed such amount, ESI shall be obligated to
obtain a policy with the greatest coverage available for a cost not exceeding
such amount.
The Merger Agreement provides that, subject to its terms and conditions,
each of the parties thereto 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 to consummate and make effective as promptly as
practicable the transactions contemplated by the Merger Agreement (including
consummation of the Offer and the Merger) and to cooperate with each other in
connection with the foregoing. In addition the Merger Agreement provides that,
each of the parties to this Agreement agrees to use (i) all reasonable efforts
to obtain all necessary waivers, consents and approvals from other parties to
loan agreements, leases, licenses and other contracts, and (ii) all reasonable
efforts to obtain all necessary consents, approvals and authorizations as
required to be obtained under any federal, state or foreign law or
regulations, including, but not limited to, those required under the HSR Act,
to defend all lawsuits or other legal proceedings challenging the Merger
Agreement or the consummation of the transactions contemplated thereby, to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated thereby, to effect all necessary registrations and filings,
including, but not limited to, filings under the HSR Act and submissions of
information requested by Governmental Entities, and to fulfill all conditions
to the Merger Agreement.
In case at any time after the Effective Time any further action is necessary
or desirable to carry out the purposes of the Merger Agreement, the proper
officers and directors of each party to the Merger Agreement are required to
use their reasonable efforts to take all such action.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to the absence of certain changes or events
concerning the Company's business, compliance with law, litigation, employee
benefit plans, real property and leases, intellectual property, environmental
matters, and material contracts.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) if required
by Delaware Law, the Merger Agreement and the Merger shall have been approved
and adopted by the requisite vote of the stockholders of the Company; (b) any
waiting period (and any extension thereof) applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated; (c) Shares
shall have purchased pursuant to the Offer; and (d) no temporary restraining
order, preliminary or permanent injunction, judgment or other order, decree or
ruling nor any statute, rule, regulation or order shall be in effect which
would (i) make the acquisition or holding by ESI or its affiliates of Shares
or shares of Common Stock of
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the Surviving Corporation illegal or otherwise prevent the consummation of the
Merger, (ii) prohibit ESI's or Purchaser's ownership or operation of, or
compel ESI or Purchaser to dispose of or hold separate, all or a material
portion of the business or assets of Purchaser, the Company or any subsidiary
thereof, (iii) compel ESI, Purchaser or the Company to dispose of or hold
separate all or a material portion of the business or assets of ESI or any of
its subsidiaries or the Company or any of its subsidiaries, (iv) impose
material limitations on the ability of ESI or Purchaser or their affiliates
effectively to exercise full ownership and financial benefits of the Surviving
Corporation, or (v) impose any material condition to the Offer, the Merger
Agreement or the Merger, which would be adverse to ESI.
Termination; Fees and Expenses. The Merger Agreement provides that it may be
terminated and the Merger and the other transactions contemplated thereby may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of the Merger Agreement and the Transactions
by the stockholders of the Company: (a) by mutual written consent duly
authorized by the Boards of Directors of ESI and the Company; (b) by ESI or
the Company if (i) the Offer shall be terminated or expire without any Shares
having been purchased pursuant to the Offer; provided, however, that a party
shall not be entitled to terminate the Merger Agreement if it is in material
breach of its representations and warranties, covenants or other obligations
thereunder or (ii) any court of competent jurisdiction in the United States or
other United States governmental authority shall have issued an order, decree
or ruling or shall have taken any other action restraining, enjoining or
otherwise prohibiting the Offer or the Merger and such order, decree, ruling
or other action shall have become final and nonappealable; (c) by ESI (i) if
the Board of Directors of the Company or any committee thereof shall have
approved, or recommended that stockholders of the Company accept or approve,
an Acquisition Proposal by a third party, or shall have resolved to do any of
the foregoing; (ii) if the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified its approval of, or recommendation
that the stockholders of the Company accept or approve (as the case may be),
the Offer, the Merger Agreement and the Merger, or shall have resolved to do
any of the foregoing; (iii) if the Company shall have failed to include in the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") the recommendation of the Board of Directors of the Company
that the stockholders of the Company accept the Offer; (iv) prior to the
purchase of Shares pursuant to the Offer, in the event that any waiting period
(and any extension thereof) under the HSR Act applicable to the purchase of
Shares shall not have expired or been terminated, or the Minimum Condition
shall not be satisfied; or (v) at any time on or after the date of the Merger
Agreement, any of the following events shall have occurred: (A) there shall
have been any action taken or threatened, or any statute, rule, regulation,
judgment, temporary restraining order, preliminary or permanent injunction or
other order, decree or ruling proposed, sought, promulgated, enacted, entered,
enforced or deemed applicable to the Offer or the Merger by any Governmental
Entity or arbitration panel that could reasonably be expected to, directly or
indirectly, (1) make the acceptance for payment or the payment for, or the
purchase of some or all of the Shares pursuant to the Offer illegal or
otherwise delay, restrict or prohibit consummation of the Offer or the Merger
or the consummation of any transaction contemplated by the Merger Agreement,
(2) result in a delay in or restrict the ability of Purchaser, or render
Purchaser unable, to accept for payment, pay for or purchase some or all of
the Shares, (3) require the divestiture by ESI, Purchaser, the Company or any
of their respective Subsidiaries or affiliates of all or any portion of the
business, assets or property of any of them or any Shares or impose any
material limitation on the ability of any of them to conduct their business
and own such assets, properties or Shares, (4) impose any material limitation
on the ability of ESI, Purchaser or their affiliates to acquire or hold or to
exercise effectively all rights of ownership of the Shares, including the
right to vote any Shares purchased by any of them on all matters properly
presented to the stockholders of the Company, including, without limitation,
the adoption and approval of the Merger Agreement and the Merger, (5) result
in a material diminution in the benefits expected to be derived by ESI or
Purchaser as a result of the transactions contemplated by the Offer or the
Merger Agreement, or (6) impose any material condition to the Offer, the
Merger Agreement or the Merger which would be adverse to ESI; or (B) the
Company shall have breached, or failed to comply with, in any material
respect, any of its covenants or obligations under the Merger Agreement or any
representation or warranty of the Company in the Merger Agreement shall have
been incorrect, in any material respect, when made or shall have since ceased
to be true and correct in any material respect; or (C) the Board of Directors
of the Company or any committee thereof shall have (1) withdrawn or modified
(including
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without limitation, by amendment of the Company's Schedule 14D-9) in a manner
adverse to ESI or Purchaser its approval or recommendation of the Offer, the
Merger or the Merger Agreement, (2) approved or recommended any Acquisition
Proposal by a third party other than the Offer and the Merger, (3) publicly
resolved to do any of the foregoing, or (4) upon a request to reaffirm the
Company's approval or recommendation of the Offer, the Merger Agreement or the
Merger, the Board of Directors of the Company shall fail to do so within two
business days after such request is made; or (D) the Merger Agreement shall
have been terminated in accordance with its terms; or (E) there shall have
occurred any Material Adverse Effect on the Company, or any event, fact or
change which could reasonably be expected to result in a Material Adverse
Effect on the Company; or (F) the Employment Agreements of Steven D. Goldby
and Thomas D. Jones shall not be in full force and effect other than by reason
of their respective deaths or incapacities; or (vi) if the Company is in
material breach of any of its covenants or obligations under this Agreement,
or any representation or warranty of the Company contained in the Merger
Agreement shall have been incorrect, in any material respect, when made or
shall have since ceased to be true and correct in any material respect; or (d)
by the Company, (i) if the Offer shall not have been commenced or ESI or
Purchaser shall have failed to purchase validly tendered Shares in violation
of the terms of the Offer within ten business days after the expiration of the
Offer; provided, however, that the Company shall not be entitled to terminate
the Merger Agreement if it is in material breach of its representations and
warranties, covenants or other obligations under the Merger Agreement; (ii) if
the Board of Directors of the Company has resolved to, and in fact does,
recommend to the Company's Stockholders that they accept a Superior Proposal,
provided that all the provisions of the Merger Agreement with respect to
Superior Proposals have been fully complied with, and provided further that
the Company shall have paid to ESI the Initial Break-up Fee (as defined
below); or (iii) prior to the purchase of Shares pursuant to the Offer, if ESI
or Purchaser is in material breach of any of its covenants or obligations
under the Merger Agreement, or any representation or warranty of ESI or
Purchaser contained in the Merger Agreement shall have been incorrect, in any
material respect, when made or shall have since ceased to be true and correct
in any material respect.
The Merger Agreement provides that the Company shall pay to ESI, in same day
funds, upon demand an amount equal to $1,500,000 (the "Initial Break-Up Fee")
in the event that (a) if the Board of Directors of the Company or any
committee thereof shall have approved, or recommended that stockholders of the
Company accept or approve, an Acquisition Proposal by a third party, or shall
have resolved to do any of the foregoing; (b) the Board of Directors of the
Company or any committee thereof shall have withdrawn or modified its approval
of, or recommendation that the stockholders of the Company accept or approve
(as the case may be), the Offer, the Merger Agreement and the Merger, or shall
have resolved to do any of the foregoing; (c) the Company shall have failed to
include in the Schedule 14D-9 the recommendation of the Board of Directors of
the Company that the stockholders of the Company accept the Offer. In
addition, the Company shall pay to ESI, in same day funds, upon demand an
amount equal to $6,500,000 if within a six-month period following the
occurrence of any of the events set forth in (a), (b) and (c) above, the
Company shall consummate any merger, consolidation or sale of all or
substantially all of its assets; or any person, entity or "group" (as that
term is used in Section 13(d)(3) of the Exchange Act), shall beneficially own
(as that term is used in Section 13(d)(3) of the Exchange Act), or shall have
acquired, 50% or more of the Shares, or shall have been granted any option or
right, conditional or otherwise, to acquire 50% or more of the Shares. The
above fees shall not be deemed (either individually or together) to be
liquidated damages, and the right to the payment of such fees shall be in
addition to (and not a maximum payment in respect of) any other damages or
remedies at law or in equity to which ESI or Purchaser may be entitled as a
result of the Company's violation or breach of any term or provision of the
Merger Agreement.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE
MERGER.
Purpose of the Offer. The purpose of the Offer and the Merger is for ESI to
acquire control of, and the entire equity interest in, the Company. The
purpose of the Merger is for ESI to acquire all Shares not purchased pursuant
to the Offer. Upon consummation of the Merger, the Company will become an
indirect wholly owned subsidiary of ESI. The Offer is being made pursuant to
the Merger Agreement.
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Under Delaware Law, the approval of the Board and the affirmative vote of
the holders of a majority of the outstanding Shares is required to approve and
adopt the Merger Agreement and the transactions contemplated thereby,
including the Merger. The Board of Directors of the Company has unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby, and, unless the Merger is consummated pursuant to the short-form
merger provisions under Delaware Law described below, the only remaining
required corporate action of the Company is the approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the affirmative
vote of the holders of a majority of the Shares. Accordingly, if the Minimum
Condition is satisfied, Purchaser will have sufficient voting power to cause
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the affirmative vote of any other stockholder.
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a meeting of its stockholders as soon as practicable after the
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby, if such action
is required. ESI and Purchaser have agreed that all Shares owned by them and
their subsidiaries will be voted in favor of the Merger Agreement and the
transactions contemplated thereby at any such meeting.
If Purchaser purchases Shares sufficient to satisfy the Minimum Condition to
the Offer, the Merger Agreement provides that Purchaser will be entitled to
designate representatives to serve on the Board in proportion to Purchaser's
ownership of Shares following such purchase. See Section 10. Purchaser expects
that such representation would permit Purchaser to exert control over the
Company's conduct of its business and operations.
Under Delaware Law, if Purchaser acquires, pursuant to the Offer or
otherwise, such number of Shares which, when added to the Shares owned of
record by Purchaser on such date, constitutes at least 90% of the then
outstanding Shares, Purchaser will be able to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the Merger,
without a vote of the Company's stockholders. In such event, ESI, Purchaser
and the Company have agreed to take, at the request of Purchaser, all
necessary and appropriate action to cause the Merger to become effective as
soon as reasonably practicable after such acquisition, without a meeting of
the Company's stockholders. If, however, Purchaser does not acquire such
number of Shares which, when added to the Shares owned of record by Purchaser
on such date, constitutes at least 90% of the then outstanding Shares pursuant
to the Offer or otherwise and a vote of the Company's stockholders is required
under Delaware Law, a significantly longer period of time will be required to
effect the Merger.
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders will have certain rights under
Delaware Law to dissent and demand appraisal of, and to receive payment in
cash of the fair value of, their Shares. Such rights to dissent, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value of the Shares, as of the day prior to the date on which the
stockholders' vote was taken approving the Merger or similar business
combination (excluding any element of value arising from the accomplishment or
expectation of the Merger), required to be paid in cash to such dissenting
holders for their Shares. In addition, such dissenting stockholders would be
entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is
required to take into account all relevant factors.
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions. Rule 13e-3 requires, among
other things, that certain financial information concerning the Company and
certain information relating to the fairness of the proposed transaction and
the consideration offered to minority stockholders in such transaction be
filed with the Commission and disclosed to stockholders prior to consummation
of the transaction. Purchaser believes that Rule 13e-3 will not be applicable
to the Offer or the Merger. However, no assurances can be given that the
Commission will not take the position that Rule 13e-3 is applicable to the
Offer or the Merger.
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Plans for the Company. It is expected that, initially following the Merger,
the business and operations of the Company will, except as set forth in this
Offer to Purchase, be continued by the Company substantially as they are
currently being conducted. ESI will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger, and will take such actions as it
deems appropriate under the circumstances then existing. ESI intends to seek
additional information about the Company during this period. Thereafter, ESI
intends to review such information as part of a comprehensive review of the
Company's business, operations, capitalization and management with a view to
optimizing realization of the Company's potential in conjunction with ESI's
businesses. It is expected that the business and operations of the Company
would form an important part of ESI's future business plans.
As more fully described in Section 17 hereof, ESI intends to enter into
employment agreements with certain key employees of the Company.
Except as indicated in this Offer to Purchase, ESI does not have any present
plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any Subsidiary, a sale or transfer of a material
amount of assets of the Company or any Subsidiary or any material change in
the Company's capitalization or dividend policy or any other material changes
in the Company's corporate structure or business, or the composition of the
Board or the Company's management.
12. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that the
Company will not, between the date of the Merger Agreement and the Effective
Time, without the prior written consent of ESI, declare or pay any dividends
on or make any other distributions (whether in cash, stock or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
ESI intends to cause the delisting of the Shares by The Nasdaq National
Market and the termination of registration of the Shares pursuant to Rule 12g-
4 under the Exchange Act following consummation of the Offer.
14. CERTAIN CONDITIONS OF THE OFFER. The Merger Agreement provides that,
notwithstanding any other provision of the Offer, and in addition to (and not
in limitation of) Purchaser's rights to extend and amend the Offer at any
time, Purchaser shall not be required to accept for payment, purchase or pay
for, or may terminate or amend the Offer and may postpone the acceptance of,
and payment for, subject to Rule 14e-1(c) under the Exchange Act (whether or
not any Shares have theretofore been accepted for payment or paid for pursuant
to the Offer), any Shares tendered pursuant to the Offer if (a) any waiting
period (and any extension thereof) under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall not have expired or been
terminated; (b) the Minimum Condition is not satisfied; or (c) at any time on
or after the date of the Merger Agreement, any of the following events shall
have occurred: (i) there shall have been any action taken or threatened, or
any statute, rule, regulation, judgment, temporary restraining order,
preliminary or permanent injunction or other order, decree or ruling proposed,
sought, promulgated, enacted, entered, enforced or deemed applicable to the
Offer or the Merger by any Governmental Entity or arbitration panel that could
reasonably be expected to, directly or indirectly, (1) make the acceptance for
payment or the payment for, or the purchase of some or all of the Shares
pursuant to the Offer illegal or otherwise delay, restrict or prohibit
consummation of the Offer or the Merger or the consummation of any transaction
contemplated by the Merger Agreement, (2) result in a delay in or restrict the
ability of Purchaser, or render Purchaser unable, to accept for payment, pay
for or purchase some or all of the Shares, (3) require the divestiture by ESI,
Purchaser, the Company or any of their respective subsidiaries or affiliates
of all or any portion of the business, assets or property of any of them or
any Shares or impose any material limitation on the ability of any of them to
conduct their business and own such assets,
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properties or Shares, (4) impose any material limitation on the ability of
ESI, Purchaser or their affiliates to acquire or hold or to exercise
effectively all rights of ownership of the Shares, including the right to vote
any Shares purchased by any of them on all matters properly presented to the
stockholders of the Company, including, without limitation, the adoption and
approval of the Merger Agreement and the Merger, (5) result in a material
diminution in the benefits expected to be derived by ESI or Purchaser as a
result of the transactions contemplated by the Offer or the Merger Agreement,
or (6) impose any material condition to the Offer, the Merger Agreement or the
Merger which would be adverse to ESI; (ii) the Company shall have breached, or
failed to comply with, in any material respect, any of its covenants or
obligations under the Merger Agreement or any representation or warranty of
the Company in the Merger Agreement shall have been incorrect, in any material
respect, when made or shall have since ceased to be true and correct in any
material respect; or (iii) the Board of Directors of the Company or any
committee thereof shall have (1) withdrawn or modified (including without
limitation, by amendment of the Company's Schedule 14D-9) in a manner adverse
to ESI or Purchaser its approval or recommendation of the Offer, the Merger or
the Merger Agreement, (2) approved or recommended any Acquisition Proposal by
a third party other than the Offer and the Merger, (3) publicly resolved to do
any of the foregoing, or (4) upon a request to reaffirm the Company's approval
or recommendation of the Offer, the Merger Agreement or the Merger, the Board
of Directors of the Company shall fail to do so within two business days after
such request is made; or (iv) the Merger Agreement shall have been terminated
in accordance with its terms; or (v) there shall have occurred any Material
Adverse Effect on the Company, or any event, fact or change which could
reasonably be expected to result in a Material Adverse Effect on the Company;
or (vi) the Employment Agreements of Steven D. Goldby and Thomas D. Jones
shall not be in full force and effect other than be reason of their respective
deaths or incapacities.
The Merger Agreement provides that the foregoing conditions are for the sole
benefit of ESI, Purchaser and their affiliates and may be asserted by ESI or
Purchaser regardless of the circumstances (including any action or inaction by
ESI or Purchaser or any of their affiliates) giving rise to such condition.
All the foregoing conditions may be waived by ESI or Purchaser in whole or in
part at any time and from time to time in the sole discretion of ESI or
Purchaser. The failure by ESI or Purchaser at any time to exercise its rights
with respect to the foregoing conditions shall not be deemed a waiver of any
such condition, and each condition shall be deemed an ongoing condition with
respect to which ESI or Purchaser may assert its rights at any time and from
time to time.
15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
General. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to ESI and discussions of representatives of ESI with representatives
of the Company during ESI's investigation of the Company (see Section 10),
neither Purchaser nor ESI is aware of any license or other regulatory permit
that appears to be material to the business of the Company and the
subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by Purchaser pursuant to the Offer or, except as set
forth below, of any approval or other action by any domestic (federal or
state) or foreign governmental, administrative or regulatory authority or
agency which would be required prior to the acquisition of Shares by Purchaser
pursuant to the Offer. Should any such approval or other action be required,
it is Purchaser's present intention to seek such approval or action. Purchaser
does not currently intend, however, to delay the purchase of Shares tendered
pursuant to the Offer pending the outcome of any such action or the receipt of
any such approval (subject to Purchaser's right to decline to purchase Shares
if any of the conditions in Section 14 shall have occurred). There can be no
assurance that any such approval or other action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result
to the business of the Company, Purchaser or ESI or that certain parts of the
businesses of the Company, Purchaser or ESI might not have to be disposed of
or held separate or other substantial conditions complied with in order to
obtain such approval or other action or in the event that such approval was
not obtained or such other action was not taken. Purchaser's obligation under
the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions relating to the legal matters discussed in
this Section 15. See Section 14.
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State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware. In general, Section 203 of Delaware Law prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in
which the interested stockholder became an interested stockholder. Section 203
is inapplicable to the Offer and the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers
of corporations meeting certain requirements more difficult. However, in 1987
in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the
State of Indiana may, as a matter of corporate law and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without the prior approval of the remaining stockholders.
The state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and
were incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws.
Should any person seek to apply any state takeover law, Purchaser will take
such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws
is applicable to the Offer or the Merger, and an appropriate court does not
determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined,
Purchaser might be unable to accept for payment any Shares tendered pursuant
to the Offer, or be delayed in continuing or consummating the Offer, and the
Merger. In such case, Purchaser may not be obligated to accept for payment any
Shares tendered. See Section 14.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
until certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by Purchaser pursuant to the Offer is subject to such
requirements. See Section 2.
Pursuant to the HSR Act, on March 26, 1997, ESI filed a Pre-merger
Notification and Report Form in connection with the purchase of Shares
pursuant to the Offer with the Antitrust Division and the FTC. Under the
provisions of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a 15-
calendar day waiting period following the filing by ESI. Accordingly, the
waiting period under the HSR Act applicable to the purchase of Shares pursuant
to the Offer will expire at 11:59 p.m., New York City time, on April 10, 1997,
unless such waiting period is earlier terminated by the FTC and the Antitrust
Division or extended by a request from the FTC or the Antitrust Division for
additional information or documentary material prior to the expiration of the
waiting period. If either the FTC or the Antitrust Division were to request
additional information or documentary material from ESI and/or the Company
with respect to the Offer, the waiting period with respect to the Offer would
expire at 11:59 p.m., New York City time, on the tenth calendar day after the
date of substantial compliance by ESI and the Company with such request.
Thereafter, the waiting period could be extended only by court order. If the
acquisition of Shares is delayed pursuant to a request by the FTC or the
Antitrust Division for additional information or documentary material pursuant
to the HSR Act, the Offer may, but need not, be extended and, in any event,
the purchase of and payment for Shares will be deferred until 10 days after
the request is substantially complied with, unless the
28
<PAGE>
extended period expires on or before the date when the initial 15-day period
would otherwise have expired, or unless the waiting period is sooner
terminated by the FTC and the Antitrust Division. Only one extension of such
waiting period pursuant to a request for additional information is authorized
by the HSR Act and the rules promulgated thereunder, except by court order.
Any such extension of the waiting period will not give rise to any withdrawal
rights not otherwise provided for by applicable law. See Section 4. It is a
condition to the Offer that the waiting period applicable under the HSR Act to
the Offer expire or be terminated. See Section 2 and Section 14.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares
by Purchaser pursuant to the Offer. At any time before or after the purchase
of Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems necessary
or desirable in the public interest, including seeking to enjoin the purchase
of Shares pursuant to the Offer or seeking the divestiture of Shares purchased
by Purchaser or the divestiture of substantial assets of ESI, the Company or
their respective subsidiaries. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances. Based upon an examination of information available to ESI
relating to the businesses in which ESI, the Company and their respective
subsidiaries are engaged, ESI and Purchaser believe that the Offer and the
Merger will not violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such a challenge is made, what the result would be. See Section 14 for
certain conditions to the Offer.
16. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Lehman has been retained on an exclusive basis to render financial advisory
services in connection with the Offer and the Merger. In addition, Lehman has
been engaged to act as Dealer Manager in connection with the Offer. Lehman
will be paid $2 million in connection with such engagements upon successful
completion of the transactions contemplated by the Merger Agreement. Lehman
will also be reimbursed for its reasonable fees and expenses and has been
granted customary indemnity.
MacKenzie Partners, Inc. has been retained to serve as the Information Agent
in connection with the Offer. The Information Agent will be paid approximately
$7,500 in fees for its services, will be reimbursed for reasonable out-of-
pocket expenses and has been provided with customary indemnity. The
Information Agent may contact holders of Shares by mail, telephone, telex,
telecopy, telegraph or personal interview and may request banks, brokers,
dealers and other nominee stockholders to forward materials relating to the
Offer to beneficial owners.
Citibank, N.A. has been retained as the Depository in connection with the
Offer. The Depository will be paid reasonable and customary compensation for
its services in connection with the Offer, will be reimbursed for its
reasonable out-of-pocket expenses in connection therewith and has been
provided with customary indemnity for certain liabilities and expenses in
connection therewith. In addition, brokers, dealers, commercial banks and
trust companies will be reimbursed for customary handling and mailing expenses
incurred by them in forwarding material to their customers.
17. EMPLOYMENT AGREEMENTS. Contemporaneously with the execution of the
Merger Agreement on March 23, 1997, the Company and each of Steven D. Goldby,
Thomas D. Jones, John J. Hanlon and Dan E. Kingman (collectively with John
Priestley, the "Employees") entered into employment agreements (the
"Employment Agreements"). Messrs. Goldby, Jones, Hanlon and Kingman currently
serve as the Company's Chief Executive Officer, President and Chief Operating
Officer, Senior Vice President and Chief Financial Officer and Vice President
of Human Resources, respectively. With the exception of Mr. Goldby's three
year term, each of the Employment Agreements is for a two year term. The
Employment Agreements are automatically extended for additional one-year
periods unless six months' advance notice of non-renewal is given by either
party. The Employment Agreements provide for an annual salary ($360,000 for
Mr. Goldby, $285,000
29
<PAGE>
for Mr. Jones, $165,000 for Mr. Hanlon and $134,000 for Mr. Kingman) as well
as an annual car allowance ($15,000 for Mr. Goldby, and $12,000 for each of
the other Employees). Each Employment Agreement contemplates an annual bonus
based on the Company's achievement of certain milestones. In addition, the
Employment Agreements provide for a retention bonus that is due and payable to
each Executive Officer upon the consummation of the Offer in an amount equal
to the Executive Officer's annual salary (with the exception of Mr. Kingman,
whose retention bonus is $50,000).
The Company and John Priestley, the Company's Senior Vice President of Sales
and Services, have reached an understanding with respect to the principal
terms of a two-year employment agreement (the "Proposed Employment
Agreement"). The Proposed Employment Agreement will automatically extend for
additional one-year periods unless six months' advance notice of non-renewal
is given by either party. The Proposed Employment Agreement provides for an
annual salary of $180,000, a $12,000 annual car allowance and a bonus not in
excess of $20,000 due and payable quarterly based on sales objectives. In
addition, the Proposed Employment Agreement provides for a retention bonus of
$50,000 that is due and payable to Mr. Priestley upon the consummation of the
Offer.
The Employment Agreements provide for severance benefits in the event that
an Employee's employment is terminated during the term of the Employment
Agreement or the Proposed Employment Agreement by the Company without cause or
in the event that an Employee resigns after a material reduction in his
responsibility, a reduction in his compensation in excess of 10%, or a
relocation in excess of 35 miles. The severance benefits include continuation
of salary, bonus and health care coverage for 24 months and full vesting of
all remaining payments attributable to options held by the Employee at the
time of the Merger. In addition, under the terms of the Proposed Employment
Agreement, in the event that Mr. Priestley's employment is terminated by the
Company without cause or he resigns for any of the reasons set forth in the
first sentence of this paragraph at the end of his two-year employment term or
at any time prior to the third anniversary of the consummation of the Offer,
then Mr. Priestley's severance benefits will also include full vesting of all
remaining payments attributable to options held by Mr. Priestley at the time
of the Merger. This description of the Employment Agreements and the Proposed
Employment Agreement is qualified in its entirety by reference to the
Employment Agreements and the Proposed Employment Agreement (which has not yet
been executed and is subject to further negotiation) which have been filed as
exhibits hereto and are incorporated herein by reference in their entirety.
18. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with any
such state statute. If, after such good faith effort, Purchaser cannot comply
with any such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser by the Dealer Manager or by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, ESI and Purchaser have filed with the Commission the Schedule
14D-1, together with exhibits, furnishing certain additional information with
respect to the Offer. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected at, and copies may be obtained from, the same
places and in the same manner as set forth in Section 7 (except that they will
not be available at the regional offices of the Commission).
Golden Gate Acquisition Corp.
March 28, 1997
30
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
ESI, PLC, NV AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PLC AND NV. The following table sets
forth the name, current business address, citizenship, position with PLC and NV
and present principal occupation or employment (if different), and material
occupations and positions, for the past five years (if different), of each
Director or executive officer of PLC and NV. Unless otherwise indicated each
such person (i) has held his Principal Occupation for the past five years and
(ii) has not been convicted in a criminal proceeding and has not been party to
a proceeding related to U.S. state and federal securities laws.
The directors and executive officers of each of PCL and NV are:
<TABLE>
<CAPTION>
PRINCIPAL OR RELATED
OCCUPATIONS
-------------------------------
ELSEVIER REED
NAME PLC* NV** REED ELSEVIER PLC FINANCE BV
--------------------- ---------------------- ------------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Herman Bruggink (NL) Non-executive Director Chairman of the Co-Chairman,
Executive Board Chairman of the
Executive
Committee
Nigel Stapleton (UK) Deputy Chairman Member of the Executive Co-Chairman, Member of
Board Chairman of the the
Executive Supervisory
Committee Board
John Mellon (UK) Executive Director Member of the Executive
Supervisory Board Director, Member
of the Executive
Committee
Paul Vlek (NL) Non-executive Director Deputy Chairman of the Executive Member of
Executive Board Director, Member the
of the Executive Supervisory
Committee Board
Mark Armour (UK) Finance Director Chief Financial
Officer
Neville Cusworth (UK) Member of the Executive Executive Director
Board
Herman Spruijt (NL) Member of the Executive Executive Director
Board
Richard Bodman (USA) Non-executive Director Non-executive
Director
Anthony Greener (UK) Non-executive Director Non-executive
Director
Paul Hamlyn (UK) Non-executive Director Non-executive
Director
Sir Christopher Non-executive Director Non-executive
Lewinton (UK) Director
Roelof Nelissen (NL) Member of the Non-executive
Supervisory Board Director
Albert Schuitemaker Member of the Non-executive
(NL) Supervisory Board Director
Loek van Vollenhoven Deputy Chairman of the Non-executive
(NL) Supervisory Board Director
Pierre Vinken (NL) Chairman of the Non-executive Chairman of
Supervisory Board Director the
Supervisory
Board
David Webster (UK) Non-executive Director Non-executive
Director
Cornelius Alberti Member of the Executive Managing
(NL) Board Director
Jules Van Dijck (NL) Member of the
Supervisory Board
Otto ter Haar (NL) Member of the
Supervisory Board
Ian Irvine (UK) Chairman Member of the
Supervisory Board
Robert van de Vijver Member of the Member of
(NL) Supervisory Board the
Supervisory
Board
Mark Radcliffe (UK) Company Secretary Company Secretary
Erik Ekker (NL) Company Secretary Legal Director
(Continental
Europe)
</TABLE>
- -------
* Business address: 6 Chesterfield Gardens, London W1A 1EJ, London, England.
** Business address: Van de Sande Bankhuyzenstraat 4, 1061 AG Amsterdam, the
Netherlands.
(NL) Citizen of the Netherlands.
(UK) Citizen of the United Kingdom of Great Britain and Northern Ireland.
(USA) Citizen of the United States of America.
I-1
<PAGE>
Mr. Bruggink became Co-Chairman of the Board of Reed Elsevier plc, Co-
Chairman of the Reed Elsevier Executive Committee ("REEC"), Chairman of the
Executive Board of NV and a non-executive director of PLC in April 1995,
having been an executive Director of Reed Elsevier plc and a member of the
Executive Board of NV since 1993. He joined NV in 1991. He will stand down as
a non-executive Director of PLC on April 16, 1997.
Mr. Stapleton became Co-Chairman of the Board of Reed Elsevier plc and Co-
Chairman of the REEC in July 1996. Prior to that he had been an ex-officio
member of the REEC and an executive Director and Chief Financial Officer of
Reed Elsevier plc since 1993. He is also a member of the Supervisory Board of
Elsevier Reed Finance BV, having been Deputy Chairman of the Board of Elsevier
Reed Finance BV since 1993. He is a member of the Executive Board of NV and
will resign from that position on April 16, 1997. Mr. Stapleton became Deputy
Chairman of PLC in June 1994, having been Finance Director since 1986, and
will become Chairman in April 1997. He is Chairman of Lexis-Nexis, Reed
Reference Publishing and Reed Technology and Information Services. Mr.
Stapleton joined PLC in 1986.
Mr. Mellon has been a member of the REEC since June 1994 and a member of the
Supervisory Board of NV since April 1995, having been an executive Director of
Reed Elsevier plc since 1993. He has been an executive Director of PLC since
January 1990. Mr. Mellon is Chairman of IPC Magazines and Reed Business
Publishing. He joined PLC in 1968.
Mr. Vlek became Deputy Chairman of the Executive Board of NV in April 1995
and became a member of the REEC and a non-executive director of PLC in
November 1995, having been an executive Director of Reed Elsevier plc since
1993 and a member of the Executive Board of NV since 1991. He has been a
member of the Supervisory Board of Elsevier Reed Finance BV since July 1996.
He joined NV in 1973.
Mr. Armour was appointed Finance Director of PLC and Chief Financial Officer
of Reed Elsevier plc in July 1996, having been Deputy Chief Financial Officer
of Reed Elsevier plc since February 1995. He was previously a partner in Price
Waterhouse, Chartered Accountants.
Mr. Cusworth became an executive director of Reed Elsevier plc and a member
of the Executive Board of NV in April 1995. He is Chairman of the Reed
Elsevier Legal Division, having joined PLC in 1967.
Mr. Spruijt became an executive director of Reed Elsevier plc and a member
of the Executive Board of NV in April 1995. He is Chairman of Elsevier
Science, having joined Elsevier in 1987.
Mr. Bodman has been a non-executive Director of PLC and Reed Elsevier plc
since May 1996. He is Managing General Partner at AT&T Ventures.
Mr. Greener has been a non-executive Director of Reed Elsevier plc since
1993 and a non-executive Director of PLC since 1990. He is Executive Chairman
of Guinness PLC and he is a Director of LVMH.
Mr. Hamlyn has been a non-executive Director of Reed Elsevier plc since 1993
and a Director of PLC since 1987. He is Chairman of Reed International Books.
He was the founder of the Hamlyn Group and the Octopus Publishing Group.
Sir Christopher Lewinton has been a non-executive Director of Reed Elsevier
plc since 1993 and a non-executive Director of PLC since 1990. He is Chairman
and Chief Executive of TI Group plc.
Mr. Nelissen has been a non-executive Director of Reed Elsevier plc since
1993. He has been a member of the Supervisory Board of NV since 1990. Mr.
Nelissen is a member of the Supervisory Boards of ABN AMRO Bank and Ahold.
Mr. Schuitemaker has been a non-executive Director of Reed Elsevier plc
since 1993. He has been a member of the Supervisory Board of NV since 1972 and
was Chairman from 1990 until April 1995. He will retire as a non-executive
Director of Reed Elsevier plc and member of the Supervisory Board of NV in
April 1997. Mr. Schuitemaker is a member of the Supervisory Board of Sarah
Lee/Douwe Egberts and SHV Holdings.
I-2
<PAGE>
Mr. van Vollenhoven has been a non-executive Director of Reed Elsevier plc
since November 1995, having been an executive Director of Reed Elsevier plc, a
member of the REEC and a non-executive Director of PLC since 1993 until
November 1995. Mr. van Vollenhoven has been a member of the Supervisory Board
of NV since November 1995 having been, until that date, a member of the
Executive Board since 1982 and the Deputy Chairman of the Executive Board
since 1987. He joined NV in 1977.
Mr. Vinken has been Chairman of the Supervisory Board of NV and a non-
executive Director of Reed Elsevier plc since April 1995, having been Co-
Chairman of the Board of Reed Elsevier plc and Co-Chairman of the REEC and a
non-executive Director of PLC since 1993 until April 1995. Mr. Vinken was a
member of the Executive Board of NV from 1972 and was the Chairman of the
Executive Board of NV from 1979 until April 1995. He is Chairman of the
Supervisory Board of Elsevier Reed Finance BV. Mr. Vinken joined NV in 1971.
He is also Chairman of the Supervisory Board of MeesPierson, a non-executive
director of Logica and a member of the Supervisory Board of other Dutch
companies.
Mr. Webster has been a non-executive Director of Reed Elsevier plc since
1993 and a non-executive Director of PLC since 1992. He is Chairman-elect of
Safeway.
Mr. Alberti has been a member of the Executive Board of NV since 1984 and
Managing Director of Elsevier Reed Finance BV since 1993. He was an executive
Director of Reed Elsevier plc since 1993 until December 1996. He joined NV in
1978 and was Chief Financial Officer from 1978 to 1984.
Mr. van Dijck has been a member of the Supervisory Board of NV since 1984.
He is professor of Industrial and Organizational Sociology at the University
of Tilburg. Mr. van Dijck is a member of the Supervisory Board of ABN AMRO
Bank, Hoechst Holland and Dutch Philips Industries.
Mr. ter Haar has been a member of the Supervisory Board of NV since 1990. He
was previously a member of the Executive Board of NV, with responsibility for
Elsevier Science.
Mr. Irvine has been Chairman of PLC since June 1994, having been Deputy
Chairman from January 1993 to June 1994. He has been a member of the
Supervisory Board of NV since 1993. He was Co-Chairman of the Board of Reed
Elsevier plc and Co-Chairman of the REEC from June 1994 until July 1996,
having previously been executive Director of Reed Elsevier plc and a member of
the REEC since 1993. He will retire as Chairman of PLC and a member of the
Supervisory Board of NV in April 1997.
Mr. van de Vijver has been a member of the Supervisory Board of NV since
1984, and was a non-executive director of Reed Elsevier plc from 1993 until
November 1995. He has been a member of the Supervisory Board of Elsevier Reed
Finance BV since July 1995. He will rejoin the Reed Elsevier plc Board as a
non-executive director in April 1997. He is a senior partner of the law firm
Loeff Claeys Verbeke (Amsterdam) and a member of the Supervisory Board of KNP
BT and of Krasnapolsky.
Mr. Radcliffe, an English Barrister, has been Company Secretary and Director
of Corporate Services of Reed Elsevier plc and Company Secretary of PLC since
1995. Prior to his appointment he was Company Secretary and Director of
Corporate Services of Reed International Books.
Mr. Ekker, a Dutch lawyer, has been Legal Director (Continental Europe) of
Reed Elsevier plc since 1993. He has been Company Secretary of NV since 1989.
Mr. Ekker joined NV in 1997 as legal counsel.
I-3
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF ESI. The following table sets forth
the name, current business address, citizenship, position with ESI, present
principal occupation or employment (if different), and material occupations,
positions, offices or employments and business addresses thereof for the past
five years (if different), of each member of the Board of Directors and
executive officer of ESI. Unless otherwise indicated each such person (i) has
held his Principal Occupation for the past five years, (ii) is a citizen of
the United States and (iii) has not been convicted in a criminal proceeding
and has not been party to a proceeding related to state and federal securities
laws.
<TABLE>
<CAPTION>
POSITION WITH
NAME ESI PRINCIPAL OCCUPATION PRIOR POSITION BUSINESS ADDRESS
- -------------------- --------------- ---------------------- ---------------- --------------------------
<S> <C> <C> <C> <C>
Herman P. Spruijt* Chairman and Chairman and Chief Sara Burgerhartstraat 25
Director (since Executive, Elsevier 1055 KV Amsterdam
1995) Science B.V. (since The Netherlands
1990)
Russell C. White President and President, 655 Avenue of the Americas
Director (since Warren Gorham & New York, NY 10010-5107
1996) Lamont, 1993-
1995; executive
with McGraw-
Hill,
1978-1993
James E. Rowan Senior Vice 655 Avenue of the Americas
President- New York, NY 10010-5107
Finance,
Assistant
Treasurer and
Director
Vera J. Lang Treasurer Treasurer/Director of Director of 200 Park Avenue
(since 1996) Financial Services, Financial 17th Floor
Reed Elsevier Inc. Accounting and New York, NY 10166
(since 1995) Controls, Reed
Travel Group
division of Reed
Elsevier Inc.,
1995. Audit
Manager, Price
Waterhouse LLP
1987-1994
Charles P. Fontaine, Assistant Tax Director, Reed Senior Tax 275 Washington Street
Esq. Treasurer Elsevier Inc. (since Counsel, Reed Newton, MA 02158-1630
(since 1996) 1993) Elsevier Inc.,
1991-1993
Henry Z. Secretary Vice President, 275 Washington Street
Horbaczewski, Esq. (since 1996) General Counsel, and Newton, MA 02158-1630
Secretary, Reed
Elsevier Inc.
Mark L. Seeley, Esq. Assistant General Legal Counsel, Associate Sara Burgerhartstraat 25
Secretary Elsevier Science B.V. Counsel 1055 KV Amsterdam
(since 1997) (since 1995) (1993-1995); The Netherlands
Intellectual
Property Manager
(1989-1993),
Reed Elsevier
Inc.
</TABLE>
- -------
* Netherlands citizen
I-4
<PAGE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name, current business address, citizenship, position with
Purchaser, present principal occupation or employment (if different), and
material occupations, positions, offices or employments and business addresses
thereof for the past five years (if different), of each member of the Board of
Directors and executive officer of Purchaser. Unless otherwise indicated each
such person (i) has held his Principal Occupation for the past five years,
(ii) is a citizen of the United States and (iii) has not been convicted in a
criminal proceeding and has not been party to a proceeding related to state
and federal securities laws.
<TABLE>
<CAPTION>
POSITION WITH
NAME PURCHASER PRINCIPAL OCCUPATION PRIOR POSITION BUSINESS ADDRESS
- -------------------- --------------- ---------------------- ---------------- --------------------------
<S> <C> <C> <C> <C>
Herman P. Spruijt* Chairman and Chairman and Chief Sara Burgerhartstraat 25
Director (since Executive, Elsevier 1055 KV Amsterdam
1997) Science B.V. (since The Netherlands
1990)
I. Malcolm Highet** President and Executive Vice- Chief Financial 200 Park Avenue
Director (since President--Corporate Officer, Reed 17th Floor
1997) Development, Reed Travel Group New York, NY 10166
Elsevier Inc. (since division of Reed
1996) Elsevier Inc.
(1990 to 1996)
Russell C. White Director (since President and President, 655 Avenue of the Americas
1997) Director, Elsevier Warren Gorham & New York, NY 10010-5107
Science Inc. (since Lamont, 1993-
1996) 1995; executive
with McGraw-
Hill,
1978-1993
James E. Rowan Vice Senior Vice President, 655 Avenue of the Americas
President-- Finance, Assistant New York, NY 10010-5107
Finance (since Treasurer and
1997) Director, Elsevier
Science, Inc.
Vera J. Lang Treasurer Treasurer/Director of Director of 200 Park Avenue
(since 1997) Financial Services, Financial 17th Floor
Reed Elsevier Inc. Accounting and New York, NY 10166
(since 1995) Controls, Reed
Travel Group
division of Reed
Elsevier Inc.,
1995. Audit
Manager, Price
Waterhouse LLP
1987-1994
Charles P. Fontaine, Assistant Tax Director, Reed Senior Tax 275 Washington Street
Esq. Treasurer Elsevier Inc. (since Counsel, Reed Newton, MA 02158-1630
(since 1997) 1993) Elsevier Inc.,
1991-1993
Henry Z. Vice President Vice President, 275 Washington Street
Horbaczewski, Esq. and Secretary General Counsel, and Newton, MA 02158-1630
(since 1997) Secretary, Reed
Elsevier Inc.
Mark L. Seeley, Esq. Assistant General Legal Counsel, Associate Sara Burgerhartstraat 25
Secretary Elsevier Science B.V. Counsel 1055 KV Amsterdam
(since 1997) (since 1995) (1993-1995); The Netherlands
Intellectual
Property Manager
(1989-1993),
Reed Elsevier
Inc.
Ralph E. Knupp Vice President Vice President--Human 255 Washington Street
Resources, Reed Newton, MA 02158-1630
Elsevier Inc. (since
1989)
</TABLE>
- -------
* Netherlands citizen
** New Zealand citizen
I-5
<PAGE>
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<CAPTION>
BY MAIL: BY OVERNIGHT CARRIER: BY HAND:
<S> <C> <C>
Citibank, N.A. Citibank, N.A. Citibank, N.A.
c/o Citicorp Data c/o Citicorp Data Corporate Trust Window
Distribution, Distribution, Inc. 111 Wall Street, 5th Floor
Inc. 404 Sette Drive New York, NY 10043
P.O. Box 7072 Paramus, NJ 07652
Paramus, NJ 07653
</TABLE>
Facsimile for Eligible Institutions: (201) 262-3240
To confirm by telephone: (800) 422-2066
Questions or requests for assistance may be directed to the Information Agent
at its address and telephone numbers listed below or to the Dealer Manager at
its address and telephone numbers listed below. Additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be obtained from the Information Agent. A stockholder may also contact
brokers, dealers, commercial banks or trust companies for assistance concerning
the Offer.
The Information Agent for the Offer is:
[Logo of Mackenzie Partners, Inc.]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
3 World Financial Center
New York, NY 10285
Call: (800) 438-3242
or
collect at (212) 526-3252
<PAGE>
EXHIBIT 99 (A)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
MDL INFORMATION SYSTEMS, INC.
PURSUANT TO THE OFFER TO PURCHASE DATED MARCH 28, 1997
AT
GOLDEN GATE ACQUISITION CORP.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
ELSEVIER SCIENCE INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
REED INTERNATIONAL P.L.C.
AND
ELSEVIER NV
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME,
ON THURSDAY, APRIL 24, 1997, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
CITIBANK, N.A.
By Mail: By Overnight Carrier: By Hand:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
c/o Citicorp Data c/o Citicorp Data Corporate Trust Window
Distribution, Inc. Distribution, Inc. 111 Wall Street, 5th
P.O. Box 7072 404 Sette Drive Floor
Paramus, NJ 07653 Paramus, NJ 07652 New York, NY 10043
Facsimile for Eligible Institutions:
(201) 262-3240
To confirm by telephone:
(800) 422-2066
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ CAREFULLY THE
ACCOMPANYING INSTRUCTIONS.
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S)
APPEAR(S) ON SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL NUMBER OF
SHARE SHARES EVIDENCED
CERTIFICATE BY SHARE NUMBER OF SHARES
NUMBER(S) CERTIFICATE(S)* TENDERED**
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
----------------------------------------------------------
TOTAL SHARES
- -------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by each Share Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
<PAGE>
This Letter of Transmittal is to be completed by stockholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or, unless an Agent's Message (as defined in the Offer to Purchase) is
utilized, if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC") or the
Philadelphia Depository Trust Company ("PDTC") (each a "Book-Entry Transfer
Facility" and collectively, the "Book-Entry Transfer Facilities") pursuant to
the book-entry transfer procedure described in Section 3 of the Offer to
Purchase (as defined below). DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. See Instruction 2.
Stockholders whose certificates evidencing Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and
all other documents required hereby to the Depositary prior to the Expiration
Date (as defined in Section 1 of the Offer to Purchase) or who cannot complete
the procedure for delivery by book-entry transfer on a timely basis and who
wish to tender their Shares must do so pursuant to the guaranteed delivery
procedure described in Section 3 of the Offer to Purchase. See Instruction 2.
[_] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER FACILITIES AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution _________________________________________________
Check Box of Applicable Book-Entry Transfer Facility:
(check one)
[_] DTC [_] PDTC
Account Number ________________________________________________________________
Transaction Code Number _______________________________________________________
[_] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) _______________________________________________
Window Ticket No. (if any) ____________________________________________________
Date of Execution of Notice of Guaranteed Delivery ____________________________
Name of Institution which Guaranteed Delivery _________________________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF
TRANSMITTAL CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Golden Gate Acquisition Corp., a Delaware
corporation ("Purchaser"), a direct wholly owned subsidiary of Elsevier
Science Inc., a New York corporation, and an indirect wholly owned subsidiary
of (i) Reed International P.L.C., a corporation organized under the laws of
England ("PLC") and (ii) Elsevier NV, a corporation organized under the laws
of The Netherlands ("NV"), the above-described shares of common stock, par
value $.01 per share (the "Shares"), of MDL Information Systems, Inc., a
Delaware corporation (the "Company"), pursuant to Purchaser's offer to
purchase all Shares at $32 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer to Purchase, dated
March 28, 1997 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together constitute the
"Offer"). The undersigned understands that Purchaser reserves the right to
transfer or assign, in whole or, from time to time, in part, to one or more of
its affiliates, the right to purchase all or any portion of the Shares
tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed
in respect of such Shares on or after March 23, 1997 (collectively,
"Distributions"), and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares and
all Distributions, with full power of substitution (such power of attorney
being deemed to be an irrevocable power coupled with an interest), to (i)
deliver Share Certificates evidencing such Shares and all Distributions, or
transfer ownership of such Shares and all Distributions on the account books
maintained by a Book-Entry Transfer Facility, together, in either case, with
all accompanying evidences of transfer and authenticity, to or upon the order
of Purchaser, (ii) present such Shares and all Distributions for transfer on
the books of the Company and (iii) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Shares and all Distributions, all
in accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Henry Horbaczewski and Mark
Seeley, and each of them, as the attorneys and proxies of the undersigned,
each with full power of substitution, to vote in such manner as each such
attorney and proxy or his or her substitute shall, in his or her sole
discretion, deem proper and otherwise act (by written consent or otherwise)
with respect to all the Shares tendered hereby which have been accepted for
payment by Purchaser prior to the time of such vote or other action and all
Shares and other securities issued in Distributions in respect of such Shares,
which the undersigned is entitled to vote at any meeting of stockholders of
the Company (whether annual or special and whether or not an adjourned or
postponed meeting) or consent in lieu of any such meeting or otherwise. This
proxy and power of attorney is coupled with an interest in the Shares tendered
hereby, is irrevocable and is granted in consideration of, and is effective
upon, the acceptance for payment of such Shares by Purchaser in accordance
with other terms of the Offer. Such acceptance for payment shall revoke all
other proxies and powers of attorney granted by the undersigned at any time
with respect to such Shares (and all Shares and other securities issued in
Distributions in respect of such Shares), and no subsequent proxy or power of
attorney shall be given or written consent executed (and if given or executed,
shall not be effective) by the undersigned with respect thereto. The
undersigned understands that, in order for Shares to be deemed validly
tendered, immediately upon Purchaser's acceptance of such Shares for payment,
Purchaser must be able to exercise full voting and other rights with respect
to such Shares and all Distributions, including, without limitation, voting at
any meeting of the Company's stockholders then scheduled.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby and all Distributions, that when such Shares are accepted for payment
by Purchaser, Purchaser will acquire good, marketable and unencumbered title
thereto and to all Distributions, free and clear of all liens, restriction,
charges and encumbrances, and that none of such Shares and Distributions will
be subject to any adverse claim. The undersigned, upon request, shall execute
and deliver all additional documents deemed to be necessary or advisable to
complete the sale, the assignment and transfer of the Shares tendered hereby
and all Distributions. In addition, the undersigned shall remit and transfer
promptly to the Depositary for the account of Purchaser all Distributions in
respect of the Shares tendered hereby, accompanied by appropriate
documentation of transfer, and pending such remittance and transfer or
appropriate assurance thereof, Purchaser shall be entitled to all rights and
privileges as owner of each such Distribution and may withhold the entire
purchase price of the Shares tendered hereby, or deduct from such purchase
price, the amount or value of such Distribution as determined by Purchaser in
its sole discretion.
<PAGE>
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as stated in the Offer to Purchase, this tender is
irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. Purchaser's acceptance of such Shares for payment
will constitute a binding agreement between the undersigned and Purchaser upon
the terms and subject to the conditions of the Offer.
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased
or not tendered in the name(s) of the registered holder(s) appearing above
under "Description of Shares Tendered". Similarly, unless otherwise indicated
in the box entitled "Special Delivery Instructions", please mail the check for
the purchase price of all Shares purchased and all Share Certificates
evidencing Shares not tendered or not purchased (and accompanying documents,
as appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares
purchased and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of, and mail such check and Share Certificates to,
the person(s) so indicated. Unless otherwise indicated herein in the box
entitled "Special Payment Instructions", please credit any Shares tendered
hereby and delivered by book-entry transfer, but which are not purchased, by
crediting the account at the Book-Entry Transfer Facility designated above.
The undersigned recognizes that Purchaser has no obligation, pursuant to the
Special Payment Instructions, to transfer any Shares from the name of the
registered holder(s) thereof if Purchaser does not purchase any of the Shares
tendered hereby.
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6, AND 7) (INSTRUCTIONS 1, 5, 6, AND 7)
To be completed ONLY If the check To be completed ONLY If the check
for the purchase price of Shares or for the purchase price of Shares
Share Certificates evidencing purchased or Share Certificates
Shares not tendered or not purchase evidencing Shares not tendered or
to be issued in the name of someone not purchased are to be mailed to
other than the undersigned, or if someone other than the undersigned,
Shares tendered hereby and or to the undersigned at an address
delivered by book-entry transfer other than that shown under
which are not purchased are to be "Description of Shares Tendered."
returned by credit to an account at
one of the Book-Entry Transfer
Facilities other than that
designated above.
Mail [_] Check [_] Share
Certificate(s) to:
Name: ______________________________
(PLEASE PRINT)
Issue [_] Check [_] Share Address: ___________________________
Certificate(s) to: (ZIP CODE)
Name: ______________________________ ____________________________________
(PLEASE PRINT) Taxpayer Identification or Social
Address: ___________________________ Security Number
(ZIP CODE) (see substitute Form W-9 on reverse
____________________________________ side)
Taxpayer Identification or Social
Security Number
(see substitute Form W-9 on reverse
side)
[_] Credit shares delivered by
book-entry transfer and not
purchased to the account set
forth below:
Check appropriate box:
[_] DTC [_] PDTC
Account Number: ____________________
<PAGE>
IMPORTANT
STOCKHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
________________________________________
________________________________________
(SIGNATURE(S) OR HOLDER(S))
Dated: _________________________________________________________________, 1997
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing or by a person(s) authorized
to become registered holder(s) by certificates and documents transmitted
herewith. If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please provide the following
information and see Instruction 5).
Name(s): _____________________________________________________________________
______________________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _______________________________________________________
Address: _____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: _________________________________________________
Tax Identification or Social Security No.: ___________________________________
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURES(S)
(SEE INSTRUCTION 1 AND 5)
Authorized Signature: ________________________________________________________
Name: ________________________________________________________________________
(PLEASE PRINT)
Title: _______________________________________________________________________
Name of Firm: ________________________________________________________________
Address: _____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number: ______________________________________________
Date: ________________________________________________________________________
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or by a commercial bank or trust company having an office or
correspondent in the United States (each of the foregoing being referred to as
an "Eligible Institution"), unless (i) this Letter of Transmittal is signed by
the registered holder(s) of the Shares (which term, for purposes of this
document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares)
tendered hereby and such holder(s) has (have) completed neither the box
entitled "Special Payment Instructions" nor the box entitled "Special Delivery
Instructions" on the reverse hereof or (ii) such Shares are tendered for the
account of an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES. This Letter of
Transmittal is to be used either if Share Certificates are to be forwarded
herewith or, unless an Agent's Message is utilized, if Shares are to be
delivered by book-entry transfer pursuant to the procedure set forth in
Section 3 of the Offer to Purchase. Share Certificates evidencing all
physically tendered Shares, or a confirmation of a book-entry transfer into
the Depositary's account at a Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer as well as a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message in the case of a book-entry
delivery, and any other documents required by this Letter of Transmittal, must
be received by the Depositary at one of its addresses set forth on the reverse
hereof prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase). If Share Certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Stockholders whose Share Certificates are not
immediately available, who cannot deliver their Share Certificates and all
other required documents to the Depositary prior to the Expiration Date or who
cannot complete the procedure for delivery by book-entry transfer on a timely
basis may tender their Shares pursuant to the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase. Pursuant to such procedure:
(i) such tender must be made by or through an Eligible Institution; (ii) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by Purchaser, must be received by the
Depositary prior to the Expiration Date; and (iii) the Share Certificates
evidencing all physically delivered Shares in proper form for transfer by
delivery, or a confirmation of a book-entry transfer into the Depositary's
account at a Book-Entry Transfer Facility of all Shares delivered by book-
entry transfer, in each case together with a Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of book-entry delivery, an Agent's
Message), and any other documents required by this Letter of Transmittal, must
be received by the Depositary within three National Association of Securities
Dealers Automated Quotation--National Market System trading days after the
date of execution of such Notice of Guaranteed Delivery, all as described in
Section 3 of the Offer to Purchase.
The method of delivery of this Letter of Transmittal, Share Certificates and
all other required documents, including delivery through any Book-Entry
Transfer Facility, is at the option and risk of the tendering stockholder, and
the delivery will be deemed made only when actually received by the
Depositary. If delivery is by mail, registered mail with return receipt
requested, properly insured, is recommended. In all cases, sufficient time
should be allowed to ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of
Transmittal (or a facsimile hereof), all tendering stockholders waive any
right to receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If fewer than all the Shares evidenced by any Share Certificate
delivered to the Depositary herewith are to be tendered hereby, fill in the
number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered". In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates
delivered to the Depositary herewith will be sent to the person(s) signing
this Letter of Transmittal, unless otherwise provided in the box entitled
"Special Delivery Instructions" on the reverse hereof, as soon as practicable
after the expiration or termination of the Offer. All Shares evidenced by
Share Certificates delivered to the Depositary will be deemed to have been
tendered unless otherwise indicated.
<PAGE>
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the Share Certificates evidencing such Shares without
alteration, enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate
stock powers are required, unless payment is to be made to, or Share
Certificates evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), in which case,
the Share Certificate(s) evidencing the Shares tendered hereby must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on such Share
Certificate(s). Signatures on such Share Certificate(s) and stock powers must
be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on
such Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of such person's authority so to act
must be submitted.
6. STOCK TRANSFER TAXES. Except as otherwise provided in this Instruction 6,
Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or
Share Certificate(s) evidencing Shares not tendered or not purchased are to be
issued in the name of, a person other than the registered holder(s), the
amount of any stock transfer taxes (whether imposed on the registered
holder(s), such other person or otherwise) payable on account of the transfer
to such other person will be deducted from the purchase price of such Shares
purchased, unless evidence satisfactory to Purchaser of the payment of such
taxes, or exemption therefrom, is submitted. Except as provided in this
Instruction 6, it will not be necessary for transfer tax stamps to be affixed
to the Share Certificates evidencing the Shares tendered hereby.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name
of a person other than the person(s) signing this Letter of Transmittal or if
such check or any such Share Certificate is to be sent to someone other than
the person(s) signing this Letter of Transmittal or to the person(s) signing
this Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the
appropriate boxes on the reverse of this Letter of Transmittal must be
completed. Stockholders delivering Shares tendered hereby by book-entry
transfer may request that Shares not purchased be credited to such account
maintained at a Book-Entry Transfer Facility as such stockholder may designate
in the box entitled "Special Payment Instructions" on the reverse hereof. If
no such instructions are given, all such Shares not purchased will be returned
by crediting the account at the Book-Entry Transfer Facility designated on the
reverse hereof as the account from which such Shares were delivered.
8. QUESTIONS AND REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and
requests for assistance may be directed to the Information Agent at its
address or telephone numbers set forth below or to the Dealer Manager at its
address or telephone number set forth below. Additional copies of the Offer to
Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be obtained from the Information Agent or from brokers, dealers, commercial
banks or trust companies.
<PAGE>
9. SUBSTITUTE FORM W-9. Under the federal income tax law, a stockholder
whose tendered Shares are accepted for payment is required by law to provide
the Depositary (as payer) with such stockholder's correct TIN on Substitute
Form W-9 below. If such stockholder is an individual, the TIN is such
stockholder's social security number. If the Depositary is not provided with
the correct TIN, the stockholder may be subject to a $50 penalty imposed by
the Internal Revenue Service. In addition, payments that are made to such
stockholder with respect to Shares purchased pursuant to the Offer may be
subject to backup withholding. If backup withholding applies, the Depositary
is required to withhold 31% of any payments made to the stockholder. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained
from the Internal Revenue Service.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit an Internal Revenue Service Form W-8,
signed under penalties of perjury, attesting to such individual's exempt
status. A form W-8 can be obtained from the Depositary. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form below certifying that the TIN provided on Substitute Form
W-9 is correct (or that such stockholder is awaiting a TIN), and that (i) such
stockholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of a failure to report all interest
or dividends or (ii) the Internal Revenue Service has notified such
stockholder that such stockholder is no longer subject to backup withholding.
See the enclosed "Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9" for additional instructions.
PAYER'S NAME:
- -------------------------------------------------------------------------------
PART I--Taxpayer
SUBSTITUTE Identification Number--For ________________________
FORM W-9 all accounts, enter Social Security Number
DEPARTMENT OF taxpayer identification OR _____________________
THE TREASURY number in the box at right. Employer Identification
INTERNAL REVENUE (For most individuals, this Number
SERVICE is your social security (If awaiting TIN write
PAYER'S REQUEST FOR number. If you do not have "Applied For")
TAXPAYER a number, see Obtaining a
IDENTIFICATION Number in the enclosed
NUMBER (TIN) Guidelines.) Certify by
signing and dating below.
NOTE: If the account is
in more than one name, see
the chart in the enlosed
Guidelines to determine
which number to give the
payer.
- -------------------------------------------------------------------------------
PART II--For Payees Exempt From Backup Withholding,
see the enclosed Guidelines and complete as instructed
therein.
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been
notified by the Internal Revenue Service (the "IRS") that I am subject to
backup withholding as a result of failure to report all interest or
dividends, or the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
of underreporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to
backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines.)
- -------------------------------------------------------------------------------
SIGNATURE _________________________________________________________ DATE , 199
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. FOR
ADDITIONAL DETAILS, PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9.
<PAGE>
IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF, PROPERLY
COMPLETED AND DULY EXECUTED, OR AN AGENT'S MESSAGE IN THE CASE OF A BOOK-ENTRY
DELIVERY (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES AND SHARE
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).
The Information Agent for the Offer is:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
Lehman Brothers
3 World Financial Center
New York, NY 10285
Call: (800) 438-3242
or
Collect at (212) 526-3252
March 28, 1997
<PAGE>
EXHIBIT 99(A)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
MDL INFORMATION SYSTEMS, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
This Notice of Guaranteed Delivery, or one substantially in the form hereof,
must be used to accept the Offer (as defined below) (i) if certificates
("Share Certificates") evidencing shares of common stock, par value $.01 per
share (the "Shares"), of MDL Information Systems, Inc., a Delaware corporation
(the "Company"), are not immediately available, (ii) if Share Certificates and
all other required documents cannot be delivered to Chemical Bank, as
Depositary (the "Depositary"), prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase (as defined below)) or (iii) if the
procedure for delivery by book-entry transfer cannot be completed on a timely
basis. This Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, telex or facsimile transmission to the Depositary.
See Section 3 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
CITIBANK, N.A.
By Mail: By Overnight Carrier: By Hand:
Citibank, N.A. Citibank, N.A. Citibank, N.A.
c/o Citicorp Data c/o Citicorp Data Corporate Trust Window
Distribution, Inc. Distribution, Inc. 111 Wall Street, 5th
P.O. Box 7072 404 Sette Drive Floor
Paramus, NJ 07653 Paramus, NJ 07652 New York, NY 10043
Facsimile for Eligible Institutions:
(201) 262-3240
To confirm by telephone:
(800) 422-2066
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION
OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Golden Gate Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Elsevier Science Inc., a New York
corporation, upon the terms and subject to the conditions set forth in the
Offer to Purchase, dated March 28, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer"), receipt
of each of which is hereby acknowledged, the number of Shares specified below
pursuant to the guaranteed delivery procedure described in Section 3 of the
Offer to Purchase.
_____________________________________
Number of Shares: ___________________ _____________________________________
SIGNATURE(S) OF HOLDER(S)
Certificate Nos. Dated: ________________________, 1997
(If Available):
Name(s) of Holders:
_____________________________________
_____________________________________ _____________________________________
_____________________________________
Check one box if Shares will be _____________________________________
delivered by book-entry transfer: PLEASE TYPE OR PRINT
_____________________________________
[_] The Depository Trust Company ADDRESS
[_] Philadelphia Depository Trust _____________________________________
Company ZIP CODE
_____________________________________
Account No. _________________________ AREA CODE AND TELEPHONE NO.
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or which is
a commercial bank or trust company having an office or correspondent in the
United States that is a member in good standing of the Securities Transfer
Agents Medallion Program the New York Stock Exchange Medallion Signature
Guarantee Program or the Stock Exchange Medallion Program, guarantees to
deliver to the Depositary, at one of its addresses set forth above, Share
Certificates evidencing the Shares tendered hereby, in proper form for
transfer, or confirmation of book-entry transfer of such Shares, into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company, in each case with delivery of a Letter of Transmittal
(or facsimile thereof) properly completed and duly executed, with any required
signature guarantees or an Agent's Message (as defined in the Offer to
Purchase) in the case of a book-entry delivery, and any other required
documents, all within three National Association of Securities Dealers
Automated Quotation--National Market System trading days of the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depository and must deliver the Letter of Transmittal and the
certificates for Shares to the Depository within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
_____________________________________ _____________________________________
NAME OF FIRM AUTHORIZED SIGNATURE
_____________________________________ Name: ________________________________
ADDRESS PLEASE TYPE OR PRINT
_____________________________________ ______________________________________
ZIP CODE TITLE
_____________________________________ Dated: _________________________, 1997
AREA CODE AND TELEPHONE NO.
DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE. SHARE CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT 99(A)(4)
LEHMAN BROTHERS
3 World Financial Center
New York, NY 10285
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MDL INFORMATION SYSTEMS, INC.
AT
$32 NET PER SHARE
BY
GOLDEN GATE ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
ELSEVIER SCIENCE INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
REED INTERNATIONAL P.L.C.
AND
ELSEVIER NV
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, APRIL 24, 1997
UNLESS THE OFFER IS EXTENDED.
March 28, 1997
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Golden Gate Acquisition Corp., a Delaware
corporation ("Purchaser"), a direct wholly owned subsidiary of Elsevier
Science Inc., a New York corporation ("ESI"), and an indirect wholly owned
subsidiary of (i) Reed International P.L.C., a corporation organized under the
laws of England ("PLC") and (ii) Elsevier NV, a corporation organized under
the laws of The Netherlands ("NV"), to act as Dealer Manager in connection
with Purchaser's offer to purchase all outstanding shares of common stock, par
value $.01 per share (the "Shares"), of MDL Information Systems, Inc., a
Delaware corporation (the "Company"), at a price of $32 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in
Purchaser's Offer to Purchase, dated March 28, 1997 (the "Offer to Purchase"),
and the related Letter of Transmittal (which together constitute the "Offer")
enclosed herewith. Please furnish copies of the enclosed materials to those of
your clients for whose accounts you hold Shares registered in your name or in
the name of your nominee.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT
NUMBER OF SHARES THAT, WHEN ADDED TO THE SHARES OWNED OF RECORD BY ESI OR ANY
OF ITS SUBSIDIARIES ON THE DATE HEREOF, SHALL CONSTITUTE A MAJORITY OF THE
THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS. THE OFFER IS ALSO
CONDITIONED UPON, AMONG OTHER THINGS, THE EXPIRATION OR TERMINATION OF ALL
WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTI-TRUST IMPROVEMENTS ACT OF
1976, AS AMENDED.
<PAGE>
Enclosed for your information and use are copies of the following documents:
1. Offer to Purchase, dated March 28, 1997;
2. Letter of Transmittal to be used by holders of Shares in accepting the
Offer and tendering Shares;
3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Shares and all other required documents are not immediately available or
cannot be delivered to Citibank, N.A. (the "Depositary") by the Expiration
Date (as defined in the Offer to Purchase) or if the procedure for book-
entry transfer cannot be completed by the Expiration Date;
4. A letter to stockholders of the Company from Steven D. Goldby, Chief
Executive Officer and Chairman of the Board of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company;
5. A letter which may be sent to your clients for whose accounts you hold
Shares registered in your name or in the name of your nominee, with space
provided for obtaining such clients' instructions with regard to the Offer;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. Return envelope addressed to the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, APRIL 24, 1997, UNLESS THE OFFER IS EXTENDED.
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (i) certificates
evidencing such Shares (or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at one of the Book-Entry Transfer
Facilities (as defined in the Offer to Purchase)), (ii) a Letter of
Transmittal (or facsimile thereof) properly completed and duly executed or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry delivery of Shares and (iii) any other required documents.
If a holder of Shares wishes to tender, but cannot deliver such holder's
certificates or other required documents, or cannot comply with the procedure
for book-entry transfer, prior to the expiration of the Offer, a tender of
Shares may be effected by following the guaranteed delivery procedure
described in Section 3 of the Offer to Purchase.
Purchaser will not pay any fees or commissions to any broker, dealer or
other person (other than the Dealer Manager, the Depositary and the
Information Agent as described in the Offer to Purchase) in connection with
the solicitation of tenders of Shares pursuant to the Offer. However,
Purchaser will reimburse you for customary mailing and handling expenses
incurred by you in forwarding any of the enclosed materials to your clients.
Purchaser will pay or cause to be paid any stock transfer taxes payable with
respect to the transfer of Shares to it, except as otherwise provided in
Instruction 6 of the Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed material may be obtained by contacting,
MacKenzie Partners, Inc. (the "Information Agent") at its address and
telephone numbers set forth on the back cover page of the Offer to Purchase.
Inquiries with respect to the Offer may also be addressed to Lehman Brothers
Inc. at the address and telephone numbers set forth on the back cover page of
the Offer to Purchase.
Very truly yours,
Lehman Brothers Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL AUTHORIZE YOU OR
ANY OTHER PERSON TO ACT ON BEHALF OF OR AS THE AGENT OF PLC, NV, ESI,
PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT OR THE
DEPOSITARY, OR OF ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO USE ANY DOCUMENT OR TO MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM
IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE
STATEMENTS CONTAINED THEREIN.
<PAGE>
EXHIBIT 99(A)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MDL INFORMATION SYSTEMS, INC.
AT
$32 NET PER SHARE
BY
GOLDEN GATE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ELSEVIER SCIENCE INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
REED INTERNATIONAL P.L.C.
AND
ELSEVIER NV
THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, APRIL 24, 1997,
UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are an Offer to Purchase dated March 28,
1997 (the "Offer to Purchase") and a related Letter of Transmittal (which
together constitute the "Offer") in connection with the offer by Golden Gate
Acquisition Corp., a Delaware corporation ("Purchaser"), a direct wholly owned
subsidiary of Elsevier Science Inc., a New York corporation ("ESI"), and an
indirect wholly owned subsidiary of (i) Reed International P.L.C., a
corporation organized under the laws of England ("PLC") and (ii) Elsevier NV,
a corporation organized under the laws of The Netherlands ("NV"), to purchase
all outstanding shares of common stock, par value $.01 per share (the
"Shares"), of MDL Information Systems, Inc., a Delaware corporation (the
"Company"), at a price of $32 per Share, net to the seller in cash, upon the
terms and subject to the conditions set forth in the Offer. Also enclosed is
the letter to stockholders of the Company from Steven D. Goldby, Chief
Executive Officer and Chairman of the Board of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company.
We are (or our nominee is) the holder of record of Shares held by us for
your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, upon the terms
and subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The tender price is $32 per Share, net to the seller in cash.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company unanimously has determined that
each of the Offer and the Merger (as defined in the Offer to Purchase) is
fair to, and in the best interests of, the stockholders of the Company, and
recommends that stockholders accept the Offer and tender their Shares
pursuant to the Offer.
<PAGE>
4. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Thursday, April 24, 1997, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration of the Offer at
least that number of Shares that shall constitute a majority of the then
outstanding Shares on a fully diluted basis (including, without limitation,
all Shares issuable upon the exercise of any options, warrants or rights).
The Offer is also conditioned upon, among other things, the expiration or
termination of all waiting periods under the Hart-Scott-Rodino Anti-Trust
Improvements Act of 1976, as amended. Stockholders are urged to read the
Offer to Purchase in its entirety for a description of all conditions to
the Offer and the other items set forth therein.
6. Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter
of Transmittal, stock transfer taxes with respect to the purchase of Shares
by Purchaser pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the instruction form contained
in this letter. An envelope in which to return your instructions to us is
enclosed. If you authorize the tender of your Shares, all such Shares will be
tendered unless otherwise specified in your instructions. YOUR INSTRUCTIONS
SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON
YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and is being made to all holders of Shares. Purchaser is not aware
of any jurisdiction where the making of the Offer is prohibited by
administrative or judicial action pursuant to any valid state statute. If
Purchaser becomes aware of any valid state statute prohibiting the making of
the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a
good faith effort to comply with any such state statute. If, after such good
faith effort, Purchaser cannot comply with any such state statute, the Offer
will not be made to (nor will tenders be accepted from or on behalf of) the
holders of Shares in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of Purchaser by Lehman
Brothers Inc. or one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING
SHARES OF COMMON STOCK OF MDL INFORMATION SYSTEMS, INC. BY GOLDEN GATE
ACQUISITION CORP.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated March 28, 1997 and the related Letter of Transmittal (which
together constitute the "Offer"), in connection with the offer by Golden Gate
Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
Elsevier Science Inc., a New York corporation, to purchase all outstanding
shares of common stock, par value $.01 per share (the "Shares"), of MDL
Information Systems, Inc., a Delaware corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) that are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer.
Number of Shares to be Tendered:_________ Shares*
Dated:____________________ , 1997
- -------------------------------------------------------------------------------
SIGN HERE
Signature(s): _______________________________________________________________
- -------------------------------------------------------------------------------
Please type or print name(s): _______________________________________________
- -------------------------------------------------------------------------------
Please type or print address: _______________________________________________
- -------------------------------------------------------------------------------
Area Code and Telephone Number: _____________________________________________
Taxpayer Identification or Social Security Number: __________________________
- -------------------------------------------------------------------------------
* Unless otherwise indicated, it will be assumed that all Shares held by us
for your account are to be tendered.
<PAGE>
EXHIBIT 99(A)(6)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
- -----------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one of
the
individuals(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4.a. The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner(1)
valid trust under State
law
5. Sole proprietorship The owner(3)
account
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF --
--------
<S> <C>
6. A valid trust, estate, or The legal entity
pension trust (Do not furnish
the identifying
number of the
personal
representative or
trustee unless
the legal entity
itself is not
designated in the
account
title.)(4)
7. Corporate account The corporation
8. Religious, charitable, or The organization
educational organization
account
9. Partnership The partnership
10. Association, club, or The organization
other tax-exempt
organization
11. A broker or registered The broker or
nominee nominee
12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State
or local government,
school district, or
prison) that receives
agricultural program
payments
</TABLE>
- ---------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER OF SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
.A corporation.
.A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S.
or a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a)
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not pro-
vided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends un-
der section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT
TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS,
ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend, inter-
est, or other payments to give taxpayer identification numbers to payers who
must report the payments to IRS. IRS uses the numbers for identification pur-
poses. Payers must be given the numbers whether or not recipients are required
to file tax returns. Payers must generally withhold 31% of taxable interest,
dividend, and certain other payments to a payee who does not furnish a tax-
payer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are sub-
ject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or im-
prisonment.
<PAGE>
EXHIBIT 99(A)(7)
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares. The Offer is made solely by the Offer to Purchase dated
March 28, 1997 and the related Letter of Transmittal, and is being made to
all holders of Shares. Purchaser is not aware of any State where the making
of the Offer is prohibited by administrative or judicial action pursuant to
any valid state statute. If Purchaser becomes aware of any valid state
statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with
such state statute. If, after such good faith effort, Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will
tenders be accepted from or on behalf of) the holders of Shares in
such state. In any jurisdiction where the securities, blue sky or
other laws require the Offer to be made by a licensed broker or
dealer, the Offer shall be deemed to be made on behalf of Purchaser
by Lehman Brothers Inc. or one or more registered brokers or
dealers licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MDL INFORMATION SYSTEMS, INC.
AT
$32 NET PER SHARE
BY
GOLDEN GATE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ELSEVIER SCIENCE INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
REED INTERNATIONAL P.L.C.
AND
ELSEVIER NV
Golden Gate Acquisition Corp., a Delaware corporation ("Purchaser"), a
direct wholly owned subsidiary of Elsevier Science Inc., a New York
corporation ("ESI"), and an indirect wholly owned subsidiary of (i) Reed
International P.L.C., a corporation organized under the laws of England
("PLC") and (ii) Elsevier NV, a corporation organized under the laws of The
Netherlands ("NV"), is offering to purchase all outstanding shares of Common
Stock, par value $.01 per share (the "Shares"), of MDL Information Systems,
Inc., a Delaware corporation (the "Company"), at a price of $32 per Share, net
to the seller in cash, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated March 28, 1997 (the "Offer to Purchase") and in
the related Letter of Transmittal (which together constitute the "Offer").
Following the Offer, Purchaser intends to effect the Merger described below.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, APRIL 24, 1997, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer at least that
number of Shares that shall constitute a majority of the then outstanding
Shares on a fully diluted basis. The Offer is also conditioned upon, among
other things, the expiration or termination of all waiting periods imposed
upon consummation of the Offer by the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the regulations thereunder as well as the other
conditions described in the Offer to Purchase.
<PAGE>
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 23, 1997 (the "Merger Agreement"), among ESI, Purchaser and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement and in
accordance with relevant provisions of the General Corporation Law of the
State of Delaware ("Delaware Law"), Purchaser will be merged with and into the
Company (the "Merger"). Following consummation of the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and will
become a wholly owned subsidiary of ESI. At the effective time of the Merger
(the "Effective Time"), each Share issued and outstanding immediately prior to
the Effective Time (other than Shares held in the treasury of the Company and
any Shares owned by Purchaser, ESI or any direct or indirect wholly owned
subsidiary of ESI or of the Company, and other than Shares held by
stockholders who shall have demanded and perfected appraisal rights, if any,
under Delaware Law) will be canceled and converted automatically into the
right to receive $32 in cash, or any higher price that may be paid per Share
in the Offer, without interest.
The Board of Directors of the Company has determined that each of the Offer
and the Merger is fair to, and in the best interests of, the stockholders of
the Company, and recommends that stockholders accept the Offer and tender
their Shares pursuant to the Offer.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to Citibank,
N.A. (the "Depositary") of Purchaser's acceptance for payment of such Shares
pursuant to the Offer. Upon the terms and subject to the conditions of the
Offer, payment for Shares accepted for payment pursuant to the Offer will be
made by deposit of the purchase price therefor with the Depositary, which will
act as agent for tendering stockholders for the purpose of receiving payments
from Purchaser and transmitting such payments to tendering stockholders whose
Shares have been accepted for payment. Under no circumstances will interest on
the purchase price for Shares be paid, regardless of any delay in making such
payment. In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) the certificates evidencing such Shares (the "Share Certificates") or
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities (as defined
in Section 2 of the Offer to Purchase) pursuant to the procedure set forth in
Section 3 of the Offer to Purchase, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees (or, in the case of a book-entry transfer, an Agent's
Message (as defined in the Offer to Purchase)) and (iii) any other documents
required under the Letter of Transmittal.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from
time to time, to extend for any reason the period of time during which the
Offer is open by giving oral or written notice of such extension to the
Depositary. Any such extension will be followed as promptly as practicable by
public announcement thereof, such announcement to be made no later than 9:00
a.m., New York City time, on the next business day after the previously
scheduled expiration date of the Offer. During any such extension, all Shares
previously tendered and not withdrawn will remain subject to the Offer,
subject to the rights of a tendering stockholder to withdraw such
stockholder's Shares.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to 12:00 Midnight, New York
City time, on Thursday, April 24, 1997 (or the latest time and date at which
the Offer, if extended by Purchaser, shall expire) and, unless theretofore
accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn
at any time after May 27, 1997. For the withdrawal to be effective, a written,
telegraphic, telex or facsimile transmission notice of withdrawal must be
timely received by the Depositary at one of its addresses set forth on the
back cover page of the Offer to Purchase. Any such notice of withdrawal must
specify the name of the person who tendered the Shares to be withdrawn, the
number of Shares to be withdrawn and the name of the registered holder of such
Shares, if different from that of the person who tendered such Shares. If
Share Certificates evidencing Shares to be withdrawn have been delivered or
otherwise identified to the Depositary, then, prior to the physical release of
such Share Certificates, the serial
2
<PAGE>
numbers shown on such Share Certificates must be submitted to the Depositary
and the signature(s) on the notice of withdrawal must be guaranteed by an
Eligible Institution (as defined in Section 3 of the Offer to Purchase),
unless such Shares have been tendered for the account of an Eligible
Institution. If Shares have been tendered pursuant to the procedure for book-
entry transfer as set forth in Section 3 of the Offer to Purchase, any notice
of withdrawal must specify the name and number of the account at the Book-
Entry Transfer Facility to be credited with the withdrawn Shares. All
questions as to the form and validity (including the time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares whose names appear on the Company's
stockholder list and will be furnished to brokers, dealers, commercial banks,
trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing for subsequent
transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information which should be read before any decision is made with
respect to the Offer.
Questions and requests for assistance or for additional copies of the Offer
to Purchase and the related Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or the Dealer Manager as
set forth below, and copies will be furnished promptly at Purchaser's expense.
No fees or commissions will be paid to brokers, dealers or other persons
(other than the Information Agent and the Dealer Manager) for soliciting
tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[Logo of MacKenzie Partners, Inc.]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
3 World Financial Center
New York, NY 10285
Call: (800) 438-3242
or
Collect at (212) 526-3252
March 28, 1997
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<PAGE>
EXHIBIT 99(A)(8)
PRESS RELEASE
FOR IMMEDIATE RELEASE
REED ELSEVIER ANNOUNCES AGREEMENT TO ACQUIRE
MDL INFORMATION SYSTEMS, INC. FOR $320 MILLION
Reed Elsevier plc and MDL Information Systems, Inc. (NASDAQ: MDLI) announced
today that Elsevier Science Inc., a US subsidiary of Reed Elsevier plc, has
entered into a definitive agreement with MDL to acquire the company by means
of a cash Tender Offer. An offer will be made to the shareholders of MDL to
acquire all outstanding shares and options for $32 per share in cash, valuing
the company at approximately $320 million. Stock options will be cashed-out as
they vest.
Reed Elsevier plc will finance the transaction using part of its U.S. dollar
cash balances that are now invested in short-term money market instruments.
The definitive agreement has been unanimously approved by the Boards of
Directors of MDL, Elsevier Science Inc. and Golden Gate Acquisition Corp., the
subsidiary of Elsevier Science Inc. through which the Tender Offer will be
made.
MDL Information Systems, Inc. is a leading provider of integrated solutions
that accelerate high-throughput discovery and development in the life science
and chemical industries. MDL's software systems, databases and services help
customers manage, communicate, and analyze the volumes of data associated with
modern R&D workflows. With applications supporting chemical and biological
information management, bioinformatics, automated synthesis and screening, and
materials science, MDL is committed to keeping pace with new technologies in
the chemical, pharmaceutical, and biotechnology industries.
MDL has offices worldwide with headquarters in San Leandro, California. In
its fiscal year ended March 31, 1996, MDL reported profits before tax of
approximately $11 million on revenues of approximately $62 million. At
December 31, 1996 MDL's balance sheet reflected net assets of approximately
$46 million.
In commenting on the acquisition, Herman Bruggink, co-Chairman of Reed
Elsevier plc said:
"MDL has an exceptional position in the scientific research community. Its
databases and software enable research scientists to access and manipulate
complex molecular information, MDL's products greatly enhance the productivity
and speed of the research process and it is continuously developing new
products to extend its market reach. There is considerable strategic fit with
Elsevier Science which, through its extensive portfolio of scientific
journals, provides the research community with comprehensive information in
the molecular sciences. There are considerable opportunities, particularly in
an online environment, to add further value to the customers of both MDL and
Elsevier Science through the electronic linkage of data."
Steven Goldby, Chief Executive Officer of MDL, commented:
"We are excited about this union of Elsevier Science, the leading provider
of scientific content, with MDL, a leading provider of scientific information
management systems. This holds great promise for our customers and for all of
the people at MDL."
Recently, Elsevier Science announced the development of ScienceDirect, an
online host database through which, in time, all of the information published
in its 1200 journals will be accessible. The launch of the service, initially
with information from 350 of its journals in the life sciences field, is
currently expected in the second half of 1997.
Reed Elsevier plc is owned equally by Reed International P.L.C. (NYSE: RUK)
and Elsevier NV (NYSE: ENL). Reed Elsevier is a world leading publisher and
information provider. Its activities include scientific, professional,
business and customer publishing. Reed Elsevier's principal operations are in
North America and Europe and it has annual sales in excess of (Pounds)3
billion (approximately $5 billion).
<PAGE>
Lehman Brothers will serve as Dealer/Manager in the Tender Offer. The Tender
Offer, which will commence shortly, will be conditional on, among other
things, satisfactory anti-trust clearances. Following completion of the Tender
Offer, it is expected that Golden Gate Acquisition Corp. will be merged into
MDL and all of the MDL shares not tendered will be converted into the right to
receive $32 per share in cash.
* * * *
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<PAGE>
EXHIBIT 99(C)(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROJECT GOLDEN GATE
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ELSEVIER SCIENCE INC.
GOLDEN GATE ACQUISITION CORP.
AND
MDL INFORMATION SYSTEMS, INC.
DATED AS OF MARCH 23, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is made and entered into
as of this 23rd day of March, 1997, by and among Elsevier Science Inc., a New
York corporation ("PARENT"), Golden Gate Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("PURCHASER"), and MDL
Information Systems, Inc., a Delaware corporation (the "COMPANY").
RECITALS
A. The Boards of Directors of Parent, Purchaser and the Company have each
unanimously approved the terms and conditions of a merger of Purchaser with
and into the Company (the "MERGER") upon the terms and subject to the
conditions set forth herein.
B. Pursuant to the Merger, Purchaser will acquire each issued and
outstanding share of Common Stock of the Company at a price of $32 net per
Share (as defined below) to the seller in cash and without interest thereon
(the "OFFER PRICE"). In order to accomplish the Merger, Purchaser shall first
commence a tender offer (the "OFFER") by Purchaser under Section 14(d)(1) of
the Securities and Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to
purchase all outstanding shares of the Common Stock, par value $0.01 per
share, of the Company (shares of the Common Stock are referred to herein as
the "SHARES").
C. The Board of Directors of the Company has unanimously resolved to
recommend the acceptance of the Offer and approval of the Merger to the
holders of Shares and determined that the consideration to be paid for each
Share in the Offer and the Merger is fair to the holders of such Shares and
that the Offer and the Merger are in the best interests of the holders of such
Shares.
NOW, THEREFORE, intending to be legally bound hereby, the parties agree as
follows:
ARTICLE I
THE TENDER OFFER
1.1 THE OFFER.
(a) Provided that this Agreement shall not have been terminated pursuant to
Section 7.1, Purchaser shall, and Parent shall cause Purchaser to, within five
business days after the public announcement (on the date hereof or the
following day) of the execution of this Agreement commence (within the meaning
of Rule 14d-2 under the Exchange Act) the Offer at the Offer Price.
(b) The obligations of Purchaser to consummate the Offer and to accept for
payment and pay for any of the Shares tendered shall be subject to the
conditions set forth on Annex I, including that a majority of the Shares
outstanding on a fully diluted basis (including for purposes of such
calculation all Shares issuable upon exercise of all vested and unvested stock
options, and conversion of convertible securities or other rights to purchase
or acquire Shares) being validly tendered and not withdrawn prior to the
expiration of the Offer (the "MINIMUM CONDITION"). The per Share amount shall
be net to the seller in cash, upon the terms and subject to the conditions of
the Offer and subject to reduction for any applicable federal back-up or other
applicable withholding or stock transfer taxes. The Offer shall remain open
until 12:00 Midnight, New York City time, on April 24, 1997 (twenty (20)
business days following the commencement of the Offer). As used in this
Agreement, the "EXPIRATION DATE" means 12:00 Midnight, New York City time, on
April 24, 1997, unless Purchaser extends the Offer as permitted by this
Agreement, in which case the "Expiration Date" means the latest time and date
to which the Offer is extended.
<PAGE>
(c) Purchaser expressly reserves the right to waive any conditions to the
Offer (other than the condition set forth in clause (ii) or (iii)(D) of Annex
I), to increase the price per Share payable in the Offer, to extend the
duration of the Offer, or to make any other changes in the terms and
conditions of the Offer; provided, however, that no such change may be made
which decreases the price per Share payable in the Offer, reduces the maximum
number of Shares to be purchased in the Offer, imposes conditions to the Offer
in addition to those set forth in Annex I or amends any other material terms
of the Offer in a manner materially adverse to the Company's stockholders, and
provided, further, that the Offer may not, without the Company's prior written
consent, be extended beyond May 31, 1997 except as necessary to provide time
to satisfy the conditions set forth in Annex I, and except that Purchaser may
extend the Offer for up to 10 business days, if as of such date, there shall
not have been tendered at least ninety percent (90%) of the outstanding Shares
so that the Merger could be effected without a meeting of the Company's
stockholders in accordance with applicable provisions of the Delaware General
Corporation Law ("DGCL") .
(d) The Offer shall be made by means of an offer to purchase (the "OFFER TO
PURCHASE") containing the terms set forth in this Agreement and the conditions
set forth in Annex I. Concurrently with the commencement of the Offer, Parent
and Purchaser shall file with the Securities and Exchange Commission (the
"SEC") a tender offer statement on Schedule 14D-1 reflecting the Offer
(together with all exhibits, amendments and supplements thereto, the "SCHEDULE
14D-1"). The Schedule 14D-1 will contain or will incorporate by reference the
Offer to Purchase (or portions thereof) and forms of the related letter of
transmittal and summary advertisements (which Schedule 14D-1, Offer to
Purchase and other documents, together with any supplements or amendments
thereto, are referred to herein collectively as the "OFFER DOCUMENTS"). The
Company and its counsel shall be given a reasonable opportunity to review and
comment on the Offer Documents prior to their filing with the SEC or
dissemination to the stockholders of the Company. Parent and Purchaser agree
to provide the Company and its counsel with any comments which Parent,
Purchaser or their counsel may receive from the SEC or the staff of the SEC
with respect to such documents promptly after receipt thereof. Upon the terms
and subject to the conditions of the Offer (including, if the Offer is
extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will purchase by accepting for payment and will pay for
Shares validly tendered and not properly withdrawn, as promptly as practicable
after the Expiration Date. Parent, Purchaser and the Company agree promptly to
correct any information provided by any of them for use in the Offer Documents
that shall have become false or misleading, and Parent and Purchaser further
agree to take all steps necessary to cause the Schedule 14D-1 as so corrected
to be filed with the SEC and the other Offer Documents as so corrected to be
disseminated to the holders of Shares, in each case as and to the extent
required by applicable federal securities laws. The Offer Documents will, on
the date filed and on the date first published, sent or given to the Company's
stockholders, comply in all material respects with all provisions of
applicable federal securities laws and the rules and regulations promulgated
thereunder.
1.2 COMPANY ACTION.
(a) The Company hereby approves of and consents to the Offer and represents
and warrants that (i) its Board of Directors has unanimously (A) determined
that this Agreement and the transactions contemplated hereby, including each
of the Offer and the Merger, are fair to and in the best interests of the
holders of the Shares, (B) approved and adopted this Agreement and the
transactions contemplated hereby and (C) resolved to recommend that the
stockholders of the Company accept the Offer and approve and adopt this
Agreement and the transactions contemplated hereby and thereby (provided,
however, that subject to the provisions of Section 5.4 such recommendation may
be withdrawn, modified or amended in connection with a Superior Proposal (as
defined in Section 5.4)) and (ii) Goldman Sachs and Co. ("GOLDMAN SACHS") has
rendered to the Board of Directors of the Company its opinion (which opinion
is permitted to be included in writing in the Schedule 14D-9 (as defined in
Section 1.2(b)), to the effect that the consideration to be received by the
holders of Shares pursuant to each of the Offer and the Merger is fair to the
holders of Shares. The Company hereby consents to the inclusion in the Offer
Documents of the recommendation of the Company's Board of Directors described
in the first sentence of this Section 1.2(a), and has obtained the consent of
Goldman Sachs to the inclusion in the Schedule 14D-9 of a copy of the written
opinion referred to in clause (ii) above.
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<PAGE>
(b) The Company shall file with the SEC, concurrently, or promptly
thereafter on the same day, with the filing by Parent and Purchaser of the
Schedule 14D-1, a Solicitation/Recommendation Statement on Schedule 14D-9
under the Exchange Act relating to the Offer (together with all exhibits,
amendments and supplements thereto as well as the Information Statement
required pursuant to Section 14(f) under the Exchange Act, collectively the
"SCHEDULE 14D-9"), which shall contain the recommendation of the Company's
Board of Directors described in Section 1.2(a), and shall disseminate the
Schedule 14D-9 as required by Rule 14d-9 promulgated under the Exchange Act.
The Schedule 14D-9, and each amendment thereto, will, on the date filed,
comply in all material respects with the provisions of applicable federal
securities laws. The Company, Parent and Purchaser agree promptly to correct
any information provided by any of them for use in the Schedule 14D-9 that
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 the Schedule 14D-9 as so corrected to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Parent and its counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9 in the form in which
such document is originally filed with the SEC, and all amendments and
supplements thereto, prior to the time at which such documents and all
documents related thereto are filed with the SEC. The Company shall provide
Purchaser and its counsel with any comments the Company or its counsel may
receive from the SEC with respect to the Schedule 14D-9 promptly after receipt
of such comments.
(c) The Company currently believes that all of its directors and executive
officers, intend to tender all outstanding Shares beneficially owned by such
person to Purchaser pursuant to the Offer unless to do so would subject such
person to liability under Section 16(b) of the Exchange Act.
(d) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and
security position listings of Shares held in stock depositories, each of a
recent date, and shall promptly furnish Purchaser with such additional
information, including updated lists of stockholders, mailing labels and
security position listings, and such other assistance as Parent, Purchaser or
their agents may reasonably request in connection with communicating the Offer
and any amendments or supplements thereto to the Company's stockholders.
Subject to the requirements of applicable laws and except for such steps as
are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Merger, Parent and Purchaser (and their agents)
shall hold in confidence the information contained in any of such labels and
lists and, if this Agreement shall be terminated, will upon request, promptly
deliver to the Company or destroy all copies of such information then in their
possession or control.
1.3 DIRECTORS. Promptly upon the acquisition by Purchaser pursuant to the
Offer of such number of Shares which satisfies the Minimum Condition and from
time to time thereafter, Parent shall be entitled to designate a majority of
the members of the Company's Board of Directors, subject to compliance with
Section 14(f) of the Exchange Act. The Company shall, upon request by Parent,
promptly increase the size of the Board of Directors to the extent permitted
by its Certificate of Incorporation and/or secure the resignations of such
number of directors as is necessary to enable Parent's designees to be elected
to the Board of Directors and shall cause Parent's designees to be so elected.
The Company shall take, at its expense, all action necessary to effect any
such election, including mailing to its stockholders the information required
by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in
form and substance reasonably satisfactory to Parent and its counsel.
Following the election or appointment of Parent's designees pursuant to this
Section 1.3 and prior to the Effective Time, any amendment or termination of
this Agreement, extension for the performance or waiver of the obligations or
other acts of Parent or Purchaser or waiver of the Company's rights hereunder,
shall require the concurrence of a majority of the Company's directors (or the
concurrence of the director, if there is only one remaining) then in office
who are directors on the date hereof, or are directors (other than directors
designated by Parent in accordance with this Section 1.3) designated by such
persons to fill any vacancy (the "CONTINUING DIRECTORS").
3
<PAGE>
ARTICLE II
THE MERGER
2.1 THE MERGER. Upon the terms and subject to the conditions hereof and in
accordance with the DGCL, Purchaser shall be merged with and into the Company
as soon as practicable following the satisfaction or waiver, if permissible,
of the conditions set forth in Article VI of this Agreement. Following the
Merger, the Company shall continue as the surviving corporation (the
"SURVIVING CORPORATION") and the separate corporate existence of Purchaser
shall cease. At the election of Parent or Purchaser, any direct or indirect
wholly-owned subsidiary of Parent incorporated under the laws of the State of
Delaware may be substituted for Purchaser as a constituent corporation in the
Merger. As used herein, the term "PURCHASER" shall, upon such substitution,
refer to any such substituted corporation.
2.2 EFFECTIVE TIME. The Merger shall be consummated by and shall be
effective at the time there has been filed as provided by Section 2.13 with
the Delaware Secretary of State a certificate or agreement of merger in such
form as is required by, and executed in accordance with, the relevant
provisions of the DGCL, and such other documents as may be required by the
provisions of the DGCL. The time of such filing is referred to as the
"EFFECTIVE TIME."
2.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in
applicable sections of the DGCL. As of the Effective Time, the Company shall
be a wholly-owned subsidiary of Parent.
2.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of the
Surviving Corporation shall be amended to contain the substantive provisions
of the Certificate of Incorporation of the Purchaser as in effect at the
Effective Time.
2.5 BYLAWS. The Bylaws of Purchaser, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation, until
thereafter duly amended in accordance with applicable law.
2.6 DIRECTORS. The directors of Purchaser immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation and will hold
office from the Effective Time until their respective successors are duly
elected or appointed and qualified in the manner provided in the Certificate
of Incorporation and Bylaws of the Surviving Corporation, as such instruments
may be amended from time to time, either before or after the Effective Time,
or as otherwise provided by law.
2.7 OFFICERS. The officers of the Purchaser immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation.
Such officers of the Surviving Corporation will hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation and
Bylaws of the Surviving Corporation, as such instruments may be amended from
time to time, either before or after the Effective Time, or as otherwise
provided by law.
2.8 CONVERSION OF SHARES.
At the Effective Time, by virtue of the Merger and without any action on the
part of Parent, Purchaser, the Company or the holders of the Shares:
(i) Each Share issued and outstanding immediately prior to the Effective
Time (other than Shares held, directly or indirectly, by Parent, Purchaser,
the Company or any of their majority-owned subsidiaries, and any Dissenting
Shares (as defined in Section 2.9)) shall automatically be canceled and
extinguished and be converted into the right to receive $32, or such higher
amount per Share as is paid pursuant to the Offer (the "MERGER
CONSIDERATION"), in cash, without interest thereon.
(ii) Each Share issued and outstanding immediately prior to the Effective
Time which is owned or held, directly or indirectly, by Parent, Purchaser,
the Company or any of their majority-owned subsidiaries
4
<PAGE>
shall be canceled and extinguished and cease to exist, without any
conversion thereof, and no payment shall be made with respect thereto.
(iii) Each holder (other than holders referred to in Section 2.8(a)(ii))
of a certificate representing any Shares shall after the Effective Time
cease to have any rights with respect to such Shares, except either to
receive the Merger Consideration upon surrender of such certificate, or to
exercise such holder's appraisal rights as provided in Section 2.9 and the
DGCL.
(iv) Each share of Common Stock of 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 and
thereafter represent one validly issued, fully paid and nonassessable share
of Common Stock of the Surviving Corporation.
2.9 DISSENTING SHARES. Notwithstanding anything in this Agreement to the
contrary, Shares which are outstanding immediately prior to the Effective Time
and which are held by a holder who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such Shares in
accordance with Section 262 of the DGCL ("DISSENTING SHARES") shall not be
converted into a right to receive the Merger Consideration pursuant to Section
2.8, but the holders of Dissenting Shares shall instead be entitled to receive
such consideration as shall be determined pursuant to Section 262 of the DGCL;
provided, however, that if any such holder shall have failed to perfect or
shall withdraw or lose such holder's right of appraisal and payment under the
DGCL, such holder's Shares shall be treated as if they had been converted as
of the Effective Time into the right to receive the Merger Consideration,
without interest thereon, as provided in Section 2.8, and such Shares shall no
longer be Dissenting Shares. The Company shall give Parent and Purchaser
prompt notice of any demands received by the Company for appraisal of Shares,
and of any withdrawals of demands for appraisal, or of any other instruments
served pursuant to Section 262 of the DGCL and received by the Company. Prior
to the Effective Time, Parent and Purchaser shall have the right to
participate in all negotiations and proceedings with respect to such demands
for appraisal. Prior to the Effective Time, the Company shall not, except with
the prior written consent of Parent and Purchaser, make any payment with
respect to, or settle or offer to settle, any such demands. Each holder of
Dissenting Shares shall have only such rights and remedies as are granted to
such holder under Section 262 of the DGCL.
2.10 PAYMENT FOR SHARES.
(a) Prior to the Effective Time, Purchaser shall select and appoint a bank
to act as agent for the holders of Shares (the "PAYING AGENT") to receive and
disburse the Merger Consideration to which holders of Shares shall become
entitled pursuant to Section 2.8. At the Effective Time, Purchaser or Parent
shall provide the Paying Agent with sufficient cash to allow the Merger
Consideration to be paid by the Paying Agent for each Share then entitled to
receive the Merger Consideration.
(b) As soon as practicable after the Effective Time, Purchaser or Parent
shall cause the Paying Agent to mail to each record holder of a certificate or
certificates representing Shares which as of the Effective Time represents the
right to receive the Merger Consideration (the "CERTIFICATES"), a form of
letter of transmittal (which shall 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) and instructions for use in
effecting the surrender of the Certificates for payment therefor. Upon
surrender to the Paying Agent of a Certificate, together with such letter of
transmittal duly executed and completed in accordance with the instructions
thereto, and such other documents as may be requested, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration and such Certificate shall forthwith be canceled. No interest
shall be paid or accrued on the Merger Consideration upon the surrender of the
Certificates. Until surrendered in accordance with the provisions of this
Section, each Certificate shall be deemed for all purposes to evidence only
the right to receive the Merger Consideration (without interest thereon), and
shall, subject to Section 2.9, have no other right.
(c) If the Merger Consideration (or any portion thereof) is to be delivered
to a person other than the person in whose name the Certificates surrendered
in exchange therefor are registered, it shall be a condition to the
5
<PAGE>
payment that the Certificates so surrendered shall be properly endorsed or
otherwise be in proper form for transfer and that the person requesting such
payment or delivery shall pay any transfer or other taxes payable by reason of
the foregoing or establish to the satisfaction of the Surviving Corporation
that such tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Paying Agent nor any party hereto shall be liable to a
holder of Shares for any Merger Consideration delivered to a public official
pursuant to applicable abandoned property, escheat and similar laws.
(d) Promptly following the date that is six months after the Effective Date,
the Paying Agent shall return to the Surviving Corporation all Merger
Consideration and other cash, property and instruments 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 exchange therefor the Merger Consideration (without interest
thereon). Notwithstanding the foregoing, the Surviving Corporation shall be
entitled to receive from time to time all interest or other amounts earned
with respect to any cash deposited with the Paying Agent as such amounts
accrue or become available.
2.11 NO FURTHER RIGHTS OR TRANSFERS. At and after the Effective Time the
holders of Certificates to be exchanged for the Merger Consideration pursuant
to this Agreement shall cease to have any rights as to stockholders of the
Company except for the right to surrender such holder's Certificates in
exchange for payment of the Merger Consideration, and after the Effective Time
there shall be no transfers on the stock transfer books of the Surviving
Corporation of the Shares which were outstanding immediately prior to the
Effective Time. Any Certificates formerly representing Shares presented to the
Surviving Corporation or Paying Agent shall be canceled and exchanged for the
Merger Consideration, as provided in this Article II, subject to applicable
law in the case of Dissenting Shares.
2.12 SUPPLEMENTARY ACTION. If at any time after the Effective Time, any
further assignments or assurances in law or any other things are necessary or
desirable to vest or to perfect or confirm of record in the Surviving
Corporation the title to any property or rights of either the Company or
Purchaser, or otherwise to carry out the provisions of this Agreement, the
officers and directors of the Surviving Corporation are hereby authorized and
empowered, in the name of and on behalf of the Company and Purchaser, to
execute and deliver any and all things necessary or proper to vest or to
perfect or confirm title to such property or rights in the Surviving
Corporation, and otherwise to carry out the purposes and provisions of this
Agreement.
2.13 CLOSING. Upon the terms and subject to the conditions of this
Agreement, as soon as practicable after all the conditions to the obligations
of the parties hereto to effect the Merger under Article VI of this Agreement
shall have been satisfied or waived, the Company and Purchaser shall (i) file
with the Secretary of the State of Delaware a certificate or agreement of
merger or a certificate of ownership and merger in such form as may be
required by, and executed in accordance with, the relevant provisions of the
DGCL and (ii) take all such other and further actions as may be required by
law to make the Merger effective. Contemporaneous with the filing referred to
in this Section, a closing (the "CLOSING") will be held at the offices of
Wilson Sonsini Goodrich & Rosati, P.C., 650 Page Mill Road, Palo Alto,
California 94304 or at such other location as the parties may establish for
the purpose of confirming all the foregoing. The date and the time of such
Closing are referred to as the "CLOSING DATE."
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company (which for purposes of this Article III shall include the
Company and each of its subsidiaries unless the context otherwise requires)
represents and warrants to Parent and Purchaser, subject to the exceptions
specifically disclosed in writing in the disclosure letter supplied by the
Company to Parent and Purchaser dated as of the date hereof and certified by a
duly authorized officer of the Company (the "COMPANY SCHEDULES"), as follows:
3.1 ORGANIZATION OF THE COMPANY.
(i) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; has the corporate power and authority to
own, lease and operate its assets and property and to carry on its business as
now being conducted; and is duly qualified or licensed to do business and is
in good standing in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except where the failure to be so
qualified would not have a Material Adverse Effect (as defined below) on the
Company.
(ii) The Company has delivered or made available to Parent a true and
complete list of all of the Company's subsidiaries, indicating the
jurisdiction of incorporation of each subsidiary, the jurisdictions in which
such subsidiary is qualified or licensed, and the Company's and any other
person's equity interest therein. All shares of subsidiaries owned indirectly
by the Company or owned of record by persons other than the Company are owned
beneficially (or the substantive equivalent) by the Company.
(iii) The Company has delivered or made available to Parent a true and
correct copy of the Certificate of Incorporation and Bylaws of the Company and
similar governing instruments of each of its subsidiaries, each as amended to
date, and each such instrument is in full force and effect. Neither the
Company nor any of its subsidiaries is in violation of any of the provisions
of its Certificate of Incorporation or Bylaws or equivalent governing
instruments.
(iv) When used in connection with the Company, the term "MATERIAL ADVERSE
EFFECT" means, for purposes of this Agreement, any change, event or effect
that is materially adverse to the business, assets (including intangible
assets), financial condition or results of operations of Company and its
subsidiaries taken as a whole; provided, however, that the following shall not
be considered a "Material Adverse Effect": (1) the filing, initiation and
subsequent prosecution, by or on behalf of stockholders of the Company, of (a)
litigation that challenges or otherwise seeks damages with respect to the
transactions contemplated herein or (b) a securities litigation against the
Company and (2) a shortfall in revenues of the Company as a result of delays
in customer orders (including any effects on the Company's operating income
which result directly from such revenue shortfall).
3.2 COMPANY CAPITAL STRUCTURE. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, $0.01 par value, of which there
were 8,782,265 shares issued and outstanding as of March 19, 1997 and
2,000,000 shares of Preferred Stock, $0.01 par value, of which no shares are
issued or outstanding. All outstanding shares of the Company Common Stock are
duly authorized, validly issued, fully paid and nonassessable and are not
subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement or document to which
the Company is a party or by which it is bound. As of March 19, 1997, the
Company had reserved an aggregate of 2,181,735 shares of the Company Common
Stock, net of exercises, for issuance to employees, consultants and non-
employee directors pursuant to the Company's 1993 Stock Option and Restricted
Stock Plan ("the 1993 Plan"). As of March 19, 1997, there were options
outstanding to purchase an aggregate of 1,985,851 shares of Common Stock,
issued to employees, consultants and non-employee directors pursuant to the
1993 Plan. All shares of the Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant
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to which they are issuable, would be duly authorized, validly issued, fully
paid and nonassessable. The Company Schedules list for each person who held
restricted stock or options, the name of the holder of such shares or option,
the exercise price of such option, the number of shares which will have vested
at such date, the vesting schedule for such shares or option and whether the
lapsing of the Company's repurchase rights or exercisability of such option
will be accelerated in any way by the transactions contemplated by this
Agreement, and indicate the extent of acceleration, if any.
3.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Section 3.2, there are no equity securities, partnership interests or similar
ownership interests of any class of the Company, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except for securities the Company owns, directly or
indirectly through one or more subsidiaries, there are no equity securities,
partnership interests or similar ownership interests of any class of any
subsidiary of the Company, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as
set forth in Section 3.2, there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Company or any of its subsidiaries is a party or by which it is bound
obligating the Company or any of its subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition, of any shares of
capital stock, partnership interests or similar ownership interests of the
Company or any of its subsidiaries or obligating the Company or any of its
subsidiaries to grant, extend, accelerate the vesting of or enter into any
such option, warrant, equity security, call, right, commitment or agreement.
There are no registration rights and, to the knowledge of the Company, as of
the date of this Agreement, there are no voting trusts, proxies or other
agreements or understandings with respect to any equity security of any class
of the Company or with respect to any equity security, partnership interest or
similar ownership interest of any class of any of its subsidiaries.
3.4 AUTHORITY.
(i) The Company has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, have been duly authorized by all
necessary corporate action on the part of the Company, subject only to the
approval and adoption of this Agreement and the approval of the Merger by the
Company's stockholders and the filing and recordation of the Certificate of
Merger pursuant to the DGCL. A vote of the holders of a majority of the
outstanding Shares is required for the Company's stockholders to approve and
adopt this Agreement and approve the Merger. This Agreement has been duly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent and, if applicable, Purchaser, constitutes a
valid and binding obligation of the Company, enforceable in accordance with
their respective terms, except as enforceability may be limited by bankruptcy
and other similar laws and general principles of equity. The execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of the Company or the equivalent
organizational documents of any of its subsidiaries, (ii) subject to obtaining
the approval and adoption of this Agreement and the approval of the Merger by
the Company's stockholders, conflict with or violate in any material respect
any law, rule, regulation, order, judgment or decree applicable to the Company
or any of its subsidiaries or by which its or any of their respective
properties is bound or affected or (iii) result in any breach of or constitute
(with or without due notice or lapse of time or both) a default (or give rise
to any right of termination, amendment, cancellation or acceleration) under,
or result in the creation of a lien or encumbrance on any of the properties or
assets of the Company or any of its subsidiaries pursuant to, any material
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
its or any of their respective properties are bound or affected (except where
such breach, default, termination, amendment, cancellation, acceleration, lien
or encumbrance would not have a Material Adverse Effect on the Company). The
Company Schedules list all material consents, waivers
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and approvals under any of the Company's or any of its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
(ii) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("GOVERNMENTAL ENTITY"), is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware, (ii) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws
and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR ACT"), and the securities or antitrust laws of any foreign country, and
(iii) such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not be material to the
Company, or have a material adverse effect on the ability of the parties to
consummate the Offer or the Merger.
3.5 SEC FILINGS; THE COMPANY FINANCIAL STATEMENTS.
(i) The Company has filed in a timely manner all forms, reports and
documents required to be filed with the SEC since its initial public offering
and has made available to Parent such forms, reports and documents in the form
filed with the SEC. All such required forms, reports and documents (including
those that the Company may file subsequent to the date hereof) are referred to
herein as the "COMPANY SEC REPORTS." As of their respective dates, the Company
SEC Reports (i) were prepared, in all material respects, in accordance with
the requirements of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), or the Exchange Act, as the case may be, and the rules and regulations
of the SEC thereunder applicable to such the Company SEC Reports, and (ii) did
not at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
None of the Company's subsidiaries is required to file any forms, reports or
other documents with the SEC.
(ii) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports (the "COMPANY
FINANCIALS"), including any the Company SEC Reports filed after the date
hereof until the Closing, (x) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, (y)
was prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto or, in the case of unaudited interim
financial statements, as may be permitted by the SEC on Form 10-Q under the
Exchange Act) and (z) fairly presented the consolidated financial position of
the Company and its subsidiaries as at the respective dates thereof and the
consolidated results of the Company's operations and cash flows for the
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments. The balance sheet
of the Company contained in the Company SEC Reports as of December 31, 1996 is
hereinafter referred to as the "COMPANY BALANCE SHEET." Except as disclosed in
the Company Financials or as contemplated by this Agreement, since the date of
the Company Balance Sheet neither the Company nor any of its subsidiaries has
any liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
consolidated financial statements prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of the Company and its subsidiaries taken as
a whole, except liabilities (i) provided for in the Company Balance Sheet, or
(ii) incurred since the date of the Company Balance Sheet in the ordinary
course of business consistent with past practices.
3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Company
Balance Sheet there has not been: (i) any change, event or condition that has
resulted in a Material Adverse Effect on the Company, (ii) any material change
by the Company in its accounting methods, principles or practices, except as
required by concurrent changes in GAAP, or (iii) any material revaluation by
the Company of any of its assets, including,
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without limitation, writing down the value of capitalized inventory or writing
off notes or accounts receivable other than in the ordinary course of
business.
3.7 TAXES.
(i) Definition of Taxes. For the purposes of this Agreement, "TAX" or
"TAXES" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities relating to taxes, including taxes based upon or measured by gross
receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts and any obligations under any agreements
or arrangements with any other person with respect to such amounts and
including any liability for taxes of a predecessor entity.
(ii) Tax Returns and Audits.
The Company and each of its subsidiaries have timely filed all federal,
state, local and foreign returns, estimates, information statements and
reports ("RETURNS") relating to Taxes required to be filed by the Company
and each of its subsidiaries, except such Returns which are not material to
the Company, and have timely paid all Taxes shown to be due on such
Returns.
Except as is not material to the Company, the Company and each of its
subsidiaries as of the Effective Time will have withheld with respect to
its employees all federal and state income taxes, its employees' share of
Federal Insurance Contribution Act ("FICA") taxes, and any Taxes required
to be withheld.
Except as is not material to the Company, to the Company's knowledge,
there is no Tax deficiency outstanding, proposed or assessed against the
Company or any of its subsidiaries, nor has the Company or any of its
subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
Except as is not material to the Company, to the Company's knowledge, no
audit or other examination of any Return of the Company or any of its
subsidiaries is presently in progress, nor has the Company or any of its
subsidiaries been notified of any request for such an audit or other
examination.
Except as is not material to the Company, no adjustment relating to any
Returns filed by the Company or any of its subsidiaries has been proposed
formally or informally by any Tax authority to the Company or any of its
subsidiaries or any representative thereof.
Except as is not material to the Company, neither the Company nor any of
its subsidiaries has any liability for unpaid Taxes which has not been
accrued for or reserved on the Company Balance Sheet or disclosed in
related notes to the Company Financials, whether asserted or unasserted,
contingent or otherwise, which is material to the Company.
There is no contract, agreement, plan or arrangement, including but not
limited to the provisions of this Agreement, covering any employee or
former employee of the Company or any of its subsidiaries that,
individually or collectively, could give rise to the payment of any amount
that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code.
Neither the Company nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the Company.
Neither the Company nor any of its subsidiaries is party to or has any
obligation under any tax-sharing or allocation agreement or arrangement.
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3.8 TITLE TO PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(i) The Company Schedules list the real property owned by the Company. The
Company Schedules list all real property leases to which the Company is a
party and each amendment thereto. All such current leases are in full force
and effect, are valid and effective in accordance with their respective terms,
and there is not, under any of such leases, any existing default or event of
default (or event which with notice or lapse of time, or both, would
constitute a default) that would result in a Material Adverse Effect on the
Company.
(ii) The Company has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("LIENS"), except as reflected in
the Company Financials or in the Company Schedules and except for liens for
taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which would not result in a Material Adverse Effect on
the Company.
3.9 INTELLECTUAL PROPERTY.
For the purposes of this Agreement, the following terms have the following
definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and
all documentation relating to any of the foregoing; (iii) all copyrights,
copyrights registrations and applications therefor, and all other rights
corresponding thereto throughout the world; (iv) all industrial designs and
any registrations and applications therefor throughout the world; (v) all
trade names, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor throughout the world;
(vi) all databases and data collections and all rights therein throughout
the world; and (vii) any similar or equivalent rights to any of the
foregoing anywhere in the world.
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, the Company.
"REGISTERED INTELLECTUAL PROPERTY" means all United States, international
and foreign: (i) patents and patent applications (including provisional
applications); (ii) registered trademarks, applications to register
trademarks, intent-to-use applications, or other registrations or
applications related to trademarks; (iii) registered copyrights and
applications for copyright registration; and (iv) any other Intellectual
Property that is the subject of an application, certificate, filing,
registration or other document issued, filed with, or recorded by any
state, government or other public legal authority.
(i) Section 3.9 of the Company Schedules lists all of the Registered
Intellectual Property owned by, or filed in the name of, the Company (the
"COMPANY REGISTERED INTELLECTUAL PROPERTY").
(ii) Section 3.9 of the Company Schedules lists all proceedings or actions
before any court, tribunal (including the United States Patent and Trademark
Office ("PTO") or equivalent authority anywhere in the world) related to any
Company Intellectual Property.
(iii) To the Company's knowledge, no Company Intellectual Property or
product or service of the Company is subject to any proceeding or outstanding
decree, order, judgment, agreement, or stipulation restricting in any manner
the use, transfer, or licensing thereof by the Company, or which may affect
the validity, use or enforceability of such Company Intellectual Property.
(iv) Each item of Company Registered Intellectual Property is valid (to the
Company's knowledge) and subsisting, all necessary registration, maintenance
and renewal fees currently due in connection with such
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Registered Intellectual Property have been made and all necessary documents
and certificates in connection with such Registered Intellectual Property have
been filed with the relevant patent, copyright, trademark or other authorities
in the United States or foreign jurisdictions, as the case may be, for the
purposes of maintaining such Registered Intellectual Property.
(v) Except as set forth in Section 3.9 of the Company Schedules: (i) the
Company owns and has good and exclusive title to, or has license to, each item
of Company Intellectual Property, including all Company Registered
Intellectual Property listed in Section 3.9 of the Company Schedules, free and
clear of any lien or encumbrance (excluding licenses and related
restrictions); and (ii) to its knowledge, the Company is the exclusive owner
of all trademarks and trade names used in connection with the operation or
conduct of the business of the Company, including the sale of any products or
the provision of any services by the Company.
(vi) The Company owns exclusively, and has good title to, all copyrighted
works that are Company products or which the Company otherwise expressly
purports to own.
(vii) To the extent that any work, invention, or material has been developed
or created by a third party for the Company, the Company has a written
agreement with such third party with respect thereto and the Company thereby
either (i) has obtained ownership of, and is the exclusive owner of, or (ii)
has obtained a license to all such third party's Intellectual Property in such
work, material or invention by operation of law or by valid assignment, to the
extent it is legally possible to do so.
(viii) Except as set forth in Section 3.9 of the Company Schedules, the
Company has not transferred ownership of, or granted any exclusive license
with respect to, any Intellectual Property that is or was Company Intellectual
Property, to any third party.
(ix) Section 3.9 of the Company Schedules lists all material contracts,
licenses and agreements to which the Company is a party (i) with respect to
Company Intellectual Property licensed or transferred to any third party
(other than end-user licenses in the ordinary course); or (ii) pursuant to
which a third party has licensed or transferred any material Intellectual
Property to the Company, with, in the case of either (i) or (ii), cost in
excess of $25,000 on a one-time or annual basis.
(x) The contracts, licenses and agreements listed on Section 3.9 of the
Company Schedules are in full force and effect. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination, or suspension of such
contracts, licenses and agreements. The Company is in material compliance
with, and has not materially breached any term any of such contracts, licenses
and agreements and, to the knowledge of the Company, all other parties to such
contracts, licenses and agreements are in compliance with, and have not
materially breached any term of, such contracts, licenses and agreements.
Following the Closing Date, the Company will be permitted to exercise all of
the Company's rights under the contracts, licenses and agreements listed in
Section 3.9 of the Company Schedules to the same extent the Company would have
been able to had the transactions contemplated by this Agreement not occurred
and without the payment of any additional amounts or consideration other than
ongoing fees, royalties or payments which the Company would otherwise be
required to pay.
(xi) Section 3.9 of the Company Schedules lists or specifically refers to
all contracts, licenses and agreements between the Company and any third party
wherein or whereby the Company has agreed to, or assumed, any obligation or
duty to warrant, indemnify, hold harmless or otherwise assume or incur any
obligation or liability with respect to the infringement or misappropriation
by the Company or such third party of the Intellectual Property of any third
party, except such contracts entered into in the ordinary course of the
Company's business.
(xii) The operation of the business of the Company as such business
currently is conducted, including the Company's design, development,
manufacture, marketing and sale of the products or services of the Company
(including with respect to products currently under development) has not, does
not and will not infringe or
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misappropriate the Intellectual Property of any third party (provided that
with respect to patent rights, rights regarding marks, names and designations,
and moral rights, such representation is limited to the Company's knowledge)
or, to its knowledge, constitute unfair competition or trade practices under
the laws of any jurisdiction.
(xiii) The Company has not received notice from any third party that the
operation of the business of the Company or any act, product or service of the
Company, infringes or misappropriates the Intellectual Property of any third
party or constitutes unfair competition or trade practices under the laws of
any jurisdiction.
(xiv) Except as set forth in Section 3.9 of the Company Schedules, to the
knowledge of the Company, no Person has or is infringing or misappropriating
any Company Intellectual Property.
(xv) Except as set forth in Section 3.9 of the Company Schedules, there have
been, and are, no claims asserted against the Company or, to its knowledge,
against any customer of the Company, related to any product or service of the
Company.
(xvi) The Company has taken reasonable steps to protect the Company's rights
in the Company's confidential information and trade secrets that it wishes to
protect or any trade secrets or confidential information of third parties
provided to the Company, and, without limiting the foregoing, the Company has
and enforces a policy requiring each employee and contractor to execute a
proprietary information / confidentiality agreement substantially in the
Company's standard form and all current and former employees and contractors
of the Company have executed such an agreement, except where the failure to do
so is not reasonably expected to be material to the Company.
3.10 COMPLIANCE; PERMITS; RESTRICTIONS.
(i) Neither the Company nor any of its subsidiaries is, in any material
respect, in conflict with, or in default or violation of (i) any law, rule,
regulation, order, judgment or decree applicable to the Company or any of its
subsidiaries or by which the Company or any of its subsidiaries or any of
their respective properties is bound or affected, or (ii) any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
its or any of their respective properties is bound or affected (except such
default or violation which would not have a Material Adverse Effect on the
Company). To the knowledge of the Company, no investigation or review by any
Governmental Entity is pending or threatened against the Company or any of its
subsidiaries, nor has any Governmental Entity indicated an intention to
conduct the same. There is no material agreement, judgment, injunction, order
or decree binding upon the Company or any of its subsidiaries which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of the Company or any of its subsidiaries, any
acquisition of material property by the Company or any of its subsidiaries or
the conduct of business by the Company as currently conducted (except such
prohibition or impairment which would not have a Material Adverse Effect on
the Company).
(ii) The Company and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities that, if not
held by the Company or its subsidiaries, would have a Material Adverse Effect
on the Company (collectively, the "Company Permits"). The Company and its
subsidiaries are in compliance in all material respects with the terms of the
Company Permits (except where such non-compliance would not have a Material
Adverse Effect on the Company).
3.11 LITIGATION. Except for suits filed in connection with this Offer, which
as of the date hereof there are none, there is no action, suit, proceeding,
claim, arbitration or investigation pending, or as to which the Company or any
of its subsidiaries has received any notice of assertion nor, to the Company's
knowledge, is there a threatened action, suit, proceeding, claim, arbitration
or investigation against the Company or any of its subsidiaries which could
reasonably be expected to have a Material Adverse Effect on the Company. To
the knowledge of the Company, no Governmental Entity has at any time
challenged or questioned in writing the legal right of the Company to
manufacture, offer or sell any of its products in the present manner or style
thereof.
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3.12 BROKERS' AND FINDERS' FEES. Except for fees payable to Goldman Sachs
pursuant to an engagement letter dated February 29, 1996, a copy of which has
been provided to Parent, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement
or any transaction contemplated hereby.
3.13 EMPLOYEE BENEFIT PLANS.
(i) With respect to each material employee benefit plan, program,
arrangement and contract (including, without limitation, any "EMPLOYEE BENEFIT
PLAN" as defined in Section 3(3) of ERISA) maintained or contributed to by the
Company or any trade or business which is under common control with the
Company within the meaning of Section 414 of the Code (the "COMPANY EMPLOYEE
PLANS"), the Company has made available to Parent a true and complete copy of,
to the extent applicable, (i) such Company Employee Plan, (ii) the most recent
annual report (Form 5500), (iii) each trust agreement related to such Company
Employee Plan, (iv) the most recent summary plan description for each Company
Employee Plan for which such a description is required, (v) the most recent
actuarial report relating to any Company Employee Plan subject to Title IV of
ERISA and (vi) the most recent IRS determination letter issued with respect to
any Company Employee Plan.
(ii) Each Company Employee Plan which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination from the IRS
covering the provisions of the Tax Reform Act of 1986 stating that such
Company Employee Plan is so qualified and nothing has occurred since the date
of such letter that could reasonably be expected to affect the qualified
status of such plan. Each Company Employee Plan has been operated in all
material respects in accordance with its terms and the requirements of
applicable law (except as would not have a Material Adverse Effect on the
Company). Neither the Company nor any ERISA Affiliate of the Company has
incurred or is reasonably expected to incur any liability under Title IV of
ERISA in connection with any Company Employee Plan (except as would not have a
Material Effect on the Company.
3.14 EMPLOYEES; LABOR MATTERS. To the Company's knowledge after reasonable
inquiry, no employee of the Company (i) is in violation of any term of any
employment contract, patent disclosure agreement, non-competition agreement,
or any restrictive covenant with a former employer relating to the right of
any such employee to be employed by the Company because of the nature of the
business conducted or presently proposed to be conducted by the Company or to
the use of trade secrets or proprietary information of others and (ii) has
given notice to the Company, nor is the Company otherwise aware, that any
employee intends to terminate his or her employment with the Company except
for terminations of a nature and number that are consistent with the Company's
prior experience. To the Company's knowledge, there are no activities or
proceedings of any labor union to organize any employees of the Company or any
of its subsidiaries and there are no strikes, or material slowdowns, work
stoppages or lockouts, or threats thereof by or with respect to any employees
of the Company or any of its subsidiaries. The Company and its subsidiaries
are and have been in compliance with all applicable laws regarding employment
practices, terms and conditions of employment, and wages and hours (including,
without limitation, OSHA, ERISA, WARN or any similar state or local law)
(except as would not have a Material Adverse Effect on the Company).
3.15 ENVIRONMENTAL MATTERS. Except in all cases as, in the aggregate, have
not had and would not be reasonably expected to have a Material Adverse Effect
on the Company, the Company and each of its subsidiaries (i) have obtained all
applicable permits, licenses and other authorizations that are required under
Federal, state or local laws relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants or hazardous or toxic
materials or wastes into ambient air, surface water, ground water or land or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants or hazardous or toxic materials or wastes by the Company or its
subsidiaries (of their respective agents); (ii) are in compliance with all
terms and conditions of such required permits, licenses and authorizations,
and also are in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in such laws or contained in any regulation, code, plan,
order, decree,
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judgment, notice or demand letter issued, entered, promulgated or approved
thereunder; (iii) as of the date hereof, are not aware of and have not
received notice of any event, condition, circumstance, activity, practice,
incident, action or plan that is reasonably likely to interfere with or
prevent continued compliance or that would give rise to any common law or
statutory liability, or otherwise form the basis of any claim, action, suit or
proceeding, based on or resulting from the Company's or any of its
subsidiaries (or any of their respective agents) manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling, or
the emission, discharge or release into the environment of any pollutant,
contaminant or hazardous or toxic material or waste; (iv) has not disposed of
any pollutants, contaminants or hazardous or toxic materials or wastes into
the soil or groundwater at any properties owned or leased by the Company,
either now or in the past, or at any other property that would result in any
assessment or remedial action; and (v) have taken all actions necessary under
application requirements of Federal, state or local laws, rules or regulations
to register any products or materials required to be registered by the Company
or its subsidiaries (or any of their respective agents) thereunder.
3.16 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in the
Company Schedules, neither the Company nor any of its subsidiaries is a party
to or is bound by:
(i) any employment or consulting agreement, contract or commitment with any
officer or director level employee or member of the Company's Board of
Directors, other than those that are terminable by the Company or any of its
subsidiaries on no more than thirty days notice without liability or financial
obligation, except to the extent general principles of wrongful termination
law may limit the Company's or any of its subsidiaries' ability to terminate
employees at will;
(ii) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan, stock purchase plan or restricted stock
purchase agreement, any of the benefits of which will be increased, or the
vesting of 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;
(iii) any agreement of indemnification or guaranty not entered into in the
ordinary course of business other than indemnification agreements between the
Company or any of its subsidiaries and any of its officers or directors;
(iv) any agreement, contract or commitment containing any covenant
prohibiting or materially impairing conduct of the business by the Company or
any of its subsidiaries (as currently conducted or as presently proposed to be
conducted by the Company or its subsidiaries) or granting any exclusive
distribution rights;
(v) any agreement, contract or commitment currently in force relating to the
disposition or acquisition of assets not in the ordinary course of business or
any ownership interest in any corporation, partnership, joint venture or other
business enterprise; or
(vi) any material joint marketing or development agreement.
Neither the Company nor any of its subsidiaries, nor to the Company's
knowledge any other party to a Company Contract (as defined below), has
breached, violated or defaulted under, or received notice that it has breached
violated or defaulted under, any of the material terms or conditions of any of
the agreements, contracts or commitments to which the Company or any of its
subsidiaries is a party or by which it is bound of the type described in
clauses (i) through (vi) above (any such agreement, contract or commitment, as
well as any agreement, contract or commitment that is an exhibit to any
Company SEC Report, a "COMPANY CONTRACT") in such a manner as would permit any
other party to cancel or terminate any such Company Contract, or would be
reasonably likely to have a Material Adverse Effect on the Company.
3.17 CHANGE OF CONTROL PAYMENTS. The Company Schedules set forth each plan
or agreement pursuant to which any amounts may become payable (whether
currently or in the future) to current or former officers and
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directors of the Company as a result of or in connection with the Offer and/or
the Merger, and the nature and amount of any such obligation.
3.18 BOARD APPROVAL. The Board of Directors of the Company has, as of the
date of this Agreement (A) determined that this Agreement and the transactions
contemplated hereby, including each of the Offer and the Merger, are fair to
and in the best interests of the holders of the Shares, (B) approved and
adopted this Agreement and the transactions contemplated hereby and (C)
resolved to recommend that the stockholders of the Company accept the Offer
and approve and adopt this Agreement and the transactions contemplated hereby
and thereby.
3.19 FAIRNESS OPINION. The Company's Board of Directors has received an
opinion from Goldman Sachs to the effect that the consideration to be received
by the holders of Shares pursuant to each of the Offer and the Merger is fair
to the holders of Shares. A copy of the written opinion will be delivered to
Parent no later than March 26, 1997.
3.20 OFFER DOCUMENTS; PROXY STATEMENT. Neither the Schedule 14D-9, nor any
of the information supplied by the Company for inclusion in the Offer
Documents, shall, at the respective times that the Schedule 14D-9, the Offer
Documents or any amendments or supplements thereto are filed with the SEC or
are first published, sent or given to stockholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Neither the proxy statement to be sent to the
stockholders of the Company in connection with the meeting of the Company's
stockholders to consider the Merger (the "COMPANY STOCKHOLDERS' MEETING") or
the information statement to be sent to such stockholders, as appropriate
(such proxy statement or information statement, as amended or supplemented, is
referred to as the "PROXY STATEMENT"), shall, at the date the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to
stockholders, at the time of the Company Stockholders' 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 the light of the circumstances under
which they are made, not misleading or necessary to correct any statement in
any earlier communication with respect to the solicitation of proxies for the
Company Stockholders' Meeting which has become false or misleading. The
Schedule 14D-9 and the Proxy Statement will comply in all material respects as
to form and substance with the requirements of the Exchange Act and the rules
and regulations thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to the
Company that:
4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and Purchaser is a
corporation duly organized validly existing and in good standing under the
laws of the jurisdiction of its incorporation, and has all requisite corporate
power and authority to own, operate and lease its properties and to carry on
its business as it is now being conducted.
4.2 CORPORATE POWER, AUTHORIZATION AND ENFORCEABILITY. Each of Parent and
Purchaser has full corporate power and authority to enter into this Agreement
and to perform its obligations hereunder and to consummate all the
transactions contemplated hereby. The execution and delivery of this Agreement
by Parent and Purchaser, the performance by each of Parent and Purchaser of
their respective obligations hereunder and the consummation by Parent and
Purchaser of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of each of Parent and Purchaser and no
other corporate action on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the transactions contemplated hereby
(other than the filing and recordation of appropriate merger documents as
required by the DGCL). This Agreement has been duly executed and delivered by
each of Parent and Purchaser and is a legal, valid and
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binding obligation of each of Parent and Purchaser, enforceable against Parent
and Purchaser in accordance with its terms.
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Assuming satisfaction of all applicable requirements referred to in
Section 4.3 (b) below, the execution and delivery of this Agreement by Parent
and Purchaser, the compliance by Parent and Purchaser with the provisions
hereof and the consummation by Parent and Purchaser of the transactions
contemplated hereby will not conflict with or violate (i) any statute, law,
ordinance, rule, regulation, order, writ, judgment, award, injunction, decree
or ruling applicable to Parent or Purchaser or any of their properties, other
than such conflicts or violations which individually or in the aggregate do
not and will not have a material adverse effect on the business, properties,
assets, results of operations or financial condition of Parent and Purchaser,
taken as a whole, or (ii) conflict with or violate the Certificate of
Incorporation or Bylaws of Parent or Purchaser.
(b) Other than in connection with or in compliance with the provisions of
the DGCL, the Exchange Act, the "takeover" or "blue sky" laws of various
states and the HSR Act, (i) neither Parent nor Purchaser is required to submit
any notice, report, registration, declaration or other filing with any
Governmental Entity in connection with the execution or delivery of this
Agreement by Parent and Purchaser or the performance by Parent and Purchaser
of their obligations hereunder or the consummation by Parent and Purchaser of
the transactions contemplated by this Agreement and (ii) no waiver, consent,
approval, order or authorization of any Governmental Entity is required to be
obtained by Parent or Purchaser in connection with the execution or delivery
of this Agreement by Parent and Purchaser or the performance by Parent and
Purchaser of their obligations hereunder or the consummation by Parent and
Purchaser of the transactions contemplated by this Agreement. None of the
information supplied by Parent or Purchaser for inclusion in the Proxy
Statement shall, at the date the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to stockholders or at the time of the
Company Stockholders' Meeting, contain any untrue statement of a 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.
4.4 SCHEDULE 14D-1. Neither the Schedule 14D-1 nor the Offer Documents, nor
any of the information supplied by Parent and Purchaser for inclusion in the
Schedule 14D-9 and the Information Statement, shall at the respective times
they are filed with the SEC or are first published, sent or given to
stockholders or upon the expiration of the Offer, as the case may be, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein in the light of the circumstances under which they were made not
misleading (except for information supplied by the Company for inclusion in
the Schedule 14D-1 and the Offer Documents, as to which Parent and Purchaser
make no representation). None of the information supplied by Parent or
Purchaser for inclusion in the Proxy Statement shall, at the date the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
stockholders, at the time of the Company Stockholders' Meeting and at the
Effective Time, contain any untrue statement of a 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.
4.5 AVAILABLE FUNDS. Parent has or has available to it, and will make
available to Purchaser, all funds necessary to satisfy all of Parent's and
Purchaser's obligations under this Agreement and in connection with the
transaction contemplated hereby, including, without limitation, the obligation
to purchase all outstanding Shares pursuant to the Offer and the Merger and to
pay all related fees and expenses in connection with the Offer and the Merger.
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ARTICLE V
COVENANTS
5.1 CONDUCT OF BUSINESS BY THE COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms and the Effective Time or such time as
Parent's designees shall constitute a majority of the Board of Directors of
the Company, the Company (which for the purposes of this Article 5 shall
include the Company and each of its subsidiaries) agrees, except to the extent
that Parent shall otherwise consent, to carry on its business diligently and
in accordance with good commercial practice and to carry on its business in
the usual, regular and ordinary course, in substantially the same manner as
heretofore conducted and in compliance in all material respects with all
applicable laws and regulations, to pay its debts and taxes when due subject
to good faith disputes over such debts or taxes, to pay or perform in all
material respects other material obligations when due and use its commercially
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees and others with which it has
business dealings.
In addition, except as permitted by the terms of this Agreement (and other
than as set forth in Section 5.1 of the Company Schedules), without the prior
consent of Parent, the Company shall not do any of the following, and shall
not permit any of its subsidiaries to do any of the following:
(i) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize
cash payments in exchange for any options granted under any of such plans;
(ii) Grant any severance or termination pay to any officer or employee
except payments in amounts consistent with policies and past practices or
pursuant to written plans or agreements outstanding, or policies existing, on
the date hereof and as previously disclosed in writing to the other, or adopt
any new severance plan;
(iii) Transfer or license to any person or entity or otherwise extend, amend
or modify in any material respect any rights to the Company's intellectual
property or other proprietary rights, or enter into grants to future patent
rights, other than in the ordinary course of business, consistent with past
practice;
(iv) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any capital stock or split,
combine or reclassify any capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock.
(v) Repurchase or otherwise acquire, directly or indirectly, any shares of
capital stock except pursuant to rights of repurchase of any such shares under
any employee, consultant or director stock plan existing on the date hereof
(which repurchase rights the Company shall be obligated to exercise if the
repurchase price is less than the Merger Consideration).
(vi) Issue, deliver, sell, authorize or propose the issuance, delivery or
sale of, any shares of capital stock or any securities convertible into shares
of capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than
the issuance of Shares, pursuant to the exercise of stock options therefor
outstanding as of the date of this Agreement;
(vii) Cause, permit or propose any amendments to any charter document or
Bylaw (or similar governing instruments of any subsidiaries);
(viii) Acquire or agree to acquire by merging or consolidating with, or by
purchasing equity interest in or a material portion of the assets of, or by
any other manner, any business or any corporation, partnership interest,
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association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets which are material, individually or in
the aggregate, to the business of the Company, or enter into any joint
ventures, strategic partnerships or alliances;
(ix) Sell, lease, license, encumber or otherwise dispose of any properties
or assets which are material, individually or in the aggregate, to the
business of the Company, except in the ordinary course of business consistent
with past practice;
(x) Incur any indebtedness for borrowed money (other than ordinary course
trade payables or pursuant to existing credit facilities in the ordinary
course of business) or guarantee any such indebtedness or issue or sell any
debt securities or warrants or rights to acquire debt securities, or guarantee
any debt securities of others;
(xi) Adopt or amend any employee benefit or employee stock purchase or
employee option plan, or enter into any employment contract, pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates of its officers or employees other than in the ordinary
course of business, consistent with past practice, or change in any material
respect any management policies or procedures;
(xii) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business;
(xiii) Make any grant of exclusive rights to any third party; or
(xiv) Agree in writing or otherwise to take any of the actions described in
(i) through (xiii) above.
5.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Subject to and in accordance with the terms and conditions of that
certain letter dated February 25, 1997 between Parent and the Company (the
"CONFIDENTIALITY AGREEMENT"), from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its subsidiaries, officers,
directors, employees and agents to, afford the officers, employees and agents
of Parent, Purchaser and their affiliates and the attorneys, accountants,
banks, other financial institutions and investment banks working with Parent
or Purchaser, and their respective officers, employees and agents, complete
access at all reasonable times to its officers, employees, agents, properties,
books, records and contracts, and shall furnish Parent, Purchaser and their
affiliates and the attorneys, banks, other financial institutions and
investment banks working with Parent or Purchaser, all financial, operating
and other data and information as they reasonably request.
(b) Subject to the requirements of law, Parent and Purchaser shall, and
shall use their reasonable efforts to cause their officers, employees and
agents, and the attorneys, banks, other financial institutions and investment
banks who obtain such information to, hold all information obtained pursuant
to this Agreement or the Confidentiality Agreement in accordance with the
terms and conditions of the Confidentiality Agreement.
(c) No investigation pursuant to this Section 5.2 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
5.3 PROXY MATERIAL; STOCKHOLDERS' MEETING.
(a) The Company and each of Parent and Purchaser shall prepare and file, or
shall cause to be prepared and filed, with the SEC those documents, schedules
and amendments and supplements thereto required to be filed with respect to
the transactions contemplated by this Agreement. The Company, acting through
its Board of Directors, shall, if necessary, cause the Company Stockholders'
Meeting to be duly called (including establishing the record date, if
requested, to be a date immediately after the date the Purchaser first
purchases any Shares pursuant to the Offer) and shall give notice of, convene
and hold the Company Stockholders' Meeting as soon as practicable, and at such
time and place designated by Parent or Purchaser, for the purpose of approving
the Merger, this Agreement and any other actions contemplated hereby which
require the approval of the Company's stockholders. The Company shall
recommend to its stockholders approval of the Merger and take all reasonable
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actions necessary to solicit such approval. The Company shall use its best
efforts to obtain and furnish the information required to be included by it in
the Proxy Statement and, after consultation with Parent and Purchaser, shall
respond promptly to any comments of the SEC relating to any preliminary proxy
statement regarding the Merger and the other transactions contemplated by this
Agreement and to cause the Proxy Statement to be mailed to its stockholders,
all at the earliest practicable time. Whenever any event occurs which should
be set forth in an amendment or supplement to the Proxy Statement or any other
filing required to be made with the SEC with respect to the Proxy Statement or
the Company Stockholders' Meeting, each party shall promptly inform the other
of such occurrence and cooperate in filing with the SEC and/or mailing to the
Company's stockholders such amendment or supplement. The Proxy Statement and
all amendments and supplements thereto shall comply with applicable law and be
in form and substance satisfactory to each of Parent and Purchaser and the
Company. The Company, acting through its Board of Directors, shall include in
the Proxy Statement the recommendation of its Board of Directors that
stockholders of the Company vote in favor of the approval and adoption of this
Agreement and the Merger. The Company shall use its best efforts to solicit
from stockholders of the Company proxies in favor of such approval and
adoption and shall take all other actions necessary or, in the reasonable
judgment of Parent and Purchaser, advisable to secure the vote or consent of
the Company's stockholders required by the DGCL to effect the Merger.
(b) Notwithstanding the foregoing, in the event that Purchaser shall acquire
at least ninety percent (90%) of the outstanding Shares, the parties hereto
agree, at the request of Purchaser, subject to Article VI, to take all
necessary and appropriate action to cause the Merger to become effective as
soon as reasonably practicable after such acquisition, without a meeting and
without a vote of the Company's stockholders, in accordance with the DGCL.
5.4 NO SOLICITATION.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to its terms, the
Company and its subsidiaries shall not, and will instruct their respective
directors, officers, employees, representatives, investment bankers, agents
and affiliates not to, directly or indirectly, (i) solicit or encourage
submission of, any proposals or offers by any person, entity or group (other
than Parent and its affiliates, agents and representatives), or (ii)
participate in any discussions or negotiations with, or disclose any non-
public information concerning the Company or any of its subsidiaries to, or
afford any access to the properties, books or records of the Company or any of
its subsidiaries to, or otherwise assist or facilitate, or enter into any
agreement or understanding with, any person, entity or group (other than
Parent and its affiliates, agents and representatives), in connection with any
Acquisition Proposal with respect to the Company. For the purposes of this
Agreement, an "ACQUISITION PROPOSAL" with respect to an entity means any
proposal or offer relating to (i) any merger, consolidation, sale of
substantial assets or similar transactions involving the entity or any
subsidiaries of the entity (other than sales of assets or inventory in the
ordinary course of business or as permitted under the terms of this
Agreement), (ii) the acquisition by any person of beneficial ownership or a
right to acquire beneficial ownership of, or the formation of any "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) which beneficially owns, or has the right to acquire beneficial
ownership of, 10% or more of the then outstanding shares of capital stock of
the entity (except for acquisitions for passive investment purposes only in
circumstances where the person or group qualifies for and files a Schedule 13G
with respect thereto); or (iii) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing. The Company will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. The Company will (i) notify Parent as promptly as
practicable if any inquiry or proposal is made or any information or access is
requested in connection with an Acquisition Proposal or potential Acquisition
Proposal and (ii) as promptly as practicable notify Parent of the terms and
conditions of any such Acquisition Proposal. In addition, subject to the other
provisions of this Section 5.4(a), from and after the date of this Agreement
until the earlier of the Effective Time and termination of this Agreement
pursuant to its terms, the Company and its subsidiaries will not, and will
instruct their respective directors, officers, employees, representatives,
investment bankers, agents and affiliates not to, directly or indirectly, make
or authorize any public statement, recommendation or solicitation in support
of any Acquisition
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Proposal made by any person, entity or group (other than Parent); provided,
however, that nothing herein shall prohibit the Company' Board of Directors
from taking and disclosing to the Company' stockholders a position with
respect to a tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under
the Exchange Act.
(b) Notwithstanding the provisions of paragraph (a) above, prior to
consummation of the Offer, the Company may, to the extent the Board of
Directors of the Company determines, in good faith, after consultation with
outside legal counsel, that the Board's fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with, and,
subject to the requirements of paragraph (c), below, furnish information to
any person, entity or group after such person, entity or group has delivered
to the Company in writing, an unsolicited bona fide Acquisition Proposal which
the Board of Directors of the Company in its good faith reasonable judgment
determines, after consultation with its independent financial advisors, would
result in a transaction more favorable than the Offer and the Merger to the
stockholders of the Company from a financial point of view and for which
financing, to the extent required, is then committed or which, in the good
faith reasonable judgment of the Board of Directors of the Company (based upon
the advice of independent financial advisors), is reasonably capable of being
financed by such person, entity or group and which is likely to be consummated
(a "SUPERIOR PROPOSAL"). In the event the Company receives a Superior
Proposal, nothing contained in this Agreement (but subject to the terms
hereof) will prevent the Board of Directors of the Company from recommending
such Superior Proposal to the Company's stockholders, if the Board determines,
in good faith, after consultation with outside legal counsel, that such action
is required by its fiduciary duties under applicable law, provided, however,
that the Company shall not recommend to its stockholders a Superior Proposal
for a period of not less than 48 hours after Parent's receipt of a copy of
such Superior Proposal (or a description of the terms and conditions thereof,
if not in writing).
(c) Notwithstanding anything to the contrary herein, the Company will not
provide any non-public information to a third party unless: (x) the Company
provides such non-public information pursuant to a nondisclosure agreement
with terms regarding the protection of confidential information at least as
restrictive as such terms in the Confidentiality Agreement; and (y) such non-
public information has been previously delivered to Parent.
5.5 PUBLIC ANNOUNCEMENTS. Parent and Purchaser on the one hand and the
Company on the other hand will consult with each other before issuing any
press release or otherwise making any public statements with respect to this
Agreement or the Merger or the other transactions contemplated hereby, and
shall not issue any such press release or make any such public statement prior
to such consultation, except as may be required by law. This Section 5.5 shall
supersede any conflicting provisions in the Confidentiality Agreement.
5.6 NOTIFICATION OF CERTAIN MATTERS.
(a) The Company shall give prompt notice (which notice shall state that it
is delivered pursuant to Section 5.6(a) of this Agreement) in writing to
Parent, and Parent and Purchaser shall give prompt notice in writing to the
Company, of (i) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date of this Agreement through the Effective Time and
(ii) any failure of the Company, Parent or Purchaser, as the case may be, or
of any officer, director, employee or agent thereof, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement; provided, however, no such notification shall affect the
representations or warranties of the parties or the conditions to the
obligations of the parties hereunder.
(b) The Company shall give prompt notice in writing (which notice shall
state that it is delivered pursuant to Section 5.6(b) of this Agreement) to
Parent of (i) any act, omission to act, event or occurrence which, with the
passage of time or otherwise, would likely have a Material Adverse Effect on
the Company and (ii) any material contingent liability of the Company or any
of its subsidiaries for which such party reasonably believes it will, with the
passage of time or otherwise, become liable; provided, however, that no such
notification shall affect the representations or warranties of the parties or
the conditions to the obligations of the parties hereunder.
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5.7 ACTIONS BY COMPANY. Subject to the terms and conditions hereof, the
Company shall, and shall cause its subsidiaries to, cooperate with Parent and
Purchaser and take all such actions as may be reasonably requested by Parent
and Purchaser to accomplish the Merger.
5.8 OFFICERS' AND DIRECTORS' INDEMNIFICATION.
(a) Parent and Purchaser agree that all rights to indemnification for acts
or omissions occurring prior to the Effective Time now existing in favor of
the current or former directors or officers (the "Indemnified Parties") of the
Company and its subsidiaries as provided in their respective certificates of
incorporation or by-laws (or similar organizational documents) or existing
indemnification contracts in the form filed with the SEC shall survive the
Merger and shall continue in full force and effect in accordance with their
terms.
(b) For six years from the Effective Time, Parent shall, unless Parent
agrees in writing to guarantee the indemnification obligations set forth in
Section 5.8(a) hereof, maintain in effect the Company's current directors' and
officers' liability insurance covering those persons who are currently covered
by the Company's directors' and officers' liability insurance policy (a copy
of which has been heretofore delivered to Parent); provided, however, that in
no event shall Parent be required to expend in any one year an amount in
excess of 150% of the annual premiums currently paid by the Company for such
insurance which the Company represents in not more than $250,000; and,
provided, further, that if the annual premiums of such insurance coverage
exceed such amount, Parent shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
(c) This Section 5.8 shall survive the consummation of the Merger at the
Effective Time, is intended to benefit the Company, Parent, the Surviving
Corporation and the Indemnified Parties, and shall be binding on all
successors and assigns of Parent and the Surviving Corporation.
5.9 RESERVED.
5.10 ADDITIONAL AGREEMENTS.
(a) Subject to the terms and conditions hereof, each of the parties to this
Agreement 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 to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement (including consummation of the
Offer and the Merger) and to cooperate with each other in connection with the
foregoing.
(b) Subject to the terms and conditions hereof, each of the parties to this
Agreement agrees to use (i) all reasonable efforts to obtain all necessary
waivers, consents and approvals from other parties to loan agreements, leases,
licenses and other contracts, and (ii) all reasonable efforts to obtain all
necessary consents, approvals and authorizations as required to be obtained
under any federal, state or foreign law or regulations, including, but not
limited to, those required under the HSR Act, to defend all lawsuits or other
legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the
parties to consummate the transactions contemplated hereby, to effect all
necessary registrations and filings, including, but not limited to, filings
under the HSR Act and submissions of information requested by Governmental
Entities, and to fulfill all conditions to this Agreement.
5.11 OTHER ACTIONS BY THE COMPANY. If any "fair price," "moratorium,"
"control share acquisition," "shareholder protection" or other form of
antitakeover statute, regulation or charter provision or contract is or shall
become applicable to the Offer or the Merger or the transactions contemplated
hereby, the Company and the Board of Directors of the Company shall grant such
approvals and take such actions as are necessary under such laws and
provisions so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of such statute, regulation, provision or
contract on the transactions contemplated hereby.
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5.12 TREATMENT OF STOCK OPTIONS. Upon the Effective Time, each of the
options then outstanding under the 1993 Plan (the "OPTIONS") shall terminate
and be converted into a right to receive quarterly cash payments (the "OPTION
PAYMENTS") from the Surviving Corporation. With respect to each Option, the
amount of the Option Payment for each calendar quarter shall be equal to the
product of (a) the Merger Consideration minus the exercise price per Share of
such Option multiplied by (b) the number of shares for which such Option would
have become exercisable during such quarter if such Option had not been
terminated. The Option Payment for a quarter shall be made to the holder of
the Option (or his or her successors) not later than 15 days following the
close of such quarter. In the case of Options that are exercisable upon the
Effective Time, or would have become exercisable at the Effective Time as a
result of the transactions contemplated by this Agreement (including, without
limitation, all Options held by the non-employee directors of the Company),
the Option Payment shall be made upon the Effective Time. The provisions of
the 1993 Plan and the applicable stock option agreement shall control in
determining when an Option would have become exercisable and to what extent an
Option is forfeited in the event that the holder's service with the Company
terminates.
5.13 SECTION 203 OF THE DGCL. From and after the date of this Agreement, the
Company will not approve any acquisition of shares of Common Stock by any
person (other than Parent, Purchaser or their respective affiliates) which
would result in such person becoming an interested stockholder (as such term
is defined in Section 203 of the DGCL) or otherwise be subject to Section 203
of the DGCL.
5.14 STOCKHOLDER LITIGATION. The Company shall give Parent the opportunity
to participate in the defense or settlement of any stockholder litigation
against the Company and its directors relating to any of the transactions
contemplated by this Agreement until the purchase of Company Common Stock
pursuant to the Offer, and thereafter, shall give Parent the opportunity to
direct the defense of such litigation and, if Parent so chooses to direct such
litigation, Parent shall give the Company and its directors an opportunity to
participate in such litigation; provided, however, that no settlement of such
litigation shall be agreed to without Parent's consent; and provided further
that no settlement requiring a payment by a director shall be agreed to
without such director's consent.
5.15 EMPLOYEE BENEFITS. Following the Effective Time, the Surviving
Corporation will provide the persons employed by the Company immediately prior
to the Effective Time, for so long as such persons remain employed by the
Surviving Corporation, with salary and benefits (other than stock options) in
the aggregate which are substantially comparable to those provided to such
persons by the Company immediately prior to the Effective Time.
ARTICLE VI
CONDITIONS OF MERGER
6.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of each of the following
conditions:
(a) If required by the DGCL, this Agreement and the Merger shall have been
approved and adopted by the requisite vote of the stockholders of the Company.
(b) Any waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(c) Shares shall have been purchased pursuant to the Offer.
(d) No temporary restraining order, preliminary or permanent injunction,
judgment or other order, decree or ruling nor any statute, rule, regulation or
order shall be in effect which would (i) make the acquisition or holding by
Parent or its affiliates of Shares or shares of Common Stock of the Surviving
Corporation illegal or
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otherwise prevent the consummation of the Merger, (ii) prohibit Parent's or
Purchaser's ownership or operation of, or compel Parent or Purchaser to
dispose of or hold separate, all or a material portion of the business or
assets of Purchaser, the Company or any Significant Subsidiary thereof, (iii)
compel Parent, Purchaser or the Company to dispose of or hold separate all or
a material portion of the business or assets of Parent or any of its
Subsidiaries or the Company or any of its Significant Subsidiaries, (iv)
impose material limitations on the ability of Parent or Purchaser or their
affiliates effectively to exercise full ownership and financial benefits of
the Surviving Corporation, or (v) impose any material condition to the Offer,
this Agreement or the Merger, which would be adverse to Parent.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated, at any time prior to the
Effective Time, whether before or after approval by the stockholders of the
Company:
(a) by mutual written agreement of the Boards of Directors of Parent and the
Company;
(b) by either Parent or the Company:
(i) if the Offer shall be terminated or expire without any Shares having
been purchased pursuant to the Offer; provided, however, that a party shall
not be entitled to terminate this Agreement pursuant to this Section
7.1(b)(i) if it is in material breach of its representations and
warranties, covenants or other obligations under this Agreement; or
(ii) if any court of competent jurisdiction in the United States or other
United States governmental body shall have issued an order, decree or
ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Offer or the Merger and such order, decree, ruling or other
action shall have become final and nonappealable;
(c) by Parent:
(i) if the Board of Directors of the Company or any committee thereof
shall have approved, or recommended that stockholders of the Company accept
or approve, an Acquisition Proposal by a third party, or shall have
resolved to do any of the foregoing;
(ii) if the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified its approval of, or recommendation that
the stockholders of the Company accept or approve (as the case may be), the
Offer, this Agreement and the Merger, or shall have resolved to do any of
the foregoing;
(iii) if the Company shall have failed to include in the Schedule 14D-9
the recommendation of the Board of Directors of the Company that the
stockholders of the Company accept the Offer;
(iv) prior to the purchase of Shares pursuant to the Offer, in the event
that the conditions to the Offer set forth in clause (i) or (ii) of Annex I
shall not be satisfied or if any of the events set forth in clause (iii)
thereof shall have occurred; or
(v) if the Company is in material breach of any of its covenants or
obligations under this Agreement, or any representation or warranty of the
Company contained in this Agreement shall have been incorrect, in any
material respect, when made or shall have since ceased to be true and
correct in any material respect;
(d) by the Company
(i) if the Offer shall not have been commenced in accordance with Section
1.1, or Parent or Purchaser shall have failed to purchase validly tendered
Shares in violation of the terms of the Offer within ten business days
after the expiration of the Offer; provided, however, that the Company
shall not be entitled to
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terminate this Agreement pursuant to this Section 7.1(d)(i) if it is in
material breach of its representations and warranties, covenants or other
obligations under this Agreement;
(ii) if the Board of Directors of the Company has resolved to, and in
fact does, recommend to the Company's Stockholders that they accept a
Superior Proposal, provided that all the provisions of Section 5.4 have
been fully complied with, and provided further that the Company shall have
paid to Parent the entire Initial Break-up Fee as provided in Section 7.3
(b); or
(iii) prior to the purchase of Shares pursuant to the Offer, if Parent or
Purchaser is in material breach of any of its covenants or obligations
under this Agreement, or any representation or warranty of Parent or
Purchaser contained in this Agreement shall have been incorrect, in any
material respect, when made or shall have since ceased to be true and
correct in any material respect.
7.2 PROCEDURE AND EFFECT OF TERMINATION.
(a) In the event of the termination of this Agreement by the Company or
Parent or both of them pursuant to Section 7.1, the terminating party shall
provide written notice of such termination to the other party and this
Agreement shall forthwith become void and there shall be no liability on the
part of Parent, Purchaser or the Company, except that Sections 5.2(b), 7.2,
7.3 and Article VIII shall survive the termination of this Agreement. The
foregoing shall not relieve any party for liability for damages actually
incurred as a result of any breach of this Agreement.
7.3 FEES AND EXPENSES.
(a) Except as otherwise provided in this Agreement and whether or not the
transactions contemplated by the Offer and this Agreement are consummated, all
costs and expenses incurred in connection with the transactions contemplated
by the Offer and this Agreement shall be paid by the party incurring such
expenses.
(b) The Company shall pay to Parent, in same day funds, upon demand, an
amount equal to $1,500,000 (the "INITIAL BREAK-UP FEE"), if any of the
following shall occur:
(i) if the Board of Directors of the Company or any committee thereof
shall have approved, or recommended that stockholders of the Company accept
or approve, an Acquisition Proposal by a third party, or shall have
resolved to do any of the foregoing;
(ii) if the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified its approval of, or recommendation that
the stockholders of the Company accept or approve (as the case may be), the
Offer, this Agreement and the Merger, or shall have resolved to do any of
the foregoing; or
(iii) if the Company shall have failed to include in the Schedule 14D-9
the recommendation of the Board of Directors of the Company that the
stockholders of the Company accept the Offer.
In addition, the Company shall pay to Parent, in same day funds, upon
demand, an amount equal to $6,500,000 (the "SUBSEQUENT BREAK-UP FEE"), if
within a six-month period following the occurrence of any of the events
specified in clauses (i), (ii), or (iii) above, (1) the Company shall
consummate any merger, consolidation or sale of all or substantially all of
its assets, or (2) any person, entity or "group" (as that term is used in
Section 13(d)(3) of the Exchange Act), shall beneficially own (as that term is
used in Section 13(d)(3) of the Exchange Act), or shall have acquired, 50% or
more of the Shares, or shall have been granted any option or right,
conditional or otherwise, to acquire 50% or more of the Shares.
(c) The Initial Break-up Fee and the Subsequent Break-up Fee shall not be
deemed (either individually or together) to be liquidated damages, and the
right to the payment of the such Break-up Fees shall be in addition to (and
not a maximum payment in respect of) any other damages or remedies at law or
in equity to which Parent or Purchaser may be entitled as a result of the
Company's violation or breach of any term or provision of this Agreement.
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7.4 AMENDMENT. This Agreement may be amended by each of the parties by
action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that (i) such amendment
shall be in writing signed by all of the parties, (ii) any such waiver,
amendment or supplement by the Company shall be effective as against the
Company only if approved by a majority of the Continuing Directors and (iii)
after adoption of this Agreement and the Merger by the stockholders of the
Company, no amendment may be made without the further approval of the
stockholders of the Company which reduces the Merger Consideration or changes
the form thereof or changes any other terms and conditions of this Agreement
if the changes, alone or in the aggregate, would materially adversely affect
the stockholders of the Company.
7.5 WAIVER. At any time prior to the Effective Time, whether before or after
the Company's Stockholders Meeting, any party hereto, by action taken by its
Board of Directors, may (i) extend the time for the performance of any of the
obligations or other acts of any other party hereto or (ii) subject to the
provisions of Section 7.4, waive compliance with any of the agreements of any
other party or with any conditions to its own obligations. Any agreement on
the part of a party hereto to any such extension or waiver shall be valid only
if set forth in an instrument in writing signed on behalf of such party by a
duly authorized officer of such party. Notwithstanding the above, any waiver
given shall not apply to any subsequent failure of compliance with agreements
of the other party or conditions to its own obligations.
ARTICLE VIII
MISCELLANEOUS
8.1 NONSURVIVAL OF REPRESENTATION AND WARRANTIES; SEVERABILITY. The
representations and warranties set forth in this Agreement shall not survive
the purchase of Shares, if any, pursuant to the Offer. If any term or other
provision of this Agreement is invalid, illegal or incapable of being enforced
by 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 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 an
acceptable manner to the end that transactions contemplated hereby are
fulfilled to the extent possible.
8.2 NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given, or
made as of the date delivered if sent via telecopier or delivered personally
(including, without limitation, delivery by commercial carrier warranting
next-day delivery) to the parties at the following addresses (or at such other
address for a party as shall be specified by similar notice, except that
notices of changes of address shall be effective upon receipt):
(a) If to Parent or Purchaser:
Elsevier Science Inc.
c/o Reed Elsevier Inc.
275 Washington Street
Newton, Massachusetts 02158
Attention: Henry Horbaczewski
With copies to:
Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Larry W. Sonsini, Esq.
Marty Korman, Esq.
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Telecopier No.: (415) 493-6811
and to:
Golden Gate Acquisition Corp.
(b) If to the Company:
MDL Information Systems, Inc.
14600 Catalina Street
San Leandro, California 94577
Attention: Chief Executive Officer
With copies to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, California 94025
Attention: Jay K. Hachigian, Esq.
Renee Lanam Barton, Esq.
8.3 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; NO ASSIGNMENT. This
Agreement, Annex I, the documents delivered pursuant hereto and the
Confidentiality Agreement (i) constitute the entire agreement and supersede
all other prior agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof, (ii) are
not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder (except as expressly set forth in Section 5.8
with respect to present officers and directors of the Company), and (iii) may
not be assigned, except that Parent or Purchaser may assign their rights
hereunder in whole or in part to one or more direct or indirect subsidiaries
or affiliates of Parent which, in written instruments reasonably satisfactory
to the Company, shall agree to make all representations and warranties of
Purchaser set forth herein and shall agree to assume all of such party's
obligations hereunder and be bound by all of the terms and conditions of this
Agreement; provided, however, that no such assignment shall relieve the
assignor of its obligations hereunder.
8.4 INTERPRETATION; KNOWLEDGE.
(i) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. The words
"INCLUDE," "INCLUDES" and "INCLUDING" when used herein shall be deemed in each
case to be followed by the words "without limitation." The table of contents
and headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
When reference is made herein to "the business of" an entity, such reference
shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity shall
be deemed to include all direct and indirect subsidiaries of such entity.
(ii) For purposes of this Agreement, the term "KNOWLEDGE" means, with
respect to any matter in question, that any of the Chief Executive Officer,
President or Chief Financial Officer (or principal accounting officer if
different from the foregoing) of the parties, as the case may be, have
knowledge of such matter.
(iii) In this Agreement, any reference to any "subsidiary" of any party
shall mean any association, corporation, individual, partnership, trust, or
any other entity or organization in which such party has a direct or indirect
equity ownership interest of more than 50%. In this Agreement, any reference
to any action, suit, proceeding, claim, arbitration, or investigation being
"pending" or "threatened" shall mean that the relevant party shall have either
been served thereunder or otherwise notified of the existence thereof.
8.5 COUNTERPARTS. This Agreement may be executed 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
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signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
8.6 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. 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.
8.7 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law
thereof; provided that issues involving the corporate governance of any of the
parties hereto shall be governed by their respective jurisdictions of
incorporation. Each of the parties hereto irrevocably consents to the
exclusive jurisdiction of any state or federal court within Delaware, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, other than issues involving the corporate
governance of any of the parties hereto, agrees that process may be served
upon them in any manner authorized by the laws of the State of Delaware for
such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction and such process.
8.8 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document.
8.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE ACTIONS OF THE PARTIES IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
ELSEVIER SCIENCE INC.
By: /s/ Herman Spruijt
-----------------------------------
Herman Spruijt, Chairman
GOLDEN GATE ACQUISITION CORP.
By: /s/ Herman Spruijt
-----------------------------------
Herman Spruijt, Chairman
MDL INFORMATION SYSTEMS, INC.
By: /s/ Steven D. Goldby
-----------------------------------
Steven D. Goldby, Chief Executive
Officer
*****SIGNATURE PAGE -- AGREEMENT AND PLAN OF MERGER*****
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ANNEX I
CONDITIONS OF THE OFFER
The term "AGREEMENT" as used in this Annex I shall mean the Agreement and
Plan of Merger to which this Annex I is attached, and all capitalized terms
used in this Annex I and not defined in this Annex I shall have the respective
meanings set forth in the Agreement.
Notwithstanding any other provision of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time, Purchaser shall not be required to accept for payment, purchase or pay
for, or may terminate or amend the Offer and may postpone the acceptance of,
and payment for, subject to Rule 14e-1(c) under the Exchange Act (whether or
not any Shares have theretofore been accepted for payment or paid for pursuant
to the Offer), any Shares tendered pursuant to the Offer if:
(i) any waiting period (and any extension thereof) under the HSR Act
applicable to the purchase of Shares pursuant to the Offer shall not have
expired or been terminated;
(ii) the Minimum Condition is not satisfied;
(iii) at any time on or after the date of the Agreement, any of the
following events shall have occurred:
(A) there shall have been any action taken or threatened, or any
statute, rule, regulation, judgment, temporary restraining order,
preliminary or permanent injunction or other order, decree or ruling
proposed, sought, promulgated, enacted, entered, enforced or deemed
applicable to the Offer or the Merger by any Governmental Entity or
arbitration panel that could reasonably be expected to, directly or
indirectly, (1) make the acceptance for payment or the payment for, or
the purchase of some or all of the Shares pursuant to the Offer illegal
or otherwise delay, restrict or prohibit consummation of the Offer or
the Merger or the consummation of any transaction contemplated by the
Merger Agreement, (2) result in a delay in or restrict the ability of
Purchaser, or render Purchaser unable, to accept for payment, pay for
or purchase some or all of the Shares, (3) require the divestiture by
Parent, Purchaser, the Company or any of their respective Subsidiaries
or affiliates of all or any portion of the business, assets or property
of any of them or any Shares or impose any material limitation on the
ability of any of them to conduct their business and own such assets,
properties or Shares, (4) impose any material limitation on the ability
of Parent, Purchaser or their affiliates to acquire or hold or to
exercise effectively all rights of ownership of the Shares, including
the right to vote any Shares purchased by any of them on all matters
properly presented to the stockholders of the Company, including,
without limitation, the adoption and approval of the Agreement and the
Merger, (5) result in a material diminution in the benefits expected to
be derived by Parent or Purchaser as a result of the transactions
contemplated by the Offer or the Agreement, or (6) impose any material
condition to the Offer, the Agreement or the Merger, which would be
adverse to Parent; or
(B) the Company shall have breached, or failed to comply with, in any
material respect, any of its covenants or obligations under the
Agreement or any representation or warranty of the Company in the
Agreement shall have been incorrect, in any material respect, when made
or shall have since ceased to be true and correct in any material
respect; or
(C) the Board of Directors of the Company or any committee thereof
shall have (1) withdrawn or modified (including without limitation, by
amendment of the Company's Schedule 14D-9) in a manner adverse to
Parent or Purchaser its approval or recommendation of the Offer, the
Merger or the Agreement, (2) approved or recommended any Acquisition
Proposal by a third party other than the Offer and the Merger, (3)
publicly resolved to do any of the foregoing, or (4) upon a request to
reaffirm the Company's approval or recommendation of the Offer, the
Agreement or the Merger, the Board of Directors of the Company shall
fail to do so within two business days after such request is made; or
(D) the Agreement shall have been terminated in accordance with its
terms; or
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(E) there shall have occurred any Material Adverse Effect on the
Company, or any event, fact or change which could reasonably be
expected to result in a Material Adverse Effect on the Company; or
(F) the Employment Agreements of Steven D. Goldby and Thomas D. Jones
shall not be in full force and effect other than by reason of their
respective deaths or incapacities.
The foregoing conditions are for the sole benefit of Parent, Purchaser and
their affiliates and may be asserted by Parent or Purchaser regardless of the
circumstances (including any action or inaction by Parent or Purchaser or any
of their affiliates) giving rise to such condition. All the foregoing
conditions may be waived by Parent or Purchaser in whole or in part at any
time and from time to time in the sole discretion of Parent or Purchaser. The
failure by Parent or Purchaser at any time to exercise its rights with respect
to the foregoing conditions shall not be deemed a waiver of any such
condition, and each condition shall be deemed an ongoing condition with
respect to which Parent or Purchaser may assert its rights at any time and
from time to time.
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EXHIBIT 99(C)2
EXHIBIT F-1
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of March 23, 1997, is between MDL Information
Systems, Inc., a Delaware corporation ("Company") and Steven D. Goldby
("Employee").
RECITALS
1) In connection with the Agreement and Plan of Merger, dated as of March
23, 1997 ("Merger Agreement"), by and among Elsevier Science Inc. a New York
corporation ("Parent"), Golden Gate Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Parent ("Purchaser"), and Company, pursuant to
which Company shall become a wholly-owned subsidiary of Parent, Company
desires to provide for the continued services of Employee, on its own behalf
and on behalf of all existing and future Affiliated Companies (defined as any
corporation or other business entity or entities that directly or indirectly
control, are controlled by or are under common control with Parent), and
Employee desires to continue in the employment of Company upon the terms and
conditions set forth below.
2) Employee and Company are parties to a letter agreement, dated February
28, 1996 (the "Change of Control Agreement"), attached hereto as Appendix A,
which Company and Employee wish to continue as herein modified.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Period of Employment. Company hereby employs Employee to render services
to Company in the position and with the duties and responsibilities described
in Section 2 for the period (the "Period of Employment") commencing on the
consummation of the Offer (as defined in the Merger Agreement) and ending upon
the earlier of (i) three (3) years from such date (the "Term Date"), and (ii)
the date the Period of Employment is terminated in accordance with Section 4.
After the initial three-year Period of Employment, the Term Date shall
automatically be extended in increments of one (1) year unless either party
has given the other party written notice of non-renewal not less than six (6)
months prior to the Term Date then in effect. Termination of this Agreement on
the Term Date solely pursuant to a timely notice of non-renewal as described
herein shall not entitle the Employee to benefits hereunder.
2. Position, Duties, Responsibilities.
(a) Position. Employee hereby accepts employment with Company as Chief
Executive Officer (or in such other position(s) as the Board of Directors
of Company (the "Board") shall designate) and shall report to the Board of
Directors, unless changed by the Board. Employee agrees to devote his
entire time, attention, energies and skills during usual business hours
(and outside those hours when reasonably necessary to the performance of
his duties hereunder) to the business and interests of Company during the
Period of Employment; provided, that Employee shall be entitled to continue
to serve on the Boards of Directors of Aspect Development, Inc., National
Center of Genome Resources and such other boards of directors as the Board
shall approve.
(b) Other Services. Employee may be required in pursuance of his duties
hereunder to perform services for any Affiliated Company but shall not be
entitled to any additional compensation for such services. Employee shall
obey all policies of Company and applicable policies of its Affiliated
Companies.
3. Compensation, Benefits, Expenses.
(a) Salary. In consideration of the services to be rendered hereunder,
including, without limitation, services to any Affiliated Company, Employee
shall be paid an annual salary (the "Base Salary") of Three
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Hundred Sixty Thousand Dollars ($360,000), payable at the time and pursuant
to the procedures regularly established, and as they may be amended, by
Company during the Period of Employment. Company shall review annually the
Base Salary and in light of such review may, in the discretion of the
Board, increase the Base Salary, taking into account Employee's
responsibilities, inflation in the cost of living, increases in salaries of
executives of Parent, Company, Affiliate Companies and other companies,
performance by Employee and other pertinent factors.
(b) Retention Bonus. Immediately following the consummation of the Offer,
Company shall pay to Employee a retention bonus in the amount of $360,000.
(c) Annual Bonus. During the Period of Employment, Employee shall be
entitled to an annual bonus, which shall be determined for fiscal years
1998 and thereafter during the Period of Employment in a manner consistent
with Company's incentive bonus program in effect before then Effective Time
and which shall be paid not later than September 1 of each year. Under such
program, Employee's target bonus percentage shall not be less than 60% of
Employee's Base Salary. The percentage of Employee's target bonus amount
that shall be payable hereunder shall be based upon the Company's
achievement of target earnings for the applicable year, as follows:
(i) If the Company achieves less than 80% of target earnings for the
year, no annual bonus shall be payable to the Employee.
(ii) If the Company achieves 80% of target earnings for the year, 50%
of the target bonus amount shall be payable to the Employee.
(iii) If the Company achieves 100% of target earnings for the year,
100% of the target bonus amount shall be payable to the Employee.
(iv) If the Company achieves 120% or more of target earnings for the
year, 150% of the target bonus amount shall be payable to the Employee.
(v) If the Company achieves between 80% and 120% of target earnings
for the year, the target bonus amount that shall be payable to the
Employee shall be a pro rata amount based on the schedule set forth
above.
(d) Car Allowance. Employee shall be entitled to an automobile allowance
of $15,000 per year during the Period of Employment, subject to withholding
for taxes to the extent required.
(e) Benefits; Expenses. Employee shall be entitled to such expense
accounts, vacation time, sick leave, perquisites of office, fringe
benefits, insurance coverage and other terms and conditions of employment
as Company generally provides to its employees having rank and seniority at
Company comparable to Employee, as the same may be changed from time to
time.
(f) Stock Options. Upon consummation of the Offer (as defined in the
Merger Agreement), Employee held certain options to purchase Company's
Common Stock (the "Options"). Pursuant to the Merger Agreement, those
Options that are not yet exercisable as of the time of the consummation of
the Offer (the "Unvested Options") shall be converted upon consummation of
the Offer into a right to receive quarterly cash payments from Parent at
the time when such Options otherwise would have become exercisable (the
"Option Payments"). The foregoing notwithstanding, those Unvested Options
that were granted on November 14, 1996, shall become exercisable in full
upon consummation of the Offer and shall not be treated as Unvested
Options. In the event of the death of Employee or if Employee shall become
Totally Disabled (as defined in Section 4(b) below) during the Period of
Employment, Employee's rights relating to all of his Option Payments shall
automatically be accelerated and become immediately payable.
4. Termination of Employment.
(a) By Death. The Period of Employment shall terminate automatically upon
the death of Employee. Company shall pay to Employee's beneficiaries or
estate, as appropriate, the Base Salary to which he is
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entitled through the end of the month in which death occurs. Thereafter,
Company's obligations hereunder shall terminate. Nothing in this Subsection
(a) shall affect any entitlement of Employee's heirs to the benefits of any
life insurance plan.
(b) By Disability. If, during the term of this Agreement, Employee should
become Totally Disabled (as hereinafter defined), Company shall have the
right, to the extent permitted by law, in its sole discretion, to terminate
this Agreement and Employee's employment with Company, in which case
Employee's Base Salary shall be paid up through the last day of the month
in which it has been determined that Employee has become Totally Disabled.
Nothing in this Subsection (b) shall affect Employee's rights under any
disability plan in which he is a participant. For purposes hereof, Employee
shall be considered "Totally Disabled" if (i) Employee is entitled to
benefits under any long-term disability income plan applicable to Employee
or (ii) Employee's physical and/or mental condition is such that Employee
is unable to perform those duties Employee would otherwise be expected to
continue to perform as an employee of Company, and Employee's non-
performance of such duties can reasonably be expected to continue or does
continue for not less than six (6) months. The determination that Employee
is Totally Disabled shall be made in good faith by Company, whose
determination shall be final and binding on Employee.
(c) By Company for Cause. Company may terminate, without liability, the
Period of Employment for Cause (as defined below) at any time and upon
fifteen (15) days' advance written notice to Employee. Company shall pay
Employee his Base Salary through the end of the notice period and
thereafter Company's obligations hereunder shall terminate. Termination
shall be for "Cause" if (i) Employee commits an act of fraud or
embezzlement, which is to the detriment of Company, Parent or any
Affiliated Company; (ii) Employee is convicted of a felony or other
criminal act; (iii) Employee willfully fails to perform his employment
duties (other than any such failure resulting from Employee's incapacity
due to physical or mental illness) after a written demand for substantial
performance is delivered to Employee by Company, which demand specifically
identifies the manner in which Company believes that Employee has not
substantially performed his duties; or (iv) Employee breaches any material
term of this Agreement or Employee Confidentiality Agreement (as defined in
Section 5 below), and, as to any such breach which is subject to cure, such
failure or breach continues for a period of ten (10) days after Employee
receives written notice of such breach from Company.
(d) By Employee for Good Reason. Employee may terminate, without
liability, the Period of Employment for Good Reason (as defined below) upon
ten (10) days' advance written notice to Company. In the event of a
termination by Employee of the Period of Employment for Good Reason
pursuant to this Subsection (d), Employee shall be entitled to the
Severance Benefits (as defined in Section 4(f) below) upon the terms
provided in said Section 4(f), and, except as provided in Section 6 below,
Company shall have no further obligations to Employee with respect to his
employment relationship with Company following payment of the Severance
Benefits. "Good Reason" shall exist in the event of (i) a change in
Employee's position with Company which materially reduces Employee's level
of responsibility or the nature of Employee's functions as set forth
herein, (ii) a greater than ten percent (10%) reduction of Employee's level
of compensation (including base salary, fringe benefits and participation
in non-discretionary bonus programs under which awards are payable pursuant
to objective financial or performance standards) or (c) a relocation of
Employee's principal place of employment by more than thirty-five (35)
miles, provided such that change, reduction or relocation is effected
without Employee's written consent. During the ten (10) day notice period,
Company shall have the right, but not the obligation, to take corrective
action to reinstate Employee to such former position, responsibility,
compensation level or location and terminate the right of Employee to
terminate the Period of Employment pursuant to this Subsection (d) as a
result of such prior change to Employee's position, responsibility,
compensation level or location. Employee acknowledges that Company may be
combined with or merged into Parent or any Affiliated Company and such
merger or combination, including any changes in the entity to whom Employee
reports thereafter, will not be deemed by itself to constitute Good Reason
for purposes of this Subsection (d).
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<PAGE>
(e) At Will. At any time, Company may terminate, without liability, the
Period of Employment for any reason, with or without cause, by giving
thirty (30) days' advance written notice to Employee. In the event of a
termination by Company of the Period of Employment pursuant to this
Subsection (e), Employee shall be entitled to receive from Company the
Severance Benefits upon the terms provided in Section 4(f) below, and,
subject to Section 6 below, Company shall have no further obligations to
Employee with respect to his employment relationship with Company following
payment of the Severance Benefits. Employee hereby agrees that Company may
dismiss him under this Subsection (e) without regard to (i) any general or
specific policies (whether written or oral) of Company relating to the
employment or termination of its employees or (ii) any statements made to
Employee, whether made orally or contained in any document, pertaining to
Employee's relationship with Company.
(f) Severance Benefits. To the extent that Employee shall be entitled to
receive Severance Benefits pursuant to Section 4(d) or 4(e) hereof, Company
and Employee agree that the following shall apply:
(i) "Severance Benefits" shall mean: (A) a continuation of Employee's
then effective salary as payable pursuant to Section 3(a) hereof during
the Severance Period (as defined below); (B) payment of any bonus
payable to Employee pursuant to Section 3(c) hereof, calculated based
on the full Company bonus payable thereunder (subject to attainment by
Company of any objective financial or performance standards applicable
to Company) and prorated for any period during the Severance Period
that is less than the full twelve (12) month period in which such bonus
would be earned; (C) immediate vesting and payment of any Option
Payments; and (D) continuation during the Severance Period of any
medical/dental care coverage (or the reasonable equivalent thereof)
which Employee is receiving as of the date of termination of the Period
of Employment, provided that such insurance coverage shall terminate
prior to the expiration of the Severance Period as of the first date
that Employee is covered under another employer's health benefit
program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. Such coverage shall be
in lieu of any other continued health care coverage to which Employee
or his dependents would otherwise be entitled in accordance with the
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), by reason of Employee's termination of
employment.
(ii) "Severance Period" shall mean a period of twenty-four (24)
months following the termination of the Period of Employment pursuant
to Section 4(d) or 4(e) hereof.
(iii) Company shall be entitled to a credit for any amounts paid
pursuant to Part One, Paragraph 1 of the Change of Control Agreement
for any amounts payable pursuant to Paragraph (i)(A) and (i)(B) above
as part of any Severance Benefits payable hereunder.
(iv) Except as provided in Section 6 below, the Severance Benefits
shall be received by Employee in lieu of any other right Employee may
have under applicable law, Company or Parent policies or plans or
otherwise with respect to any payments or compensation in connection
with the termination of Employee's employment with Company.
(v) Employee agrees that payment of the Severance Benefits may, in
the discretion of the Company, be subject to the prior execution by the
Employee of a release of claims in a form provided by the Company prior
to any such payment and that payment of the Severance Benefits shall be
consideration for such release.
(g) Termination Obligations.
(i) Employee hereby acknowledges and agrees that all personal
property, including, without limitation, all books, manuals, records,
reports, notes, contracts, lists, blueprints and other documents or
materials, or copies thereof, and equipment furnished to or prepared by
Employee in the course of or incident to his employment pertaining to
Proprietary Information (as defined in the Employee Confidentiality
Agreement), belong to Company and shall be promptly returned to Company
upon termination of the Period of Employment. Following termination,
Employee will not retain any written or other tangible material
containing any Proprietary Information.
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<PAGE>
(ii) Upon termination of the Period of Employment, Employee shall be
deemed to have resigned from all offices and directorships then held
with Company, Parent or any Affiliated Company.
(iii) Employee's obligations under this Subsection (g) and under
Sections 5, 6, and 7 shall survive termination of the Period of
Employment and the expiration of this Agreement.
5. Proprietary Information. During the term of this Agreement and
thereafter, Employee agrees to remain bound by the terms of that certain
employee confidentiality agreement to which he is presently bound (the
"Employee Confidentiality Agreement").
6. Change of Control Agreement. Company and Employee acknowledge and agree
that the Change of Control Agreement shall remain in full force and effect in
accordance with its terms, subject to the following amendments:
(a) Any payments made by Company pursuant to Part One, Paragraph 1
thereof shall be credited against any Severance Benefits payable hereunder;
(b) Compliance by Company with Part One, Paragraph 2 of the Change of
Control Agreement shall be deemed to be full performance by Company of its
duties to provide equivalent benefits to Employee as part of the Severance
Benefits for any periods in which Company shall be complying with said
Paragraph 2; and
(c) For purposes of Subparagraph (ii) of the definition of "Involuntary
Termination," any change in position or compensation referenced therein
shall be defined to be with reference to the position referenced in Section
1(a) hereof and the compensation referenced in Section 3(a), 3(c) and 3(d)
hereof.
(d) Company acknowledges and agrees that the transactions contemplated by
the Merger Agreement constitute a Change in Control (as defined in Part Two
of the Change of Control Agreement) for purposes of the Change of Control
Agreement, and Employee acknowledges and agrees that any subsequent Change
in Control as to Company shall not be deemed to give rise to any further
rights in favor of Employee thereunder.
(e) Employee acknowledges and agrees that, to the extent payments are to
be made to Employee pursuant to the Change of Control Agreement, that such
payments shall be received by Employee in lieu of any payments under any
severance plan or policy of Company or Parent.
7. Non-Competition. Employee agrees that the restrictions contained in Part
One, Paragraph 4 of the Change of Control Agreement shall apply, in addition
to the period specified in said Paragraph 4, for a period commencing as of the
consummation of the Offer and ending upon the later of (i) two (2) years from
the consummation of the Offer or (ii) the expiration of the period in which
Employee shall be entitled to Severance Benefits pursuant to Section 4(f)
hereof.
The parties acknowledge and agree that (i) the obligations of Employee set
forth in this Section 7 are entered into in connection with the acquisition of
Company as contemplated by the Merger Agreement and, as such, shall be
governed by California Business and Professions Code Section 16601 to the
exclusion of California Business and Professions Code 16600; and (ii) the
duration and geographic scope of the non-competition provision set forth in
this Section 7 is fair and reasonable and such provision is reasonably
required for the protection of Company.
8. Assignment; Successors and Assigns.
Employee agrees that he will not assign, sell, transfer, delegate or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any rights or obligations under this Agreement, nor shall Employee's
rights be subject to encumbrance or the claims of creditors. Any purported
assignment, transfer, or delegation shall be null and void. Nothing in this
Agreement shall prevent the consolidation of Company with, or its merger into,
any other corporation, or the sale by Company of all or substantially all of
its properties or assets, or the assignment by Company of this Agreement and
the performance of its obligations hereunder to any successor in
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<PAGE>
interest or the Parent or any Affiliated Company. Subject to the foregoing,
this Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective heirs, legal representatives, successors, and
permitted assigns, and shall not benefit any person or entity other than those
enumerated above.
9. Notices. All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand or mailed, postage prepaid, by certified or registered
mail, return receipt requested, and addressed to Company at:
MDL Information Systems, Inc.
14600 Catalina Street
San Leandro, CA 94577
or to Employee at:
Steven D. Goldby
180 Stockbridge Avenue
Atherton, CA 94027
Notice of change of address shall be effective only when done in accordance
with this Section 9.
10. Entire Agreement. The terms of this Agreement are intended by the
parties to be the final expression of their agreement with respect to the
employment of Employee by Company, and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms
and that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.
11. Amendments; Waivers. This Agreement may not be modified, amended, or
terminated, except by an instrument in writing, signed by Employee and by a
duly authorized representative of Company, other than Employee. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform, provided, however, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in exercising any
right, remedy, or power hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, remedy, or power hereunder
preclude any other or further exercise thereof, or the exercise of any other
right, remedy, or power provided herein or by law or in equity.
12. Severability; Enforcement. If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions, as applied to other persons,
places and circumstances shall remain in full force and effect. It is the
intention of the parties that the covenants contained in Section 7 shall be
enforced to the greatest extent (but to no greater extent) in time, area, and
degree of participation as is permitted by the law of that jurisdiction whose
law is found to be applicable to any acts allegedly in breach of these
covenants. It being the purpose of this Agreement to govern competition by
Employee in the United States and in every other country in which Company is
then conducting its business, these covenants shall be governed by and
construed according to that law (from among those jurisdictions arguably
applicable to this Agreement and those in which a breach of this Agreement is
alleged to have occurred or to be threatened) which best gives them effect.
13. Governing Law. Subject to Section 12, the validity, interpretation,
enforceability, and performance of this Agreement shall be governed by, and
construed in accordance with, the law of the State of California.
14. Employee Acknowledgment. Employee acknowledges (i) that he has consulted
with or has had the opportunity to consult with counsel concerning this
Agreement, and has been advised to do so by Company, and
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<PAGE>
(ii) that he has read and understands the Agreement, is fully aware of its
legal effect and has entered into it freely based upon his own judgment.
15. Opportunity to Cure. Except as provided in Section 16 hereof, it shall
be a condition to the assertion by either party that the other party has
breached its obligations under this Agreement that the party alleging such
breach shall have given written notice of such breach to the other, and that,
if such breach is reasonably susceptible of being cured, the breaching party
shall have had the opportunity for a reasonable period, not in excess of
thirty (30) days, to cure such breach.
16. Remedies. The parties agree that in the event of any breach or
threatened breach of any of the covenants in Section 7, the damage or imminent
damage to the value and the goodwill of Company's business will be irreparable
and extremely difficult to estimate, making any remedy at law or in damages
inadequate. Accordingly, the parties agree that Company shall be entitled to
injunctive relief against Employee in the event of any breach or threatened
breach of any such provisions by Employee, in addition to any other relief
(including damages) available to Company under this Agreement or under law.
17. Arbitration. Except as provided in Section 16 above, any dispute or
disagreement between the parties under this Agreement that is not settled
within thirty (30) days (or such longer period as may be mutually agreed upon)
from the date a party gives notice to the other in writing specifying such
dispute or disagreement, including, without limitation, any issue as to the
arbitrability of such dispute or disagreement, shall be settled by arbitration
before a single arbitrator selected by the parties in Oakland, California, who
shall be directed to follow the Commercial Arbitration Rules of the American
Arbitration Association, as in effect on the date that such notice is given.
Any decision of the arbitrator appointed and acting pursuant to this Section
17 shall be final and binding upon the parties and judgment may be entered
thereon, upon the application of either party, by any court having competent
jurisdiction. The arbitrator may also award reasonable attorney's fees and the
costs of the arbitration to the prevailing party. This Section 17 shall not
preclude either party from seeking a temporary restraining order, preliminary
injunction or other temporary injunctive relief to prevent an anticipatory or
continuing breach of this Agreement. Employee understands that each party's
promise to resolve claims by arbitration in accordance with the provisions of
this Agreement, rather than through the courts, is consideration for other
party's like promise. Employee further understands that he is offered
employment in consideration of his promise to arbitrate claims. This
Arbitration clause constitutes a waiver of employee's right to a jury trial
and relates to the resolution of all disputes relating to all aspects of the
employer/employee relationship, including, but not limited to, the following
claims:
(a) any and all claims for wrongful discharge of employment; breach of
contract, both express and implied; breach of the covenant of good faith
and fair dealing, both express and implied; negligent or intentional
infliction of emotional distress; negligent or intentional
misrepresentation; negligent or intentional interference with contract or
prospective economic advantage; and defamation;
(b) any and all claims for violation of any federal, state or municipal
statute, including, but not limited to, Title VII of the Civil Rights Act
of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor
Standards Act, the California Fair Employment and Housing Act, and Labor
Code Section 201, et seq.;
(c) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THIS AGREEMENT SHALL BE
VALID AND OF LEGAL EFFECT, IF AND ONLY IF, THE OFFER IS CONSUMMATED (AS
DEFINED IN THE MERGER AGREEMENT). ANY ATTEMPT TO ENFORCE ANY PROVISION OF THIS
AGREEMENT WITHOUT THE SATISFACTION OF THE FOREGOING CONDITION SHALL BE NULL
AND VOID.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly signed this Agreement the day and
year first written above.
MDL Information Systems
By /s/ Thomas D. Jones
-----------------------------------
NAME : THOMAS D. JONES
TITLE: CHIEF OPERATING OFFICER
STEVEN D. GOLDBY
/s/ Steven D. Goldby
-----------------------------------
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<PAGE>
EXHIBIT F-2
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of March 23, 1997, is between MDL Information
Systems, Inc., a Delaware corporation ("Company") and Thomas D. Jones
("Employee").
RECITALS
1) In connection with the Agreement and Plan of Merger, dated as of March
23, 1997 ("Merger Agreement"), by and among Elsevier Science Inc. a New York
corporation ("Parent"), Golden Gate Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Parent ("Purchaser"), and Company, pursuant to
which Company shall become a wholly-owned subsidiary of Parent, Company
desires to provide for the continued services of Employee, on its own behalf
and on behalf of all existing and future Affiliated Companies (defined as any
corporation or other business entity or entities that directly or indirectly
control, are controlled by or are under common control with Parent), and
Employee desires to continue in the employment of Company upon the terms and
conditions set forth below.
2) Employee and Company are parties to a letter agreement, dated February
28, 1996 (the "Change of Control Agreement"), attached hereto as Appendix A,
which Company and Employee wish to continue as herein modified.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Period of Employment. Company hereby employs Employee to render services
to Company in the position and with the duties and responsibilities described
in Section 2 for the period (the "Period of Employment") commencing on the
consummation of the Offer (as defined in the Merger Agreement) and ending upon
the earlier of (i) two (2) years from such date (the "Term Date"), and (ii)
the date the Period of Employment is terminated in accordance with Section 4.
After the initial two-year Period of Employment, the Term Date shall
automatically be extended in increments of one (1) year unless either party
has given the other party written notice of non-renewal not less than six (6)
months prior to the Term Date then in effect. Termination of this Agreement on
the Term Date solely pursuant to a timely notice of non-renewal as described
herein shall not entitle the Employee to benefits hereunder.
2. Position, Duties, Responsibilities.
(a) Position. Employee hereby accepts employment with Company as
President and Chief Operating Officer (or in such other position(s) as the
Board of Directors of Company (the "Board") shall designate) and shall
report to the Board of Directors, unless changed by the Board. Employee
agrees to devote his entire time, attention, energies and skills during
usual business hours (and outside those hours when reasonably necessary to
the performance of his duties hereunder) to the business and interests of
Company during the Period of Employment.
(b) Other Services. Employee may be required in pursuance of his duties
hereunder to perform services for any Affiliated Company but shall not be
entitled to any additional compensation for such services. Employee shall
obey all policies of Company and applicable policies of its Affiliated
Companies.
3. Compensation, Benefits, Expenses.
(a) Salary. In consideration of the services to be rendered hereunder,
including, without limitation, services to any Affiliated Company, Employee
shall be paid an annual salary (the "Base Salary") of Two Hundred Eighty-
Five Thousand Dollars ($285,000), payable at the time and pursuant to the
procedures regularly established, and as they may be amended, by Company
during the Period of Employment. Company shall review annually the Base
Salary and in light of such review may, in the discretion of the Board,
increase the Base Salary, taking into account Employee's responsibilities,
inflation in the cost of living, increases in salaries of executives of
Parent, Company, Affiliate Companies and other companies, performance by
Employee and other pertinent factors.
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<PAGE>
(b) Retention Bonus. Immediately following the consummation of the Offer,
Company shall pay to Employee a retention bonus in the amount of $285,000.
(c) Annual Bonus. During the Period of Employment, Employee shall be
entitled to an annual bonus, which shall be determined for fiscal years
1998 and thereafter during the Period of Employment in a manner consistent
with Company's incentive bonus program in effect before then Effective Time
and which shall be paid not later than September 1 of each year. Under such
program, Employee's target bonus percentage shall not be less than 60% of
Employee's Base Salary. The percentage of Employee's target bonus amount
that shall be payable hereunder shall be based upon the Company's
achievement of target earnings for the applicable year, as follows:
(i) If the Company achieves less than 80% of target earnings for the
year, no annual bonus shall be payable to the Employee.
(ii) If the Company achieves 80% of target earnings for the year, 50%
of the target bonus amount shall be payable to the Employee.
(iii) If the Company achieves 100% of target earnings for the year,
100% of the target bonus amount shall be payable to the Employee.
(iv) If the Company achieves 120% or more of target earnings for the
year, 150% of the target bonus amount shall be payable to the Employee.
(v) If the Company achieves between 80% and 120% of target earnings
for the year, the target bonus amount that shall be payable to the
Employee shall be a pro rata amount based on the schedule set forth
above.
(d) Car Allowance. Employee shall be entitled to an automobile allowance
of $12,000 per year during the Period of Employment, subject to withholding
for taxes to the extent required.
(e) Benefits; Expenses. Employee shall be entitled to such expense
accounts, vacation time, sick leave, perquisites of office, fringe
benefits, insurance coverage and other terms and conditions of employment
as Company generally provides to its employees having rank and seniority at
Company comparable to Employee, as the same may be changed from time to
time.
(f) Stock Options. Upon consummation of the Offer (as defined in the
Merger Agreement), Employee held certain options to purchase Company's
Common Stock (the "Options"). Pursuant to the Merger Agreement, those
Options that are not yet exercisable as of the time of the consummation of
the Offer (the "Unvested Options") shall be converted upon consummation of
the Offer into a right to receive quarterly cash payments from Parent at
the time when such Options otherwise would have become exercisable (the
"Option Payments"). The foregoing notwithstanding, those Unvested Options
that were granted on November 14, 1996, shall become exercisable in full
upon consummation of the Offer and shall not be treated as Unvested
Options. In the event of the death of Employee or if Employee shall become
Totally Disabled (as defined in Section 4(b) below) during the Period of
Employment, Employee's rights relating to all of his Option Payments shall
automatically be accelerated and become immediately payable.
4. Termination of Employment.
(a) By Death. The Period of Employment shall terminate automatically upon
the death of Employee. Company shall pay to Employee's beneficiaries or
estate, as appropriate, the Base Salary to which he is entitled through the
end of the month in which death occurs. Thereafter, Company's obligations
hereunder shall terminate. Nothing in this Subsection (a) shall affect any
entitlement of Employee's heirs to the benefits of any life insurance plan.
(b) By Disability. If, during the term of this Agreement, Employee should
become Totally Disabled (as hereinafter defined), Company shall have the
right, to the extent permitted by law, in its sole discretion, to
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terminate this Agreement and Employee's employment with Company, in which
case Employee's Base Salary shall be paid up through the last day of the
month in which it has been determined that Employee has become Totally
Disabled. Nothing in this Subsection (b) shall affect Employee's rights
under any disability plan in which he is a participant. For purposes
hereof, Employee shall be considered "Totally Disabled" if (i) Employee is
entitled to benefits under any long-term disability income plan applicable
to Employee or (ii) Employee's physical and/or mental condition is such
that Employee is unable to perform those duties Employee would otherwise be
expected to continue to perform as an employee of Company, and Employee's
non-performance of such duties can reasonably be expected to continue or
does continue for not less than six (6) months. The determination that
Employee is Totally Disabled shall be made in good faith by Company, whose
determination shall be final and binding on Employee.
(c) By Company for Cause. Company may terminate, without liability, the
Period of Employment for Cause (as defined below) at any time and upon
fifteen (15) days' advance written notice to Employee. Company shall pay
Employee his Base Salary through the end of the notice period and
thereafter Company's obligations hereunder shall terminate. Termination
shall be for "Cause" if (i) Employee commits an act of fraud or
embezzlement, which is to the detriment of Company, Parent or any
Affiliated Company; (ii) Employee is convicted of a felony or other
criminal act; (iii) Employee willfully fails to perform his employment
duties (other than any such failure resulting from Employee's incapacity
due to physical or mental illness) after a written demand for substantial
performance is delivered to Employee by Company, which demand specifically
identifies the manner in which Company believes that Employee has not
substantially performed his duties; or (iv) Employee breaches any material
term of this Agreement or Employee Confidentiality Agreement (as defined in
Section 5 below), and, as to any such breach which is subject to cure, such
failure or breach continues for a period of ten (10) days after Employee
receives written notice of such breach from Company.
(d) By Employee for Good Reason. Employee may terminate, without
liability, the Period of Employment for Good Reason (as defined below) upon
ten (10) days' advance written notice to Company. In the event of a
termination by Employee of the Period of Employment for Good Reason
pursuant to this Subsection (d), Employee shall be entitled to the
Severance Benefits (as defined in Section 4(f) below) upon the terms
provided in said Section 4(f), and, except as provided in Section 6 below,
Company shall have no further obligations to Employee with respect to his
employment relationship with Company following payment of the Severance
Benefits. "Good Reason" shall exist in the event of (i) a change in
Employee's position with Company which materially reduces Employee's level
of responsibility or the nature of Employee's functions as set forth
herein, (ii) a greater than ten percent (10%) reduction of Employee's level
of compensation (including base salary, fringe benefits and participation
in non-discretionary bonus programs under which awards are payable pursuant
to objective financial or performance standards) or (c) a relocation of
Employee's principal place of employment by more than thirty-five (35)
miles, provided such that change, reduction or relocation is effected
without Employee's written consent. During the ten (10) day notice period,
Company shall have the right, but not the obligation, to take corrective
action to reinstate Employee to such former position, responsibility,
compensation level or location and terminate the right of Employee to
terminate the Period of Employment pursuant to this Subsection (d) as a
result of such prior change to Employee's position, responsibility,
compensation level or location. Employee acknowledges that Company may be
combined with or merged into Parent or any Affiliated Company and such
merger or combination, including any changes in the entity to whom Employee
reports thereafter, will not be deemed by itself to constitute Good Reason
for purposes of this Subsection (d).
(e) At Will. At any time, Company may terminate, without liability, the
Period of Employment for any reason, with or without cause, by giving
thirty (30) days' advance written notice to Employee. In the event of a
termination by Company of the Period of Employment pursuant to this
Subsection (e), Employee shall be entitled to receive from Company the
Severance Benefits upon the terms provided in Section 4(f) below, and,
subject to Section 6 below, Company shall have no further obligations to
Employee with respect to his employment relationship with Company following
payment of the Severance Benefits. Employee hereby
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agrees that Company may dismiss him under this Subsection (e) without
regard to (i) any general or specific policies (whether written or oral) of
Company relating to the employment or termination of its employees or (ii)
any statements made to Employee, whether made orally or contained in any
document, pertaining to Employee's relationship with Company.
(f) Severance Benefits. To the extent that Employee shall be entitled to
receive Severance Benefits pursuant to Section 4(d) or 4(e) hereof, Company
and Employee agree that the following shall apply:
(i) "Severance Benefits" shall mean: (A) a continuation of Employee's
then effective salary as payable pursuant to Section 3(a) hereof during
the Severance Period (as defined below); (B) payment of any bonus
payable to Employee pursuant to Section 3(c) hereof, calculated based
on the full Company bonus payable thereunder (subject to attainment by
Company of any objective financial or performance standards applicable
to Company) and prorated for any period during the Severance Period
that is less than the full twelve (12) month period in which such bonus
would be earned; (C) immediate vesting and payment of any Option
Payments; and (D) continuation during the Severance Period of any
medical/dental care coverage (or the reasonable equivalent thereof)
which Employee is receiving as of the date of termination of the Period
of Employment, provided that such insurance coverage shall terminate
prior to the expiration of the Severance Period as of the first date
that Employee is covered under another employer's health benefit
program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. Such coverage shall be
in lieu of any other continued health care coverage to which Employee
or his dependents would otherwise be entitled in accordance with the
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), by reason of Employee's termination of
employment.
(ii) "Severance Period" shall mean a period of twenty-four (24)
months following the termination of the Period of Employment pursuant
to Section 4(d) or 4(e) hereof.
(iii) Company shall be entitled to a credit for any amounts paid
pursuant to Part One, Paragraph 1 of the Change of Control Agreement
for any amounts payable pursuant to Paragraph (i)(A) and (i)(B) above
as part of any Severance Benefits payable hereunder.
(iv) Except as provided in Section 6 below, the Severance Benefits
shall be received by Employee in lieu of any other right Employee may
have under applicable law, Company or Parent policies or plans or
otherwise with respect to any payments or compensation in connection
with the termination of Employee's employment with Company.
(v) Employee agrees that payment of the Severance Benefits may, in
the discretion of the Company, be subject to the prior execution by the
Employee of a release of claims in a form provided by the Company prior
to any such payment and that payment of the Severance Benefits shall be
consideration for such release.
(g) Termination Obligations.
(i) Employee hereby acknowledges and agrees that all personal property,
including, without limitation, all books, manuals, records, reports, notes,
contracts, lists, blueprints and other documents or materials, or copies
thereof, and equipment furnished to or prepared by Employee in the course
of or incident to his employment pertaining to Proprietary Information (as
defined in the Employee Confidentiality Agreement), belong to Company and
shall be promptly returned to Company upon termination of the Period of
Employment. Following termination, Employee will not retain any written or
other tangible material containing any Proprietary Information.
(ii) Upon termination of the Period of Employment, Employee shall be
deemed to have resigned from all offices and directorships then held with
Company, Parent or any Affiliated Company.
(iii) Employee's obligations under this Subsection (g) and under Sections
5, 6, and 7 shall survive termination of the Period of Employment and the
expiration of this Agreement.
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5. Proprietary Information. During the term of this Agreement and
thereafter, Employee agrees to remain bound by the terms of that certain
employee confidentiality agreement to which he is presently bound (the
"Employee Confidentiality Agreement").
6. Change of Control Agreement. Company and Employee acknowledge and agree
that the Change of Control Agreement shall remain in full force and effect in
accordance with its terms, subject to the following amendments:
(a) Any payments made by Company pursuant to Part One, Paragraph 1
thereof shall be credited against any Severance Benefits payable hereunder;
(b) Compliance by Company with Part One, Paragraph 2 of the Change of
Control Agreement shall be deemed to be full performance by Company of its
duties to provide equivalent benefits to Employee as part of the Severance
Benefits for any periods in which Company shall be complying with said
Paragraph 2; and
(c) For purposes of Subparagraph (ii) of the definition of "Involuntary
Termination," any change in position or compensation referenced therein
shall be defined to be with reference to the position referenced in Section
1(a) hereof and the compensation referenced in Section 3(a), 3(c) and 3(d)
hereof.
(d) Company acknowledges and agrees that the transactions contemplated by
the Merger Agreement constitute a Change in Control (as defined in Part Two
of the Change of Control Agreement) for purposes of the Change of Control
Agreement, and Employee acknowledges and agrees that any subsequent Change
in Control as to Company shall not be deemed to give rise to any further
rights in favor of Employee thereunder.
(e) Employee acknowledges and agrees that, to the extent payments are to
be made to Employee pursuant to the Change of Control Agreement, that such
payments shall be received by Employee in lieu of any payments under any
severance plan or policy of Company or Parent.
7. Non-Competition. Employee agrees that the restrictions contained in Part
One, Paragraph 4 of the Change of Control Agreement shall apply, in addition
to the period specified in said Paragraph 4, for a period commencing as of the
consummation of the Offer and ending upon the later of (i) two (2) years from
the consummation of the Offer or (ii) the expiration of the period in which
Employee shall be entitled to Severance Benefits pursuant to Section 4(f)
hereof.
The parties acknowledge and agree that (i) the obligations of Employee set
forth in this Section 7 are entered into in connection with the acquisition of
Company as contemplated by the Merger Agreement and, as such, shall be
governed by California Business and Professions Code Section 16601 to the
exclusion of California Business and Professions Code 16600; and (ii) the
duration and geographic scope of the non-competition provision set forth in
this Section 7 is fair and reasonable and such provision is reasonably
required for the protection of Company.
8. Assignment; Successors and Assigns.
Employee agrees that he will not assign, sell, transfer, delegate or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any rights or obligations under this Agreement, nor shall Employee's
rights be subject to encumbrance or the claims of creditors. Any purported
assignment, transfer, or delegation shall be null and void. Nothing in this
Agreement shall prevent the consolidation of Company with, or its merger into,
any other corporation, or the sale by Company of all or substantially all of
its properties or assets, or the assignment by Company of this Agreement and
the performance of its obligations hereunder to any successor in interest or
the Parent or any Affiliated Company. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and permitted assigns,
and shall not benefit any person or entity other than those enumerated above.
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<PAGE>
9. Notices. All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand or mailed, postage prepaid, by certified or registered
mail, return receipt requested, and addressed to Company at:
MDL Information Systems, Inc.
14600 Catalina Street
San Leandro, CA 94577
or to Employee at:
Thomas D. Jones
6 Lassen Court
Menlo Park, CA 94025
Notice of change of address shall be effective only when done in accordance
with this Section 9.
10. Entire Agreement. The terms of this Agreement are intended by the
parties to be the final expression of their agreement with respect to the
employment of Employee by Company, and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms
and that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.
11. Amendments; Waivers. This Agreement may not be modified, amended, or
terminated, except by an instrument in writing, signed by Employee and by a
duly authorized representative of Company, other than Employee. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform, provided, however, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in exercising any
right, remedy, or power hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, remedy, or power hereunder
preclude any other or further exercise thereof, or the exercise of any other
right, remedy, or power provided herein or by law or in equity.
12. Severability; Enforcement. If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions, as applied to other persons,
places and circumstances shall remain in full force and effect. It is the
intention of the parties that the covenants contained in Section 7 shall be
enforced to the greatest extent (but to no greater extent) in time, area, and
degree of participation as is permitted by the law of that jurisdiction whose
law is found to be applicable to any acts allegedly in breach of these
covenants. It being the purpose of this Agreement to govern competition by
Employee in the United States and in every other country in which Company is
then conducting its business, these covenants shall be governed by and
construed according to that law (from among those jurisdictions arguably
applicable to this Agreement and those in which a breach of this Agreement is
alleged to have occurred or to be threatened) which best gives them effect.
13. Governing Law. Subject to Section 12, the validity, interpretation,
enforceability, and performance of this Agreement shall be governed by, and
construed in accordance with, the law of the State of California.
14. Employee Acknowledgment. Employee acknowledges (i) that he has consulted
with or has had the opportunity to consult with counsel concerning this
Agreement, and has been advised to do so by Company, and (ii) that he has read
and understands the Agreement, is fully aware of its legal effect and has
entered into it freely based upon his own judgment.
15. Opportunity to Cure. Except as provided in Section 16 hereof, it shall
be a condition to the assertion by either party that the other party has
breached its obligations under this Agreement that the party alleging such
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<PAGE>
breach shall have given written notice of such breach to the other, and that,
if such breach is reasonably susceptible of being cured, the breaching party
shall have had the opportunity for a reasonable period, not in excess of
thirty (30) days, to cure such breach.
16. Remedies. The parties agree that in the event of any breach or
threatened breach of any of the covenants in Section 7, the damage or imminent
damage to the value and the goodwill of Company's business will be irreparable
and extremely difficult to estimate, making any remedy at law or in damages
inadequate. Accordingly, the parties agree that Company shall be entitled to
injunctive relief against Employee in the event of any breach or threatened
breach of any such provisions by Employee, in addition to any other relief
(including damages) available to Company under this Agreement or under law.
17. Arbitration. Except as provided in Section 16 above, any dispute or
disagreement between the parties under this Agreement that is not settled
within thirty (30) days (or such longer period as may be mutually agreed upon)
from the date a party gives notice to the other in writing specifying such
dispute or disagreement, including, without limitation, any issue as to the
arbitrability of such dispute or disagreement, shall be settled by arbitration
before a single arbitrator selected by the parties in Oakland, California, who
shall be directed to follow the Commercial Arbitration Rules of the American
Arbitration Association, as in effect on the date that such notice is given.
Any decision of the arbitrator appointed and acting pursuant to this Section
17 shall be final and binding upon the parties and judgment may be entered
thereon, upon the application of either party, by any court having competent
jurisdiction. The arbitrator may also award reasonable attorney's fees and the
costs of the arbitration to the prevailing party. This Section 17 shall not
preclude either party from seeking a temporary restraining order, preliminary
injunction or other temporary injunctive relief to prevent an anticipatory or
continuing breach of this Agreement. Employee understands that each party's
promise to resolve claims by arbitration in accordance with the provisions of
this Agreement, rather than through the courts, is consideration for other
party's like promise. Employee further understands that he is offered
employment in consideration of his promise to arbitrate claims. This
Arbitration clause constitutes a waiver of employee's right to a jury trial
and relates to the resolution of all disputes relating to all aspects of the
employer/employee relationship, including, but not limited to, the following
claims:
(a) any and all claims for wrongful discharge of employment; breach
of contract, both express and implied; breach of the covenant of good
faith and fair dealing, both express and implied; negligent or
intentional infliction of emotional distress; negligent or intentional
misrepresentation; negligent or intentional interference with contract
or prospective economic advantage; and defamation;
(b) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the
Civil Rights Act of 1964, the Civil Rights Act of 1991, the Age
Discrimination in Employment Act of 1967, the Americans with
Disabilities Act of 1990, the Fair Labor Standards Act, the California
Fair Employment and Housing Act, and Labor Code Section 201, et seq.;
(c) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THIS AGREEMENT SHALL BE
VALID AND OF LEGAL EFFECT, IF AND ONLY IF, THE OFFER IS CONSUMMATED (AS
DEFINED IN THE MERGER AGREEMENT). ANY ATTEMPT TO ENFORCE ANY PROVISION OF THIS
AGREEMENT WITHOUT THE SATISFACTION OF THE FOREGOING CONDITION SHALL BE NULL
AND VOID.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly signed this Agreement the day and
year first written above.
MDL Information Systems
By /s/ Steven D. Goldby
-----------------------------------
NAME : STEVEN D. GOLDBY
TITLE: CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
THOMAS D. JONES
/s/ Thomas D. Jones
-----------------------------------
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<PAGE>
EXHIBIT F-3
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of March 23, 1997, is between MDL Information
Systems, Inc., a Delaware corporation ("Company") and John J. Hanlon
("Employee").
RECITALS
1) In connection with the Agreement and Plan of Merger, dated as of March
23, 1997 ("Merger Agreement"), by and among Elsevier Science Inc. a New York
corporation ("Parent"), Golden Gate Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Parent ("Purchaser"), and Company, pursuant to
which Company shall become a wholly-owned subsidiary of Parent, Company
desires to provide for the continued services of Employee, on its own behalf
and on behalf of all existing and future Affiliated Companies (defined as any
corporation or other business entity or entities that directly or indirectly
control, are controlled by or are under common control with Parent), and
Employee desires to continue in the employment of Company upon the terms and
conditions set forth below.
2) Employee and Company are parties to a letter agreement, dated February
28, 1996 (the "Change of Control Agreement"), attached hereto as Appendix A,
which Company and Employee wish to continue as herein modified.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Period of Employment. Company hereby employs Employee to render services
to Company in the position and with the duties and responsibilities described
in Section 2 for the period (the "Period of Employment") commencing on the
consummation of the Offer (as defined in the Merger Agreement) and ending upon
the earlier of (i) two (2) years from such date (the "Term Date"), and (ii)
the date the Period of Employment is terminated in accordance with Section 4.
After the initial two-year Period of Employment, the Term Date shall
automatically be extended in increments of one (1) year unless either party
has given the other party written notice of non-renewal not less than six (6)
months prior to the Term Date then in effect. Termination of this Agreement on
the Term Date solely pursuant to a timely notice of non-renewal as described
herein shall not entitle the Employee to benefits hereunder.
2. Position, Duties, Responsibilities.
(a) Position. Employee hereby accepts employment with Company as Senior
Vice President and Chief Financial Officer (or in such other position(s) as
the Board of Directors of Company (the "Board") shall designate) and shall
report to the Board of Directors, unless changed by the Board. Employee
agrees to devote his entire time, attention, energies and skills during
usual business hours (and outside those hours when reasonably necessary to
the performance of his duties hereunder) to the business and interests of
Company during the Period of Employment.
(b) Other Services. Employee may be required in pursuance of his duties
hereunder to perform services for any Affiliated Company but shall not be
entitled to any additional compensation for such services. Employee shall
obey all policies of Company and applicable policies of its Affiliated
Companies.
3. Compensation, Benefits, Expenses.
(a) Salary. In consideration of the services to be rendered hereunder,
including, without limitation, services to any Affiliated Company, Employee
shall be paid an annual salary (the "Base Salary") of One Hundred Sixty-
Five Thousand Dollars ($165,000), payable at the time and pursuant to the
procedures regularly established, and as they may be amended, by Company
during the Period of Employment.
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<PAGE>
Company shall review annually the Base Salary and in light of such review
may, in the discretion of the Board, increase the Base Salary, taking into
account Employee's responsibilities, inflation in the cost of living,
increases in salaries of executives of Parent, Company, Affiliate Companies
and other companies, performance by Employee and other pertinent factors.
(b) Retention Bonus. Immediately following the consummation of the Offer,
Company shall pay to Employee a retention bonus in the amount of $165,000.
(c) Annual Bonus. During the Period of Employment, Employee shall be
entitled to an annual bonus, which shall be determined for fiscal years
1998 and thereafter during the Period of Employment in a manner consistent
with Company's incentive bonus program in effect before then Effective Time
and which shall be paid not later than September 1 of each year. Under such
program, Employee's target bonus percentage shall not be less than 50% of
Employee's Base Salary. The percentage of Employee's target bonus amount
that shall be payable hereunder shall be based upon the Company's
achievement of target earnings for the applicable year, as follows:
(i) If the Company achieves less than 80% of target earnings for the
year, no annual bonus shall be payable to the Employee.
(ii) If the Company achieves 80% of target earnings for the year, 50%
of the target bonus amount shall be payable to the Employee.
(iii) If the Company achieves 100% of target earnings for the year,
100% of the target bonus amount shall be payable to the Employee.
(iv) If the Company achieves 120% or more of target earnings for the
year, 150% of the target bonus amount shall be payable to the Employee.
(v) If the Company achieves between 80% and 120% of target earnings
for the year, the target bonus amount that shall be payable to the
Employee shall be a pro rata amount based on the schedule set forth
above.
(d) Car Allowance. Employee shall be entitled to an automobile allowance
of $12,000 per year during the Period of Employment, subject to withholding
for taxes to the extent required.
(e) Benefits; Expenses. Employee shall be entitled to such expense
accounts, vacation time, sick leave, perquisites of office, fringe
benefits, insurance coverage and other terms and conditions of employment
as Company generally provides to its employees having rank and seniority at
Company comparable to Employee, as the same may be changed from time to
time.
(f) Stock Options. Upon consummation of the Offer (as defined in the
Merger Agreement), Employee held certain options to purchase Company's
Common Stock (the "Options"). Pursuant to the Merger Agreement, those
Options that are not yet exercisable as of the time of the consummation of
the Offer (the "Unvested Options") shall be converted upon consummation of
the Offer into a right to receive quarterly cash payments from Parent at
the time when such Options otherwise would have become exercisable (the
"Option Payments"). The foregoing notwithstanding, those Unvested Options
that were granted on November 14, 1996, shall become exercisable in full
upon consummation of the Offer and shall not be treated as Unvested
Options. In the event of the death of Employee or if Employee shall become
Totally Disabled (as defined in Section 4(b) below) during the Period of
Employment, Employee's rights relating to all of his Option Payments shall
automatically be accelerated and become immediately payable.
4. Termination of Employment.
(a) By Death. The Period of Employment shall terminate automatically upon
the death of Employee. Company shall pay to Employee's beneficiaries or
estate, as appropriate, the Base Salary to which he is
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<PAGE>
entitled through the end of the month in which death occurs. Thereafter,
Company's obligations hereunder shall terminate. Nothing in this Subsection
(a) shall affect any entitlement of Employee's heirs to the benefits of any
life insurance plan.
(b) By Disability. If, during the term of this Agreement, Employee should
become Totally Disabled (as hereinafter defined), Company shall have the
right, to the extent permitted by law, in its sole discretion, to terminate
this Agreement and Employee's employment with Company, in which case
Employee's Base Salary shall be paid up through the last day of the month
in which it has been determined that Employee has become Totally Disabled.
Nothing in this Subsection (b) shall affect Employee's rights under any
disability plan in which he is a participant. For purposes hereof, Employee
shall be considered "Totally Disabled" if (i) Employee is entitled to
benefits under any long-term disability income plan applicable to Employee
or (ii) Employee's physical and/or mental condition is such that Employee
is unable to perform those duties Employee would otherwise be expected to
continue to perform as an employee of Company, and Employee's non-
performance of such duties can reasonably be expected to continue or does
continue for not less than six (6) months. The determination that Employee
is Totally Disabled shall be made in good faith by Company, whose
determination shall be final and binding on Employee.
(c) By Company for Cause. Company may terminate, without liability, the
Period of Employment for Cause (as defined below) at any time and upon
fifteen (15) days' advance written notice to Employee. Company shall pay
Employee his Base Salary through the end of the notice period and
thereafter Company's obligations hereunder shall terminate. Termination
shall be for "Cause" if (i) Employee commits an act of fraud or
embezzlement, which is to the detriment of Company, Parent or any
Affiliated Company; (ii) Employee is convicted of a felony or other
criminal act; (iii) Employee willfully fails to perform his employment
duties (other than any such failure resulting from Employee's incapacity
due to physical or mental illness) after a written demand for substantial
performance is delivered to Employee by Company, which demand specifically
identifies the manner in which Company believes that Employee has not
substantially performed his duties; or (iv) Employee breaches any material
term of this Agreement or Employee Confidentiality Agreement (as defined in
Section 5 below), and, as to any such breach which is subject to cure, such
failure or breach continues for a period of ten (10) days after Employee
receives written notice of such breach from Company.
(d) By Employee for Good Reason. Employee may terminate, without
liability, the Period of Employment for Good Reason (as defined below) upon
ten (10) days' advance written notice to Company. In the event of a
termination by Employee of the Period of Employment for Good Reason
pursuant to this Subsection (d), Employee shall be entitled to the
Severance Benefits (as defined in Section 4(f) below) upon the terms
provided in said Section 4(f), and, except as provided in Section 6 below,
Company shall have no further obligations to Employee with respect to his
employment relationship with Company following payment of the Severance
Benefits. "Good Reason" shall exist in the event of (i) a change in
Employee's position with Company which materially reduces Employee's level
of responsibility or the nature of Employee's functions as set forth
herein, (ii) a greater than ten percent (10%) reduction of Employee's level
of compensation (including base salary, fringe benefits and participation
in non-discretionary bonus programs under which awards are payable pursuant
to objective financial or performance standards) or (c) a relocation of
Employee's principal place of employment by more than thirty-five (35)
miles, provided such that change, reduction or relocation is effected
without Employee's written consent. During the ten (10) day notice period,
Company shall have the right, but not the obligation, to take corrective
action to reinstate Employee to such former position, responsibility,
compensation level or location and terminate the right of Employee to
terminate the Period of Employment pursuant to this Subsection (d) as a
result of such prior change to Employee's position, responsibility,
compensation level or location. Employee acknowledges that Company may be
combined with or merged into Parent or any Affiliated Company and such
merger or combination, including any changes in the entity to whom Employee
reports thereafter, will not be deemed by itself to constitute Good Reason
for purposes of this Subsection (d).
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<PAGE>
(e) At Will. At any time, Company may terminate, without liability, the
Period of Employment for any reason, with or without cause, by giving
thirty (30) days' advance written notice to Employee. In the event of a
termination by Company of the Period of Employment pursuant to this
Subsection (e), Employee shall be entitled to receive from Company the
Severance Benefits upon the terms provided in Section 4(f) below, and,
subject to Section 6 below, Company shall have no further obligations to
Employee with respect to his employment relationship with Company following
payment of the Severance Benefits. Employee hereby agrees that Company may
dismiss him under this Subsection (e) without regard to (i) any general or
specific policies (whether written or oral) of Company relating to the
employment or termination of its employees or (ii) any statements made to
Employee, whether made orally or contained in any document, pertaining to
Employee's relationship with Company.
(f) Severance Benefits. To the extent that Employee shall be entitled to
receive Severance Benefits pursuant to Section 4(d) or 4(e) hereof, Company
and Employee agree that the following shall apply:
(i) "Severance Benefits" shall mean: (A) a continuation of Employee's
then effective salary as payable pursuant to Section 3(a) hereof during
the Severance Period (as defined below); (B) payment of any bonus
payable to Employee pursuant to Section 3(c) hereof, calculated based
on the full Company bonus payable thereunder (subject to attainment by
Company of any objective financial or performance standards applicable
to Company) and prorated for any period during the Severance Period
that is less than the full twelve (12) month period in which such bonus
would be earned; (C) immediate vesting and payment of any Option
Payments; and (D) continuation during the Severance Period of any
medical/dental care coverage (or the reasonable equivalent thereof)
which Employee is receiving as of the date of termination of the Period
of Employment, provided that such insurance coverage shall terminate
prior to the expiration of the Severance Period as of the first date
that Employee is covered under another employer's health benefit
program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. Such coverage shall be
in lieu of any other continued health care coverage to which Employee
or his dependents would otherwise be entitled in accordance with the
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), by reason of Employee's termination of
employment.
(ii) "Severance Period" shall mean a period of twenty-four (24)
months following the termination of the Period of Employment pursuant
to Section 4(d) or 4(e) hereof.
(iii) Company shall be entitled to a credit for any amounts paid
pursuant to Part One, Paragraph 1 of the Change of Control Agreement
for any amounts payable pursuant to Paragraph (i)(A) and (i)(B) above
as part of any Severance Benefits payable hereunder.
(iv) Except as provided in Section 6 below, the Severance Benefits
shall be received by Employee in lieu of any other right Employee may
have under applicable law, Company or Parent policies or plans or
otherwise with respect to any payments or compensation in connection
with the termination of Employee's employment with Company.
(v) Employee agrees that payment of the Severance Benefits may, in
the discretion of the Company, be subject to the prior execution by the
Employee of a release of claims in a form provided by the Company prior
to any such payment and that payment of the Severance Benefits shall be
consideration for such release.
(g) Termination Obligations.
(i) Employee hereby acknowledges and agrees that all personal
property, including, without limitation, all books, manuals, records,
reports, notes, contracts, lists, blueprints and other documents or
materials, or copies thereof, and equipment furnished to or prepared by
Employee in the course of or incident to his employment pertaining to
Proprietary Information (as defined in the Employee Confidentiality
Agreement), belong to Company and shall be promptly returned to Company
upon termination of the Period of Employment. Following termination,
Employee will not retain any written or other tangible material
containing any Proprietary Information.
F-3-4
<PAGE>
(ii) Upon termination of the Period of Employment, Employee shall be
deemed to have resigned from all offices and directorships then held
with Company, Parent or any Affiliated Company.
(iii) Employee's obligations under this Subsection (g) and under
Sections 5, 6, and 7 shall survive termination of the Period of
Employment and the expiration of this Agreement.
5. Proprietary Information. During the term of this Agreement and
thereafter, Employee agrees to remain bound by the terms of that certain
employee confidentiality agreement to which he is presently bound (the
"Employee Confidentiality Agreement").
6. Change of Control Agreement. Company and Employee acknowledge and agree
that the Change of Control Agreement shall remain in full force and effect in
accordance with its terms, subject to the following amendments:
(a) Any payments made by Company pursuant to Part One, Paragraph 1
thereof shall be credited against any Severance Benefits payable hereunder;
(b) Compliance by Company with Part One, Paragraph 2 of the Change of
Control Agreement shall be deemed to be full performance by Company of its
duties to provide equivalent benefits to Employee as part of the Severance
Benefits for any periods in which Company shall be complying with said
Paragraph 2; and
(c) For purposes of Subparagraph (ii) of the definition of "Involuntary
Termination," any change in position or compensation referenced therein
shall be defined to be with reference to the position referenced in Section
1(a) hereof and the compensation referenced in Section 3(a), 3(c) and 3(d)
hereof.
(d) Company acknowledges and agrees that the transactions contemplated by
the Merger Agreement constitute a Change in Control (as defined in Part Two
of the Change of Control Agreement) for purposes of the Change of Control
Agreement, and Employee acknowledges and agrees that any subsequent Change
in Control as to Company shall not be deemed to give rise to any further
rights in favor of Employee thereunder.
(e) Employee acknowledges and agrees that, to the extent payments are to
be made to Employee pursuant to the Change of Control Agreement, that such
payments shall be received by Employee in lieu of any payments under any
severance plan or policy of Company or Parent.
7. Non-Competition. Employee agrees that the restrictions contained in Part
One, Paragraph 4 of the Change of Control Agreement shall apply, in addition
to the period specified in said Paragraph 4, for a period commencing as of the
consummation of the Offer and ending upon the later of (i) two (2) years from
the consummation of the Offer or (ii) the expiration of the period in which
Employee shall be entitled to Severance Benefits pursuant to Section 4(f)
hereof.
The parties acknowledge and agree that (i) the obligations of Employee set
forth in this Section 7 are entered into in connection with the acquisition of
Company as contemplated by the Merger Agreement and, as such, shall be
governed by California Business and Professions Code Section 16601 to the
exclusion of California Business and Professions Code 16600; and (ii) the
duration and geographic scope of the non-competition provision set forth in
this Section 7 is fair and reasonable and such provision is reasonably
required for the protection of Company.
8. Assignment; Successors and Assigns.
Employee agrees that he will not assign, sell, transfer, delegate or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any rights or obligations under this Agreement, nor shall Employee's
rights be subject to encumbrance or the claims of creditors. Any purported
assignment, transfer, or delegation shall be null and void. Nothing in this
Agreement shall prevent the consolidation of Company with, or its merger
F-3-5
<PAGE>
into, any other corporation, or the sale by Company of all or substantially
all of its properties or assets, or the assignment by Company of this
Agreement and the performance of its obligations hereunder to any successor in
interest or the Parent or any Affiliated Company. Subject to the foregoing,
this Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective heirs, legal representatives, successors, and
permitted assigns, and shall not benefit any person or entity other than those
enumerated above.
9. Notices. All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand or mailed, postage prepaid, by certified or registered
mail, return receipt requested, and addressed to Company at:
MDL Information Systems, Inc.
14600 Catalina Street
San Leandro, CA 94577
or to Employee at:
John Hanlon
20 Cortaderia Court
Danville, CA 94526
Notice of change of address shall be effective only when done in accordance
with this Section 9.
10. Entire Agreement. The terms of this Agreement are intended by the
parties to be the final expression of their agreement with respect to the
employment of Employee by Company, and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms
and that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.
11. Amendments; Waivers. This Agreement may not be modified, amended, or
terminated, except by an instrument in writing, signed by Employee and by a
duly authorized representative of Company, other than Employee. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform, provided, however, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in exercising any
right, remedy, or power hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, remedy, or power hereunder
preclude any other or further exercise thereof, or the exercise of any other
right, remedy, or power provided herein or by law or in equity.
12. Severability; Enforcement. If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions, as applied to other persons,
places and circumstances shall remain in full force and effect. It is the
intention of the parties that the covenants contained in Section 7 shall be
enforced to the greatest extent (but to no greater extent) in time, area, and
degree of participation as is permitted by the law of that jurisdiction whose
law is found to be applicable to any acts allegedly in breach of these
covenants. It being the purpose of this Agreement to govern competition by
Employee in the United States and in every other country in which Company is
then conducting its business, these covenants shall be governed by and
construed according to that law (from among those jurisdictions arguably
applicable to this Agreement and those in which a breach of this Agreement is
alleged to have occurred or to be threatened) which best gives them effect.
13. Governing Law. Subject to Section 12, the validity, interpretation,
enforceability, and performance of this Agreement shall be governed by, and
construed in accordance with, the law of the State of California.
F-3-6
<PAGE>
14. Employee Acknowledgment. Employee acknowledges (i) that he has consulted
with or has had the opportunity to consult with counsel concerning this
Agreement, and has been advised to do so by Company, and (ii) that he has read
and understands the Agreement, is fully aware of its legal effect and has
entered into it freely based upon his own judgment.
15. Opportunity to Cure. Except as provided in Section 16 hereof, it shall
be a condition to the assertion by either party that the other party has
breached its obligations under this Agreement that the party alleging such
breach shall have given written notice of such breach to the other, and that,
if such breach is reasonably susceptible of being cured, the breaching party
shall have had the opportunity for a reasonable period, not in excess of
thirty (30) days, to cure such breach.
16. Remedies. The parties agree that in the event of any breach or
threatened breach of any of the covenants in Section 7, the damage or imminent
damage to the value and the goodwill of Company's business will be irreparable
and extremely difficult to estimate, making any remedy at law or in damages
inadequate. Accordingly, the parties agree that Company shall be entitled to
injunctive relief against Employee in the event of any breach or threatened
breach of any such provisions by Employee, in addition to any other relief
(including damages) available to Company under this Agreement or under law.
17. Arbitration. Except as provided in Section 16 above, any dispute or
disagreement between the parties under this Agreement that is not settled
within thirty (30) days (or such longer period as may be mutually agreed upon)
from the date a party gives notice to the other in writing specifying such
dispute or disagreement, including, without limitation, any issue as to the
arbitrability of such dispute or disagreement, shall be settled by arbitration
before a single arbitrator selected by the parties in Oakland, California, who
shall be directed to follow the Commercial Arbitration Rules of the American
Arbitration Association, as in effect on the date that such notice is given.
Any decision of the arbitrator appointed and acting pursuant to this Section
17 shall be final and binding upon the parties and judgment may be entered
thereon, upon the application of either party, by any court having competent
jurisdiction. The arbitrator may also award reasonable attorney's fees and the
costs of the arbitration to the prevailing party. This Section 17 shall not
preclude either party from seeking a temporary restraining order, preliminary
injunction or other temporary injunctive relief to prevent an anticipatory or
continuing breach of this Agreement. Employee understands that each party's
promise to resolve claims by arbitration in accordance with the provisions of
this Agreement, rather than through the courts, is consideration for other
party's like promise. Employee further understands that he is offered
employment in consideration of his promise to arbitrate claims. This
Arbitration clause constitutes a waiver of employee's right to a jury trial
and relates to the resolution of all disputes relating to all aspects of the
employer/employee relationship, including, but not limited to, the following
claims:
(a) any and all claims for wrongful discharge of employment; breach of
contract, both express and implied; breach of the covenant of good faith
and fair dealing, both express and implied; negligent or intentional
infliction of emotional distress; negligent or intentional
misrepresentation; negligent or intentional interference with contract or
prospective economic advantage; and defamation;
(b) any and all claims for violation of any federal, state or municipal
statute, including, but not limited to, Title VII of the Civil Rights Act
of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor
Standards Act, the California Fair Employment and Housing Act, and Labor
Code Section 201, et seq.;
(c) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THIS AGREEMENT SHALL BE
VALID AND OF LEGAL EFFECT, IF AND ONLY IF, THE OFFER IS CONSUMMATED (AS
DEFINED IN THE MERGER AGREEMENT). ANY ATTEMPT TO ENFORCE ANY PROVISION OF THIS
AGREEMENT WITHOUT THE SATISFACTION OF THE FOREGOING CONDITION SHALL BE NULL
AND VOID.
F-3-7
<PAGE>
IN WITNESS WHEREOF, the parties have duly signed this Agreement the day and
year first written above.
MDL Information Systems
By /s/ Steven D. Goldby
-----------------------------------
NAME : STEVEN D. GOLDBY
TITLE: CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
JOHN HANLON
/s/ John Hanlon
-----------------------------------
F-3-8
<PAGE>
EXHIBIT F-4
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of March 23, 1997, is between MDL Information
Systems, Inc., a Delaware corporation ("Company") and Dan E. Kingman
("Employee").
RECITALS
1) In connection with the Agreement and Plan of Merger, dated as of March
23, 1997 ("Merger Agreement"), by and among Elsevier Science Inc. a New York
corporation ("Parent"), Golden Gate Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Parent ("Purchaser"), and Company, pursuant to
which Company shall become a wholly-owned subsidiary of Parent, Company
desires to provide for the continued services of Employee, on its own behalf
and on behalf of all existing and future Affiliated Companies (defined as any
corporation or other business entity or entities that directly or indirectly
control, are controlled by or are under common control with Parent), and
Employee desires to continue in the employment of Company upon the terms and
conditions set forth below.
2) Employee and Company are parties to a letter agreement, dated February
28, 1996 (the "Change of Control Agreement"), attached hereto as Appendix A,
which Company and Employee wish to continue as herein modified.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Period of Employment. Company hereby employs Employee to render services
to Company in the position and with the duties and responsibilities described
in Section 2 for the period (the "Period of Employment") commencing on the
consummation of the Offer (as defined in the Merger Agreement) and ending upon
the earlier of (i) two (2) years from such date (the "Term Date"), and (ii)
the date the Period of Employment is terminated in accordance with Section 4.
After the initial two-year Period of Employment, the Term Date shall
automatically be extended in increments of one (1) year unless either party
has given the other party written notice of non-renewal not less than six (6)
months prior to the Term Date then in effect. Termination of this Agreement on
the Term Date solely pursuant to a timely notice of non-renewal as described
herein shall not entitle the Employee to benefits hereunder.
2. Position, Duties, Responsibilities.
(a) Position. Employee hereby accepts employment with Company as Vice
President of Human Resources (or in such other position(s) as the Board of
Directors of Company (the "Board") shall designate) and shall report to the
Board of Directors, unless changed by the Board. Employee agrees to devote
his entire time, attention, energies and skills during usual business hours
(and outside those hours when reasonably necessary to the performance of
his duties hereunder) to the business and interests of Company during the
Period of Employment.
(b) Other Services. Employee may be required in pursuance of his duties
hereunder to perform services for any Affiliated Company but shall not be
entitled to any additional compensation for such services. Employee shall
obey all policies of Company and applicable policies of its Affiliated
Companies.
3. Compensation, Benefits, Expenses.
(a) Salary. In consideration of the services to be rendered hereunder,
including, without limitation, services to any Affiliated Company, Employee
shall be paid an annual salary (the "Base Salary") of One Hundred Thirty-
Four Thousand Dollars ($134,000), payable at the time and pursuant to the
procedures regularly established, and as they may be amended, by Company
during the Period of Employment.
F-4-1
<PAGE>
Company shall review annually the Base Salary and in light of such review
may, in the discretion of the Board, increase the Base Salary, taking into
account Employee's responsibilities, inflation in the cost of living,
increases in salaries of executives of Parent, Company, Affiliate Companies
and other companies, performance by Employee and other pertinent factors.
(b) Retention Bonus. Immediately following the consummation of the Offer,
Company shall pay to Employee a retention bonus in the amount of $50,000.
(c) Annual Bonus. During the Period of Employment, Employee shall be
entitled to an annual bonus, which shall be determined for fiscal years
1998 and thereafter during the Period of Employment in a manner consistent
with Company's incentive bonus program in effect before then Effective Time
and which shall be paid not later than September 1 of each year. Under such
program, Employee's target bonus percentage shall not be less than 50% of
Employee's Base Salary. The percentage of Employee's target bonus amount
that shall be payable hereunder shall be based upon the Company's
achievement of target earnings for the applicable year, as follows:
(i) If the Company achieves less than 80% of target earnings for the
year, no annual bonus shall be payable to the Employee.
(ii) If the Company achieves 80% of target earnings for the year, 50%
of the target bonus amount shall be payable to the Employee.
(iii) If the Company achieves 100% of target earnings for the year,
100% of the target bonus amount shall be payable to the Employee.
(iv) If the Company achieves 120% or more of target earnings for the
year, 150% of the target bonus amount shall be payable to the Employee.
(v) If the Company achieves between 80% and 120% of target earnings
for the year, the target bonus amount that shall be payable to the
Employee shall be a pro rata amount based on the schedule set forth
above.
(d) Car Allowance. Employee shall be entitled to an automobile allowance
of $12,000 per year during the Period of Employment, subject to withholding
for taxes to the extent required.
(e) Benefits; Expenses. Employee shall be entitled to such expense
accounts, vacation time, sick leave, perquisites of office, fringe
benefits, insurance coverage and other terms and conditions of employment
as Company generally provides to its employees having rank and seniority at
Company comparable to Employee, as the same may be changed from time to
time.
(f) Stock Options. Upon consummation of the Offer (as defined in the
Merger Agreement), Employee held certain options to purchase Company's
Common Stock (the "Options"). Pursuant to the Merger Agreement, those
Options that are not yet exercisable as of the time of the consummation of
the Offer (the "Unvested Options") shall be converted upon consummation of
the Offer into a right to receive quarterly cash payments from Parent at
the time when such Options otherwise would have become exercisable (the
"Option Payments"). The foregoing notwithstanding, those Unvested Options
that were granted on November 14, 1996, shall become exercisable in full
upon consummation of the Offer and shall not be treated as Unvested
Options. In the event of the death of Employee or if Employee shall become
Totally Disabled (as defined in Section 4(b) below) during the Period of
Employment, Employee's rights relating to all of his Option Payments shall
automatically be accelerated and become immediately payable.
4. Termination of Employment.
(a) By Death. The Period of Employment shall terminate automatically upon
the death of Employee. Company shall pay to Employee's beneficiaries or
estate, as appropriate, the Base Salary to which he is
F-4-2
<PAGE>
entitled through the end of the month in which death occurs. Thereafter,
Company's obligations hereunder shall terminate. Nothing in this Subsection
(a) shall affect any entitlement of Employee's heirs to the benefits of any
life insurance plan.
(b) By Disability. If, during the term of this Agreement, Employee should
become Totally Disabled (as hereinafter defined), Company shall have the
right, to the extent permitted by law, in its sole discretion, to terminate
this Agreement and Employee's employment with Company, in which case
Employee's Base Salary shall be paid up through the last day of the month
in which it has been determined that Employee has become Totally Disabled.
Nothing in this Subsection (b) shall affect Employee's rights under any
disability plan in which he is a participant. For purposes hereof, Employee
shall be considered "Totally Disabled" if (i) Employee is entitled to
benefits under any long-term disability income plan applicable to Employee
or (ii) Employee's physical and/or mental condition is such that Employee
is unable to perform those duties Employee would otherwise be expected to
continue to perform as an employee of Company, and Employee's non-
performance of such duties can reasonably be expected to continue or does
continue for not less than six (6) months. The determination that Employee
is Totally Disabled shall be made in good faith by Company, whose
determination shall be final and binding on Employee.
(c) By Company for Cause. Company may terminate, without liability, the
Period of Employment for Cause (as defined below) at any time and upon
fifteen (15) days' advance written notice to Employee. Company shall pay
Employee his Base Salary through the end of the notice period and
thereafter Company's obligations hereunder shall terminate. Termination
shall be for "Cause" if (i) Employee commits an act of fraud or
embezzlement, which is to the detriment of Company, Parent or any
Affiliated Company; (ii) Employee is convicted of a felony or other
criminal act; (iii) Employee willfully fails to perform his employment
duties (other than any such failure resulting from Employee's incapacity
due to physical or mental illness) after a written demand for substantial
performance is delivered to Employee by Company, which demand specifically
identifies the manner in which Company believes that Employee has not
substantially performed his duties; or (iv) Employee breaches any material
term of this Agreement or Employee Confidentiality Agreement (as defined in
Section 5 below), and, as to any such breach which is subject to cure, such
failure or breach continues for a period of ten (10) days after Employee
receives written notice of such breach from Company.
(d) By Employee for Good Reason. Employee may terminate, without
liability, the Period of Employment for Good Reason (as defined below) upon
ten (10) days' advance written notice to Company. In the event of a
termination by Employee of the Period of Employment for Good Reason
pursuant to this Subsection (d), Employee shall be entitled to the
Severance Benefits (as defined in Section 4(f) below) upon the terms
provided in said Section 4(f), and, except as provided in Section 6 below,
Company shall have no further obligations to Employee with respect to his
employment relationship with Company following payment of the Severance
Benefits. "Good Reason" shall exist in the event of (i) a change in
Employee's position with Company which materially reduces Employee's level
of responsibility or the nature of Employee's functions as set forth
herein, (ii) a greater than ten percent (10%) reduction of Employee's level
of compensation (including base salary, fringe benefits and participation
in non-discretionary bonus programs under which awards are payable pursuant
to objective financial or performance standards) or (c) a relocation of
Employee's principal place of employment by more than thirty-five (35)
miles, provided such that change, reduction or relocation is effected
without Employee's written consent. During the ten (10) day notice period,
Company shall have the right, but not the obligation, to take corrective
action to reinstate Employee to such former position, responsibility,
compensation level or location and terminate the right of Employee to
terminate the Period of Employment pursuant to this Subsection (d) as a
result of such prior change to Employee's position, responsibility,
compensation level or location. Employee acknowledges that Company may be
combined with or merged into Parent or any Affiliated Company and such
merger or combination, including any changes in the entity to whom Employee
reports thereafter, will not be deemed by itself to constitute Good Reason
for purposes of this Subsection (d).
F-4-3
<PAGE>
(e) At Will. At any time, Company may terminate, without liability, the
Period of Employment for any reason, with or without cause, by giving
thirty (30) days' advance written notice to Employee. In the event of a
termination by Company of the Period of Employment pursuant to this
Subsection (e), Employee shall be entitled to receive from Company the
Severance Benefits upon the terms provided in Section 4(f) below, and,
subject to Section 6 below, Company shall have no further obligations to
Employee with respect to his employment relationship with Company following
payment of the Severance Benefits. Employee hereby agrees that Company may
dismiss him under this Subsection (e) without regard to (i) any general or
specific policies (whether written or oral) of Company relating to the
employment or termination of its employees or (ii) any statements made to
Employee, whether made orally or contained in any document, pertaining to
Employee's relationship with Company.
(f) Severance Benefits. To the extent that Employee shall be entitled to
receive Severance Benefits pursuant to Section 4(d) or 4(e) hereof, Company
and Employee agree that the following shall apply:
(i) "Severance Benefits" shall mean: (A) a continuation of Employee's
then effective salary as payable pursuant to Section 3(a) hereof during
the Severance Period (as defined below); (B) payment of any bonus
payable to Employee pursuant to Section 3(c) hereof, calculated based
on the full Company bonus payable thereunder (subject to attainment by
Company of any objective financial or performance standards applicable
to Company) and prorated for any period during the Severance Period
that is less than the full twelve (12) month period in which such bonus
would be earned; (C) immediate vesting and payment of any Option
Payments; and (D) continuation during the Severance Period of any
medical/dental care coverage (or the reasonable equivalent thereof)
which Employee is receiving as of the date of termination of the Period
of Employment, provided that such insurance coverage shall terminate
prior to the expiration of the Severance Period as of the first date
that Employee is covered under another employer's health benefit
program which provides substantially the same level of benefits without
exclusion for pre-existing medical conditions. Such coverage shall be
in lieu of any other continued health care coverage to which Employee
or his dependents would otherwise be entitled in accordance with the
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), by reason of Employee's termination of
employment.
(ii) "Severance Period" shall mean a period of twenty-four (24)
months following the termination of the Period of Employment pursuant
to Section 4(d) or 4(e) hereof.
(iii) Company shall be entitled to a credit for any amounts paid
pursuant to Part One, Paragraph 1 of the Change of Control Agreement
for any amounts payable pursuant to Paragraph (i)(A) and (i)(B) above
as part of any Severance Benefits payable hereunder.
(iv) Except as provided in Section 6 below, the Severance Benefits
shall be received by Employee in lieu of any other right Employee may
have under applicable law, Company or Parent policies or plans or
otherwise with respect to any payments or compensation in connection
with the termination of Employee's employment with Company.
(v) Employee agrees that payment of the Severance Benefits may, in
the discretion of the Company, be subject to the prior execution by the
Employee of a release of claims in a form provided by the Company prior
to any such payment and that payment of the Severance Benefits shall be
consideration for such release.
(g) Termination Obligations.
(i) Employee hereby acknowledges and agrees that all personal
property, including, without limitation, all books, manuals, records,
reports, notes, contracts, lists, blueprints and other documents or
materials, or copies thereof, and equipment furnished to or prepared by
Employee in the course of or incident to his employment pertaining to
Proprietary Information (as defined in the Employee Confidentiality
Agreement), belong to Company and shall be promptly returned to Company
upon termination of the Period of Employment. Following termination,
Employee will not retain any written or other tangible material
containing any Proprietary Information.
F-4-4
<PAGE>
(ii) Upon termination of the Period of Employment, Employee shall be
deemed to have resigned from all offices and directorships then held
with Company, Parent or any Affiliated Company.
(iii) Employee's obligations under this Subsection (g) and under
Sections 5, 6, and 7 shall survive termination of the Period of
Employment and the expiration of this Agreement.
5. Proprietary Information. During the term of this Agreement and
thereafter, Employee agrees to remain bound by the terms of that certain
employee confidentiality agreement to which he is presently bound (the
"Employee Confidentiality Agreement").
6. Change of Control Agreement. Company and Employee acknowledge and agree
that the Change of Control Agreement shall remain in full force and effect in
accordance with its terms, subject to the following amendments:
(a) Any payments made by Company pursuant to Part One, Paragraph 1
thereof shall be credited against any Severance Benefits payable hereunder;
(b) Compliance by Company with Part One, Paragraph 2 of the Change of
Control Agreement shall be deemed to be full performance by Company of its
duties to provide equivalent benefits to Employee as part of the Severance
Benefits for any periods in which Company shall be complying with said
Paragraph 2; and
(c) For purposes of Subparagraph (ii) of the definition of "Involuntary
Termination," any change in position or compensation referenced therein
shall be defined to be with reference to the position referenced in Section
1(a) hereof and the compensation referenced in Section 3(a), 3(c) and 3(d)
hereof.
(d) Company acknowledges and agrees that the transactions contemplated by
the Merger Agreement constitute a Change in Control (as defined in Part Two
of the Change of Control Agreement) for purposes of the Change of Control
Agreement, and Employee acknowledges and agrees that any subsequent Change
in Control as to Company shall not be deemed to give rise to any further
rights in favor of Employee thereunder.
(e) Employee acknowledges and agrees that, to the extent payments are to
be made to Employee pursuant to the Change of Control Agreement, that such
payments shall be received by Employee in lieu of any payments under any
severance plan or policy of Company or Parent.
7. Non-Competition. Employee agrees that the restrictions contained in Part
One, Paragraph 4 of the Change of Control Agreement shall apply, in addition
to the period specified in said Paragraph 4, for a period commencing as of the
consummation of the Offer and ending upon the later of (i) two (2) years from
the consummation of the Offer or (ii) the expiration of the period in which
Employee shall be entitled to Severance Benefits pursuant to Section 4(f)
hereof.
The parties acknowledge and agree that (i) the obligations of Employee set
forth in this Section 7 are entered into in connection with the acquisition of
Company as contemplated by the Merger Agreement and, as such, shall be
governed by California Business and Professions Code Section 16601 to the
exclusion of California Business and Professions Code 16600; and (ii) the
duration and geographic scope of the non-competition provision set forth in
this Section 7 is fair and reasonable and such provision is reasonably
required for the protection of Company.
8. Assignment; Successors and Assigns.
Employee agrees that he will not assign, sell, transfer, delegate or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any rights or obligations under this Agreement, nor shall Employee's
rights be subject to encumbrance or the claims of creditors. Any purported
assignment, transfer, or delegation shall be null and void. Nothing in this
Agreement shall prevent the consolidation of Company with, or its merger into,
any other corporation, or the sale by Company of all or substantially all of
its properties or assets, or the assignment by Company of this Agreement and
the performance of its obligations hereunder to any successor in
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<PAGE>
interest or the Parent or any Affiliated Company. Subject to the foregoing,
this Agreement shall be binding upon and shall inure to the benefit of the
parties and their respective heirs, legal representatives, successors, and
permitted assigns, and shall not benefit any person or entity other than those
enumerated above.
9. Notices. All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand or mailed, postage prepaid, by certified or registered
mail, return receipt requested, and addressed to Company at:
MDL Information Systems, Inc.
14600 Catalina Street
San Leandro, CA 94577
or to Employee at:
Dan E. Kingman
1215 Los Trancos Road
Portola Valley, CA 94028
Notice of change of address shall be effective only when done in accordance
with this Section 9.
10. Entire Agreement. The terms of this Agreement are intended by the
parties to be the final expression of their agreement with respect to the
employment of Employee by Company, and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms
and that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.
11. Amendments; Waivers. This Agreement may not be modified, amended, or
terminated, except by an instrument in writing, signed by Employee and by a
duly authorized representative of Company, other than Employee. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform, provided, however, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in exercising any
right, remedy, or power hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, remedy, or power hereunder
preclude any other or further exercise thereof, or the exercise of any other
right, remedy, or power provided herein or by law or in equity.
12. Severability; Enforcement. If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions, as applied to other persons,
places and circumstances shall remain in full force and effect. It is the
intention of the parties that the covenants contained in Section 7 shall be
enforced to the greatest extent (but to no greater extent) in time, area, and
degree of participation as is permitted by the law of that jurisdiction whose
law is found to be applicable to any acts allegedly in breach of these
covenants. It being the purpose of this Agreement to govern competition by
Employee in the United States and in every other country in which Company is
then conducting its business, these covenants shall be governed by and
construed according to that law (from among those jurisdictions arguably
applicable to this Agreement and those in which a breach of this Agreement is
alleged to have occurred or to be threatened) which best gives them effect.
13. Governing Law. Subject to Section 12, the validity, interpretation,
enforceability, and performance of this Agreement shall be governed by, and
construed in accordance with, the law of the State of California.
14. Employee Acknowledgment. Employee acknowledges (i) that he has consulted
with or has had the opportunity to consult with counsel concerning this
Agreement, and has been advised to do so by Company, and (ii) that he has read
and understands the Agreement, is fully aware of its legal effect and has
entered into it freely based upon his own judgment.
15. Opportunity to Cure. Except as provided in Section 16 hereof, it shall
be a condition to the assertion by either party that the other party has
breached its obligations under this Agreement that the party alleging such
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<PAGE>
breach shall have given written notice of such breach to the other, and that,
if such breach is reasonably susceptible of being cured, the breaching party
shall have had the opportunity for a reasonable period, not in excess of
thirty (30) days, to cure such breach.
16. Remedies. The parties agree that in the event of any breach or
threatened breach of any of the covenants in Section 7, the damage or imminent
damage to the value and the goodwill of Company's business will be irreparable
and extremely difficult to estimate, making any remedy at law or in damages
inadequate. Accordingly, the parties agree that Company shall be entitled to
injunctive relief against Employee in the event of any breach or threatened
breach of any such provisions by Employee, in addition to any other relief
(including damages) available to Company under this Agreement or under law.
17. Arbitration. Except as provided in Section 16 above, any dispute or
disagreement between the parties under this Agreement that is not settled
within thirty (30) days (or such longer period as may be mutually agreed upon)
from the date a party gives notice to the other in writing specifying such
dispute or disagreement, including, without limitation, any issue as to the
arbitrability of such dispute or disagreement, shall be settled by arbitration
before a single arbitrator selected by the parties in Oakland, California, who
shall be directed to follow the Commercial Arbitration Rules of the American
Arbitration Association, as in effect on the date that such notice is given.
Any decision of the arbitrator appointed and acting pursuant to this Section
17 shall be final and binding upon the parties and judgment may be entered
thereon, upon the application of either party, by any court having competent
jurisdiction. The arbitrator may also award reasonable attorney's fees and the
costs of the arbitration to the prevailing party. This Section 17 shall not
preclude either party from seeking a temporary restraining order, preliminary
injunction or other temporary injunctive relief to prevent an anticipatory or
continuing breach of this Agreement. Employee understands that each party's
promise to resolve claims by arbitration in accordance with the provisions of
this Agreement, rather than through the courts, is consideration for other
party's like promise. Employee further understands that he is offered
employment in consideration of his promise to arbitrate claims. This
Arbitration clause constitutes a waiver of employee's right to a jury trial
and relates to the resolution of all disputes relating to all aspects of the
employer/employee relationship, including, but not limited to, the following
claims:
(a) any and all claims for wrongful discharge of employment; breach of
contract, both express and implied; breach of the covenant of good faith
and fair dealing, both express and implied; negligent or intentional
infliction of emotional distress; negligent or intentional
misrepresentation; negligent or intentional interference with contract or
prospective economic advantage; and defamation;
(b) any and all claims for violation of any federal, state or municipal
statute, including, but not limited to, Title VII of the Civil Rights Act
of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor
Standards Act, the California Fair Employment and Housing Act, and Labor
Code Section 201, et seq.;
(c) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THIS AGREEMENT SHALL BE
VALID AND OF LEGAL EFFECT, IF AND ONLY IF, THE OFFER IS CONSUMMATED (AS
DEFINED IN THE MERGER AGREEMENT). ANY ATTEMPT TO ENFORCE ANY PROVISION OF THIS
AGREEMENT WITHOUT THE SATISFACTION OF THE FOREGOING CONDITION SHALL BE NULL
AND VOID.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly signed this Agreement the day and
year first written above.
MDL Information Systems
By /s/ Steven D. Goldby
-----------------------------------
NAME : STEVEN D. GOLDBY
TITLE: CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
DAN E. KINGMAN
/s/ Dan E. Kingman
-----------------------------------
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<PAGE>
EXHIBIT F-5
EMPLOYMENT AGREEMENT
THIS AGREEMENT, dated as of March 23, 1997, is between MDL Information
Systems, Inc., a Delaware corporation ("Company") and John Priestley
("Employee").
RECITALS
1) In connection with the Agreement and Plan of Merger, dated as of March
23, 1997 ("Merger Agreement"), by and among Elsevier Science Inc. a New York
corporation ("Parent"), Golden Gate Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Parent ("Purchaser"), and Company, pursuant to
which Company shall become a wholly-owned subsidiary of Parent, Company
desires to provide for the continued services of Employee, on its own behalf
and on behalf of all existing and future Affiliated Companies (defined as any
corporation or other business entity or entities that directly or indirectly
control, are controlled by or are under common control with Parent), and
Employee desires to continue in the employment of Company upon the terms and
conditions set forth below.
2) Employee and Company are parties to a letter agreement, dated May 17,
1996 (the "Change of Control Agreement"), attached hereto as Appendix A, which
Company and Employee wish to continue as herein modified.
ACCORDINGLY, THE PARTIES AGREE AS FOLLOWS:
1. Period of Employment. Company hereby employs Employee to render services
to Company in the position and with the duties and responsibilities described
in Section 2 for the period (the "Period of Employment") commencing on the
consummation of the Offer (as defined in the Merger Agreement) and ending upon
the earlier of (i) two (2) years from such date (the "Term Date"), and (ii)
the date the Period of Employment is terminated in accordance with Section 4.
After the initial two-year Period of Employment, the Term Date shall
automatically be extended in increments of one (1) year unless either party
has given the other party written notice of non-renewal not less than six (6)
months prior to the Term Date then in effect. Termination of this Agreement on
the Term Date solely pursuant to a timely notice of non-renewal as described
herein shall not entitle the Employee to benefits hereunder.
2. Position, Duties, Responsibilities.
(a) Position. Employee hereby accepts employment with Company as Senior
Vice President of Sales and Service (or in such other position(s) as the
Board of Directors of Company (the "Board") shall designate) and shall
report to the Chief Operating Officer, unless changed by the Board.
Employee agrees to devote his entire time, attention, energies and skills
during usual business hours (and outside those hours when reasonably
necessary to the performance of his duties hereunder) to the business and
interests of Company during the Period of Employment.
(b) Other Services. Employee may be required in pursuance of his duties
hereunder to perform services for any Affiliated Company but shall not be
entitled to any additional compensation for such services. Employee shall
obey all policies of Company and applicable policies of its Affiliated
Companies.
3. Compensation, Benefits, Expenses.
(a) Salary. In consideration of the services to be rendered hereunder,
including, without limitation, services to any Affiliated Company, Employee
shall be paid an annual salary (the "Base Salary") of One Hundred Eighty
Thousand Dollars ($180,000), payable at the time and pursuant to the
procedures regularly established, and as they may be amended, by Company
during the Period of Employment. Company shall
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<PAGE>
review annually the Base Salary and in light of such review may, in the
discretion of the Board, increase the Base Salary, taking into account
Employee's responsibilities, inflation in the cost of living, increases in
salaries of executives of Parent, Company, Affiliate Companies and other
companies, performance by Employee and other pertinent factors.
(b) Retention Bonus. Immediately following the consummation of the Offer,
Company shall pay to Employee a retention bonus in the amount of $50,000.
(c) Bonus. During the Period of Employment, Employee shall be entitled to
quarterly bonuses, which shall be determined for fiscal years 1998 and
thereafter during the Period of Employment in a manner consistent with
Company's incentive bonus program in effect before then Effective Time and
which shall be paid to Employee on a quarterly basis. Under such program,
Employee's target bonus amount initially shall be $20,000 per quarter.
Employee's target bonus amount shall be based on sales objectives set by
management and which may be changed from time to time.
(d) Car Allowance. Employee shall be entitled to an automobile allowance
of $12,000 per year during the Period of Employment, subject to withholding
for taxes to the extent required.
(e) Benefits; Expenses. Employee shall be entitled to such expense
accounts, vacation time, sick leave, perquisites of office, fringe
benefits, insurance coverage and other terms and conditions of employment
as Company generally provides to its employees having rank and seniority at
Company comparable to Employee, as the same may be changed from time to
time.
(f) Stock Options. Upon consummation of the Offer (as defined in the
Merger Agreement), Employee held certain options to purchase Company's
Common Stock (the "Options"). Pursuant to the Merger Agreement, those
Options that are not yet exercisable as of the time of the consummation of
the Offer (the "Unvested Options") shall be converted upon consummation of
the Offer into a right to receive quarterly cash payments from Parent at
the time when such Options otherwise would have become exercisable (the
"Option Payments"). In the event of the death of Employee or if Employee
shall become Totally Disabled (as defined in Section 4(b) below) during the
Period of Employment, Employee's rights relating to all of his Option
Payments shall automatically be accelerated and become immediately payable.
In the event that Employee's employment with the Company terminates upon
the Term Date as a result of non-renewal of this Agreement pursuant to
Section 1 hereof, Employee's rights relating to all of his Option Payments
shall automatically be accelerated and immediately become payable.
4. Termination of Employment.
(a) By Death. The Period of Employment shall terminate automatically upon
the death of Employee. Company shall pay to Employee's beneficiaries or
estate, as appropriate, the Base Salary to which he is entitled through the
end of the month in which death occurs. Thereafter, Company's obligations
hereunder shall terminate. Nothing in this Subsection (a) shall affect any
entitlement of Employee's heirs to the benefits of any life insurance plan.
(b) By Disability. If, during the term of this Agreement, Employee should
become Totally Disabled (as hereinafter defined), Company shall have the
right, to the extent permitted by law, in its sole discretion, to terminate
this Agreement and Employee's employment with Company, in which case
Employee's Base Salary shall be paid up through the last day of the month
in which it has been determined that Employee has become Totally Disabled.
Nothing in this Subsection (b) shall affect Employee's rights under any
disability plan in which he is a participant. For purposes hereof, Employee
shall be considered "Totally Disabled" if (i) Employee is entitled to
benefits under any long-term disability income plan applicable to Employee
or (ii) Employee's physical and/or mental condition is such that Employee
is unable to perform those duties Employee would otherwise be expected to
continue to perform as an employee of Company, and Employee's non-
performance of such duties can reasonably be expected to continue or does
continue for not less than six (6) months. The determination that Employee
is Totally Disabled shall be made in good faith by Company, whose
determination shall be final and binding on Employee.
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<PAGE>
(c) By Company for Cause. Company may terminate, without liability, the
Period of Employment for Cause (as defined below) at any time and upon
fifteen (15) days' advance written notice to Employee. Company shall pay
Employee his Base Salary through the end of the notice period and
thereafter Company's obligations hereunder shall terminate. Termination
shall be for "Cause" if (i) Employee commits an act of fraud or
embezzlement, which is to the detriment of Company, Parent or any
Affiliated Company; (ii) Employee is convicted of a felony or other
criminal act; (iii) Employee willfully fails to perform his employment
duties (other than any such failure resulting from Employee's incapacity
due to physical or mental illness) after a written demand for substantial
performance is delivered to Employee by Company, which demand specifically
identifies the manner in which Company believes that Employee has not
substantially performed his duties; or (iv) Employee breaches any material
term of this Agreement or Employee Confidentiality Agreement (as defined in
Section 5 below), and, as to any such breach which is subject to cure, such
failure or breach continues for a period of ten (10) days after Employee
receives written notice of such breach from Company.
(d) By Employee for Good Reason. Employee may terminate, without
liability, the Period of Employment for Good Reason (as defined below) upon
ten (10) days' advance written notice to Company. In the event of a
termination by Employee of the Period of Employment for Good Reason
pursuant to this Subsection (d), Employee shall be entitled to the
Severance Benefits (as defined in Section 4(f) below) upon the terms
provided in said Section 4(f), and, except as provided in Section 6 below,
Company shall have no further obligations to Employee with respect to his
employment relationship with Company following payment of the Severance
Benefits. "Good Reason" shall exist in the event of (i) a change in
Employee's position with Company which materially reduces Employee's level
of responsibility or the nature of Employee's functions as set forth
herein, (ii) a greater than ten percent (10%) reduction of Employee's level
of compensation (including base salary, fringe benefits and participation
in non-discretionary bonus programs under which awards are payable pursuant
to objective financial or performance standards) or (c) a relocation of
Employee's principal place of employment by more than thirty-five (35)
miles, provided such that change, reduction or relocation is effected
without Employee's written consent. During the ten (10) day notice period,
Company shall have the right, but not the obligation, to take corrective
action to reinstate Employee to such former position, responsibility,
compensation level or location and terminate the right of Employee to
terminate the Period of Employment pursuant to this Subsection (d) as a
result of such prior change to Employee's position, responsibility,
compensation level or location. Employee acknowledges that Company may be
combined with or merged into Parent or any Affiliated Company and such
merger or combination, including any changes in the entity to whom Employee
reports thereafter, will not be deemed by itself to constitute Good Reason
for purposes of this Subsection (d).
(e) At Will. At any time, Company may terminate, without liability, the
Period of Employment for any reason, with or without cause, by giving
thirty (30) days' advance written notice to Employee. In the event of a
termination by Company of the Period of Employment pursuant to this
Subsection (e), Employee shall be entitled to receive from Company the
Severance Benefits upon the terms provided in Section 4(f) below, and,
subject to Section 6 below, Company shall have no further obligations to
Employee with respect to his employment relationship with Company following
payment of the Severance Benefits. Employee hereby agrees that Company may
dismiss him under this Subsection (e) without regard to (i) any general or
specific policies (whether written or oral) of Company relating to the
employment or termination of its employees or (ii) any statements made to
Employee, whether made orally or contained in any document, pertaining to
Employee's relationship with Company.
(f) Severance Benefits. To the extent that Employee shall be entitled to
receive Severance Benefits pursuant to Section 4(d) or 4(e) hereof, Company
and Employee agree that the following shall apply:
(i) "Severance Benefits" shall mean: (A) a continuation of Employee's
then effective salary as payable pursuant to Section 3(a) hereof during
the Severance Period (as defined below); (B) payment of any bonus
payable to Employee pursuant to Section 3(c) hereof, calculated based
on the full
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<PAGE>
Company bonus payable thereunder (subject to attainment by Company of
any objective financial or performance standards applicable to Company)
and prorated for any period during the Severance Period that is less
than the full twelve (12) month period in which such bonus would be
earned; (C) immediate vesting and payment of any Option Payments; and
(D) continuation during the Severance Period of any medical/dental care
coverage (or the reasonable equivalent thereof) which Employee is
receiving as of the date of termination of the Period of Employment,
provided that such insurance coverage shall terminate prior to the
expiration of the Severance Period as of the first date that Employee
is covered under another employer's health benefit program which
provides substantially the same level of benefits without exclusion for
pre-existing medical conditions. Such coverage shall be in lieu of any
other continued health care coverage to which Employee or his
dependents would otherwise be entitled in accordance with the
requirements of the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended ("COBRA"), by reason of Employee's termination of
employment.
(ii) "Severance Period" shall mean a period of twenty-four (24)
months following the termination of the Period of Employment pursuant
to Section 4(d) or 4(e) hereof.
(iii) Company shall be entitled to a credit for any amounts paid
pursuant to Part One, Paragraph 1 of the Change of Control Agreement
for any amounts payable pursuant to Paragraph (i)(A) and (i)(B) above
as part of any Severance Benefits payable hereunder.
(iv) Except as provided in Section 6 below, the Severance Benefits
shall be received by Employee in lieu of any other right Employee may
have under applicable law, Company or Parent policies or plans or
otherwise with respect to any payments or compensation in connection
with the termination of Employee's employment with Company.
(v) Employee agrees that payment of the Severance Benefits may, in
the discretion of the Company, be subject to the prior execution by the
Employee of a release of claims in a form provided by the Company prior
to any such payment and that payment of the Severance Benefits shall be
consideration for such release.
(g) Termination Obligations.
(i) Employee hereby acknowledges and agrees that all personal property,
including, without limitation, all books, manuals, records, reports, notes,
contracts, lists, blueprints and other documents or materials, or copies
thereof, and equipment furnished to or prepared by Employee in the course
of or incident to his employment pertaining to Proprietary Information (as
defined in the Employee Confidentiality Agreement), belong to Company and
shall be promptly returned to Company upon termination of the Period of
Employment. Following termination, Employee will not retain any written or
other tangible material containing any Proprietary Information.
(ii) Upon termination of the Period of Employment, Employee shall be
deemed to have resigned from all offices and directorships then held with
Company, Parent or any Affiliated Company.
(iii) Employee's obligations under this Subsection (g) and under Sections
5, 6, and 7 shall survive termination of the Period of Employment and the
expiration of this Agreement.
5. Proprietary Information. During the term of this Agreement and
thereafter, Employee agrees to remain bound by the terms of that certain
employee confidentiality agreement to which he is presently bound (the
"Employee Confidentiality Agreement").
6. Change of Control Agreement. Company and Employee acknowledge and agree
that the Change of Control Agreement shall remain in full force and effect in
accordance with its terms, subject to the following amendments:
(a) Any payments made by Company pursuant to Part One, Paragraph 1
thereof shall be credited against any Severance Benefits payable hereunder;
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<PAGE>
(b) Compliance by Company with Part One, Paragraph 2 of the Change of
Control Agreement shall be deemed to be full performance by Company of its
duties to provide equivalent benefits to Employee as part of the Severance
Benefits for any periods in which Company shall be complying with said
Paragraph 2; and
(c) For purposes of Subparagraph (ii) of the definition of "Involuntary
Termination," any change in position or compensation referenced therein
shall be defined to be with reference to the position referenced in Section
1(a) hereof and the compensation referenced in Section 3(a), 3(c) and 3(d)
hereof.
(d) Company acknowledges and agrees that the transactions contemplated by
the Merger Agreement constitute a Change in Control (as defined in Part Two
of the Change of Control Agreement) for purposes of the Change of Control
Agreement, and Employee acknowledges and agrees that any subsequent Change
in Control as to Company shall not be deemed to give rise to any further
rights in favor of Employee thereunder.
(e) Employee acknowledges and agrees that, to the extent payments are to
be made to Employee pursuant to the Change of Control Agreement, that such
payments shall be received by Employee in lieu of any payments under any
severance plan or policy of Company or Parent.
7. Non-Competition. Employee agrees that the restrictions contained in Part
One, Paragraph 4 of the Change of Control Agreement shall apply, in addition
to the period specified in said Paragraph 4, for a period commencing as of the
consummation of the Offer and ending upon the later of (i) two (2) years from
the consummation of the Offer or (ii) the expiration of the period in which
Employee shall be entitled to Severance Benefits pursuant to Section 4(f)
hereof.
The parties acknowledge and agree that (i) the obligations of Employee set
forth in this Section 7 are entered into in connection with the acquisition of
Company as contemplated by the Merger Agreement and, as such, shall be
governed by California Business and Professions Code Section 16601 to the
exclusion of California Business and Professions Code 16600; and (ii) the
duration and geographic scope of the non-competition provision set forth in
this Section 7 is fair and reasonable and such provision is reasonably
required for the protection of Company.
8. Assignment; Successors and Assigns.
Employee agrees that he will not assign, sell, transfer, delegate or
otherwise dispose of, whether voluntarily or involuntarily, or by operation of
law, any rights or obligations under this Agreement, nor shall Employee's
rights be subject to encumbrance or the claims of creditors. Any purported
assignment, transfer, or delegation shall be null and void. Nothing in this
Agreement shall prevent the consolidation of Company with, or its merger into,
any other corporation, or the sale by Company of all or substantially all of
its properties or assets, or the assignment by Company of this Agreement and
the performance of its obligations hereunder to any successor in interest or
the Parent or any Affiliated Company. Subject to the foregoing, this Agreement
shall be binding upon and shall inure to the benefit of the parties and their
respective heirs, legal representatives, successors, and permitted assigns,
and shall not benefit any person or entity other than those enumerated above.
9. Notices. All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand or mailed, postage prepaid, by certified or registered
mail, return receipt requested, and addressed to Company at:
MDL Information Systems, Inc.
14600 Catalina Street
San Leandro, CA 94577
or to Employee at:
John Priestley
251 Morris Ranch Court
Danville, CA 94526
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Notice of change of address shall be effective only when done in accordance
with this Section 9.
10. Entire Agreement. The terms of this Agreement are intended by the
parties to be the final expression of their agreement with respect to the
employment of Employee by Company, and may not be contradicted by evidence of
any prior or contemporaneous agreement. The parties further intend that this
Agreement shall constitute the complete and exclusive statement of its terms
and that no extrinsic evidence whatsoever may be introduced in any judicial,
administrative, or other legal proceeding involving this Agreement.
11. Amendments; Waivers. This Agreement may not be modified, amended, or
terminated, except by an instrument in writing, signed by Employee and by a
duly authorized representative of Company, other than Employee. By an
instrument in writing similarly executed, either party may waive compliance by
the other party with any provision of this Agreement that such other party was
or is obligated to comply with or perform, provided, however, that such waiver
shall not operate as a waiver of, or estoppel with respect to, any other or
subsequent failure. No failure to exercise and no delay in exercising any
right, remedy, or power hereunder shall operate as a waiver thereof, nor shall
any single or partial exercise of any right, remedy, or power hereunder
preclude any other or further exercise thereof, or the exercise of any other
right, remedy, or power provided herein or by law or in equity.
12. Severability; Enforcement. If any provision of this Agreement, or the
application thereof to any person, place, or circumstance, shall be held by a
court of competent jurisdiction to be invalid, unenforceable, or void, the
remainder of this Agreement and such provisions, as applied to other persons,
places and circumstances shall remain in full force and effect. It is the
intention of the parties that the covenants contained in Section 7 shall be
enforced to the greatest extent (but to no greater extent) in time, area, and
degree of participation as is permitted by the law of that jurisdiction whose
law is found to be applicable to any acts allegedly in breach of these
covenants. It being the purpose of this Agreement to govern competition by
Employee in the United States and in every other country in which Company is
then conducting its business, these covenants shall be governed by and
construed according to that law (from among those jurisdictions arguably
applicable to this Agreement and those in which a breach of this Agreement is
alleged to have occurred or to be threatened) which best gives them effect.
13. Governing Law. Subject to Section 12, the validity, interpretation,
enforceability, and performance of this Agreement shall be governed by, and
construed in accordance with, the law of the State of California.
14. Employee Acknowledgment. Employee acknowledges (i) that he has consulted
with or has had the opportunity to consult with counsel concerning this
Agreement, and has been advised to do so by Company, and (ii) that he has read
and understands the Agreement, is fully aware of its legal effect and has
entered into it freely based upon his own judgment.
15. Opportunity to Cure. Except as provided in Section 16 hereof, it shall
be a condition to the assertion by either party that the other party has
breached its obligations under this Agreement that the party alleging such
breach shall have given written notice of such breach to the other, and that,
if such breach is reasonably susceptible of being cured, the breaching party
shall have had the opportunity for a reasonable period, not in excess of
thirty (30) days, to cure such breach.
16. Remedies. The parties agree that in the event of any breach or
threatened breach of any of the covenants in Section 7, the damage or imminent
damage to the value and the goodwill of Company's business will be irreparable
and extremely difficult to estimate, making any remedy at law or in damages
inadequate. Accordingly, the parties agree that Company shall be entitled to
injunctive relief against Employee in the event of any breach or threatened
breach of any such provisions by Employee, in addition to any other relief
(including damages) available to Company under this Agreement or under law.
17. Arbitration. Except as provided in Section 16 above, any dispute or
disagreement between the parties under this Agreement that is not settled
within thirty (30) days (or such longer period as may be mutually agreed
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<PAGE>
upon) from the date a party gives notice to the other in writing specifying
such dispute or disagreement, including, without limitation, any issue as to
the arbitrability of such dispute or disagreement, shall be settled by
arbitration before a single arbitrator selected by the parties in Oakland,
California, who shall be directed to follow the Commercial Arbitration Rules
of the American Arbitration Association, as in effect on the date that such
notice is given. Any decision of the arbitrator appointed and acting pursuant
to this Section 17 shall be final and binding upon the parties and judgment
may be entered thereon, upon the application of either party, by any court
having competent jurisdiction. The arbitrator may also award reasonable
attorney's fees and the costs of the arbitration to the prevailing party. This
Section 17 shall not preclude either party from seeking a temporary
restraining order, preliminary injunction or other temporary injunctive relief
to prevent an anticipatory or continuing breach of this Agreement. Employee
understands that each party's promise to resolve claims by arbitration in
accordance with the provisions of this Agreement, rather than through the
courts, is consideration for other party's like promise. Employee further
understands that he is offered employment in consideration of his promise to
arbitrate claims. This Arbitration clause constitutes a waiver of employee's
right to a jury trial and relates to the resolution of all disputes relating
to all aspects of the employer/employee relationship, including, but not
limited to, the following claims:
(a) any and all claims for wrongful discharge of employment; breach of
contract, both express and implied; breach of the covenant of good faith
and fair dealing, both express and implied; negligent or intentional
infliction of emotional distress; negligent or intentional
misrepresentation; negligent or intentional interference with contract or
prospective economic advantage; and defamation;
(b) any and all claims for violation of any federal, state or municipal
statute, including, but not limited to, Title VII of the Civil Rights Act
of 1964, the Civil Rights Act of 1991, the Age Discrimination in Employment
Act of 1967, the Americans with Disabilities Act of 1990, the Fair Labor
Standards Act, the California Fair Employment and Housing Act, and Labor
Code Section 201, et seq.;
(c) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, THIS AGREEMENT SHALL BE
VALID AND OF LEGAL EFFECT, IF AND ONLY IF, THE OFFER IS CONSUMMATED (AS
DEFINED IN THE MERGER AGREEMENT). ANY ATTEMPT TO ENFORCE ANY PROVISION OF THIS
AGREEMENT WITHOUT THE SATISFACTION OF THE FOREGOING CONDITION SHALL BE NULL
AND VOID.
IN WITNESS WHEREOF, the parties have duly signed this Agreement the day and
year first written above.
MDL Information Systems
By
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NAME: STEVEN D. GOLDBY
TITLE: CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
JOHN PRIESTLEY
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