<PAGE> 1
Exhibits Index at Page 4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): January 31, 2000
COMPUTER CONCEPTS CORP
(Exact name of Registrant as specified in its charter)
Delaware 0-20660 11-2895590
- -------- ------- ----------
(State or other jurisdiction (Commission File Number) (IRS Employer
Identification No.)
80 Orville Drive
Bohemia, NY 11716
----------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (631) 244 1500
<PAGE> 2
ITEM 2. DISPOSITION OF ASSETS
a.) On December 23, 1999, Eagle Merger Corp.,("Eagle"), a wholly owned
subsidiary of EMC Corporation, ("EMC"), issued a Tender Offer ("the
offer") to purchase for cash, at $10.00 per share, all of the outstanding
shares of common stock of Softworks, Inc., ("SWRX"). The offer was
conditioned upon, among other things, there being validly tendered and not
withdrawn prior to the expiration a majority of the shares outstanding on
a fully diluted basis. T he Registrant tendered all of its shares
(6,145,767), which approximated 33% of the total shares outstanding of
SWRX. The Registrant's officers and Board of Directors obtained an
independent fairness opinion which supported its position to tender its
holding.
As a condition and inducement to EMC and Eagle entering into the Merger
Agreement, (i) an Escrow Agreement (the "Escrow Agreement") was entered
into as of December 21, 1999 by and among EMC, Eagle, Registrant and State
Street Bank and Trust Company, Inc. as escrow agent (the "Escrow Agent"),
and (ii) an Indemnification Agreement (the "Indemnification Agreement")
was entered into as of the same date by and among EMC, Eagle and
Registrant.
Pursuant to the terms of the two agreements, Registrant agreed to
indemnify and hold harmless EMC, Eagle, SWRX and their respective
subsidiaries and officers, directors, employees and agents (the
"Indemnified Parties") from and against and in respect of any Loss
(defined below) incurred or sustained by any of them as a result of any
breach by SWRX of any of the representations or warranties in the Merger
Agreement relating to the SWRX's capitalization, filings with the
Commission, the absence of certain changes or events in the SWRX's
business, no undisclosed liabilities, the absence of litigation, employee
benefit plans, options, and employment agreements, taxes, and intellectual
property. Additionally, Registrant agreed to provide indemnification
regarding its representations and warranties in the Registrant's Stock
Tender Agreement. The Registrant shall not be required to indemnify any
Indemnified Party under the Escrow Agreement unless the aggregate Losses
exceed $100,000, in which case the parties incurring the indemnification
obligations with respect to such Losses shall be responsible for the
entire amount of such Losses. The term "Loss" means any loss, liability
(including tax liability), damage, deficiency, fine, penalty, cost and
expense (including reasonable expenses of investigation, amounts paid in
settlement, interest, court costs, reasonable fees and expenses of
attorneys and accountants and other costs of litigation).
Upon consummation by Eagle of the purchase of Shares pursuant to the
Offer, the Eagle delivered $10 million (the "Escrow Amount") to the Escrow
Agent.
The Indemnification Agreement terminates two years after the consummation
of the purchase of Shares in the Offer by Eagle and the Escrow Agreement
terminates one year after the consummation of the purchase of Shares in
the Offer by Eagle, provided, however, that if prior to such date the
Registrant receives a notice from an Indemnified Party seeking
indemnification, neither agreement will terminate until such outstanding
claim is resolved.
As such, the Registrant received approximately $51 million, (net of the
$10 million escrow amount) from the sale of its SWRX common stock.
<PAGE> 3
The offer condition was met on January 25, 2000 as a result of the tender
of approximately 99% of the outstanding shares of SWRX. The Registrant
received its cash proceeds on January 31, 2000. Prior to this transaction
there were no relationships between the registrant, Eagle Merger Corp. or
EMC.
The Registrant anticipates recognizing a gain, from this transaction of
approximately $49 million during the first quarter of 2000.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS .
a) No financial statements are required to be filed in regard to this
transaction.
b) The Registrant is unable at this time to include with this Form 8-K, the
pro forma financial information required pursuant to Securities and
Exchange Act of 1934. The Registrant will file an amended Form 8-K within
sixty days of the due date of the Form 8-K in order to satisfy this
obligation.
c) The following exhibits are attached hereto:
i. Offer to Purchase dated December 23,1999
ii. Indemnification Agreement dated December 21,1999 by and among
EMC, Corporation, Eagle Merger Corp. and Computer Concepts
Corp.
iii. Indemnification Agreement dated December 21,1999 by and
between Softworks, Inc. and Computer Concepts Corp.
iv. Escrow Agreement dated December 21,1999, by and among EMC,
Corporation, Eagle Merger Corp., Computer Concepts Corp. and
State Street Bank and Trust Company, Inc as escrow agent.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
COMPUTER CONCEPTS CORP.
DATE: February 9, 2000 By: /s/ Daniel Del Giorno, Jr.
-------------------------
Daniel Del Giorno, Jr.
Chief Executive Officer
<PAGE> 4
EXHIBIT INDEX
exhibit number
- --------------
1. Offer to Purchase dated December 23,1999
2. Indemnification Agreement dated December 21,1999 by and among EMC,
Corporation, Eagle Merger Corp. and Computer Concepts Corp.
3. Indemnification Agreement dated December 21,1999 by and between
Softworks, Inc. and Computer Concepts Corp.
4. Escrow Agreement dated December 21,1999, by and among EMC,
Corporation, Eagle Merger Corp., Computer Concepts Corp. and State
Street Bank and Trust Company, Inc as escrow agent.
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SOFTWORKS, INC.
AT
$10.00 NET PER SHARE IN CASH
BY
EAGLE MERGER CORP.,
A WHOLLY OWNED SUBSIDIARY OF
EMC CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
TUESDAY, JANUARY 25, 2000, UNLESS THE OFFER IS EXTENDED. SHARES WHICH ARE
TENDERED PURSUANT TO THE OFFER MAY BE WITHDRAWN AT ANY TIME PRIOR TO THE
EXPIRATION DATE.
THE OFFER IS BEING MADE PURSUANT TO AN AGREEMENT AND PLAN OF MERGER, DATED
AS OF DECEMBER 21, 1999 (THE "MERGER AGREEMENT"), BY AND AMONG EMC CORPORATION
("PARENT"), EAGLE MERGER CORP. ("PURCHASER") AND SOFTWORKS, INC. (THE
"COMPANY"). THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE
OFFER, THE MERGER AGREEMENT AND THE MERGER AND HAS DETERMINED THAT THE TERMS OF
THE OFFER AND THE MERGER ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF,
THE COMPANY'S STOCKHOLDERS, AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY PARENT OR
PURCHASER, IF ANY, REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A
FULLY DILUTED BASIS ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT PURSUANT TO THE
OFFER. THE OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS OFFER
TO PURCHASE. SEE SECTION 14.
------------------------
IMPORTANT
Any stockholder who desires to tender all or any portion of such
stockholder's Shares (as defined herein) should either (i) complete and sign the
enclosed Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal, mail or deliver it and any other
required documents to the Depositary (as defined herein) and either deliver the
certificates for such Shares to the Depositary or tender such Shares pursuant to
the procedures for book-entry transfer set forth in Section 3 of this Offer to
Purchase or (ii) 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 to tender such Shares.
Any stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in Section
3 of this Offer to Purchase.
Questions and requests for assistance may be directed to the Information
Agent at the address and telephone numbers set forth on the back cover of this
Offer to Purchase. Requests for additional copies of this Offer to Purchase, the
Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent. A stockholder also may contact brokers,
dealers, commercial banks or trust companies for assistance concerning the
Offer.
------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. KING & CO., INC.
------------------------
THE DATE OF THIS OFFER TO PURCHASE IS DECEMBER 23, 1999.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
INTRODUCTION............................................................ 1
THE OFFER............................................................... 3
1. Terms of the Offer.......................................... 3
2. Acceptance for Payment and Payment.......................... 4
3. Procedure for Tendering Shares.............................. 5
4. Withdrawal Rights........................................... 8
5. Certain United States Federal Income Tax Consequences....... 8
6. Price Range of the Shares; Dividends on the Shares.......... 9
7. Effect of the Offer on the Market for the Shares; Stock
Listing; Exchange Act Registration; Margin Regulations...... 10
8. Certain Information Concerning the Company.................. 11
9. Certain Information Concerning Parent and Purchaser......... 12
10. Source and Amount of Funds.................................. 13
11. Background of the Offer; Purpose of the Offer and the
Merger; The Merger Agreement and Certain Other Agreements... 13
12. Plans for the Company; Other Matters........................ 25
13. Dividends and Distributions................................. 27
14. Conditions to the Offer..................................... 27
15. Certain Legal Matters....................................... 29
16. Fees and Expenses........................................... 31
17. Miscellaneous............................................... 31
Schedule I Information Concerning Directors and Executive Officers of
Purchaser and Parent........................................ I-1
</TABLE>
<PAGE> 3
To the Holders of Common Stock of
Softworks, Inc.:
INTRODUCTION
Eagle Merger Corp., a Delaware corporation ("Purchaser") and a wholly owned
subsidiary of EMC Corporation, a Massachusetts corporation ("Parent"), hereby
offers to purchase all outstanding shares of common stock, par value $0.001 per
share (the "Shares"), of Softworks, Inc., a Delaware corporation (the
"Company"), at a price of $10.00 per Share (the "Offer Price"), net to the
seller in cash, without interest, upon the terms and subject to the conditions
set forth in this Offer to Purchase and in the related Letter of Transmittal
(which, together with any amendments or supplements hereto or thereto,
collectively constitute the "Offer").
Tendering stockholders of record who tender Shares directly will not be
obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase
of Shares by Purchaser pursuant to the Offer. Stockholders who hold their Shares
through a bank or broker should check with such institution as to whether they
charge any service fees. Purchaser will not pay such service fees. Purchaser
will pay all fees and expenses of State Street Bank and Trust Company, as
Depositary (the "Depositary"), and D.F. King & Co., Inc., as Information Agent
(the "Information Agent"), incurred in connection with the Offer and in
accordance with the terms of the agreements entered into between Purchaser
and/or Parent and each such person. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT (AS DEFINED HEREIN) AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND HAS UNANIMOUSLY
DETERMINED THAT THE OFFER AND THE MERGER ARE ADVISABLE, FAIR TO, AND IN THE BEST
INTERESTS OF, THE COMPANY'S STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
SoundView Technology Group, Inc. has delivered to the Company Board its
opinion, dated as of December 20, 1999 (the "SoundView Opinion"), to the effect
that, as of such date and based upon and subject to certain assumptions and
matters stated therein, the Offer Price to be received by the holders of Shares
pursuant to the Offer and the Merger is fair, from a financial point of view, to
such holders. A copy of the SoundView Opinion, which sets forth the assumptions
made, the matters considered and the limitations on the review undertaken, is
attached as an exhibit to the Company's Solicitation/Recommendation Statement on
Schedule 14D-9 (the "Schedule 14D-9"), which has been filed by the Company with
the Securities and Exchange Commission (the "Commission") in connection with the
Offer and which is being mailed to holders of Shares herewith. Holders of Shares
are urged to read the SoundView Opinion carefully.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION
1) THAT NUMBER OF SHARES WHICH, WHEN ADDED TO THE SHARES BENEFICIALLY OWNED BY
PARENT OR PURCHASER (IF ANY), REPRESENTS A MAJORITY OF THE SHARES OUTSTANDING ON
A FULLY DILUTED BASIS ON THE DATE SHARES ARE ACCEPTED FOR PAYMENT (THE "MINIMUM
CONDITION"). THE OFFER IS ALSO SUBJECT TO THE OTHER CONDITIONS SET FORTH IN THIS
OFFER TO PURCHASE. SEE SECTION 14. As used in this Offer to Purchase, "fully
diluted basis" takes into account the exercise of all outstanding options. The
authorized capital stock of the Company consists of 50,000,000 Shares and
2,000,000 shares of preferred stock. The Company has represented and warranted
to Parent and Purchaser that, as of December 20, 1999, there were (i) 17,373,191
Shares issued and outstanding; (ii) no shares of preferred stock issued and
outstanding; and (iii) an aggregate of 6,064,825 Shares issuable pursuant to the
exercise of outstanding options (the "Company Options"). The Merger Agreement
provides, among other things, that the Company, without Parent's consent, will
not issue any new Shares except pursuant to the exercise of existing stock
options, or issue any options or rights of any kind to acquire shares of capital
stock of the Company. Based on the foregoing and assuming the issuance of
6,064,825 Shares issuable upon exercise of outstanding Options, Purchaser
believes that the Minimum Condition will be satisfied if 11,719,009 Shares are
validly tendered and not withdrawn prior to the Expiration Date.
<PAGE> 4
Parent and Purchaser have entered into a Stock Tender Agreement, dated as
of December 21, 1999 (the "Major Shareholder's Stock Tender Agreement") with
Computer Concepts Corp., a Delaware corporation (the "Major Shareholder"), which
owns 6,145,767 Shares (the "Major Shareholder's Covered Shares") and the
trustees of a Voting Trust Agreement, dated August 3, 1998 (the "Voting Trust
Agreement"), which gives the trustees certain rights with respect to the Major
Shareholder's Covered Shares. The Major Shareholder's Covered Shares represent
approximately 35.4% of the Company's outstanding Shares. Pursuant to the Major
Shareholder's Stock Tender Agreement, the Major Shareholder and the trustees
have agreed to tender the Major Shareholder's Covered Shares pursuant to the
Offer, to grant Parent an option to purchase such Shares under certain
circumstances, and to grant Purchaser an irrevocable proxy with respect to the
voting of such Shares. See Section 11.
Parent and Purchaser have also entered into a Stockholders' Stock Tender
Agreement, dated as of December 21, 1999 (the Individuals' Stock Tender
Agreement"), with eight persons (the "Individuals") who are stockholders of the
Company. The Individuals collectively own 1,182,000 Shares which are subject to
the Individual's Stock Tender Agreement (the "Individuals' Covered Shares"). The
Individuals' Covered Shares represent approximately 6.8% of the Company's
outstanding Shares. The terms of the Individuals' Stock Tender Agreement are
substantially the same as the terms of the Major Shareholder's Stock Tender
Agreement. See Section 11.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 21, 1999 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. Pursuant to the Merger Agreement and subject to the Delaware
General Corporation Law (the "DGCL"), as soon as practicable after the
completion of the Offer and satisfaction or waiver, if permissible, of all
conditions to the Merger, Purchaser will be merged with and into the Company and
the separate corporate existence of Purchaser will thereupon cease. The merger,
as effected pursuant to the immediately preceding sentence, is referred to as
the "Merger," and the Company, as the surviving corporation of the Merger, is
sometimes referred to as the "Surviving Corporation." At the effective time of
the Merger (the "Effective Time"), each Share then outstanding (other than
Shares held by Parent or Purchaser and Shares held by stockholders who properly
perfect their dissenters' rights under the DGCL) will be cancelled and
extinguished and converted into the right to receive $10.00 in cash or any
higher price per Share paid in the Offer (the "Merger Consideration"), without
interest. The Merger Agreement is more fully described in Section 11.
The Merger Agreement provides that, upon the purchase of Shares pursuant to
the Offer and from time to time thereafter, Parent will be entitled to designate
such number of directors, rounded down to the next whole number, on the Company
Board as is equal to the product of the total number of directors on the Company
Board (including the directors designated by Parent) multiplied by a fraction,
the numerator being equal to the number of Shares beneficially owned by Parent
and its subsidiaries and the denominator being equal to the total number of
Shares then outstanding. The Company will use its reasonable best efforts to
cause such persons designated by Parent to be appointed or elected to the
Company Board and to secure resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be so elected or
appointed.
Consummation of the Merger is conditioned upon, among other things, the
approval and adoption by the requisite vote of stockholders of the Company of
the Merger Agreement, if required by applicable law. See Section 11. Under the
DGCL and pursuant to the Company's Certificate of Incorporation, the affirmative
vote of the holders of a majority of the outstanding Shares is the only vote of
any class or series of the Company's capital stock that would be necessary to
approve the Merger Agreement at a meeting of the Company's stockholders. If
Purchaser purchases a majority of the outstanding Shares in the Offer (which
will be the case if the Minimum Condition is satisfied and the other conditions
to the Offer are satisfied or waived), Purchaser will be able to effect the
Merger without the affirmative vote of any other stockholder. Pursuant to the
Merger Agreement, Parent and Purchaser have agreed to vote the Shares acquired
by them pursuant to the Offer in favor of the Merger. See Section 12.
2
<PAGE> 5
Under Section 253 of the DGCL, if a corporation owns at least 90% of the
outstanding shares of each class of a subsidiary corporation, the corporation
holding such stock may merge such subsidiary into itself, or itself into such
subsidiary, without any action or vote on the part of the board of directors or
the stockholders of such other corporation (a "Short-Form Merger"). In the event
that Purchaser acquires in the aggregate at least 90% of the outstanding Shares
pursuant to the Offer or otherwise, then, at the election of Parent, a Short-
Form Merger could be effected without any further approval of the Company Board
or the stockholders of the Company.
Even if Purchaser does not own at least 90% of the outstanding Shares
following consummation of the Offer, Parent or Purchaser could (a) immediately
prior to the expiration date of the Offer, extend the Offer for a period not to
exceed ten business days, or (b) if Parent and its subsidiaries own at least a
majority of the Shares, exercise an option granted under the Merger Agreement to
purchase from the Company such number of Shares (up to a maximum of 19.9% of the
number of Shares outstanding) as will result in Purchaser owning 90.1% of the
total number of Shares. Parent presently intends to effect a Short-Form Merger,
if permitted to do so under the DGCL, pursuant to which Purchaser will be merged
with and into the Company. See Section 11.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
THE OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such extension
or amendment), Purchaser will accept for payment and pay for all Shares validly
tendered prior to the Expiration Date and not properly withdrawn in accordance
with Section 4 of this Offer to Purchase. The term "Expiration Date" shall mean
5:00 p.m., New York City time, on Tuesday, January 25, 2000, unless and until
Purchaser, in accordance with the terms of the Merger Agreement, shall have
extended the period of time for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as so
extended by Purchaser, shall expire.
The Offer is conditioned upon the satisfaction of the Minimum Condition and
the other conditions set forth in Section 14. If such conditions are not
satisfied prior to the Expiration Date, Purchaser reserves the right, subject to
the terms of the Merger Agreement and subject to the applicable rules and
regulations of the Commission, to (i) decline to purchase any Shares tendered in
the Offer and terminate the Offer and return all tendered Shares to the
tendering stockholders, (ii) waive any or all conditions to the Offer and, to
the extent permitted by applicable law, purchase all Shares validly tendered and
not withdrawn, (iii) subject to the conditions summarized below, extend the
Offer and, subject to the right of stockholders to withdraw Shares until the
Expiration Date, retain all Shares which have been validly tendered and not
withdrawn during the period or periods for which the Offer is extended or (iv)
subject to the following sentence, modify the terms of the Offer. The Merger
Agreement provides that Purchaser will not reduce the Offer Price, change the
form of consideration to be paid in the Offer, reduce the number of Shares
subject to the Offer, amend any other condition to the Offer in any manner
adverse to the holders of the Shares or impose additional conditions to the
Offer without the written consent of the Company or, except as described below,
extend the Expiration Date of the Offer.
If on the initial scheduled Expiration Date of the Offer, which shall be no
earlier than twenty business days after the date the Offer is commenced, all
conditions to the Offer have not been satisfied or waived, Purchaser may, from
time to time, in its sole discretion, extend the expiration date of the Offer.
In addition, Purchaser may increase the amount it offers to pay per Share in the
Offer (but is not obligated to do so), and the Offer may be extended to the
extent required by law in connection with such increase, in each case without
the consent of the Company. If, immediately prior to the Expiration Date of the
Offer (as it may be extended), the Shares tendered and not withdrawn pursuant to
the Offer constitute less than 90% of the
3
<PAGE> 6
outstanding Shares, Purchaser may extend the Offer for a period not to exceed
ten business days, notwithstanding that all conditions to the Offer are
satisfied as of such Expiration Date of the Offer.
Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement thereof, the announcement in the
case of an extension to be issued no later than 9:00 a.m., New York City time,
on the next business day after the previously scheduled Expiration Date in
accordance with the public announcement requirements of Rules 14d-4(c), 14d-6(d)
and 14e-1(d) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). As used in this Offer to Purchase, "business day" has the
meaning set forth in Rule 14d-1 under the Exchange Act. Without limiting the
obligation of Purchaser under such Rule or the manner in which Purchaser may
choose to make any public announcement, Purchaser currently intends to make
announcements by issuing a press release to the Dow Jones News Service.
If Purchaser extends the Offer, or if Purchaser (whether before or after
its acceptance for payment of Shares) is delayed in its purchase of, or payment
for, Shares or is unable to pay for Shares pursuant to the Offer for any reason,
then, without prejudice to Purchaser's rights under the Offer, the Depositary
may retain tendered Shares on behalf of Purchaser, and such Shares may not be
withdrawn except to the extent tendering stockholders are entitled to withdrawal
rights as described in Section 4. However, the ability of Purchaser to delay the
payment for Shares that Purchaser has accepted for payment is limited by Rule
14e-l(c) under the Exchange Act, which requires that a bidder pay the
consideration offered or return the securities deposited by, or on behalf of,
holders of securities promptly after the termination or withdrawal of the Offer.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances then existing, including
the relative materiality of the changed terms or information. In a public
release, the Commission has stated that in its view an offer must remain open
for a minimum period of time following a material change in the terms of the
Offer and that waiver of a material condition, such as the Minimum Condition, is
a material change in the terms of the Offer. The release states that an offer
should remain open for a minimum of five business days from the date a material
change is first published, sent or given to security holders and that, if
material changes are made with respect to information not materially less
significant than the offer price and the number of shares being sought, a
minimum of ten business days may be required to allow adequate dissemination and
investor response. The requirement to extend the Offer will not apply to the
extent that the number of business days remaining between the occurrence of the
change and the then-scheduled Expiration Date equals or exceeds the minimum
extension period that would be required because of such amendment. If, prior to
the Expiration Date, Purchaser increases the consideration offered to holders of
Shares pursuant to the Offer, such increased consideration will be paid to all
holders whose Shares are purchased in the Offer whether or not such Shares were
tendered prior to such increase.
The Company has provided Purchaser with the Company's stockholder lists 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 by Purchaser to record holders of Shares and will be furnished by
Purchaser to brokers, dealers, banks and similar persons whose names, or the
names of whose nominees, appear on the stockholder lists or, if applicable, who
are listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Upon the terms and subject to the conditions to 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, promptly after
the Expiration Date, for all Shares validly tendered prior to the Expiration
Date and not properly withdrawn in accordance with Section 4.
4
<PAGE> 7
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 for
such Shares (or a timely Book-Entry Confirmation (as defined below) with respect
thereto), (ii) a Letter of Transmittal (or 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 Section 3
below), and (iii) any other documents required by the Letter of Transmittal. The
per Share consideration paid to any holder of Shares pursuant to the Offer will
be the highest per Share consideration paid to any other holder of such Shares
pursuant to the Offer.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to Purchaser and not
withdrawn, if and when Purchaser gives oral or written notice to the Depositary
of Purchaser's acceptance for payment of such Shares. Payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the Offer
Price therefor with the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to tendering stockholders.
UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE OFFER PRICE TO BE PAID
BY PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY
DELAY IN MAKING SUCH PAYMENT.
Purchaser reserves the right, in its sole discretion, to delay acceptance
for payment of, or payment for, Shares in order to comply with any applicable
law. If Purchaser is delayed in its acceptance for payment of, or payment for,
Shares or is unable to accept for payment, or pay for, Shares pursuant to the
Offer for any reason, then, without prejudice to Purchaser's rights under the
Offer (including such rights as are set forth in Sections 1 and 14, but subject
to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent tendering stockholders are entitled to
exercise, and duly exercise, withdrawal rights as described in Section 4.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted representing more Shares than are
tendered, certificates evidencing Shares not tendered or not accepted for
purchase will be returned to the tendering stockholder, or such other person as
the tendering stockholder shall specify in the Letter of Transmittal, as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. In the case of Shares delivered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility (as defined below)
pursuant to the procedures set forth in Section 3, such shares will be credited
to such account maintained at the Book-Entry Transfer Facility as the tendering
stockholder shall specify in the Letter of Transmittal, as promptly as
practicable following the expiration, termination or withdrawal of the Offer. If
no such instructions are given with respect to Shares delivered by book-entry
transfer, any such shares not tendered or not purchased will be returned by
crediting the account at the Book-Entry Transfer Facility designated in the
Letter of Transmittal as the account from which such Shares were delivered.
Purchaser reserves the right to transfer or assign, in whole or in part, to
Parent or to any direct or indirect wholly owned subsidiary of Parent, the right
to purchase 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.
3. PROCEDURE FOR TENDERING SHARES.
Valid Tender. For Shares to be validly tendered pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent's Message (as defined below), and any
other required documents, must 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, and either certificates for tendered Shares must be received by
the Depositary at one of such addresses or such Shares must be delivered
pursuant to the procedures for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined below)
5
<PAGE> 8
received by the Depositary), in each case prior to the Expiration Date or (ii)
the tendering stockholder must comply with the guaranteed delivery procedures
set forth below.
Book-Entry Transfer. The Depositary will establish accounts with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
Book-Entry Transfer Facility's system may make book-entry delivery of Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the Book-Entry Transfer Facility's
procedure for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required signature guarantees, or
an Agent's Message, and any other required documents must be transmitted to, and
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 procedures described below.
The confirmation of a book-entry transfer of Shares into the Depositary's
account at the Book-Entry Transfer Facility as described above is referred to
herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that 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 Purchaser
may enforce such agreement against the participant.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY,
IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED
DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE
OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). 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.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section, includes any participant in
the Book Entry Transfer Facility's 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 (ii) if such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) which is a participant in good standing in
the Security Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution" and, collectively, "Eligible Institutions"). In
all other cases, all signatures on Letters of Transmittal must be guaranteed by
an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal.
If the certificates for Shares 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
certificates for Shares not tendered or not accepted for payment are to be
returned, to a person other than the registered holder of the certificates
surrendered, then the tendered certificates for such Shares must be endorsed or
accompanied by appropriate stock powers, signed exactly as the name or names of
the registered holders or owners appear on the certificates, with the signatures
on the certificates or stock powers guaranteed as aforesaid. See Instruction 5
to the Letter of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's certificates for Shares are not immediately
available or the procedures for book-entry transfer
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<PAGE> 9
cannot be completed on a timely basis or time will not permit all required
documents to reach the Depositary prior to the Expiration Date, such
stockholder's tender may be effected if all the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary, as provided below, prior to the Expiration Date; and
(iii) the certificates for (or a Book-Entry Confirmation with respect
to) such Shares, together with a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or, in the case of a book-entry transfer, an Agent's Message,
and any other required documents, are received by the Depositary within
three trading days after the date of execution of such Notice of Guaranteed
Delivery. A "trading day" is any day on which the Nasdaq National Market,
operated by the National Association of Securities Dealers, Inc. (the
"NASD"), is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the
Depositary or transmitted by telegram, facsimile transmission or mail to the
Depositary and must include a guarantee by an Eligible Institution in the form
set forth in such Notice of Guaranteed Delivery.
Upon the acceptance of Shares for payment pursuant to the Offer, the valid
tender of Shares pursuant to one 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.
Appointment. By executing the Letter of Transmittal as set forth above
(including delivery through an Agent's Message), the tendering stockholder will
irrevocably appoint designees of Purchaser as such stockholder's
attorneys-in-fact and proxies, in the manner set forth in the Letter of
Transmittal, each with full power of substitution, 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 or rights issued or issuable in respect of such Shares on or
after December 21, 1999. All such powers of attorney and proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective if, as and when, and only to the extent that, Purchaser
accepts for payment Shares tendered by such stockholder as provided herein. Upon
such appointment, all prior powers of attorney, proxies and consents given by
such stockholder with respect to such Shares or other securities or rights will,
without further action, be revoked and no subsequent powers of attorney,
proxies, consents or revocations may be given by such stockholder and, if given,
will not be deemed effective. The designees of Purchaser will thereby be
empowered to exercise all voting and other rights with respect to such Shares
and other securities or rights, including, without limitation, in respect of any
annual, special or adjourned meeting of the Company's stockholders, actions by
written consent in lieu of any such meeting or otherwise, as they in their sole
discretion deem proper. Purchaser reserves the right to require that, in order
for Shares to be deemed validly tendered, immediately upon Purchaser's
acceptance for payment of such Shares, Purchaser must be able to exercise full
voting, consent and other rights with respect to such Shares and other related
securities or rights, including voting at any meeting of stockholders.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by Purchaser, in its sole discretion, which determination
will be final and binding. Purchaser reserves the absolute right to reject any
or all tenders of any Shares determined by it not to be in proper form or the
acceptance for payment of which, or payment for which, may, in the opinion of
Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right, in
its sole discretion, subject to the provisions of the Merger Agreement, to waive
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 or irregularities relating thereto have been
cured or waived. None of Purchaser, Parent, 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. Subject to the terms of
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<PAGE> 10
the Merger Agreement, 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.
Backup Withholding. Under the "backup withholding" provisions of United
States federal income tax law, the Depositary may be required to withhold 31% of
the amount of any payments of cash pursuant to the Offer. In order 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 ("TIN") and certify that such stockholder
is not subject to backup withholding by completing the Substitute Form W-9 in
the Letter of Transmittal. Certain stockholders (including, among others, all
corporations and certain foreign individuals and entities) are not subject to
backup withholding. If a stockholder does not provide its correct TIN or fails
to provide the certifications described above, the Internal Revenue Service may
impose a penalty on the stockholder and payment of cash to the stockholder
pursuant to the Offer may be subject to backup withholding. All stockholders
surrendering Shares pursuant to the Offer should complete and sign the
Substitute Form W-9 included in the Letter of Transmittal to provide the
information necessary to avoid backup withholding (unless an applicable
exemption exists and is proved in a manner satisfactory to the Depositary).
Non-corporate foreign stockholders should complete and sign a Form W-8,
Certificate of Foreign Status (a copy of which may be obtained from the
Depositary), in order to avoid backup withholding. See Instruction 10 of the
Letter of Transmittal.
4. WITHDRAWAL RIGHTS.
Except as otherwise provided in this Section 4, or as provided by
applicable law, tenders of Shares are irrevocable. Shares tendered pursuant to
the Offer may be withdrawn pursuant to the procedures set forth below at any
time prior to the Expiration Date and, unless theretofore accepted for payment
and paid for by Purchaser pursuant to the Offer, may also be withdrawn at any
time after February 21, 2000.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
must specify the name of the person having tendered the Shares to be withdrawn,
the number of Shares to be withdrawn and the name of the registered holder of
the Shares to be withdrawn, if different from the name of the person who
tendered the Shares. If certificates for Shares have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary, and unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedures
for book-entry transfer as set forth in Section 3, any notice of withdrawal must
also specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with the withdrawn Shares and otherwise comply with such
Book-Entry Transfer Facility's procedures.
Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be retendered by again following one
of the procedures described in Section 3 any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding. None of Purchaser, Parent, 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.
5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of certain United States federal income tax
consequences of the Offer and the Merger to stockholders of the Company whose
Shares are tendered and accepted for payment pursuant to the Offer or whose
Shares are converted into cash in the Merger. The discussion is for general
information
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only and does not purport to consider all aspects of United States federal
income taxation that might be relevant to stockholders of the Company. The
discussion is based on current provisions of the Internal Revenue Code of 1986,
as amended (the "Code"), existing, proposed and temporary regulations
promulgated thereunder and administrative and judicial interpretations thereof,
all of which are subject to change, possibly with a retroactive effect. The
discussion applies only to stockholders of the Company in whose hands Shares are
capital assets within the meaning of Section 1221 of the Code and may not apply
to Shares received pursuant to the exercise of employee stock options or
otherwise as compensation, or to certain types of stockholders (such as
insurance companies, tax-exempt organizations, financial institutions and
broker-dealers) who may be subject to special rules. This discussion does not
discuss the United States federal income tax consequences to any stockholder of
the Company who, for United States federal income tax purposes, is a
non-resident alien individual, a foreign corporation, a foreign partnership or a
foreign estate or trust, nor does it consider the effect of any foreign, state
or local tax laws.
BECAUSE INDIVIDUAL CIRCUMSTANCES MAY DIFFER, EACH STOCKHOLDER SHOULD
CONSULT SUCH STOCKHOLDER'S TAX ADVISOR TO DETERMINE THE APPLICABILITY OF THE
RULES DISCUSSED BELOW TO SUCH STOCKHOLDER AND THE PARTICULAR TAX EFFECTS TO SUCH
BENEFICIAL HOLDER OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND
EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for United States federal income tax purposes and possibly
for state and local income tax purposes as well. In general, a stockholder who
sells Shares pursuant to the Offer or receives cash in exchange for Shares
pursuant to the Merger will recognize gain or loss for United States federal
income tax purposes equal to the difference, if any, between the amount of cash
received and the stockholder's adjusted tax basis in the Shares sold pursuant to
the Offer or surrendered for cash pursuant to the Merger. Gain or loss will be
determined separately for each block of Shares (i.e., Shares acquired at the
same cost in a single transaction) tendered pursuant to the Offer or surrendered
for cash pursuant to the Merger. Such gain or loss will be long-term capital
gain or loss provided that a stockholder's holding period for such Shares is
more than one year at the time of consummation of the Offer or Merger, as the
case may be. Capital gains recognized by an individual (or an estate or certain
trusts) upon a disposition of a Share that has been held for more than one year
generally will be subject to a maximum United States federal income tax rate of
20% or, in the case of a Share that has been held for one year or less, will be
subject to tax at ordinary income rates. Certain limitations apply to the tax
treatment of a stockholder's capital losses.
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES.
The Shares are traded through the Nasdaq National Market under the symbol
SWRX. The following table sets forth, for each of the fiscal quarters indicated,
the high and low reported sales price per Share on the Nasdaq National Market.
SOFTWORKS, INC.
<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
Year Ended December 31, 1998
Third Quarter (commencing August 7, 1998)................... $ 6.94 $3.13
Fourth Quarter............................................ 7.44 3.50
Year Ending December 31, 1999
First Quarter............................................. 14.88 5.38
Second Quarter............................................ 16.88 9.06
Third Quarter............................................. 13.69 4.50
Fourth Quarter (through December 20, 1999)................ 9.88 3.03
</TABLE>
On December 20, 1999, the last full trading day prior to the public
announcement of the execution of the Merger Agreement by the Company, Parent and
Purchaser, the last reported sales price of the Shares on the Nasdaq National
Market was $9.31 per Share. On December 22, 1999, the last full trading day
prior to
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<PAGE> 12
the commencement of the Offer, the last reported sales price of the Shares on
the Nasdaq National Market was $9.53 per Share. STOCKHOLDERS ARE URGED TO OBTAIN
A CURRENT MARKET QUOTATION FOR THE SHARES.
The Company did not declare or pay any cash dividends during any of the
periods indicated in the above table. Under the terms of the Merger Agreement,
the Company is not permitted to declare, set aside or pay dividends with respect
to the Shares without the prior written consent of Parent.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE ACT
REGISTRATION; MARGIN REGULATIONS.
Market for the Shares. 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, depending upon the number of
Shares so purchased, could adversely affect the liquidity and market value of
the remaining Shares held by the public. Purchaser cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly would have
an adverse or beneficial effect on the market price for, or marketability of,
the Shares or whether it would cause future market prices to be greater or
lesser than the Offer Price.
Nasdaq Quotation. Depending upon the number of Shares purchased pursuant
to the Offer, the Shares may no longer meet the requirements for continued
inclusion in the Nasdaq National Market, which requires that there be at least
750,000 shares publicly held by at least 400 round lot holders, with a market
value of at least $5,000,000. Shares held directly or indirectly by directors,
officers or beneficial owners of more than 10% of the Shares are not considered
as being publicly held for this purpose. If the Nasdaq National Market were to
cease to publish quotations for the Shares, it is possible that the Shares would
continue to trade in the over-the-counter market and that prices or other
quotations would be reported by other sources. The extent of the public market
for such Shares and the availability of such quotations would depend upon such
factors as the number of stockholders and/or the aggregate market value of such
securities remaining at such time, the interest in maintaining a market in the
Shares on the part of securities firms, the possible termination of registration
under the Exchange Act (as described below) and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more holders
of record. Termination of registration of the Shares under the Exchange Act,
assuming there are no other securities of the Company subject to registration,
would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act, such as the short-swing profit recovery
provisions of Section 16(b), the requirement of furnishing a proxy statement
pursuant to Section 14(a) in connection with stockholders' meetings and the
related requirement of furnishing an annual report to stockholders, and the
requirements of Rule 13e-3 under the Exchange Act with respect to "going
private" transactions, no longer applicable to the Company. Furthermore, the
ability of "affiliates" of the Company and persons holding "restricted
securities" of the Company to dispose of such securities pursuant to Rule 144 or
Rule 144A promulgated under the Securities Act of 1933, as amended (the
"Securities Act"), may be impaired or eliminated.
Purchaser may seek delisting of the Shares from the Nasdaq National Market
and the termination of the registration of the Shares under the Exchange Act as
soon after the completion of the Offer as the requirements for such delisting
and termination are met. If the Nasdaq National Market listing and the Exchange
Act registration of the Shares are not terminated prior to the Merger, then the
Shares will be delisted from the Nasdaq National Market and the registration of
the Shares under the Exchange Act will be terminated following the consummation
of the Merger.
Margin Regulations. The Shares presently are "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which status has the effect, among other things, of
allowing brokers to extend credit on the collateral of such securities.
Depending upon factors similar to those described above regarding stock exchange
listing and market quotations, it is possible that, following the Offer, the
Shares would no longer constitute "margin securities" for the purposes of the
margin
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regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers. In addition, if registration of the
Shares under the Exchange Act were terminated, the Shares would no longer
constitute "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY.
General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by Company or has been taken from or based upon
publicly available documents and records on file with the Commission and other
public sources. Neither Parent nor Purchaser assumes responsibility for the
accuracy or completeness of the information concerning Company contained in such
documents and records or for any failure by Company to disclose events which may
have occurred or may affect the significance or accuracy of any such information
but which are unknown to Parent or Purchaser.
The Company develops, markets, licenses and supports a family of enterprise
systems management and maintenance software products for performance, data and
storage management. Its products are designed to optimize system and application
performance, maximize the value of purchased hardware and software, and enhance
the reliability and availability of the data processing environment for
enterprises that employ enterprise servers, UNIX and/or Microsoft (R) Windows NT
(R) computing environments. The Company is a Delaware corporation with its
principal executive office at 5845 Richmond Highway, Suite 400, Alexandria,
Virginia 22303. The telephone number of the Company at that address is (703)
317-2424.
Selected Financial Information. Set forth below is certain selected
consolidated financial information with respect to the Company, derived from the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
and its Quarterly Report on Form 10-Q for the nine month period ended September
30, 1999, each as filed with the Commission pursuant to the Exchange Act.
More comprehensive financial information is included in the reports and in
other documents filed by the Company with the Commission. The following summary
is qualified in its entirety by reference to such reports and all of the
financial information (including any related notes) contained therein. Such
reports may be inspected and copies may be obtained from the Commission in the
manner set forth below.
SOFTWORKS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
----------------------------- ---------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997
------------- ------------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues...................................... $36,777 $26,897 $43,749 $26,770
Gross Margin................................ 34,529 24,183 39,499 25,135
Net Income (loss)........................... 946 (243) 2,957 786
Net Income (loss) per share................. .06 (.02) .20 .06
BALANCE SHEET DATA:
Cash and Cash Equivalents................... $13,613 $ 6,704 $ 6,003 $ 360
Current Assets.............................. 43,977 27,621 38,380 18,282
Total Assets................................ 67,881 45,995 58,352 35,683
Long Term Debt, net of current portion...... 1,479 1,575 1,401 1,294
Total Stockholders' Equity.................. 28,266 15,476 18,685 6,087
</TABLE>
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act and, in accordance therewith, is
obligated to file reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Information as
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<PAGE> 14
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 interests 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 of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
information should be obtainable by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a website at
http://www.sec.gov that contains reports, proxy statements and other information
relating to the Company that have been filed via the EDGAR System.
9. CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER.
Parent and Purchaser. Parent is a Massachusetts corporation whose
principal executive offices are located at 35 Parkwood Drive, Hopkinton,
Massachusetts 01748. Its telephone number at that location is (508) 435-1000.
Its principal business is the design, manufacture, marketing and support of a
wide range of hardware, software and service products for the enterprise storage
market.
Purchaser is a newly organized Delaware corporation formed 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. All of the outstanding capital
stock of Purchaser is owned by Parent. Until immediately prior to the time
Purchaser acquires 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. Its principal office is
located at 35 Parkwood Drive, Hopkinton, Massachusetts. Purchaser's telephone
number is (508) 435-1000.
For certain information concerning executive officers and directors of
Parent and Purchaser, see Schedule I.
Except as set forth in this Offer to Purchase, neither Purchaser nor Parent
(collectively, the "Acquirors") nor, to the best knowledge of the Acquirors, any
of the persons or entities listed on Schedule I, nor any associate or
majority-owned subsidiary of any of the foregoing, beneficially owns or has a
right to acquire any Shares, and no Acquiror nor, to the best of knowledge of
the Acquirors, any of the persons or entities listed on Schedule I, has effected
any transaction in the Shares during the past sixty days.
Except as set forth in this Offer to Purchase, no Acquiror nor, to the best
knowledge of Acquirors, any of the persons or entities listed on Schedule I, 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 the voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss, or
the giving or withholding of proxies.
Except as set forth in Section 11, no Acquiror or any of their respective
subsidiaries, nor, to the best knowledge of the Acquirors, any of the persons or
entities listed on Schedule I, has had, since January 1, 1996, any business
relationships or transactions with the Company or any of its executive officers,
directors or affiliates that would be required to be reported under the rules of
the Commission. Except as set forth in Section 11, since January 1, 1996 there
have been no contacts, negotiations or transactions between any Acquiror, any of
their respective subsidiaries or, to the best knowledge of the Acquirors, any of
the persons or entities listed on Schedule I, and the Company or its affiliates
concerning a merger, consolidation or acquisition, tender offer or other
acquisition of securities, election of directors or a sale or other transfer of
a material amount of assets.
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10. SOURCE AND AMOUNT OF FUNDS.
The Offer is not conditioned upon any financing arrangements. The total
amount of funds required by Purchaser to purchase all of the Shares is estimated
to be approximately $191,310,000 million. Purchaser will obtain all such funds
from Parent in the form of capital contributions and/or loans. Parent will
provide such funds through available cash on hand.
11. BACKGROUND OF THE OFFER; PURPOSE OF THE OFFER AND THE MERGER; THE MERGER
AGREEMENT AND CERTAIN OTHER AGREEMENTS.
Background of the Offer.
In November 1998, Parent began an evaluation of the Company as a potential
acquisition candidate. This evaluation followed an introductory meeting in
October 1998 at which Parent and the Company exchanged high level information on
the respective strategies and products of the two companies.
The companies signed a confidentiality agreement on November 1, 1998. In
November, Michael Cody and Thomas Joyce of the EMC New Business Development
Group met with Judy Carter, President and Chief Executive Officer of the
Company, to discuss Parent's interest in evaluating a potential acquisition.
Parent's primary interest in the Company involved the Company's CenterStage
Storage Resource Management software product. Following this meeting,
representatives of Parent's Engineering and Product Management groups met with
representatives of the Company's technology organization to evaluate the
Company's products and technologies. This meeting resulted in sufficient
interest on the part of both Parent and the Company to proceed to a series of
preliminary business discussions during December 1998 and January 1999 while
Parent's internal technical evaluation proceeded. These discussions stalled,
however, when Parent requested additional detailed technical and architectural
information in order to ensure that the Company's products met Parent's
requirements and could ultimately be integrated with certain of Parent's
products. The Company was averse to disclosing to Parent certain proprietary
information regarding its software architecture, and did not wish to provide
direct access to its key software designers. Attempts to resolve this impasse
continued through March 1999. However, the parties were not successful in
resolving this matter, and discussions regarding an acquisition were
discontinued.
In October 1999, Parent decided to attempt to renew discussions with the
Company about a possible acquisition. A telephone conversation between Michael
Ruettgers, President and Chief Executive Officer of Parent and James Cannavino,
Chairman of the Company, led to a meeting on November 4, 1999. The meeting was
held in Waltham, Massachusetts at the office of Broadview International LLC, a
financial advisor to Parent ("Broadview"). Attending the meeting were Mr. James
Cannavino, Chairman of the Company; Joseph Markus, a consultant to the Company;
several representatives from Broadview including Steve Smith, Senior Managing
Director and Mark Whitcher, Senior Associate; and the following persons from
Parent: David Donatelli, Vice President, New Business Development; John Hartjen,
Manager, New Business Development; Michael Cody, Vice President, Corporate
Development; and Thomas Joyce, Senior Product Marketing Specialist, New Business
Development. The meeting involved a general discussion of Parent's interest in
the possibility of acquiring all of the outstanding common stock of the Company
and a discussion of the Company's business. At the conclusion of the meeting, it
was agreed that the type of information Parent unsuccessfully sought earlier in
the year would be provided, and the parties agreed to proceed with detailed
technical discussions relating to the products and capabilities of the Company.
On November 17, 1999, employees of Parent met with employees of the Company
at its headquarters in Alexandria, Virginia for an in-depth technical review of
the Company's products and technologies. The following day there was a meeting
between representatives of Parent and the Company to discuss Parent's due
diligence information requirements. On November 19, 1999, the Company's Board
was updated as to the status of the meetings with Parent.
On November 24, 1999, Messrs. Cody and Joyce called Judy Carter and
notified her that based on the status of Parent's technical review, it planned
to communicate to the Company its interest in pursuing more detailed discussions
concerning an acquisition of the Company.
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On November 29, 1999, Parent outlined to the Company its potential interest
in acquiring all of the outstanding common stock of the Company at a price in
the range of $8 to $11 per share subject, among other things, to the completion
of due diligence and negotiation of an acceptable acquisition agreement.
During the period from December 1 through December 20, 1999, business,
financial and legal due diligence activities with respect to the Company were
conducted by representatives of Parent. From December 14 through December 20,
1999, representatives of management of Parent and the Company, along with their
respective legal and financial advisors, held meetings and telephone conferences
to discuss and negotiate the terms of the Merger Agreement and the related
agreements.
On December 17, 1999, the Mergers & Acquisitions Committee of the Board of
Directors of Parent held a meeting to consider the transaction. Mr. Donatelli
reviewed the business of the Company and details of the proposed transaction.
Mr. Donatelli was authorized to complete due diligence and to complete
negotiation of appropriate transaction documents.
On December 19 and 20, 1999, the Board of Directors of the Company held
special meetings to consider the proposed transaction. At the meetings, the
Company's management and representatives of its legal advisors, Blau, Kramer,
Wactlar & Lieberman, P.C., discussed the proposed offer by Parent for all of the
outstanding stock of the Company and the Merger Agreement and outlined the
directors' legal duties and responsibilities. At the meeting on December 20,
1999, representatives of SoundView Technology Group presented a summary of its
analyses of the financial aspects of the proposed transaction, including an
analysis of the fairness of the Offer Price, from a financial point of view, to
the stockholders of the Company. At the conclusion of the meeting, the Company
Board unanimously approved the Merger Agreement and determined that the Offer
and the Merger are advisable, fair to, and in the best interests of the
Company's stockholders. They voted unanimously to recommend to the Company's
stockholders that they accept the Offer and tender their shares pursuant to the
Offer.
On December 20, 1999, the Board of Directors of Parent, at a special
meeting, discussed the proposed transaction. Following a review of the business
of the Company and the terms of the proposed Merger Agreement and the Offer to
Purchase the Board of Directors unanimously approved the transaction and
directed management to finalize the Merger Agreement.
Definitive agreements dated as of December 21, 1999, were executed, and on
December 21, 1999, EMC issued a press release announcing its offer to purchase
all of the outstanding shares of the Company for a price of $10.00 per share.
The Offer was commenced on December 23, 1999.
Purpose of the Offer and the Merger. The purpose of the Offer and the
Merger is to enable Parent to acquire control of, and the entire equity interest
in, the Company. The Offer is being made pursuant to the Merger Agreement and is
intended to increase the likelihood that the Merger will be effected. The
purpose of the Merger is to acquire all of the outstanding Shares not purchased
pursuant to the Offer. The transaction is structured as a merger in order to
ensure the acquisition by Parent of all the outstanding Shares.
If the Merger is consummated, Parent's common equity interest in the
Company would increase to 100% and Parent would be entitled to all benefits
resulting from that interest. These benefits include complete management and
control with regard to the future conduct of the Company's business and the
right to any increase in its value. Similarly, Parent will also bear the risk of
any losses incurred in the operation of the Company and any decrease in the
value of the Company.
Stockholders of the Company who sell their Shares in the Offer will cease
to have any equity interest in the Company and any right to participate in its
earnings and any future growth. If the Merger is consummated, non-tendering
stockholders will no longer have an equity interest in the Company and instead
will have only the right to receive the Merger Consideration pursuant to the
Merger Agreement. See Section 12. Similarly, after selling their Shares in the
Offer or the subsequent Merger, stockholders of the Company will not bear the
risk of any decrease in the value of the Company.
The primary benefits of the Offer and the Merger to the stockholders of the
Company are that such stockholders are being afforded an opportunity to sell all
of their Shares for cash at a price which represents a
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premium of approximately 7.4% over the closing market price of the Shares on
December 20, 1999, the last full trading day prior to the initial public
announcement that the Company, Purchaser and Parent executed the Merger
Agreement.
The following is a summary of certain provisions of various agreements.
This summary is not a complete description of the terms and conditions of these
agreements and is qualified in its entirety by reference to the full text of
these agreements filed with the Commission as exhibits to the Schedule 14D-1 and
they are incorporated herein by reference. Capitalized terms used but not
otherwise defined herein shall have the meanings set forth in the Merger
Agreement. These agreements may be examined, and copies obtained, as set forth
in Section 8 of this Offer to Purchase.
MERGER AGREEMENT.
The Offer. The Merger Agreement provides for the making of the Offer as
provided in this Offer to Purchase.
The Company Board. The Merger Agreement provides that, upon the purchase
of Shares pursuant to the Offer and from time to time thereafter, Parent will be
entitled to designate such number of directors, rounded down to the next whole
number, on the Company Board as is equal to the product of the total number of
directors on the Company Board (including the directors designated by Parent)
multiplied by a fraction, the numerator being equal to the number of Shares
beneficially owned by Parent and its subsidiaries and the denominator being the
total number of Shares then outstanding. The Company will use its reasonable
best efforts to cause such persons designated by Parent to be appointed or
elected to the Company Board and to secure resignations of such number of its
incumbent directors as is necessary to enable Parent's designees to be so
elected or appointed.
The Merger Agreement also provides that in the event that Parent's
designees are elected or appointed to the Company Board, until the Effective
Time, the Company Board shall have at least two directors who were directors of
the Company as of the date of the Merger Agreement and who are not affiliates of
Parent and Purchaser ("Independent Directors"), provided that if the number of
Independent Directors shall be reduced below two for any reason whatsoever, the
remaining Independent Director, if any, shall be entitled to designate a person
to fill such vacancy who shall be deemed to be an Independent Director. If no
Independent Director remains, the other directors shall designate two persons to
fill such vacancies who shall not be stockholders, affiliates or associates of
Parent or Purchaser, and such persons shall be deemed to be Independent
Directors. In the event that Parent's designees constitute a majority of the
directors on the Company Board, the affirmative vote of a majority of the
Independent Directors shall be required after the acceptance for payment of
Shares pursuant to the Offer and prior to the Effective Time, to: (i) amend or
terminate the Merger Agreement by the Company; (ii) exercise or waive any of the
Company's rights, benefits or remedies under the Merger Agreement; or (iii) take
any other action under or in connection with the Merger Agreement if such action
materially and adversely affects holders of Shares other than Parent or
Purchaser; provided that if there shall be no such directors, such actions may
be effected by unanimous vote of the entire Company Board.
The Merger. At the Effective Time of the Merger, each Share then
outstanding, other than Shares held by (i) the Company as treasury stock, (ii)
Parent or any of its wholly owned subsidiaries, including Purchaser, and (iii)
stockholders who properly perfect their dissenters' rights under the DGCL, will
be converted into the right to receive the Offer Price, without interest.
Options. The Merger Agreement provides that as of the Effective Time,
holders of options, other than options designated as 1999 Options (as defined in
the Merger Agreement), to purchase shares of the Company's common stock
("General Options") will be entitled to receive a cash amount equal to the
product of (i) the excess, if any, of the Offer Price over the exercise price
per Share of such General Option and (ii) the number of Shares covered by the
holder's General Options. Upon such payment, the General Options will then be
cancelled. All options designated as 1999 Options will automatically convert
into a right to receive Parent common stock (a "Parent Option"). With respect to
any such Parent Option, (i) the number of shares of Parent common stock subject
to such Parent Option will be determined by multiplying the number of
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Shares subject to the 1999 Option by the Option Exchange Ratio (defined below),
rounding any fractional Share down to the nearest whole Share, and (ii) the
exercise price per share of such Parent Option will be determined by dividing
the exercise price per Share applicable to the 1999 Option by the Option
Exchange Ratio, and rounding the exercise price thus determined up to the
nearest whole cent. Except as provided above, the converted or substituted
Parent Options will be subject to the same terms and conditions (including,
without limitation, expiration date, vesting and exercise provisions) as were
applicable to the 1999 Option immediately prior to the Effective Time. The term
"Option Exchange Ratio" means (i) the Merger Consideration divided by (ii) the
average of the closing prices of Parent Common Stock on the NYSE during the
twenty trading days preceding the fifth trading day prior to the date on which
the closing of the Merger occurs.
The Company will take all necessary actions so that all stock option,
incentive or other equity-based plans established by the Company or any
subsidiary of the Company (a "Company Subsidiary") shall terminate as of the
Effective Time and the provisions in any other plan, program, or arrangement
providing for the issuance or grant of any other interest in respect of the
capital stock of the Company or any Company Subsidiary shall be deleted and
terminated as of the Effective Time. The Company will use its reasonable best
efforts to obtain the consent of each holder of outstanding General Options and
1999 Options to the treatment of such options specified by the Merger Agreement
to the extent necessary.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things:
- corporate organization, good standing and capitalization,
- the authorization, execution, delivery, performance and enforceability of
the Merger Agreement and related matters,
- the absence of conflict with its certificate of incorporation, by-laws,
or any agreements to which the Company is a party,
- filings with the Commission and financial statements,
- no undisclosed liabilities,
- absence of certain changes,
- taxes,
- owned and leased real property, title to assets,
- no existing discussions with any other party regarding an Acquisition
Proposal (as defined below under the heading "No Solicitation") or any
other substantially similar proposal,
- contractual and other obligations,
- employee benefit plans and compensation agreements,
- litigation,
- compliance with legal requirements, and
- receipt of the SoundView Opinion.
In the Merger Agreement, each of Parent and Purchaser has made customary
representations and warranties to the Company with respect to, among other
things:
- corporate organization and good standing,
- the authorization, execution, delivery, performance and enforceability of
the Merger Agreement and related matters,
- consents and approvals,
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- the absence of conflict with their respective certificates of
incorporation, by-laws, or any applicable law, and
- sufficient funds.
The representations and warranties made in the Merger Agreement or any
other document delivered pursuant to the Merger Agreement shall survive the
Effective Time as necessary to effect the terms and provisions of the
Indemnification Agreement (described under the heading "Escrow Agreement and
Indemnification Agreement" below).
Grant of Option to Effect a Short-Form Merger. To facilitate Purchaser
effectuating a Short-Form Merger, the Merger Agreement provides that the Company
grants Purchaser an option to purchase from the Company such number of Shares as
will result in the Purchaser owning 90.1% of the total number of Shares, at a
price per Share equal to the Offer Price (up to a maximum of 19.9% of the
outstanding Shares). This option is exercisable by Parent or any of its
subsidiaries only after the purchase of and payment for Shares pursuant to the
Offer as a result of which Parent and its subsidiaries own beneficially at least
a majority of the then outstanding Shares. The portion of the purchase price
owing upon exercise of such option equal to the product of (i) the number of
Shares purchased pursuant to such option multiplied by (ii) the par value per
Share will be paid to the Company in cash by wire transfer or cashier's check,
and the balance of the purchase price will be paid by delivery to the Company of
a non-interest bearing unsecured demand note from Purchaser. Such option may be
exercised on two day's written notice given by Purchaser to the Company.
Interim Operations of the Company. Except as contemplated by the Merger
Agreement or agreed in writing by Parent, prior to the Effective Time, the
business of the Company and each Company Subsidiary will be conducted according
to its ordinary and usual course of business in substantially the same manner as
conducted prior to entering into the Merger Agreement and shall use its
reasonable best efforts to preserve intact its current business organization,
keep available the services of its current officers and employees, and maintain
existing relationships with franchisees, customers, suppliers, creditors,
business partners and others having business dealings with it, to the end that
the goodwill and ongoing business of each of them shall be unimpaired at the
Effective Time.
Additionally, except as contemplated by the Merger Agreement or agreed in
writing by Parent, prior to the Effective Time neither the Company nor any
Company Subsidiary shall:
(i) directly or indirectly amend its Certificate of Incorporation or
By-Laws or similar organizational documents;
(ii) (A) declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to any shares of any class
or series of its capital stock, (B) redeem, purchase or otherwise acquire
directly or indirectly any shares of any class or series of its capital
stock, or any instrument or security which consists of or includes a right
to acquire such shares; (C) issue, sell, transfer, pledge, dispose of or
encumber any shares of any class or series of its capital stock or
indebtedness having voting rights, or securities convertible or
exchangeable for, or options, warrants, calls, commitments or rights of any
kind to acquire any shares of any class or series of its capital stock
indebtedness having voting rights, other than Shares reserved for issuance
on the date of the Merger Agreement; or (D) split, combine or reclassify
any shares of any class or series of its stock;
(iii) (A) incur or modify any indebtedness or other liability, other
than in the ordinary and usual course of business and consistent with past
practice and not in excess of $50,000; or (B) modify, amend or terminate
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation or arrangement to which the Company or any
Company Subsidiary is a party or by which any of them or any of their
properties or assets may be bound, or waive, release or assign any material
rights or claims, except in the ordinary course of business and consistent
with past practice;
(iv) (A) incur or assume any long-term debt, or except in the ordinary
course of business, incur or assume any short-term indebtedness in amounts
not consistent with past practice; (B) modify the terms of any indebtedness
or other liability; (C) assume, guarantee, endorse or otherwise become
liable or
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responsible (whether directly, contingently or otherwise) for the
obligations of any other person or entity; (D) make any loans, advances or
capital contributions to, or investments in, any other person or entity
(other than to or in wholly owned subsidiaries of the Company); or (E)
enter into any material commitment or transaction in the ordinary course of
business not in excess of $1,000,000;
(v) transfer, lease, license, sell, mortgage, pledge, dispose of, or
encumber any assets other than in the ordinary and usual course of business
and consistent with past practice;
(vi) make any change in the compensation payable or to become payable
to any of its officers, directors, employees, agents or consultants (other
than normal recurring increases in wages to employees who are not officers
or directors or affiliates in the ordinary course of business consistent
with past practice) or to persons providing management services, or enter
into or amend any employment, severance, consulting, termination or other
agreement or employee benefit plan or make any loans to any of its
officers, directors, employees, affiliates, agents or consultants or make
any change in its existing borrowing or lending arrangements for or on
behalf of any of such persons pursuant to an employee benefit plan or
otherwise;
(vii) pay or make any accrual or arrangement for payment of any
pension, retirement allowance or other employee benefit pursuant to any
existing plan, agreement or arrangement to any officer, director, employee
or affiliate or pay or agree to pay or make any accrual or arrangement for
payment to any officers, directors, employees or affiliates of the Company
of any amount relating to unused vacation days, except payments and
accruals made in the ordinary course of business consistent with past
practice; adopt or pay, grant, issue, accelerate or accrue salary or other
payments or benefits pursuant to any pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, stock purchase, stock
option, stock appreciation right, group insurance, severance pay,
retirement or other employee benefit plan, agreement or arrangement, or any
employment or consulting agreement with or for the benefit of any director,
officer, employee, agent or consultant; or amend in any material respect
any such existing plan, agreement or arrangement in a manner inconsistent
with the foregoing;
(viii) neither the Company nor any Company Subsidiary shall permit any
insurance policy naming it as a beneficiary or a loss payable payee to be
cancelled or terminated without notice to Parent, except policies providing
coverage for losses not in excess of $50,000;
(ix) enter into any contract or transaction relating to the purchase
of assets other than in the ordinary course of business consistent with
past practice and in no such case for assets in excess of $50,000;
(x) pay, repurchase, discharge or satisfy any of its claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction
in the ordinary course of business and consistent with past practice to any
person or entity who is not an affiliate of the Company, of claims,
liabilities or obligations reflected or reserved against in, or
contemplated by, the financial statements of the Company included in its
filings with the Commission;
(xi) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any Company Subsidiary (other than the
Merger);
(xii) (A) change any of the accounting methods used by it unless
required by GAAP or (B) make any material election relating to taxes,
change any material election relating to taxes already made, change any
material accounting method relating to taxes, change any material
accounting method relating to taxes unless required by GAAP, enter into any
closing agreement relating to taxes, settle any claim or assessment
relating to taxes or consent to any claim or assessment relating to taxes
or any waiver of the statute of limitations for any such claim or
assessment;
(xiii) take, or commit to take, any action that would or is reasonably
likely to result in any of the conditions to the Offer or any of the
conditions to the Merger not being satisfied, or would make any
representation or warranty of the Company contained in the Merger Agreement
inaccurate in any respect
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at, or as of any time prior to, the Effective Time, or that would impair
the ability of the Company, Parent, Purchaser or the holders of Shares to
consummate the Offer or the Merger in accordance with the terms hereof or
materially delay such consummation; and
(xiv) enter into an agreement, contract, commitment or arrangement to
do any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
Employee Benefits. As soon as reasonably practicable following the
Effective Time and for a three-year period following the Effective Time, the
Surviving Corporation and its subsidiaries and successors shall provide to
persons who were employees of the Company or a Company Subsidiary immediately
prior to the Effective Time (the "Retained Employees") employee plans and
programs that provide benefits that are no less favorable in the aggregate than
those provided to employees of Parent generally during such time. With respect
to such benefits, service accrued by such Retained Employees during employment
with the Company and its Subsidiaries prior to the Effective Time shall be
recognized for all purposes, except to the extent necessary to prevent
duplication of benefits.
The Company shall take all necessary and appropriate actions to terminate,
prior to the Effective Time, the Softworks Retirement 401(k) Plan.
Stockholders' Meeting. In the event that Purchaser does not acquire 90% of
the outstanding Shares pursuant to the Offer or otherwise, a stockholder vote
will be required to approve the Merger. Pursuant to the Merger Agreement, if
required by applicable law in order to consummate the Merger, the Company will:
(i) duly call, give notice of, convene and hold a special meeting of its
stockholders as soon as practicable following the acceptance for payment and
purchase of Shares by Purchaser pursuant to the Offer for the purpose of
considering and taking action upon the approval of the Merger and the adoption
of the Merger Agreement; (ii) prepare and file with the Commission a proxy or
information statement relating to the Merger; (iii) cause a definitive proxy
(and any amendments thereto) to be mailed to stockholders, (iii) include in the
proxy statement the recommendation of the Company Board that stockholders to
approve the Merger and adopt the Merger Agreement; and (iv) use its reasonable
best efforts to solicit from holders of Shares proxies in favor of the Merger.
Parent has agreed that it will vote, or cause to be voted, all of the
shares of capital stock of Purchaser and all Shares owned by Parent, Purchaser
or any of Parent's other subsidiaries in favor of approval of the Merger and the
adoption of the Merger Agreement.
No Solicitation. The Company has agreed that neither it, its subsidiaries,
or its affiliates will (i) directly or indirectly, encourage, solicit or
facilitate any inquiries or proposals that constitute, or could reasonably be
expected to lead to, any proposal or offer to acquire any part of the stock or
assets of the Company or any Company Subsidiary (an "Acquisition Proposal") or
(ii) participate in or initiate discussions or negotiations concerning, or
provide any information to, any person, entity, or group (other than Parent, any
of its affiliates or representatives) relating to, an Acquisition Proposal. If,
however, at any time prior to the time of acceptance of Shares for payment
pursuant to the Offer, the Company Board determines in good faith, after
consultation with outside counsel, that it is necessary to do so in order to
comply with its fiduciary duties to the Company's stockholders under applicable
law, the Company may, in response to a Superior Proposal (defined below) that
was not solicited by it or that did not otherwise result from a breach of the
Company's obligations regarding Acquisition Proposals and subject to providing
prior written notice of its decision to take such action to Parent, furnish
information with respect to the Company and any Company Subsidiary to any person
or entity making a Superior Proposal pursuant to a confidentiality agreement
containing terms no less favorable to the Company than the Confidentiality
Agreement and participate in discussions or negotiations regarding the Superior
Proposal. The Company shall cause the officers, directors, employees,
representatives and agents of the Company, each Company Subsidiary, and each
affiliate of the Company, including, but not limited to, investment bankers,
attorneys and accountants to comply with this non-solicitation provision. The
term "Superior Proposal" means any proposal or offer by a third party to acquire
more than 50% of the combined voting power of the Shares then outstanding, or
all or substantially all of the assets of the Company, which the Company Board
determines in good faith (after receipt of (i) an opinion of a financial advisor
that such proposal is financially superior and (ii) an opinion from independent
legal counsel that failure to provide such
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information or engage in such discussions would be a breach of the Company
Board's fiduciary duties to the Company stockholders under applicable law) to be
more favorable to the Company's stockholders than the Offer and the Merger,
which is not subject to the receipt of any necessary financing or is subject to
financing which, in the good faith judgment of the Company Board, is reasonably
capable of being obtained by the third party.
Neither the Company Board nor any committee thereof shall (i) withdraw or
modify, or propose to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by the Company Board or any committee
thereof of the Offer, the Merger Agreement or the Merger, (ii) approve or
recommend or propose to approve or recommend, any Acquisition Proposal or (iii)
enter into a letter of intent, agreement in principle, acquisition agreement or
any other agreement with respect to any Acquisition Proposal. Notwithstanding
the foregoing, prior to the time of acceptance for payment of Shares pursuant to
the Offer, in response to a Superior Proposal that was not solicited by the
Company and that did not otherwise result from a breach of the non-solicitation
provision, the Company Board may terminate the Merger Agreement after the
seventh business day following Parent's receipt of written notice from the
Company advising Parent that the Company Board has received a Superior Proposal
that it intends to accept, specifying the material terms and conditions of such
Superior Proposal, identifying the person or entity making such Superior
Proposal, but only if the Company shall have first caused its financial and
legal advisors to negotiate with Parent to make such adjustments in the terms
and conditions of the Merger Agreement as would enable the Company to proceed
with the transactions contemplated in the Merger Agreement on such adjusted
terms. No such termination shall be effective until the Company makes payment to
Parent of funds equal to the Termination Fee (as discussed under the heading
"Termination Fee; Expenses" below).
The Company agrees that as of the date of the Merger Agreement, it, its
subsidiaries and affiliates (and their respective officers, directors,
employees, representatives and agents) shall immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any person
or entity (other than Parent, Purchaser or their respective representatives)
conducted heretofore with respect to any Acquisition Proposal.
The Company has further agreed to notify Parent immediately after receipt
by the Company (or its advisors) of any Acquisition Proposal or any request for
nonpublic information in connection with an Acquisition Proposal or for access
to the properties, books or records of the Company or any Company Subsidiary by
any person or entity that informs the Company that it is considering making, or
has made, an Acquisition Proposal. Such notice to Parent shall be made orally
and in writing and shall indicate in reasonable detail the identity of the
offeror and the terms and conditions of such proposal, inquiry or contact. The
Company shall keep Parent informed of all material developments and the status
of any Acquisition Proposal, any negotiations or discussions with respect to any
Acquisition Proposal or any request for nonpublic information in connection with
any Acquisition Proposal or for access to the properties, books or records of
the Company or any Company Subsidiary by any person or entity that is
considering making, or has made, an Acquisition Proposal. The Company shall
provide Parent with copies of all documents received from or delivered or sent
to any person that is considering making or has made an Acquisition Proposal.
Nothing shall prohibit the Company or the Company Board from (i) taking and
disclosing to the Company's stockholders a position with respect to a tender or
exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated
under the Exchange Act, or (ii) making such disclosure to the Company's
stockholders as, in the good faith judgment of the Company Board, after
receiving advice from outside counsel, is required under applicable law,
provided that the Company may not, except as permitted under the Merger
Agreement, withdraw or modify, or propose to withdraw or modify, its position
with respect to the Offer or the Merger or approve or recommend, or propose to
approve or recommend, any Acquisition Proposal, or enter into any agreement with
respect to any Acquisition Proposal.
Indemnification and Insurance. The Merger Agreement provides that for
three years after the Effective Time, Parent or the Surviving Corporation shall
jointly and severally indemnify, defend and hold harmless each present and
former officer and director of the Company and its subsidiaries, and each person
who becomes an officer or director of the Company or any Company Subsidiary
before the Effective Time, against
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all losses, claims, damages, liabilities, costs, fees and expenses arising out
of acts or omissions occurring at or prior to the Effective Time to the full
extent required under applicable Delaware law, the terms of the Company's
Certificate of Incorporation or By-Laws. Reasonable attorneys fees, judgements,
fines, losses, claims, and settlements (effected with the written consent of
Parent or Surviving Corporation, which consent shall not be unreasonably
withheld) are included. In the event that any claim or assertion is made within
such three year period, rights to indemnification shall continue until
disposition of the claim.
The Merger Agreement further provides that the Surviving Corporation shall
maintain the Company's existing officers' and directors' liability insurance for
a period of not less than three years after the Effective Date. Parent may
substitute policies of substantially equivalent coverage, amounts, and terms.
However, in no event shall the Company be required to pay aggregate premiums for
insurance in excess of 200% of the aggregate paid by the Company in 1999 on an
annualized basis. If the premium for such coverage exceeds such amount, the
Surviving Corporation shall purchase a policy with the greatest coverage
available that does not exceed 200% of the aggregate paid by the Company in 1999
for such insurance.
Conditions to the Merger. The respective obligations of each party to
effect the Merger will be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any and all of which may be
waived in whole or in part by the Company, Parent or Purchaser, as the case may
be, to the extent permitted by applicable law: (i) the Merger Agreement shall
have been approved and duly adopted by the requisite vote of the stockholders of
the Company, if required by applicable law, in order to consummate the Merger;
(ii) no statute, rule or regulation shall have been enacted or promulgated by
any governmental authority which restrains, enjoins or otherwise prevents or
prohibits the consummation of the Merger; nor shall there be any preliminary or
permanent injunction or other order of any governmental entity precluding
consummation of the Merger; (iii) the purchase of Shares pursuant to the Offer
shall have occurred; and (iv) any applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), shall have expired or been terminated.
The obligations of Parent and Purchaser to consummate the Merger are
subject to the satisfaction on or prior to the Closing Date of each of the
following conditions, any and all of which may be waived in whole or in part by
Parent and Purchaser, to the extent permitted by applicable law: (i) all actions
regarding settlement and termination of the Company Options shall have been
taken; (ii) representations and warranties set forth by the Company in the
Merger Agreement shall be true in all material respects on the date of the
Merger Agreement and as of the Effective Time; and (iii) the Company shall have
complied in all material respects with its covenants under the Merger Agreement.
Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, whether before or after
stockholder approval:
(a) by the mutual written consent of Parent and the Company;
(b) by either the Company or Parent if: (i) the Offer shall have
expired without any Shares being purchased, or Purchaser shall not have
accepted for payment any Shares pursuant to the Offer by April 15, 2000;
provided, however, that a party does not have the right to terminate if the
party has been the cause of or resulted in Purchaser's failure to purchase
the Shares, or (ii) any governmental entity issues a final order or takes
any other final action (which both parties took reasonable actions to lift)
which permanently restrains, enjoins, or otherwise prohibits the acceptance
for payment or payment for Shares pursuant to the Offer or the Merger;
(c) by the Company if: (i) Parent, Purchaser or any of their
affiliates have failed to commence the Offer on or prior to five business
days following date of the initial public announcement of the Offer;
provided, however, that the Company may not terminate if the Company is at
such time in material breach of its obligations under the Merger Agreement;
(ii) as permitted under the terms of the Merger Agreement allowing the
Company to terminate in order to accept a Superior Proposal, so long as the
Company complies with all provisions in the Merger Agreement regarding
valid acceptance of a Superior Proposal, including notice provisions and
termination fees; and (iii) if Parent or Purchaser shall have breached in
any material respect any of their respective representations, warranties,
covenants or other
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agreements contained in the Merger Agreement, which breach cannot be or has
not been cured within 15 days after the Company has given written notice,
as applicable;
(d) by Parent if: (i) due to an occurrence, not involving a breach by
Parent or Purchaser of their obligations hereunder, which makes it
impossible to satisfy any of the Conditions of the Offer, Parent,
Purchaser, or any of their affiliates shall have failed to commence the
Offer on or prior to the fifth business day following the date of the
initial public announcement of the Offer; (ii) prior to the purchase of
Shares by Purchaser pursuant to the Offer, the Company Board shall have
withdrawn, modified or changed in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer, the Merger Agreement or the
Merger or shall have recommended an Acquisition Proposal or shall have
executed an agreement in principle or definitive agreement relating to an
Acquisition Proposal or similar business combination with a person or
entity other than Parent, Purchaser or their affiliates; (iii) prior to the
purchase of Shares pursuant to the Offer, the Company shall have breached
any representation, warranty, covenant or other agreement contained in the
Merger Agreement which would give rise to the failure of the Conditions of
the Offer set forth in sections (f) or (g) of Item 14 below, which breach
cannot be cured within 15 days after the giving of written notice by Parent
to the Company, (iv) if, prior to the purchase of Shares pursuant to the
Offer, the Major Shareholder shall have breached any representation,
warranty, covenant or other agreement contained in the Major Shareholder's
Stock Tender Agreement which would give rise to the failure of the
Conditions of the Offer set forth in section (h) of Item 14 below, which
breach cannot be or has not been cured within 15 days after the giving of
written notice by Parent to the Company, or (v) if prior to the purchase of
Shares pursuant to the Offer, there shall have been entered any injunction
with respect to the performance by the Major Shareholder or the Trustees of
their respective obligations as set forth in the Major Stockholder's Stock
Tender Agreement, which injunction has not been withdrawn or rendered
inapplicable to the obligations of the Major Shareholder or the Trustees
within 15 days of being so entered (provided that Parent may not terminate
the Merger Agreement on this occurrence until after the initial scheduled
Expiration Date of the Offer and if the Minimum Condition is otherwise
satisfied).
In the event of the termination or abandonment by any party pursuant to the
terms of the Merger Agreement, the provisions of the Confidentiality Agreement
will continue in full force and effect and there shall be no liability on the
part of Parent, Purchaser or the Company except (i) for fraud or for breach of
the Merger Agreement prior to such termination or abandonment of the
Transactions and (ii) as described under the heading "Termination Fee; Expenses"
below.
Termination Fee; Expenses. Pursuant to the Merger Agreement, if: (i) the
Company enters into an agreement which accepts or implements another Acquisition
Agreement; (ii) either the Company or Parent terminates or abandons the
transactions pursuant to clause (b)(i) under the heading "Termination" above,
and prior thereto another Acquisition Proposal was publicly announced; (iii) the
Company terminates or abandons the transactions pursuant to clause (c)(ii) under
the heading "Termination" above; (iv) Parent terminates or abandons the
transactions pursuant to clause (d)(ii) under the heading "Termination" above;
or (v) Parent terminates or abandons the transactions pursuant to clause
(d)(iii) under the heading "Termination" above resulting from a breach of the
provisions regarding no solicitation described under the heading "No
Solicitation" above, or the intentional or willful breach of any other
provision; then Company shall pay to Parent a termination fee equal to
$10,572,670 plus an amount equal to Parent's actual and reasonably documented
out-of-pocket fees and expenses incurred by Parent and Purchaser in connection
with the Offer, the Merger, the Merger Agreement and the consummation of the
transactions. If Parent terminates or abandons the transaction pursuant to
clause (d)(iv) under the heading "Termination" above, or if the Offer shall have
expired without the Minimum Condition having been satisfied and the Major
Shareholder shall not have satisfied its obligations under the Major
Shareholder's Stock Tender Agreement, then a termination fee of $9,130,942, plus
the expenses described above, shall be paid to Parent. The termination fee and
Parent's good faith estimate of its expenses shall be paid in same day funds
concurrently with the execution of any agreement accepting or implementing
another Acquisition Proposal or any termination or abandonment, whichever shall
first occur, together with delivery of a written acknowledgment by the Company
of its obligation to reimburse Parent for its actual reasonable expenses in
excess of such estimated expense payment.
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<PAGE> 25
Except as specifically provided to the contrary in the Merger Agreement,
all costs and expenses incurred in connection with this the Merger Agreement and
the consummation of the transactions shall be paid by the party incurring such
costs and expenses.
STOCK TENDER AGREEMENTS
The Shares beneficially owned by the Major Shareholder are subject to a
Voting Trust Agreement, dated as of August 3, 1998, as amended, by and among the
Company, the Major Shareholder and James Cannavino, Charles Feld and Dennis
Murray, as trustees (the "Trustees"). The Major Shareholder and the Trustees
have entered into the Major Shareholder's Stock Tender Agreement, dated as of
the date of the Merger Agreement, with Parent and Purchaser. Pursuant to the
Major Shareholder's Stock Tender Agreement, the Major Shareholder and the
Trustees have agreed (i) to tender the Major Shareholder's Covered Shares
promptly after Purchaser commences the Offer, and (ii) to appoint certain
officers of Purchaser as irrevocable proxies (A) to vote all the Major
Shareholder's Covered Shares in favor of the Merger and the Merger Agreement,
and (B) to vote against any action or agreement that is contrary to the Offer,
the Merger or any other Transactions contemplated by the Merger Agreement or the
Major Shareholder's Stock Tender Agreement, or that would materially change the
Company's corporate structure or business. The Major Shareholder's Stock Tender
Agreement also gives Parent an option to acquire all the Major Shareholder's
Covered Shares at a purchase price per share equal to the Offer Price (or such
higher price as may be offered by Purchaser in the Offer), exercisable only if
the Major Shareholder or the Trustees fail to comply with the Major
Shareholder's Stock Tender Agreement or the Merger Agreement, or if the Major
Shareholder or the Trustees withdraw their tender of Shares made pursuant to the
Offer.
Additionally, the Trustees and Major Shareholder have agreed to (i) not
transfer, or enter into any agreement to transfer, the Major Shareholder's
Covered Shares to any other person or entity except pursuant to the Major
Shareholder's Stock Tender Agreement; (ii) not take any action in violation of
any warranty or representation made by the Trustees or Major Shareholders under
the Major Shareholder's Stock Tender Agreement, or that would result in a breach
by the Company of its obligations under the Merger Agreement; (iii) not solicit
another Acquisition Proposal or engage in any negotiations regarding another
Acquisition Proposal, (iv) waive all appraisal or dissenting rights, and (v)
waive claims against the Company, Parent or Purchaser including claims arising
from ownership of Shares, stockholder status, conduct of business, and the
consummation of the transactions contemplated by the Merger Agreement.
The parties to the Major Shareholder's Stock Tender Agreement have each
made certain representations and warranties. The Trustees' representations and
warranties include that they have good and marketable title to the Major
Shareholder's Covered Shares, authority to enter into the transactions, and that
no conflicts with other agreements will result. The Major Shareholder's
representations and warranties include that it beneficially owns (but is not the
record holder of) the Major Shareholder's Covered Shares, that it is a duly
organized corporation with the power to perform its obligations, that the Major
Shareholder's Stock Tender Agreement covers all of the Shares owned by the Major
Shareholder (including any options exercised by the Major Shareholder prior to
the Offer), and that no conflicts with other agreements will result. The Parent
and Purchaser's representations and warranties include that each is a duly
organized corporation with the power to perform its obligations.
Parent and Purchaser have also entered into a Stockholders' Stock Tender
Agreement, dated as of December 21, 1999 (the "Individuals' Stock Tender
Agreement"), with James A. Cannavino, Judy G. Carter, Daniel DelGiorno, Jr.,
Claude R. Kinsey, III, Joseph J. Markus, George Aronson, Robert McLaughlin and
Lisa Welch (the "Individuals") as stockholders of the Company who collectively
own 1,182,000 Shares of the common stock of the Company which are subject to the
Individuals' Stock Tender Agreement(the "Individuals' Covered Shares"). The
Individuals' Covered Shares represent approximately 6.8% of the Company's
outstanding Shares. The obligations of the Individuals under the Individual's
Stock Tender Agreement are substantially the same as those of the Major
Shareholder and the Trustees under the Major Shareholder's Stock Tender
Agreement described above.
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<PAGE> 26
ESCROW AGREEMENT AND INDEMNIFICATION AGREEMENT
As a condition and inducement to Parent and Purchaser entering into the
Merger Agreement, (i) an Escrow Agreement (the "Escrow Agreement") was entered
into as of December 21, 1999 by and among Parent, Purchaser, the Major
Shareholder, and State Street Bank and Trust Company, Inc. as escrow agent (the
"Escrow Agent"), and (ii) an Indemnification Agreement (the "Indemnification
Agreement") was entered into as of the same date by and among Parent, Purchaser
and the Major Shareholder.
Pursuant to the terms of the two agreements, the Major Shareholder agreed
to indemnify and hold harmless Parent, Purchaser, the Surviving Corporation and
their respective subsidiaries and officers, directors, employees and agents (the
"Indemnified Parties") from and against and in respect of any Loss (defined
below) incurred or sustained by any of them as a result of any breach by the
Company of any of the representations or warranties in the Merger Agreement
relating to the Company's capitalization, filings with the Commission, the
absence of certain changes or events in the Company's business, no undisclosed
liabilities, the absence of litigation, employee benefit plans, options, and
employment agreements, taxes, and intellectual property. Additionally, the Major
Shareholder agreed to provide indemnification regarding its representations and
warranties in the Major Shareholder's Stock Tender Agreement. The Major
Shareholder shall not be required to indemnify any Indemnified Party under the
Escrow Agreement unless the aggregate Losses exceed $100,000, in which case the
parties incurring the indemnification obligations with respect to such Losses
shall be responsible for the entire amount of such Losses. The term "Loss" means
any loss, liability (including tax liability), damage, deficiency, fine,
penalty, cost and expense (including reasonable expenses of investigation,
amounts paid in settlement, interest, court costs, reasonable fees and expenses
of attorneys and accountants and other costs of litigation).
Upon consummation by the Purchaser of the purchase of Shares pursuant to
the Offer, the Major Shareholder will deliver $10 million (the "Escrow Amount")
to the Escrow Agent by wire transfer of immediately available funds. In order to
effect such delivery obligation, the Major Shareholder assigned to the Escrow
Agent a portion of the proceeds payable to the Major Shareholder as a result of
the purchase of the Shares of the Major Shareholder purchased in the Offer equal
to the Escrow Amount.
The Indemnification Agreement terminates two years after the consummation
of the purchase of Shares in the Offer by the Purchaser, and the Escrow
Agreement terminates one year after the consummation of the purchase of Shares
in the Offer by the Purchaser; provided, however, that if prior to such date the
Major Shareholder receives a notice from an Indemnified Party seeking
indemnification, neither agreement will terminate until such outstanding claim
is resolved.
CONFIDENTIALITY AGREEMENT
Parent and the Company executed a Bilateral Confidentiality Agreement (the
"Confidentiality Agreement") dated as of November 1, 1998, as amended January
12, 1999, March 9, 1999 and December, 1999.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, the parties agreed, subject to certain exceptions,
to keep confidential all nonpublic, confidential or proprietary information
concerning the other parties which is furnished to any party in connection with
its evaluation of a possible transaction involving Purchaser and the Company
(the "Confidential Information"), and to use the Confidential Information solely
for the purpose of evaluating a possible transaction involving the Company and
Purchaser. Upon termination, confidential information disclosed under the
Confidentiality Agreement must be returned to the disclosing party or, at the
disclosing party's option, may be destroyed. The Confidentiality Agreement will
remain in effect until November 1, 2000 unless terminated earlier by written
notice of either party. Termination of the Confidentiality Agreement will not
relieve a party of its obligation not to disclose confidential information, as
this obligation will continue for three years after the date of disclosure under
the Confidentiality Agreement.
The January 12, 1999 Amendment provided that Parent would not, until
October 14, 1999, acquire any equity security of the Company or the Major
Shareholder without the written consent of the Company Board. Additionally, if
the acquisition contemplated in the Merger Agreement is not consummated, the
Confidential-
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ity Agreement provides that until December 31, 2000, neither party will directly
solicit employees of the other without prior written consent.
12. PLANS FOR THE COMPANY; OTHER MATTERS.
Plans for the Company. If Purchaser acquires control of the Company,
Parent and Purchaser intend to conduct a detailed review of the Company and its
assets, corporate structure, capitalization, operations, properties, policies,
management and personnel and to consider and determine what, if any, changes
would be desirable in light of the circumstances which then exist. Such changes
could include, among others things, changes in the Company's business, corporate
structure, certificate of incorporation, by-laws, capitalization, management or
dividend policy.
The Merger Agreement provides that, upon the purchase of Shares pursuant to
the Offer and from time to time thereafter, Parent will be entitled to designate
such number of directors, rounded down to the next whole number, on the Company
Board as is equal to the product of the total number of directors on the Company
Board (including the directors designated by Parent) multiplied by a fraction,
the numerator being equal to the number of shares beneficially owned by Parent
and its subsidiaries and the denominator the total number of shares then
outstanding. The Company will use its reasonable best efforts to cause such
persons designated by Parent to be appointed or elected to the Company Board and
to secure resignations of such number of its incumbent directors as is necessary
to enable Parent's designees to be so elected or appointed. The Merger Agreement
also provides that in the event that Parent's designees are elected or appointed
to the Company Board, until the Effective Time, the Company Board shall have at
least two Independent Directors, provided that if the number of Independent
Directors shall be reduced below two for any reason whatsoever, the remaining
Independent Director, if any, shall be entitled to designate a person to fill
such vacancy who shall be deemed to be an Independent Director. In the event
that Parent's designees constitute a majority of the directors on the Company
Board, the affirmative vote of a majority of the Independent Directors shall be
required after the acceptance for payment of Shares pursuant to the Offer and
prior to the Effective Time, to: (i) amend or terminate the Merger Agreement by
the Company; (ii) exercise or waive any of the Company's rights, benefits or
remedies under the Merger Agreement; (iii) take action with respect to the
retention of counsel and other advisors in connection with the transactions
contemplated by the Merger Agreement; or (iv) take any other action under or in
connection with the Merger Agreement if such action materially and adversely
affects holders of Shares other than Parent or Purchaser; provided that if there
shall be no such directors, such actions may be effected by unanimous vote of
the entire Company Board.
The Merger Agreement provides that the directors and officers of Purchaser
at the Effective Time of the Merger will, from and after the Effective Time, be
the initial directors and officers, respectively, of the Surviving Corporation.
Purchaser or an affiliate of Purchaser may, following the consummation or
termination of the Offer, seek to acquire additional Shares through open market
purchases, privately negotiated transactions, a tender offer or exchange offer
or otherwise, upon such terms and at such prices as it shall determine, which
may be more or less than the price to be paid pursuant to the Offer. Purchaser
and its affiliates also reserve the right to dispose of any or all Shares
acquired by them, subject to the terms of the Merger Agreement.
Except as disclosed in this Offer to Purchase, and except as may be
effected in connection with the integration of operations referred to above,
neither Parent nor Purchaser has any present plans or proposals that would
result in an extraordinary corporate transaction, such as a merger,
reorganization, liquidation, relocation of operations or sale or transfer of a
material amount of assets, involving the Company or its Subsidiaries, or any
material changes in the Company's capitalization, corporate structure, business
or composition of its management or the Company Board.
Stockholder Approval. Under the DGCL, the approval of the Company Board
and the affirmative vote of the holders of a majority of the outstanding Shares
are required to adopt and approve the Merger Agreement and the transactions
contemplated thereby. The Company has represented in the Merger Agreement that
the execution and delivery of the Merger Agreement by the Company and the
consummation by the Company of the transactions contemplated by the Merger
Agreement have been duly authorized by all
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necessary corporate action on the part of the Company, subject to the approval
of the Merger by the Company's stockholders if required in accordance with the
DGCL. In addition, the Company has represented that the affirmative vote of the
holders of a majority of the outstanding Shares is the only vote of the holders
of any class or series of the Company's capital stock which is necessary to
approve the Merger Agreement and the transactions contemplated thereby,
including the Merger. Therefore, unless the Merger is consummated pursuant to
the Short-Form Merger provisions under the DGCL described below (in which case
no further corporate action by the stockholders of the Company will be required
to complete the Merger), the only remaining required corporate action of the
Company will be the approval of the Merger Agreement and the transactions
contemplated thereby by the affirmative vote of the holders of a majority of the
Shares. The Merger Agreement provides that Parent will vote, or cause to be
voted, all of the Shares then owned by Parent, Purchaser or any of Parent's
other subsidiaries and affiliates in favor of the approval of the Merger and the
adoption of the Merger Agreement. In the event that Parent, Purchaser and
Parent's other subsidiaries and affiliates acquire in the aggregate at least a
majority of the Shares (which would be the case if the Minimum Condition is
satisfied and Purchaser were to accept for payment Shares tendered in the
Offer), they would have the ability to effect the Merger without the affirmative
votes of any other stockholders.
Short-Form Merger. Section 253 of the DGCL provides that, if a corporation
owns at least 90% of the outstanding shares of each class of another
corporation, the corporation holding such stock may merge itself into such
corporation without any action or vote on the part of the board of directors or
the stockholders of such other corporation. In the event that Parent, Purchaser
and any other subsidiaries of Parent acquire in the aggregate at least 90% of
the outstanding Shares, pursuant to the Offer or otherwise, then, at the
election of Parent, a Short-Form Merger could be effected without any approval
of the Company Board or the stockholders of the Company, subject to compliance
with the provisions of Section 253 of the DGCL. Even if Parent and Purchaser do
not own 90% of the outstanding Shares following consummation of the Offer,
Parent and Purchaser could seek to purchase additional shares in the open market
or otherwise in order to reach the 90% threshold and employ a Short-Form Merger.
The per share consideration paid for any Shares so acquired may be greater or
less than that paid in the Offer. Alternatively, Purchaser could exercise an
option granted pursuant to the Merger Agreement to obtain 90.1% of the
outstanding shares. Parent presently intends to effect a Short-Form Merger if
permitted to do so under the DGCL.
Appraisal Rights. Holders of the Shares do not have appraisal rights in
connection with the Offer. However, if the Merger is consummated, holders of the
Shares at the Effective Time will have certain rights pursuant to the provisions
of Section 262 of the DGCL, including the right to dissent and demand appraisal
of, and to receive payment in cash of the fair value of their Shares. Dissenting
stockholders of the Company who comply with the applicable statutory procedures
will be entitled to receive a judicial determination of the fair value of their
Shares (exclusive of any element of value arising from the accomplishment or
expectation of the Merger) and to receive payment of such fair value in cash,
together with a fair rate of interest thereon, if any. Any such judicial
determination of the fair value of the Shares could be based upon factors other
than, or in addition to, the price per Share to be paid in the Merger or the
market value of the Shares. The value so determined could be more or less than
the price per Share to be paid in the Merger.
The foregoing summary of the rights of dissenting stockholders under the
DGCL does not purport to be a complete statement of the procedures to be
followed by stockholders desiring to exercise any appraisal rights available
under the DGCL. The preservation and exercise of appraisal rights require strict
adherence to the applicable provisions of the DGCL. If a shareholder withdraws
or loses his right to appraisal, such holder's shares will be automatically
converted into, and represent only the right to receive, the Merger
Consideration, without interest.
Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may, under
certain circumstances, be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer in which
Purchaser seeks to acquire the remaining Shares not held by it. Purchaser
believes, however, that Rule 13e-3 will not be applicable to the Merger because
it is anticipated that the Merger would be effected within one year following
consummation of the Offer, and in the Merger stockholders would receive the same
price per share as paid in the Offer. If Rule 13e-3 were applicable to the
Merger, it would require, among other things, that certain
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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 a transaction, be filed with the Commission and
disclosed to minority stockholders prior to consummation of the transaction.
13. DIVIDENDS AND DISTRIBUTIONS.
The Merger Agreement provides that prior to the Effective Date, neither the
Company nor any Company Subsidiary shall (i) declare, set aside or pay any
dividend or other distribution payable in cash, stock or property with respect
to any shares of any class or series of its capital stock, (ii) redeem, purchase
or otherwise acquire directly or indirectly any shares of any class or series of
its capital stock, or any instrument or security which consists of or includes a
right to acquire such shares; (iii) issue, sell, transfer, pledge, dispose of or
encumber any shares of any class or series of its capital stock or Voting Debt,
or securities convertible or exchangeable for, or options, warrants, calls,
commitments or rights of any kind to acquire any shares of any class or series
of its capital stock or Voting Debt, other than Shares reserved for issuance on
the date hereof pursuant to the exercise of outstanding Company stock options;
or (iv) split, combine or reclassify any shares of any class or series of its
capital stock.
14. CONDITIONS TO THE OFFER.
The Offer is subject to the condition that there shall have been validly
tendered and not withdrawn prior to the expiration of the Offer, such number of
Shares which, when added to the Shares beneficially owned by Parent or
Purchaser, would constitute a majority of the Shares outstanding on a fully
diluted basis.
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time in its sole discretion (subject to the provisions of the Merger Agreement),
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the Offer), pay for, and may
delay the acceptance for payment of or, subject to the restriction referred to
above, the payment for, any tendered Shares, and may terminate or amend the
Offer as to any Shares not then paid for, if (i) any applicable waiting period
under the HSR Act has not expired or terminated, (ii) the Minimum Condition has
not been satisfied, or (iii) at any time on or after the date of the Merger
Agreement and before the scheduled expiration date of the Offer, any of the
following events shall occur or shall be determined by Purchaser to have
occurred:
(a) there shall be threatened or pending any suit, action or
proceeding by any governmental entity (i) seeking to prohibit or impose any
material limitations on Parent's or Purchaser's ownership or operation (or
that of any of their respective subsidiaries or affiliates) of all or a
material portion of their or the Company's businesses or assets, or to
compel Parent or Purchaser or their respective subsidiaries and affiliates
to dispose of or hold separate any material portion of the business or
assets of the Company or Parent and their respective subsidiaries, in each
case taken as a whole, (ii) challenging the acquisition by Parent or
Purchaser of any Shares under the Offer or pursuant to the Major
Shareholder's Stock Tender Agreement of the Stockholders' Stock Tender
Agreement, seeking to restrain or prohibit the making or consummation of
the Offer or the Merger or the performance of any of the other transactions
contemplated by the Merger Agreement, the Major Shareholder's Stock Tender
Agreement or the Stockholders' Stock Tender Agreement, or seeking to obtain
from the Company, Parent or Purchaser any damages that are material in
relation to the Company and its subsidiaries, taken as a whole, (iii)
seeking to impose material limitations on the ability of Purchaser, or
rendering Purchaser unable, to accept for payment, pay for or purchase some
or all of the Shares pursuant to the Offer and the Merger, (iv) seeking to
impose material limitations on the ability of Purchaser or Parent
effectively to exercise full rights of ownership of the Shares, including,
without limitation, the right to vote the Shares purchased by it on all
matters properly presented to the Company's stockholders, or (v) which
otherwise is reasonably likely to have a material adverse affect on the
consolidated financial condition, businesses or results of operations of
the Company and its subsidiaries, taken as a whole; or
27
<PAGE> 30
(b) there shall be any statute, rule, regulation, judgment, order or
injunction enacted, entered, enforced, promulgated or deemed applicable to
the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger
of applicable waiting periods under the HSR Act, that is reasonably likely
to result, directly or indirectly, in any of the consequences referred to
in clauses (i) through (v) of paragraph (a) above; or
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on the NYSE or in the Nasdaq
National Market System, for a period in excess of three hours (excluding
suspensions or limitations resulting solely from physical damage or
interference with such exchanges not related to market conditions), (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (iii) a
commencement of a war, armed hostilities or other international or national
calamity directly or indirectly involving the United States, (iv) any
limitation (whether or not mandatory) by any United States or foreign
governmental authority on the extension of credit by banks or other
financial institutions, (v) any decline in either the Dow Jones Industrial
Average or the Standard & Poor's Index of 500 Industrial Companies by an
amount in excess of 15% measured from the close of business on the date of
the Merger Agreement, or (vi) a change in general financial bank or capital
market conditions which materially or adversely affects the ability of
financial institutions in the United States to extend credit or syndicate
loans or (vii) in the case of any of the foregoing existing at the time of
the commencement of the Offer, a material acceleration or worsening
thereof; or
(d) there shall have occurred any material adverse change (or any
development that, insofar as reasonably can be foreseen, is reasonably
likely to result in any material adverse change) in the consolidated
financial condition, businesses, results of operations or prospects of the
Company and its subsidiaries, taken as a whole; or
(e) the Company Board or any committee thereof (i) shall have
withdrawn, modified or changed in a manner adverse to Parent or Purchaser
its approval or recommendation of the Offer, the Merger Agreement or the
Merger, (ii) shall have recommended the approval or acceptance of an
Acquisition Proposal from, or similar business combination with, a Person
other than Parent, Purchaser or their affiliates, (iii) shall have executed
an agreement in principle or definitive agreement relating to an
Acquisition Proposal from, or similar business combination with, a Person
other than Parent, Purchaser or their affiliates or (iv) shall have adopted
any resolution to effect any of the foregoing which, in the sole judgment
of Parent in any such case, and regardless of the circumstances (including
any action or inaction by Parent or Purchaser) giving rise to any such
condition, makes it inadvisable to proceed with such acceptance or payment;
or
(f) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct and any such representations and warranties that are not
so qualified shall not be true and correct in any material respect, in each
case as of the date of the Merger Agreement and as of the scheduled
Expiration Date of the Offer; or
(g) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement; or
(h) (A) any of the representations and warranties of the Major
Shareholder set forth in the Major Shareholder's Stock Tender Agreement
that are qualified as to materiality shall not be true and correct and any
such representations and warranties that are not so qualified shall not be
true and correct in any material respect, in each case as of the date of
the Merger Agreement and as of the scheduled expiration date of the Offer;
or (B) either the Major Shareholder or the Trustees shall have failed to
perform in any material respect any obligation or to comply in any material
respect with any agreement or covenant of the Major Shareholder or the
Trustees to be performed or complied with by them under the Major
Shareholder's Stock Tender Agreement or (c) there shall be any judgment,
order or injunction deemed applicable to certain obligations of the Major
Shareholder or the Trustees under the Major Shareholder's Stock Tender
Agreement, which after the initial scheduled Expiration Date of the Offer
has not been
28
<PAGE> 31
withdrawn or made inapplicable to the Major Shareholder or the Trustees
within 15 days after being entered;
(i) all consents necessary to the consummation of the Offer or the
Merger including, without limitation, consents from parties to loans,
contracts, leases or other agreements and consents from governmental
agencies, whether federal, state or local shall not have been obtained,
other than consents the failure to obtain which would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole; or
(j) the Merger Agreement shall have been terminated in accordance with
its terms;
which in the sole judgment, exercised reasonably, of Parent or Purchaser, in any
such case, and regardless of the circumstances (including any action or inaction
by Parent or Purchaser) giving rise to such condition, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment of or payment for
Shares.
The foregoing conditions are for the sole benefit of Parent and Purchaser,
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 any of the foregoing rights shall
not be deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS.
Except as described in this Section 15, based on information provided by
the Company, none of the Company, Purchaser or Parent is aware of any license or
regulatory permit that appears to be material to the business of the Company
that might be adversely affected by Purchaser's acquisition of Shares pursuant
to the Offer and the Merger or of any approval or other action by a domestic or
foreign governmental, administrative or regulatory agency or authority that
would be required prior to the acquisition of the Shares by Purchaser as
contemplated herein. Should any such approval or other action be required,
Purchaser and Parent presently contemplate that such approval or other action
will be sought. While, except as otherwise described in this Offer to Purchase,
Purchaser does not presently intend to delay the acceptance for payment of, or
payment for, Shares tendered pursuant to the Offer pending the outcome of any
such matter, there can be no assurance that any such approval or other action,
if needed, would be obtained or would be obtained without substantial conditions
or that failure to obtain any such approval or other action might not result in
consequences adverse to the Company's business or that certain parts of the
Company's business might not have to be disposed of, or other substantial
conditions complied with, in the event that such approvals were not obtained or
such other actions were not taken or in order to obtain any such approval or
other action. If certain types of adverse action are taken with respect to the
matters discussed below, Purchaser could decline to accept for payment, or pay
for, any Shares tendered. See Section 14 for certain conditions to the Offer,
including conditions with respect to governmental actions.
State Antitakeover Statutes. A number of states have adopted laws and
regulations that purport to apply to attempts to acquire corporations that are
incorporated in such states, or whose business operations have substantial
economic effects in such states, or which have substantial assets, security
holders, employees, principal executive offices or principal places of business
in such states. In Edgar v. MITE Corp., the Supreme Court of the United States
(the "Supreme Court") invalidated on constitutional grounds the Illinois
Business Takeover statute, which, as a matter of state securities law, made
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.
29
<PAGE> 32
Parent and Purchaser do not believe that the antitakeover laws and
regulations of any state will by their terms apply to the Offer and the Merger,
and neither Parent nor Purchaser has attempted to comply with any state
antitakeover statute or regulation. Purchaser reserves the right to challenge
the applicability or validity of any state law purportedly applicable to the
Offer and nothing in this Offer to Purchase or any action taken in connection
with the Offer is intended as a waiver of such right. If it is asserted that any
state antitakeover statute is applicable to the Offer, and an appropriate court
does not determine that it is inapplicable or invalid as applied to the Offer,
Purchaser might be required to file certain information with, or to receive
approvals from, the relevant state authorities, and Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the Offer or may be
delayed in consummating the Offer. In such case, Purchaser may not be obligated
to accept for payment, or pay for, any Shares tendered pursuant to the Offer.
See Section 14.
Antitrust. The Offer and the Merger are subject to the HSR Act, which
provides that certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC")
and certain waiting period requirements have been satisfied.
The waiting period under the HSR Act with respect to the Offer will expire
at 11:59 p.m., New York City time, on the fifteenth day after the date Parent's
form was filed unless early termination of the waiting period is granted.
However, the DOJ or the FTC may extend the waiting period by requesting
additional information or documentary material from Parent or the Company. If
such a request is made, such waiting period will expire at 11:59 p.m., New York
City time, on the tenth day after substantial compliance by Parent with such
request. Only one extension of the waiting period pursuant to a request for
additional information is authorized by the HSR Act. Thereafter, such waiting
period may be extended only by court order or with the consent of Parent. In
practice, complying with a request for additional information or material can
take a significant amount of time. In addition, if the DOJ or the FTC raises
substantive issues in connection with a proposed transaction, the parties
frequently engage in negotiations with the relevant governmental agency
concerning possible means of addressing those issues and may agree to delay
consummation of the transaction while such negotiations continue. The Purchaser
will not accept for payment Shares tendered pursuant to the Offer unless and
until the waiting period requirements imposed by the HSR Act with respect to the
Offer have been satisfied. See Section 14.
The FTC and the DOJ frequently scrutinize the legality under the Antitrust
Laws (as defined below) of transactions such as Purchaser's acquisition of
Shares pursuant to the Offer and the Merger. At any time before or after
Purchaser's acquisition of Shares, the DOJ or the FTC could take such action
under the Antitrust Laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the acquisition of Shares pursuant to the
Offer or otherwise seeking divestiture of Shares acquired by Purchaser or
divestiture of substantial assets of Parent or its subsidiaries. Private
parties, as well as state governments, may also bring legal action under the
Antitrust Laws under certain circumstances. Based upon an examination of
information provided by the Company relating to the businesses in which Parent
and the Company are engaged, Parent and Purchaser believe that the acquisition
of Shares by Purchaser will not violate the Antitrust Laws. Nevertheless, there
can be no assurance that a challenge to the Offer or other acquisition of Shares
by Purchaser on antitrust grounds will not be made or, if such a challenge is
made, of the result. See Section 14 for certain conditions to the Offer,
including conditions with respect to litigation and certain government actions.
As used in this Offer to Purchase, "Antitrust Laws" shall mean and include
the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other Federal and state
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade.
Federal Reserve Board Regulations. Regulations G, U and X (the "Margin
Regulations") of the Federal Reserve Board restrict the extension or maintenance
of credit for the purpose of buying or carrying margin stock, including the
Shares, if the credit is secured directly or indirectly by margin stock. Such
secured credit may not be extended or maintained in an amount that exceeds the
maximum loan value of all the direct
30
<PAGE> 33
and indirect collateral securing the credit, including margin stock and other
collateral. As described in Section 10 of this Offer to Purchase, the financing
of the Offer will not be directly or indirectly secured by the Shares or other
securities which constitute margin stock. Accordingly, all financing for the
Offer will be in full compliance with the Margin Regulations.
16. FEES AND EXPENSES.
Purchaser has retained D.F. King & Co., Inc. to act as the Information
Agent and State Street Bank and Trust Company to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by personal interview, mail, telephone, telex, telegraph and other methods of
electronic communication and may request brokers, dealers, commercial banks,
trust companies and other nominees to forward the Offer materials to beneficial
holders. The Information Agent and the Depositary will each receive reasonable
and customary compensation for their services. Purchaser has also agreed to
reimburse each such firm for certain reasonable out-of-pocket expenses and to
indemnify each such firm against certain liabilities in connection with their
services, including certain liabilities under federal securities laws.
Neither Parent nor Purchaser will pay any fees or commissions to any broker
or dealer or other person (other than the Information Agent) for making
solicitations or recommendations in connection with the Offer. Brokers, dealers,
banks and trust companies will be reimbursed by Purchaser for customary mailing
and handling expenses incurred by them in forwarding the Offer materials to
their customers.
17. MISCELLANEOUS.
The Offer is being made to all holders of Shares other than the Company.
Purchaser is not aware of any jurisdiction in which the making of the Offer or
the tender of Shares in connection therewith would not be in compliance with the
laws of such jurisdiction. 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 or one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED HEREIN OR IN THE
LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Purchaser and Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional
information with respect to the Offer. The Schedule 14D-1 and any amendments
thereto, including exhibits, may be examined and copies may be obtained at the
same places and in the same manner as set forth in Section 9 of this Offer to
Purchase (except that they will not be available at the regional offices of the
Commission).
EAGLE MERGER CORP.
December 23, 1999
31
<PAGE> 34
SCHEDULE I
1. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER AND PARENT. The following
table sets forth the name and present principal occupation or employment, and
material occupations, positions, offices or employment for the past five years
of the directors and executive officers of Purchaser and Parent. Except as
otherwise noted, each such person is a citizen of the United States. The
business address of each person is c/o EMC Corporation, 35 Parkwood Drive,
Hopkinton, Massachusetts 01748. Unless otherwise indicated, each person has held
his or her present position as set forth below, or has been an executive officer
of Parent for the past five years. Persons who are also directors or officers of
Purchaser are indicated with an asterisk ("*"). Their positions with the
Purchaser took effect in December, 1999.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ---- ------------------------------------------------------
<S> <C>
Michael J. Cronin............................ Mr. Cronin is a director of Parent. Mr. Cronin has
held the position of director since May 1990. He has
been chief executive officer of Cognition Corporation
since September 1987, where he is also the chairman of
the board of directors.
*Paul T. Dacier.............................. Mr. Dacier is a director and the secretary of
Purchaser. He has been vice president and general
counsel of Parent since February 1993.
*David A. Donatelli.......................... Mr. Donatelli is a director and the president of
Purchaser. Mr. Donatelli has been vice president, new
business development of Parent since April 1999. For
the five years prior to that time, he held senior
management positions with Parent.
John R. Egan................................. Since September 1998, Mr. Egan has been an employee of
Parent, providing ongoing services to various
organizations within Parent. Mr. Egan has been a
director of Parent since May 1992. He was executive
vice president, sales and marketing from January 1992
to June 1996. From May 1997 to September 1998, Mr.
Egan was executive vice president, products and
offerings.
Maureen E. Egan.............................. Mrs. Egan has been a director of Parent since March
1993. She is a member of the Hopkinton Technology for
Education Trust.
Richard J. Egan.............................. Mr. Egan has been the chairman of the board since
January 1988 and a director of Parent since 1979. He
is also a director of NSTAR and NetScout Systems, Inc.
</TABLE>
I-1
<PAGE> 35
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
NAME MATERIAL POSITIONS HELD DURING PAST FIVE YEARS
- ---- ------------------------------------------------------
<S> <C>
W. Paul Fitzgerald........................... Mr. Fitzgerald is a director of Parent. Mr. Fitzgerald
has held this position since March 1991. From January
1988 to March 1995, Mr. Fitzgerald was senior vice
president, finance and administration, and chief
financial officer. Mr. Fitzgerald was also treasurer
from October 1991 to March 1995.
Paul E. Noble, Jr. .......................... Mr. Noble is executive vice president, products and
offerings, of Parent. Mr. Noble has held this position
since September 1998. Mr. Noble was vice president and
general manager of OEM operations from June 1992 to
January 1998, and from January 1998 to September 1998
was senior vice president, new business development.
Joseph F. Oliveri............................ Mr. Oliveri has been a director of Parent since March
1993. He is president and chief executive officer of
Interface Electronics Corporation.
*Colin G. Patteson........................... Mr. Patteson is a director and the treasurer of
Purchaser. He has been senior vice president, chief
administrative officer and treasurer of Parent since
February 1997. He was vice president and corporate
controller from February 1993 to April 1995, and vice
president, chief financial officer and treasurer from
April 1995 to February 1997. Mr. Patteson is a citizen
of the United Kingdom.
Michael C. Ruettgers......................... Mr. Ruettgers is president, chief executive officer
and a director of Parent. Mr. Ruettgers has held the
position of president since October 1989, the position
of chief executive officer since January 1992 and the
position of director since May 1992. He is also a
director of PerkinElmer.
William J. Teuber, Jr. ...................... William J. Teuber is vice president and chief
financial officer of Parent. Mr. Teuber has held these
positions since February 1997. He was vice president
and controller from August 1995 to February 1997. From
1988 to August 1995, Mr. Teuber was a partner at
Coopers & Lybrand L.L.P.
Alfred M. Zeien.............................. Mr. Zeien has been a director of Parent since December
1999. He was chairman of the board and chief executive
officer of The Gillette Company from December 1994 to
June 1999. He is a director of The Gillette Company,
Massachusetts Mutual Life Insurance Company, Polaroid
Corporation and Raytheon Company.
</TABLE>
I-2
<PAGE> 36
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each stockholder of the Company or his
broker, dealer, commercial bank, trust company or other nominee to the
Depositary, at the applicable address set forth below:
The Depositary for the Offer is:
STATE STREET BANK AND TRUST COMPANY
<TABLE>
<CAPTION>
By Mail: By Hand: By Overnight Courier:
<S> <C> <C>
State Street Bank and Trust Securities Transfer & Reporting State Street Bank and Trust
Company Services, Inc. Company
c/o EquiServe c/o EquiServe c/o EquiServe
Attn: Corporate Actions 100 Williams Street Galleria Attn: Corporate Actions
P.O. Box 9573 New York, New York 10038 40 Campanelli Drive
Boston, Massachusetts 02205 Braintree, Massachusetts 02184
By Facsimile Transmission
(781) 575-4826
For Confirmation Telephone:
(781) 575-4816
</TABLE>
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and
the other tender offer materials may be directed to the Information Agent at the
address and telephone number set forth below. Stockholders may also contact
their broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 628-8532
<PAGE> 1
Exhibit (7)
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is entered into
as of December 21, 1999 by and among EMC Corporation, a Massachusetts
corporation ("Parent"), Eagle Merger Corp., a Delaware corporation and a wholly
owned subsidiary of Parent (the "Purchaser"), and Computer Concepts Corp., a
Delaware corporation (the "Major Shareholder"). Capitalized terms used and not
otherwise defined herein shall have the respective meanings ascribed in Section
1 hereof.
WHEREAS, Parent, Purchaser and Softworks, Inc., a Delaware
corporation (the "Company"), are parties to an Agreement and Plan of Merger
dated as of December 21, 1999 (the "Merger Agreement") which provides that,
among other things, upon the terms and subject to the conditions thereof,
Purchaser will be merged with and into the Company, with the Company continuing
as the surviving corporation (in such capacity, the "Surviving Entity"); and
WHEREAS, Parent, Purchaser, the Major Shareholder and James
Cannavino, Dennis Murray and Charles Feld, as trustees (the "Trustees") under
the Voting Trust Agreement, are parties to a Stock Tender Agreement dated as of
December 21, 1999 (the "Stock Tender Agreement") which provides that, among
other things, the Major Shareholder and the Trustees will take such actions as
may be necessary to tender the Shares held by the Major Shareholder pursuant to
the Offer, grant Parent an option to purchase such Shares under certain
circumstances and grant Purchaser a proxy with respect to the voting of such
Shares, all upon the terms and subject to the conditions set forth in the Stock
Tender Agreement; and
WHEREAS, Parent, Purchaser, the Company, the Major Shareholder
and State Street Bank and Trust Company, Inc., a Massachusetts trust company, as
escrow agent (the "Escrow Agent"), are entering into an Escrow Agreement dated
as of December 21, 1999 (the "Escrow Agreement") which provides that, among
other things, a portion of the consideration received by the Major Shareholder
in consideration of the purchase of the Shares held by the Major Shareholder
pursuant to the Offer be deposited into escrow, upon the terms and subject to
the conditions set forth in the Escrow Agreement; and
<PAGE> 2
WHEREAS, as a condition and inducement to Parent and Purchaser
entering into the Merger Agreement, Parent and Purchaser have requested that the
Major Shareholder agree, and the Major Shareholder has agreed, to provide
indemnification to Parent, Purchaser and the Surviving Entity, upon the terms
and subject to the conditions set forth below.
NOW, THEREFORE, in consideration of the foregoing and the
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Parent, Purchaser and
the Major Shareholder hereby agree as follows:
1. Certain Definitions. For purposes of this Agreement, except as
otherwise expressly provided or unless the context clearly requires otherwise:
(a) "Closing" shall mean the consummation of the purchase by
Purchaser of Shares in the Offer.
(b) "Escrow Amount" shall mean $10 million.
(c) "Governmental Entity" shall mean a court, arbitral
tribunal, administrative agency or commission or other governmental or other
regulatory authority or agency, whether domestic or foreign.
(d) "Loss" or "Losses" shall mean any loss, liability
(including any liability for Taxes), damage, deficiency, fine, penalty, cost and
expense (including reasonable expenses of investigation, amounts paid in
settlement, interest, court costs, reasonable fees and expenses of attorneys and
accountants and other costs of litigation).
(e) "Offer" shall mean the cash tender offer to be made by
Purchaser pursuant to Section 1.1 of the Merger Agreement to acquire any and all
issued and outstanding Shares at $10.00 per Share net to the seller in cash, or
such increased amount, if any, as the Purchaser may offer to pay as contemplated
by Section 1.1(a) and Section 5.5(b) of the Merger Agreement.
(f) "Person" shall mean a natural person, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, Governmental Entity or other
entity or organization.
2
<PAGE> 3
(g) "Shares" shall mean the shares of common stock, par
value $.001 per share, of the Company.
(h) "Subsidiary" shall mean, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (a) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or (b) such party or any other Subsidiary
of such party is a general partner (excluding any such partnership where such
party or any Subsidiary of such party does not have a majority of the voting
interest in such partnership).
(i) "Tax" or "Taxes" shall mean all taxes, charges, fees,
duties, levies, tariffs, imposts, penalties or other assessments of any kind
imposed by any federal, state, local or foreign governmental authority,
including, but not limited to, income, gross receipts, excise, profits, ad
valorem, net worth, value added, service, special assessments, workers'
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, real or personal property, sales, gain, use,
license, custom duty, unemployment, capital stock, transfer, franchise,
payroll, withholding, social security, minimum estimated, and other taxes, and
shall include interest, penalties or additions attributable thereto; provided
that "Tax" or "Taxes" as used herein shall not include (i) any amounts arising
as a result of the filing of any amended tax return filed by the Company unless
such amendment is required by applicable law, rule or regulation or (ii) as a
result of the negligence of Parent or Purchaser.
(j) "Voting Trust Agreement" shall mean the Voting Trust
Agreement, dated as of August 3, 1998, between the Company, the Major Share-
holder and the Trustees.
2. Indemnification.
(a) (i) The Major Shareholder shall indemnify and hold
harmless Parent, Purchaser, the Surviving Entity and their respective
Subsidiaries and officers, directors, employees and agents (the "Indemnified
Parties") from and against and in respect of any Loss incurred or sustained by
any of them as a result of any breach (A) by the Company of any of the
representations or warranties relating to the Company contained in Sections 3.3,
3.9, 3.10, 3.11, 3.12, 3.13, 3.16 and 3.18
3
<PAGE> 4
of the Merger Agreement and (B) by the Major Shareholder of any of the
representations and warranties relating to the Major Shareholder contained in
Section 11 of the Stock Tender Agreement. The Major Shareholder shall not be
required to indemnify any Indemnified Party under this Section 2(a) unless and
until the aggregate Losses with respect to which the Indemnified Parties are
entitled to indemnification hereunder exceed $100,000, in which case the
parties incurring the indemnification obligations with respect to such Losses
shall be responsible for the entire amount of such Losses. In no event shall any
Indemnified Party be entitled to indemnification for any Losses incurred by such
Indemnified Party to the extent that such Indemnified Party has already actually
received payment for such Losses pursuant to this Section 2(a). No investigation
made by Parent or Purchaser or any other Person shall affect any representation
or warranty of the Company or the Major Shareholder contained in the Merger
Agreement or the Stock Tender Agreement.
(b) To secure the indemnification obligations described in
Section 2(a) hereof, the Escrow Amount will be deposited into escrow with the
Escrow Agent in accordance with Section 2 of the Escrow Agreement. The Escrow
Amount will be subject to delivery to Parent upon the terms and subject to the
conditions set forth within the Escrow Agreement.
3. Procedure for Indemnification.
(a) An Indemnified Party shall give prompt written notice (a
"Claim Notice") to the Escrow Agent, with a copy to the Major Shareholder, of
any claim or event known to it which does, or in its reasonable judgment may,
give rise to a claim for indemnification hereunder (an "Indemnifiable Claim") by
the Indemnified Party against the Major Shareholder; provided that the failure
of any Indemnified Party to give Claim Notice as provided in this Section 3(a)
shall not relieve the Major Shareholder of its obligations under this Agreement,
except to the extent that such failure has materially and adversely affected the
rights of the Major Shareholder. A Claim Notice shall specify the basis for and
estimated amount of such Indemnifiable Claim. In the case of any claim for
indemnification hereunder arising out of a claim, action, suit or proceeding
brought by any Person who is not a party to this Agreement (a "Third-Party
Claim"), the Indemnified Party shall also give the Major Shareholder copies of
any written claims, process or legal pleadings with respect to such Third-Party
Claim promptly after such documents are received by the Indemnified Party.
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<PAGE> 5
(b) The Indemnified Party shall be entitled to control the
defense of any Third-Party Claim; provided, however, that the Major Shareholder
may elect, at its own cost and expense, to participate in any Third-Party Claim;
provided further, however, that the Major Shareholder shall not take any action
with respect to such Third-Party Claim before consulting with, and receiving the
consent of, each Indemnified Party involved. The Major Shareholder shall
reasonably cooperate in the compromise of, or defense against, such Third-Party
Claim. The Major Shareholder shall pay its own costs and expenses incurred in
connection with such cooperation. The Indemnified Party shall not consent to
entry of any judgement or enter into any settlement without the prior written
consent of the Major Share holder (which consent shall not be unreasonably
withheld).
(c) If the Indemnified Party elects not to compromise or
defend against a Third-Party Claim, the Major Shareholder shall pay, compromise
or defend such Third-Party Claim at the Major Shareholder's own cost and
expense. Major Shareholder shall, within ten days (or sooner, if the nature of
such Third-Party Claim so requires), notify the Indemnified Party of its intent
to pay, compromise or defend such Third-Party Claim, and such Indemnified Party
shall reasonably cooperate in the compromise of, or defense against, such
Third-Party Claim. The Major Shareholder shall pay the Indemnified Party's costs
and expenses incurred in connection with such cooperation. The Major Shareholder
shall not consent to entry of any judgment or enter into any settlement without
the prior written consent of each related Indemnified Party (which consent shall
not be unreasonably withheld), unless such judgment or settlement provides
solely for money damages or other money payments for which such Indemnified
Party is entitled to indemnification hereunder and includes as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect of such Third-Party Claim. After
notice from the Major Shareholder to an Indemnified Party of its election to
assume the defense of a Third-Party Claim, the Major Shareholder shall not be
liable to such Indemnified Party under Sections 2 or 3 hereof for any legal
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof; provided that such Indemnified Party shall have the right to
employ one counsel of its choice to represent such Indemnified Party if, in such
Indemnified Party's reasonable judgment, a conflict of interest between such
Indemnified Party and the Major Shareholder exists in respect of such claim, or
if there is a reasonable likelihood that a Third-Party Claim may have a material
adverse effect on an Indemnified Party, and in that event the reasonable fees
and expenses of such separate counsel shall be paid by the Major Shareholder.
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<PAGE> 6
(d) If the amount of any Losses shall, at any time
subsequent to payment pursuant to this Agreement, be reduced by recovery,
settlement or otherwise, the amount of such reduction, less any expenses
incurred in connection therewith, shall promptly be repaid by the Indemnified
Party to the Major Shareholder.
4. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
sent by facsimile (if confirmed) or mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, as specified below):
(a) if to Parent, Purchaser or the Surviving Entity, to:
EMC Corporation
35 Parkwood Drive
Hopkinton, Massachusetts 01748
Attention: Vice President, Corporate Development
Telephone No.: (508) 435-1000
Facsimile No.: (508) 435-8900
with a copy to:
EMC Corporation
35 Parkwood Drive
Hopkinton, Massachusetts 01748
Attention: Office of the General Counsel
Telephone No.: (508) 435-1000
Facsimile No.: (508) 497-6915
and a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street, 31st Floor
Boston, Massachusetts 02108
Attention: Margaret A. Brown, Esq.
Telephone No.: (617) 573-4800
Facsimile No.: (617) 573-4822
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<PAGE> 7
(b) If to the Major Shareholder:
Computer Concepts Corp.
80 Orville Drive
Bohemia, New York 11716
Attention: Daniel DelGiorno, Jr., President
Telephone No.: (516) 244-1500
Facsimile No.: (516) 244-1468
With a copy to:
Beckman, Millman & Sanders LLP
116 John Street
New York, New York 10038
Attention: Michael Beckman, Esq.
Telephone No.: (212) 406-4700
Facsimile No.: (212) 406-3750
(c) If to the Escrow Agent:
State Street Bank and Trust Company, Inc.
2 Avenue de Lafayatte
Boston, Massachusetts 02111
Attention: Corporate Trust, 6th Floor
Telephone No.: (617) 662-1806
Facsimile No.: (617) 662-1463
The address of a party for the purposes of this Section 4 may be changed by
giving written notice to the other parties hereto of such change in the manner
provided herein for giving notice. Unless and until such written notice is
received, the addresses as provided herein shall be deemed to continue in effect
for all purposes hereunder.
5. Entire Agreement; Binding Effect. This Agreement and the
agreements, documents and other instruments referred to herein (a) constitute
the entire agreement, and supersede all other agreements and understandings,
both written and oral, between the parties with respect to the subject matter
hereof and (b) shall not be assigned by any party (by operation of law or
otherwise) without the prior written consent of the other parties.
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<PAGE> 8
6. Applicable Law. This Agreement shall be governed by and be
construed in accordance with the laws of the State of Delaware, without giving
effect to the principles thereof relating to conflicts of law.
7. Consent to Jurisdiction. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Federal court
located in the Commonwealth of Massachusetts or any Massachusetts state court in
the event any dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a Federal or state court sitting in the Commonwealth of
Massachusetts.
8. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective successors
and permitted assigns, and nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
9. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto on separate counterparts, each of which,
when so executed and delivered, shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10. Interpretation. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." Unless otherwise indicated herein or
the context otherwise requires, the masculine pronoun shall include the feminine
and neuter, and the singular shall include the plural. The word "or" shall not
be deemed exclusive.
11. Severability. In case any term, provision, covenant or
restriction of this Agreement is held to be invalid, illegal or unenforceable
by a competent court in any jurisdiction, the validity, legality and
enforceability of the remaining terms, provisions, covenants or restrictions, or
of such term, provision, covenant or
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<PAGE> 9
restriction in any other jurisdiction, shall not in any way be affected or
impaired thereby.
12. Amendment and Waiver. No amendment of any provision of this
Agreement shall in any event be effective, unless the same shall be in writing
and signed by the parties hereto. Any failure of any party to comply with any
obligation, agreement or condition hereunder may only be waived in writing by
the other party, but such waiver shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure. No failure by any party to
take any action against any breach of this Agreement or default by the other
party shall constitute a waiver of such party's right to enforce any provision
hereof or to take any such action.
13. Termination. This Agreement shall terminate two years after
the date upon which the Closing occurred; provided, however, that if prior to
such date, the Major Shareholder or the Escrow Agent shall have received a Claim
Notice in accordance with Section 3(a) hereof, this Agreement shall not
terminate until such outstanding Indemnifiable Claim has been finally resolved.
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<PAGE> 10
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement under seal as of the date first written above.
EMC CORPORATION
By: /s/ Michael J. Cody
---------------------------------------------
Name: Michael J. Cody
Title: Vice President, Corporate Development
EAGLE MERGER CORP.
By: /s/ Paul T. Dacier
---------------------------------------------
Name: Paul T. Dacier
Title: Secretary
COMPUTER CONCEPTS CORP.
By: /s/ Daniel DelGiorno
---------------------------------------------
Name: Daniel DelGiorno
Title: Chairman
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<PAGE> 1
EXHIBIT 8
INDEMNITY AGREEMENT
AGREEMENT made the 21st day of December, 1999 by and between:
PARTIES
CCC: Computer Concepts Corp., a Delaware corporation.
SOFTWORKS: Softworks, Inc., a Delaware corporation.
FACTS
A. Softworks is entering into a agreement of merger (the "Merger Agreement")
with Parent and Merger Sub which provides certain provisions relative to an
offer for the outstanding common stock of Softworks (the "Stock").
B. Parent and Merger Sub have required that CCC, as a major shareholder of
Softworks, enter into a Tender Agreement for the Stock owned by CCC which
provides for certain representations, warranties and covenants.
C. Parent and Merger Sub are providing in the Merger Agreement that a breach of
the obligations of CCC under the Tender Agreement shall be deemed a breach by
Softworks of the Merger Agreement with provisions for certain costs and fees to
be incurred by Softworks in such event.
D. In order to induce Softworks to enter into the Merger Agreement, CCC has
agreed, in accordance with the terms of this agreement, to provide certain
assurances and hold harmless provisions to Softworks where CCC defaults under
specified terms of the Tender Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and covenants herein
contained, it is agreed among the Parties as follows:
1. DEFINITIONS: All defined terms set forth in the Merger Agreement and or
Tender Agreement are hereby incorporated by reference.
<PAGE> 2
2. THE APPLICABLE PROVISION:
2.1. Parent and Merger Sub have demanded that Softworks agree to the
provisions of Paragraphs 7.1(d)(iv) and (v) of the Merger Agreement which
provides for certain obligations of Softworks in the event that CCC breaches any
representation, warranty, covenant or other agreement contained in the Tender
Agreement or that an injunction, as described in the Merger Agreement, is issued
preventing CCC from fulfilling its obligations under the Tender Agreement, and
such action gives rise to the failure of a condition set forth in Paragraph (h)
of Annex A to the Merger Agreement.
2.2. CCC acknowledges that Softworks would not enter into the Merger
Agreement without CCC agreeing to the obligations provided for herein.
3. INDEMNITY
3.1. CCC agrees to indemnify Softworks and its officers and directors
against all expenses, claims, losses, damages, liabilities or termination fees
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on the payment of a termination fee and related expenses by Softworks where
Parent terminates the transaction contemplated by the Merger Agreement pursuant
to Paragraphs 7.1(d)(iv) and (v) of the Merger Agreement, and CCC will reimburse
Softworks and its officers and directors, for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, provided that CCC shall in no
event be obligated for any amount in excess of the amount paid pursuant to said
Paragraphs 7.1(d)(iv) and (v).
3.2. Softworks (the "Indemnified Party") shall give notice (the "Notice
of Claim") to CCC (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought.
3.3. Within three (3) days of receipt of the Notice of Claim,
Indemnifying Party shall advise Indemnified Party as to whether they agree to
the claim or are electing to defend such claim.
3.3.1. Where Indemnifying Party agrees to the claim,
Indemnifying Party shall promptly pay to or on behalf of Indemnified Party, the
amount of the claim.
3.3.2. Where Indemnifying Party, in the exercise of its
reasonable judgement, disputes the claim, Indemnified Party shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by
Indemnified Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's expense, and
provided further that the failure of Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its
<PAGE> 3
obligations under this Section unless the failure to give such notice is
materially prejudicial to the Indemnifying Party's ability to defend such action
and provided further, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses. Indemnifying Party, in the defense of any such claim or
litigation, shall not, except with the consent of Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
Indemnified Party of a release from all further liability in respect to such
claim or litigation.
4. WARRANTIES AND REPRESENTATIONS: CCC and Softworks each represent and warrant
that:
4.1. Its respective Board of Directors has approved this agreement and
has the authority to enter into this agreement and its principals are under no
obligation or disability which might prevent them from performing their
obligations thereunder:
4.2. It will execute further documents or perform any further acts
which may reasonably be required to effect the arrangements specified in this
agreements.
5. GENERAL TERMS
5.1. Amendment This Agreement may not be validly modified, amended,
rescinded, changed or discharged unless the same is in writing, and signed by
the Parties affected thereby, or by their duly authorized agents.
5.2. Entire Agreement This Agreement embodies the entire agreement and
understanding of the Parties hereto with respect to the indemnity and hold
harmless provisions herein contained, and there are no agreements,
understandings or representations made or existing between the Parties hereto,
with respect to the indemnity and hold harmless provisions herein contained,
except as is herein expressly set forth.
5.3. Binding Effect Of Agreement This Agreement shall be binding not
only on the Parties hereto, but also on their heirs, executors, administrators,
successors, and assigns, and the Parties hereto agree for themselves and their
heirs, executors, administrators, successors, and assigns, to execute any
instruments which may be necessary or proper to carry out the purposes and
intent of this Agreement.
5.4. Effect of a Waiver No waiver of a provision of this Agreement
shall be deemed a waiver of any other provisions or shall a waiver of the
performance of a provision in one or more instances be deemed a waiver of future
performance thereof.
<PAGE> 4
5.5. Governing Law: This understanding is to be governed and construed
in accordance with the law of the State of Delaware applicable to contracts
entered into and to be fully performed therein, without reference to the
principles of conflict of laws.
5.6. Separability If any provision of this Agreement shall be
determined by the arbitrators, or by any Court having jurisdiction, to be
invalid, illegal or unenforceable, the remainder of this Agreement shall not be
affected thereby but shall continue in full force and effect as though such
invalid, illegal or unenforceable provision were not originally a part hereof.
5.7. Counterparts. This Agreement may be executed in any number of
counterparts, and all of which together shall constitute one instrument.
5.8. Legal Requirements: Nothing contained in this agreement shall be
construed so as to require the commission of any act contrary to law, and
wherever there is any conflict between any provision of this agreement and any
material statute, law, ordinance, order or regulation contrary to which the
parties have no legal right to contract, the latter shall prevail, but in such
event any provisions of this agreement so affected shall be curtailed and
limited only to the extent necessary to bring it within the legal requirements;
provided, however, that no other provision of this agreement shall be affected
thereby and such other provisions shall continue in full force and effect.
5.9. Headings Paragraph headings used herein are for convenience only
and shall not be deemed a part of this Agreement.
6. NOTICES
6.1. Any notice to be given hereunder shall be sent by registered or
certified mail, return receipt requested, by overnight carrier, or telecopy to a
facsimile number provided by the respective party with a copy sent by regular
mail, or by delivering the same personally to the parties. Any party may
designate the applicable address by notice so given. Copies of all notices shall
be sent to the parties as hereto named above and, in addition:
Copies of all notices shall be sent to:
Beckman Millman & Sanders LLP
Suite 1313
116 John Street
New York, New York 10038
Attn: Michael Beckman, Esq.
fax 212-406-3750
<PAGE> 5
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, NY 11753
Attn: David Lieberman, Esq.
fax (516)822-4824
6.2. Any notice mailed, sent by overnight carrier or personally
delivered as aforesaid shall be deemed to have been given on the date of
receipt; telecopies shall be deemed received on the business day after being
sent by telecopy.
IN WITNESS WHEREOF, the Parties hereto have set their hands as of the
day and year first above written.
Computer Concepts Corp. Softworks, Inc.
By:___________________________ By:________________________________
<PAGE> 1
Exhibit (6)
ESCROW AGREEMENT
This Escrow Agreement (the "Escrow Agreement") is entered into
as of December 21, 1999 by and among EMC Corporation, a Massachusetts
corporation ("Parent"), Eagle Merger Corp., a Delaware corporation and a wholly
owned subsidiary of Parent (the "Purchaser"),Computer Concepts Corp., a Delaware
corporation (the "Major Shareholder"), and State Street Bank and Trust Company,
Inc., a Massachusetts trust company, as escrow agent (the "Escrow Agent").
Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed in Section 1 hereof.
WHEREAS, Parent, Purchaser and Softworks, Inc., a Delaware
corporation (the "Company"), are parties to an Agreement and Plan of Merger
dated as of December 21, 1999 (the "Merger Agreement") which provides that,
among other things, upon the terms and subject to the conditions thereof,
Purchaser will be merged with and into the Company (the "Merger"), with the
Company continuing as the surviving corporation (in such capacity, the
"Surviving Entity"); and
WHEREAS, Parent, Purchaser, the Major Shareholder and James
Cannavino, Dennis Murray and Charles Feld, as trustees (the "Trustees") under
the Voting Trust Agreement, are parties to a Stock Tender Agreement dated as of
December 21, 1999 (the "Stock Tender Agreement") which provides that, among
other things, the Major Shareholder and the Trustees will take such actions as
may be necessary to tender the Shares held by the Major Shareholder pursuant to
the Offer, grant Parent an option to purchase such Shares under certain
circumstances and grant Purchaser a proxy with respect to the voting of such
Shares, all upon the terms and subject to the conditions set forth in the Stock
Tender Agreement; and
WHEREAS, as a condition and inducement to Parent and Purchaser
entering into the Merger Agreement, Parent and Purchaser have requested that the
Major Shareholder agree, and the Major Shareholder has agreed, to provide
indemnification to Parent, Purchaser and the Surviving Entity, as set forth in
the Indemnification Agreement dated as of the date hereof by and among Parent,
Purchaser and the Major Shareholder (the "Indemnification Agreement"); and
WHEREAS, Parent, Purchaser and the Major Shareholder desire
that a portion of the consideration received by the Major Shareholder in
consideration of the purchase of the Shares held by the Major Shareholder
pursuant to the Offer be deposited into escrow, upon the terms and subject to
the conditions set forth below in order to secure the indemnification
obligations set forth in the Indemnification Agreement.
<PAGE> 2
NOW, THEREFORE, in consideration of the foregoing and the
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Parent, Purchaser, the
Major Shareholder and the Escrow Agent hereby agree as follows:
1. Certain Definitions. For purposes of this Escrow Agreement,
except as otherwise expressly provided or unless the context clearly requires
otherwise:
(a) "Closing" shall mean the consummation of the
purchase by Purchaser of Shares in the Offer.
(b) "Escrow Amount" shall mean $10 million.
(c) "Escrow Release Date" shall mean close of
business (Eastern United States time) on the date 12 months after the date upon
which the Closing occurred.
(d) "Interested Parties" shall mean Parent,
Purchaser, the Surviving Entity and their respective Subsidiaries and officers,
directors, employees and agents.
(e) "Loss" or "Losses" shall mean any loss, liability
(including any liability for Taxes), damage, deficiency, fine, penalty, cost and
expense (including reasonable expenses of investigation, amounts paid in
settlement, interest, court costs, reasonable fees and expenses of attorneys and
accountants and other costs of litigation).
(f) "Offer" shall mean the cash tender offer to be
made by Purchaser pursuant to Section 1.1 of the Merger Agreement to acquire any
and all issued and outstanding Shares at $10 per Share net to the seller in
cash, or such increased amount, if any, as the Purchaser may offer to pay as
contemplated by Section 1.1(a) and Section 5.5(b) of the Merger Agreement.
(g) "Shares" shall mean the shares of common stock,
par value $.001 per share, of the Company.
(h) "Subsidiary" shall mean, with respect to any
party, any corporation or other organization, whether incorporated or
unincorporated, of which (a) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
Board of Directors or others per-
2
<PAGE> 3
forming similar functions with respect to such corporation or other organization
is directly or indirectly owned or controlled by such party or by any one or
more of its Subsidiaries, or (b) such party or any other Subsidiary of such
party is a general partner (excluding any such partnership where such party or
any Subsidiary of such party does not have a majority of the voting interest in
such partnership).
(i) "Tax" or "Taxes" shall mean all taxes, charges,
fees, duties, levies, tariffs, imposts, penalties or other assessments of any
kind imposed by any federal, state, local or foreign governmental authority,
including, but not limited to, income, gross receipts, excise, profits, ad
valorem, net worth, value added, service, special assessments, workers'
compensation, utility, severance, production, excise, stamp, occupation,
premiums, windfall profits, real or personal property, sales, gain, use,
license, custom duty, unemployment, capital stock, transfer, franchise, payroll,
withholding, social security, minimum estimated, and other taxes, and shall
include interest, penalties or additions attributable thereto; provided that
"Tax" or "Taxes" as used herein shall not include (i) any amounts arising as a
result of the filing of any amended tax return filed by the Company unless such
amendment is required by applicable law, rule or regulation or (ii) as a result
of the negligence of Parent or the Purchaser.
(j) "Voting Trust Agreement" shall mean the Voting
Trust Agreement, dated as of August 3, 1998, between the Company, the Major
Share holder and the Trustees.
2. Escrow Funds.
(a) At the Closing, the Major Shareholder shall
deposit the Escrow Amount with the Escrow Agent by wire transfer of immediately
available funds. In satisfaction of the obligation in the preceding sentence,
the Major Share holder hereby irrevocably authorizes the Purchaser to deliver to
the Escrow Agent a portion of the proceeds payable to the Major Shareholder from
the purchase of the Shares of the Major Shareholder in the Offer equal to the
Escrow Amount. The Escrow Agent agrees to hold and administer the Escrow Amount,
together with any investment income earned thereon pursuant to the terms hereof
(such deposit amount together with such income, if any, collectively, the
"Escrow Funds") subject to the terms of this Escrow Agreement.
3. Investment of Escrow Funds; Interest
(a) The Escrow Agent shall invest the Escrow Funds
at, and pursuant to, the written direction of Parent and Major Shareholder, or
if no such
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<PAGE> 4
direction shall be given, to the extent possible, in United States Treasury
bills having a remaining maturity of 90 days or less and repurchase obligations
secured by such United States Treasury bills, with any remainder being deposited
and maintained in a money market deposit account with the Escrow Agent until
disbursement of all of the Escrow Funds in accordance with this Escrow
Agreement. The Escrow Agent is authorized to liquidate in accordance with its
customary procedures any portion of the Escrow Funds consisting of investments
to provide for payments required to be made therefrom under this Escrow
Agreement. Any income earned or accrued with respect to the Escrow Amount shall
be taxable solely to the Major Shareholder, and the parties shall follow the
procedures set forth in Section 3(b) hereof with respect thereto. The Escrow
Agent shall have no liability for any investment losses, including any losses on
any investment required to be liquidated prior to maturity in order to make a
payment required hereunder.
(b) All interest or other amounts earned on the
Escrow Amount shall be added to the, and shall then be considered, Escrow Funds
and shall be considered the currently reportable income, for all tax purposes,
of the Major Shareholder.
(c) The Escrow Agent shall provide the Major Share
holder with such information as may be required by the Major Shareholder in
connection with the filings and notices to be made by the Major Shareholder.
4. Claims on Escrow Funds.
(a) At any time on or prior to the Escrow Release
Date (as defined in Section 1(c)), Parent, Purchaser or the Surviving Entity
("the Indemnified Party") may assert an indemnification claim pursuant to the
Indemnification Agreement (an "Indemnification Claim"), by sending written
notice to the Escrow Agent, with a copy to the Major Shareholder ("Notice of
Claim"). The Notice of Claim shall state the basis for the Indemnification Claim
and the estimated amount claimed (the "Claimed Amount"). Upon receipt, on or
before the Escrow Release Date, by the Escrow Agent and the Major Shareholder,
of a Notice of Claim from an Indemnified Party that such Indemnified Party is
asserting an Indemnification Claim, the Escrow Agent shall retain, set aside and
continue to hold the Escrow Funds, or such lesser portion of the Escrow Funds
having a value equal to the Claimed Amount, in escrow hereunder subject to the
further provisions hereof.
(b) Within 15 Business Days (as hereinafter defined)
after the receipt of a Notice of Claim by the Escrow Agent, the Major
Shareholder shall provide to Parent and the Surviving Entity, with a copy to the
Escrow Agent, a
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<PAGE> 5
written response (a "Response Notice") in which the Major Shareholder shall: (i)
agree that the full Claimed Amount specified in such Notice of Claim shall be
released to Parent from the Escrow Funds, (ii) agree that part, but not all, of
the Claimed Amount specified in such Notice of Claim (the "Agreed Amount") may
be released to Parent from the Escrow Funds and contest the release to Parent of
the balance of such Claimed Amount or (iii) contest the release to Parent of any
part of the Claimed Amount specified in such Notice of Claim from the Escrow
Funds. If no Response Notice is received by the Escrow Agent by 5:00 p.m.
(Eastern United States time) on the last Business Day of such 15 Business Day
period, the Major Shareholder shall be deemed to have agreed that all of the
Claimed Amount shall be released to Parent from the Escrow Funds. As used
herein, "Business Day" shall mean any day other than a Saturday, Sunday or a day
on which banking institutions in the Commonwealth of Massachusetts are
authorized or obligated by law or executive order to close.
(c) If the Major Shareholder in any Response Notice
agrees (or is deemed to have agreed) that the entire Claimed Amount specified in
such Notice of Claim may be released to Parent from the Escrow Funds, the Escrow
Agent shall promptly thereafter pay to Parent the Escrow Funds having an
aggregate value equal to the Claimed Amount (or such lesser value of Escrow
Funds as are held in escrow hereunder at such time).
(d) If the Major Shareholder in any Response Notice
agrees that part, but not all, of the Claimed Amount specified in the related
Notice of Claim may be released to Parent from the Escrow Funds, the Escrow
Agent shall promptly thereafter, following the receipt of the Response Notice by
the Escrow Agent, pay to Parent the Escrow Funds having an aggregate value equal
to the Agreed Amount (or such lesser amount of the Escrow Funds as are held in
escrow hereunder at such time).
(e) If the Major Shareholder in any Response Notice
contests the release of all or part of the Claimed Amount specified in the
related Notice of Claim (the "Contested Amount"), the matter shall be resolved
or settled either by mutual agreement of Parent and the Major Shareholder, by
arbitration if Parent and the Major Shareholder mutually agree thereto or by a
final order, decree or judgment of a court of competent jurisdiction in the
United States of America (which order, decree or judgment shall have become
final by expiration of the applicable appeal period without appeal having been
perfected or by definitive resolution of the dispute by the highest court to
which an appeal may be made), all costs and expenses of which shall be borne by
the losing party in any such proceeding (with costs and expenses to be assessed
and assigned by the arbitrator in the
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event of an arbitration in which there is no losing party). Notwithstanding any
provision of this Escrow Agreement or the Merger Agreement to the contrary,
after delivery of any Response Notice which contests the Claimed Amount
specified in the related Notice of Claim, the Escrow Agent, pursuant to this
Section 4, shall continue to hold Escrow Funds having a value equal to the
Contested Amount (up to the amount of Escrow Funds then held in escrow
hereunder), notwithstanding the occurrence of the Escrow Release Date, until (i)
receipt by the Escrow Agent of a copy of a settlement agreement executed by
Parent and the Major Shareholder setting forth written instructions to the
Escrow Agent as to the release of the Escrow Funds, if any, that shall be made
with respect to the Contested Amount, (ii) receipt by the Escrow Agent of a
final order, decree or judgment of a court of competent jurisdiction in the
United States of America as described above or (iii) receipt by the Escrow Agent
of a copy of a final arbitration decision, setting forth written instructions
to the Escrow Agent as to the release of the Escrow Funds, if any, that shall be
made with respect to the Contested Amount. Upon the mutual direction of the
parties or upon receipt of such order, decree, judgment or decision, the Escrow
Agent shall promptly thereafter release those Escrow Funds from escrow (to the
extent that any portion of the Escrow Funds is then held in escrow hereunder) in
accordance with such agreement, order, decree, judgment or instructions. The
Escrow Agent shall be under no duty whatsoever to institute or defend any
proceedings which might in its judgment involve expense or liability unless it
shall have been furnished with indemnity from Parent and the Major Shareholder
acceptable to it. The Escrow Agent shall have the right to interplead the
parties to any dispute in any court of competent jurisdiction and request that
such court determine the respective rights of the parties with respect to this
Escrow Agreement, and upon doing so, the Escrow Agent shall be released from any
obligations or liability as a consequence of such claims or demands.
(f) Within three Business Days after the Escrow
Release Date, the Escrow Agent shall release to the Major Shareholder an amount
equal to the amount, if any, by which the Escrow Funds then exceeds the
aggregate Claimed Amount in respect of all Indemnification Claims theretofore
asserted by the Indemnified Party and not theretofore finally resolved,
including any Contested Claims ("Outstanding Claims"). Under no circumstances
should the terms of this Escrow Agreement require the Escrow Agent to release or
distribute escrowed funds or property (or take similar action, such as making a
draw on an underlying letter of credit) sooner than two Business Days after the
Escrow Agent has received the requisite notices or paperwork in good form, or
passage of the applicable claims period or release date, as the case may be.
5. Duties of Escrow Agent.
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(a) The Escrow Agent shall not be under any duty to
give the Escrow Funds held by it hereunder any greater degree of care than it
gives its own similar property and shall not be required to invest any funds
held hereunder except as directed in this Escrow Agreement.
(b) The Escrow Agent shall not be liable to anyone
for any action taken or omitted to be taken by it hereunder, except for its own
gross negligence or willful misconduct, and except with respect to claims based
upon such gross negligence or willful misconduct that are successfully asserted
against the Escrow Agent, the Interested Parties hereto shall jointly and
severally indemnify and hold harmless the Escrow Agent from and against any and
all losses, liabilities, claims, actions, damages and expenses, including
reasonable attorneys' fees and disbursements, arising out of and in connection
with this Escrow Agreement. Without limiting the foregoing, the Escrow Agent
shall in no event be liable in connection with its investment or reinvestment of
the Escrow Funds held by it hereunder in good faith, in accordance with the
terms hereof, including without limitation any liability for any delays (not
resulting from its gross negligence or willful misconduct) in the investment or
reinvestment of the Escrow Funds, or any loss of interest incident to any such
delays. The foregoing indemnification and agreement to hold harmless shall
survive the termination of this Escrow Agreement.
(c) The Escrow Agent shall be entitled to rely upon
any order, judgment, certification, demand, notice, instrument or other writing
delivered to it hereunder reasonably believed by the Escrow Agent to be
authentic, correct and properly and validly served without being required to
determine the authenticity or the correctness of any fact stated therein or the
propriety or validity of the service thereof. The Escrow Agent may act in
reliance upon any instrument or signature reasonably believed by it to be
genuine and may assume that the person purporting to give notice or advice or
make any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so.
(d) The Escrow Agent may act pursuant to the advice
of counsel with respect to any matter relating to this Escrow Agreement and
shall not be liable for any action taken or omitted by it in accordance with
such advice, except that the Escrow Agent shall be liable for any actions or
omissions which result from the Escrow Agent's gross negligence or willful
misconduct.
Each Interested Party and the Major Shareholder acknowledges
and agrees that the Escrow Agent (i) shall not be responsible for any of the
agreements referred to or described herein (including without limitation the
Indemnification Agreement) or for determining or compelling compliance
therewith, and shall not
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otherwise be bound thereby, and (ii) shall be obligated only for the performance
of such duties as are expressly and specifically set forth in this Escrow
Agreement on its part to be performed, each of which are ministerial (and shall
not be construed to be fiduciary) in nature, and no implied duties or
obligations of any kind shall be read into this Escrow Agreement against or on
the part of the Escrow Agent.
In no event shall the Escrow Agent be liable for indirect,
punitive, special or consequential damage or loss (including but not limited to
lost profits) whatsoever, even if the Escrow Agent has been informed of the
likelihood of such loss or damage and regardless of the form of action.
The Escrow Agent shall have no more or less responsibility or
liability on account of any action or omission of any book-entry depository,
securities intermediary or other subescrow agent employed by the Escrow Agent
than any such book-entry depository, securities intermediary or other subescrow
agent has to the Escrow Agent, except to the extent that such action or omission
of any book-entry depository, negligence, bad faith or wilful misconduct in
breach of this Escrow Agreement.
(e) The Escrow Agent does not have any interest in
the Escrow Funds deposited hereunder other than as escrow agent hereunder. Any
payments from or release of the Escrow Funds shall be subject to withholding if
required under any applicable law.
(f) The Escrow Agent may at any time resign as Escrow
Agent hereunder by giving thirty days' prior written notice of resignation to
Parent and Major Shareholder. Prior to the effective date of the resignation as
specified in such notice, Parent will issue to the Escrow Agent a written
instruction authorizing redelivery of the Escrow Funds to a bank or trust
company that it selects as successor to the Escrow Agent hereunder subject to
the consent of Major Shareholder (which consent shall not be unreasonably
withheld or delayed). If, however, Parent shall fail to name such a successor
escrow agent within twenty days after the notice of resignation from the Escrow
Agent, the Major Shareholder shall be entitled to name such successor escrow
agent. If no successor escrow agent is named by Parent or Major Shareholder, the
Escrow Agent may apply to a court of competent jurisdiction for appointment of
a successor escrow agent.
(g) In the event of any disagreement between the
Major Shareholder and Parent relating to this Escrow Agreement, including
without limitation with respect to the disposition of the Escrow Funds, or in
the event that the Escrow Agent is in doubt as to what action it should take
hereunder, the Escrow
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Agent shall be entitled to retain the Escrow Funds until the Escrow Agent shall
have received (i) a copy of the final arbitration decision directing in writing
delivery of the Escrow Funds, (ii) a written agreement executed by the Major
Shareholder and Parent, directing delivery of the Escrow Funds or (iii) a final
order, decree or judgment of a court of competent jurisdiction in the United
States of America directing delivery of the Escrow Funds, and in any such event
the Escrow Agent shall disburse the Escrow Funds in accordance with such
decision, agreement, order, decree or judgment.
(h) Each of the Interested Parties agrees, jointly
and severally (i) to pay or reimburse the Escrow Agent for its attorney's fees
and expenses incurred in connection with the preparation of this Escrow
Agreement and (ii) to pay the Escrow Agent's compensation for its normal
services hereunder in accordance with the attached fee schedule, which may be
subject to change hereafter on an annual basis.
Each of the Interested Parties agrees, jointly and severally,
to reimburse the Escrow Agent on demand for all costs and expenses incurred in
connection with the administration of this Escrow Agreement or the escrow
created hereby or the performance or observance of its duties hereunder which
are in excess of its compensation for normal services hereunder, including
without limitation, payment of any legal fees and expenses incurred by the
Escrow Agent in connection with resolution of any claim by any party hereunder.
6. Notices. All notices, requests and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
sent by facsimile (if confirmed) or mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice, as specified below):
(a) if to Parent, Purchaser or the Surviving Entity, to:
EMC Corporation
35 Parkwood Drive
Hopkinton, Massachusetts 01748
Attention: Vice President, Corporate Development
Telephone No.: (508) 435-1000
Facsimile No.: (508) 495-8900
with a copy to:
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EMC Corporation
35 Parkwood Drive
Hopkinton, Massachusetts 01748
Attention: Office of the General Counsel
Telephone No.: (508) 435-1000
Facsimile No.: (508) 497-6915
and a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
One Beacon Street, 31st Floor
Boston, Massachusetts 02108
Attention: Margaret A. Brown, Esq.
Telephone No.: (617) 573-4800
Facsimile No.: (617) 573-4822
(b) If to the Major Shareholder:
Computer Concepts Corp.
80 Orville Drive
Bohemia, New York 11716
Attention: Daniel DelGiorno, Jr., President
Telephone No.: (516) 244-1500
Facsimile No.: (516) 244-1468
With a copy to:
Beckman, Millman & Sanders LLP
116 John Street
New York, New York 10038
Attention: Michael Beckman, Esq.
Telephone No.: (212) 406-4700
Facsimile No.: (212) 406-3750
(c) If to the Escrow Agent:
State Street Bank and Trust Company, Inc.
2 Avenue de Lafayette
Boston, Massachusetts 02111
Attention: Corporate Trust, 6th Floor
Telephone No.: (617) 662-1806
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Facsimile No.: (617) 662-1463
The address of a party for the purposes of this Section 6 may be changed by
giving written notice to the other parties hereto of such change in the manner
provided herein for giving notice. Unless and until such written notice is
received, the addresses as provided herein shall be deemed to continue in effect
for all purposes hereunder.
7. Wiring Instructions. Any funds to be paid to or by the
Escrow Agent hereunder shall be sent by wire transfer pursuant to the following
instructions (or by such method of payment and pursuant to such instruction as
may have been given in advance and in writing to or by the Escrow Agent, as the
case may be, in accordance with Section 6 hereof):
If to Parent/Purchaser/Surviving Entity:
Bank: BankBoston Corporation
ABA#: 011 000 0390
A/C#: 270-42122
Attn: Amy Beninato
Ref: EMC/Softworks Escrow
If to Major Shareholder:
Bank: European American Bank
ABA#: 021001486
A/C#: 024-04775-5
Attn: Computer Concepts Money Market
Ref: EMC/Softworks Escrow
If to the Escrow Agent:
Bank: State Street Bank and Trust Company, Inc.
ABA#: 0110 0002 8
A/C#: 9903-990-1
Attn: Corporate Trust Department
Ref: EMC/Softworks Escrow
8. Entire Agreement; Binding Effect. This Escrow Agreement and
the agreements, documents and other instruments referred to herein (a) consti
tute the entire agreement, and supersede all other agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) shall not be assigned by any party (by operation
of law or otherwise) without the prior written consent of the other parties.
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9. Applicable Law. This Escrow Agreement shall be governed by
and be construed in accordance with the laws of the State of Delaware, without
giving effect to the principles thereof relating to conflicts of law. The
parties hereby consent to the jurisdiction of Massachusetts state and federal
courts over all matters relating to this Escrow Agreement.
10. Parties in Interest. This Escrow Agreement shall be
binding upon and inure solely to the benefit of each party hereto and their
respective successors and permitted assigns, and nothing in this Escrow
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this Escrow
Agreement.
11. Counterparts. This Escrow Agreement may be executed in any
number of counterparts and by the parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be deemed an original, but all
of which together shall constitute one and the same instrument.
12. Interpretation. The section and other headings contained
in this Escrow Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Escrow Agreement. Whenever the
words "include," "includes" or "including" are used in this Escrow Agreement,
they shall be deemed to be followed by the words "without limitation." Unless
otherwise indicated herein or the context otherwise requires, the masculine
pronoun shall include the feminine and neuter, and the singular shall include
the plural. The word "or" shall not be deemed exclusive.
13. Severability. In case any term, provision, covenant or
restriction of this Escrow Agreement is held to be invalid, illegal or
unenforceable by a competent court in any jurisdiction, the validity, legality
and enforceability of the remaining terms, provisions, covenants or
restrictions, or of such term, provision, covenant or restriction in any other
jurisdiction, shall not in any way be affected or impaired thereby.
14. Amendment and Waiver. No amendment of any provision of
this Escrow Agreement shall in any event be effective, unless the same shall be
in writing and signed by the parties hereto. Any failure of any party to comply
with any obligation, agreement or condition hereunder may only be waived in
writing by the other party, but such waiver shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure. No failure by any
party to take any action against any breach of this Escrow Agreement or default
by the other party shall constitute a
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waiver of such party's right to enforce any provision hereof or to take any such
action.
15. Termination. This Escrow Agreement shall terminate upon
the Escrow Release Date, if no Indemnification Claim is outstanding, or if such
a claim is outstanding, the first date after the Escrow Release Date on which no
Indemnification Claim remains outstanding. Upon termination of the Escrow
Agreement, the Escrow Agent shall pay to the Major Shareholder, any amounts
remaining in the Escrow Funds.
16. Tax Related Terms.
(a) Tax Reporting. The Interested Parties agree that,
for tax reporting purposes, all interest or other income earned from the
investment of the Escrow Funds in any tax year shall (i) to the extent such
interest or other income is distributed by the Escrow Agent to any person or
entity pursuant to the terms of this Escrow Agreement during such tax year, be
allocated to such person or entity, and (ii) otherwise shall be allocated to the
Major Shareholder.
(b) Certification of Taxpayer Identification Number.
The Interested Parties hereto agree to provide the Escrow Agent with a certified
tax identification number by signing and returning a Form W-9 (or Form W-8, in
case of non-U.S. persons) to the Escrow Agent prior to the date on which any
income earned on the investment of the Escrow Funds is credited to the Escrow
Funds. The Interested Parties understand that, in the event their tax
identification numbers are not certified to the Escrow Agent, the Internal
Revenue Code, as amended from time to time, may require withholding of a portion
of any interest or other income earned on the investment of the Escrow Funds.
(c) Tax Indemnification. Each of the Interested
Parties agree, jointly and severally, (i) to assume any and all obligations
imposed now or hereafter by any applicable tax law with respect to any payment
or distribution of the Escrow Funds or performance of other activities under
this Escrow Agreement, (ii) to instruct the Escrow Agent in writing with respect
to the Escrow Agent's responsibility for withholding and other taxes,
assessments or other governmental charges, and to instruct the Escrow Agent with
respect to any certifications and governmental reporting that may be required
under any laws or regulations that may be applicable in connection with its
acting as Escrow Agent under this Escrow Agreement, and (iii) to indemnify and
hold the Escrow Agent harmless from any liability or obligation on account of
taxes, assessments, additions for late payment, interest, penalties, expenses
and other governmental charges that may be assessed or asserted against the
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Escrow Agent in connection with or relating to any payment made or other
activities performed under the terms of this Escrow Agreement, including without
limitation any liability for the withholding or deduction of (or the failure to
withhold or deduct) the same, in connection with this Escrow Agreement,
including costs and expense (including reasonable legal fees and expenses),
interest and penalties. The foregoing indemnification and agreement to hold
harmless shall survive the termination of this Escrow Agreement.
17. Force Majeure.
The Escrow Agent shall not be responsible for delays or
failures in performance resulting from acts beyond its control. Such acts shall
include but not be limited to acts of God, strikes, lockouts, riots, acts of
war, epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes or
other disasters.
18. Reproduction of Documents. This Escrow Agreement and all
documents relating thereto, including, without limitation, (a) consents, waivers
and modifications which may hereafter be executed, and (b) certificates and
other information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
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IN WITNESS WHEREOF, the parties have executed and delivered
this Escrow Agreement as of the date first written above.
EMC CORPORATION
By: /s/ Michael J. Cody
---------------------
Name: Michael J. Cody
Title: Vice President,
Corporate Development
EAGLE MERGER CORP.
By: /s/ Paul T. Dacier
---------------------
Name: Paul T. Dacier
Title: Secretary
COMPUTER CONCEPTS CORP.
By: /s/ Daniel DelGiorno
----------------------
Name: Daniel DelGiorno
Title: Chairman
STATE STREET BANK AND
TRUST COMPANY, INC. AS ESCROW
By: /s/
----------------------
Name:
Title: Vice President
15
