<PAGE>
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 23, 2000
CompUSA Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-11566 75-2261497
(Commission File Number) (I.R.S. Employer Identification No.)
14951 North Dallas Parkway
Dallas, Texas 75240
(Address of principal executive offices)
Registrant's telephone number, including
area code: (972) 982-4000
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On January 23, 2000, CompUSA Inc., a Delaware corporation (the "Company"),
entered into a Merger Agreement, dated as of January 23, 2000, by and among the
Company, Grupo Sanborns, S.A. de C.V., a corporation organized under the laws of
the United Mexican States ("Grupo Sanborns") and TPC Acquisition Corp., a
Delaware corporation and subsidiary of Grupo Sanborns ("TPC"), providing for a
cash tender offer by TPC for all outstanding shares of common stock, $0.01 par
value (the "Shares"), of the Company not owned by Grupo Sanborns or its
affiliates for $10.10 per Share, and following the tender offer, a merger of TPC
with the Company. In connection with the Merger Agreement, the Company entered
into Amendment No. 1 to Rights Agreement (the "Amendment"), dated as of January
23, 2000, between the Company and American Stock Transfer & Trust Company. On
January 24, 2000, Grupo Sanborns and the Company issued a joint press release
(the "Press Release") announcing the execution of the Merger Agreement.
The Merger Agreement, the Amendment and the Press Release are attached
hereto as Exhibits 2.1, 4.1 and 99.1, respectively, and are incorporated herein
by reference. The description of the Merger Agreement set forth above does not
purport to be complete and is qualified in its entirety by reference to the
provisions of such agreement.
Item 7. Financial Statements and Exhibits.
(a) Financial statements of businesses being acquired: Not Applicable.
(b) Pro forma financial information: Not Applicable.
(c) Exhibits:
2.1 Merger Agreement, among Grupo Sanborns, S.A. de C.V., TPC
Acquisition Corp. and CompUSA Inc., dated as of January 23, 2000.
4.1 Amendment No. 1 to Rights Agreement, between CompUSA Inc. and
American Stock Transfer & Trust Company, dated as of January 23,
2000.
99.1 Press Release, dated as of January 24, 2000.
-2-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CompUSA Inc.
Dated: January 26, 2000 By: /s/ James E. Skinner
------------------------------
James E. Skinner
Executive Vice President and
Chief Financial Officer
-3-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
2.1 Merger Agreement, among Grupo Sanborns, S.A. de C.V., TPC
Acquisition Corp. and CompUSA Inc., dated as of January 23,
2000.
4.1 Amendment No. 1 to Rights Agreement, between CompUSA Inc.
and American Stock Transfer & Trust Company, dated as of
January 23, 2000.
99.1 Press Release, dated as of January 24, 2000.
-4-
<PAGE>
2.1
Execution Copy
--------------
MERGER AGREEMENT
AMONG
GRUPO SANBORNS, S.A. de C.V.,
TPC ACQUISITION CORP.
and
COMPUSA INC.
Dated as of January 23, 2000
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE OFFER
SECTION 1.01 THE OFFER........................................................1
SECTION 1.02 COMPANY ACTIONS..................................................2
SECTION 1.03 STOCKHOLDER LISTS................................................3
SECTION 1.04 DIRECTORS........................................................3
ARTICLE II
THE MERGER
SECTION 2.01 THE MERGER.......................................................4
SECTION 2.02 CONSUMMATION OF THE MERGER.......................................4
SECTION 2.03 EFFECTS OF THE MERGER............................................5
SECTION 2.04 CERTIFICATE OF INCORPORATION AND BYLAWS..........................5
SECTION 2.05 DIRECTORS AND OFFICERS...........................................5
SECTION 2.06 CONVERSION OF SHARES.............................................5
SECTION 2.07 CONVERSION OF COMMON STOCK OF PURCHASER..........................5
SECTION 2.08 STOCKHOLDERS' MEETING............................................5
SECTION 2.09 MERGER WITHOUT MEETING OF STOCKHOLDERS...........................6
SECTION 2.10 WITHHOLDING TAXES................................................6
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
SECTION 3.01 DISSENTING SHARES................................................6
SECTION 3.02 PAYMENT FOR SHARES...............................................6
SECTION 3.03 CLOSING OF THE COMPANY'S TRANSFER BOOKS..........................8
SECTION 3.05 OTHER EQUITY BASED AWARDS........................................8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01 ORGANIZATION AND QUALIFICATION...................................9
SECTION 4.02 CAPITALIZATION...................................................9
SECTION 4.03 AUTHORITY FOR THIS AGREEMENT....................................11
SECTION 4.07 CONSENTS AND APPROVALS; NO VIOLATION............................11
SECTION 4.05 REPORTS; FINANCIAL STATEMENTS...................................12
SECTION 4.04 ABSENCE OF CERTAIN CHANGES......................................12
SECTION 4.07 SCHEDULE 14D-9; OFFER DOCUMENTS AND PROXY STATEMENT.............13
SECTION 4.08 BROKERS.........................................................14
SECTION 4.09 EMPLOYEE BENEFIT MATTERS........................................14
SECTION 4.10 LITIGATION, ETC.................................................16
SECTION 4.11 TAX MATTERS.....................................................16
SECTION 4.12 COMPLIANCE WITH LAW; NO DEFAULT.................................17
i
<PAGE>
SECTION 4.13 ENVIRONMENTAL MATTERS...........................................18
SECTION 4.14 INTELLECTUAL PROPERTY...........................................19
SECTION 4.15 REAL PROPERTY...................................................21
SECTION 4.16 YEAR 2000.......................................................21
SECTION 4.17 MATERIAL CONTRACTS..............................................21
SECTION 4.18 RELATED PARTY TRANSACTIONS......................................22
SECTION 4.19 STATE TAKEOVER STATUTES INAPPLICABLE............................22
SECTION 4.20 RIGHTS AGREEMENT................................................22
SECTION 4.21 REQUIRED VOTE OF COMPANY SHAREHOLDERS...........................22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 5.01 ORGANIZATION AND QUALIFICATION..................................23
SECTION 5.02 AUTHORITY FOR THIS AGREEMENT....................................23
SECTION 5.03 OFFER DOCUMENTS; PROXY STATEMENT................................23
SECTION 5.04 CONSENTS AND APPROVALS; NO VIOLATION............................23
SECTION 5.05 OPERATIONS OF PURCHASER.........................................24
SECTION 5.06 REQUIRED VOTE OF PARENT SHAREHOLDERS............................24
SECTION 5.07 BROKERS.........................................................24
SECTION 5.07 FINANCIAL WEHREWITHAL...........................................24
SECTION 5.09 OWNERSHIP OF COMPANY SHARES.....................................24
ARTICLE VI
COVENANTS
SECTION 6.01 CONDUCT OF BUSINESS OF THE COMPANY..............................25
SECTION 6.02 NO SOLICITATION.................................................27
SECTION 6.03 ACCESS TO INFORMATION...........................................29
SECTION 6.04 REASONABLE BEST EFFORTS.........................................29
SECTION 6.05 INDEMNIFICATION AND INSURANCE...................................30
SECTION 6.06 EMPLOYEE MATTERS................................................31
SECTION 6.07 TAKEOVER LAWS...................................................32
SECTION 6.08 PROXY STATEMENT.................................................32
SECTION 6.09 NOTIFICATION OF CERTAIN MATTERS.................................32
SECTION 6.10 SUBSEQUENT FILINGS..............................................32
SECTION 6.11 PRESS RELEASES..................................................33
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER......33
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 TERMINATION.....................................................34
SECTION 8.02 EFFECT OF TERMINATION...........................................35
ii
<PAGE>
SECTION 8.03 FEES AND EXPENSES...............................................35
SECTION 8.04 AMENDMENT.......................................................36
SECTION 8.05 EXTENSION; WAIVER; REMEDIES.....................................36
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................36
SECTION 9.02 ENTIRE AGREEMENT; ASSIGNMENT....................................37
SECTION 9.03 ENFORCEMENT OF THE AGREEMENT; JURISDICTION......................37
SECTION 9.04 VALIDITY........................................................37
SECTION 9.05 NOTICES.........................................................37
SECTION 9.06 GOVERNING LAW...................................................39
SECTION 9.07 DESCRIPTIVE HEADINGS............................................39
SECTION 9.08 PARTIES IN INTEREST.............................................39
SECTION 9.09 COUNTERPARTS....................................................39
SECTION 9.10 CERTAIN DEFINITIONS.............................................39
EXHIBIT A....................................................................A-1
iii
<PAGE>
Glossary of Defined Terms
-------------------------
Defined Terms Defined in Section
- ------------- ------------------
Acceptance Date Section 3.04
Acquisition Proposal Section 6.02(f)
Aggregate Payments Section 4.09(f)
Agreement Opening Paragraph
Certificates Section 3.02(b)
Closing Section 2.02
Code Section 2.10
Company Intellectual Property Rights Section 4.14(d)
Company Permits Section 4.12
Company SEC Reports Section 4.05
Company Securities Section 4.02(a)
Company Opening Paragraph
Continuing Directors Section 1.04(b)
Copyrights Section 4.14(c)(ii)
DGCL Recitals
Disclosure Letter Article IV
Dissenting Shares Section 3.01
Effective Time Section 2.02
Environmental Disclosure Requirement Section 4.13(g)
Environmental Law Section 4.13(d)
ERISA Section 4.09(a)
Exchange Act Section 1.01(a)
Existing Stock Option Section 3.04
Expiration Date Exhibit A
Governmental Entity Section 4.07
Hazardous Substance Section 4.13(e)
HSR Act Section 4.04
Intellectual Property Rights Section 4.14(c)
Material Adverse Effect Section 9.10
Material Contracts Section 4.17
Merger Agreement Exhibit A
Merger Consideration Section 2.06
Merger Section 2.01
Minimum Tender Condition Exhibit A
Offer Section 1.01(a)
Offer Conditions Section 1.01(a)
Offer Documents Section 1.01(b)
Offer Price Section 1.01(a)
Option Consideration Section 3.04
Parent Opening Paragraph
Patents Section 4.14(c)(iii)
iv
<PAGE>
Paying Agent Section 3.02(a)
Payment Fund Section 3.02(a)
Person Section 9.10
Plan Section 4.09(a)
Potential Acquirer Section 6.02(b)
Preferred Stock Section 4.02(a)
Preliminary Proxy Statement Section 6.08
Proxy Statement Section 4.07(b)
Purchaser Opening Paragraph
Real Property Leases Section 4.15(b)
Release Section 4.13(f)
Rights Section 4.20
Rights Agreement Section 4.20
Rights Agreement Amendment Section 4.20
Schedule 14D-9 Section 1.02(b)
Schedule TO Section 1.01(b)
SEC Section 1.01(a)
Securities Acts Section 4.05(a)
Shares Section 1.01(a)
Special Meeting Section 2.08
Software Section 4.14(c)(iv)
Stock Option Plans Section 3.04
Subsidiary Section 9.10
Subsidiary Securities Section 4.02(b)
Superior Proposal Section 6.02(f)
Surviving Corporation Section 2.01
Takeover Laws Section 1.02(a)
Tax Section 9.10
Taxing Authority Section 4.11
Termination Fee Section 8.03(b)
Trademarks Section 4.14(c)(i)
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of January 23,
2000, among GRUPO SANBORNS, S.A. de C.V., a corporation organized under the laws
of the United Mexican States ("Parent"), TPC ACQUISITION CORP., a Delaware
corporation and a subsidiary of Parent ("Purchaser"), and COMPUSA INC., a
Delaware corporation (the "Company").
RECITALS
WHEREAS, the Boards of Directors of Purchaser and the Company have each
determined that this Agreement and the transactions contemplated hereby,
including the Merger (as defined in Section 2.01), are advisable and fair to,
and in the best interests of, their respective stockholders;
WHEREAS, the Board of Directors of the Company has unanimously adopted
resolutions approving the acquisition of the Company by Parent, this Agreement
and the transactions contemplated hereby, and has agreed to recommend that the
Company's shareholders approve the agreement of merger (as such term is used in
Section 251 of the Delaware General Corporation Law (the "DGCL")) contained in
this Agreement and the transactions contemplated hereby and tender their Shares
(as defined below) in the Offer (as defined below); and
WHEREAS, Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement;
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, the parties hereto agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01 The Offer.
(a) (i) Provided that this Agreement shall not have been terminated in
accordance with Section 8.01 and that none of the events set forth in clause
(iii) of Exhibit A hereto shall have occurred or be existing, Purchaser shall,
and Parent shall cause Purchaser to, as promptly as practicable (but in no event
later than seven business days following the public announcement of the terms of
this Agreement) commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) an offer to purchase all
outstanding shares of common stock of the Company, par value $.01 per share (the
"Shares"), including the associated Rights (as defined below), at a price (such
price, or any higher price as may be paid in the Offer, the "Offer Price") of
$10.10 per Share, net to the seller in cash (the "Offer"). The obligation of
Purchaser to consummate the Offer and to accept for payment and to pay for any
Shares tendered pursuant thereto shall be subject to only those conditions set
forth in Exhibit A hereto (the "Offer Conditions"), any of which may be waived
by Purchaser in its sole discretion. The initial expiration date of the Offer
shall be the twentieth
<PAGE>
business day following the commencement of the Offer (determined in accordance
with Rule 14d-1(e)(6) under the Exchange Act). Purchaser expressly reserves the
right to modify the terms of the Offer, except that, without the prior written
consent of the Company, Purchaser shall not (A) decrease the Offer Price or
change the form of the consideration payable in the Offer, (B) decrease the
number of Shares sought pursuant to the Offer, (C) impose additional conditions
to the Offer, (D) change the conditions to the Offer or waive the Minimum Tender
Condition or (E) make any other change in the terms or conditions of the Offer
which is adverse to the holders of Shares.
(ii) Subject to the terms and conditions of this Agreement and to the
satisfaction or waiver of the Offer Conditions as of any scheduled expiration of
the initial offering period of the Offer, Purchaser shall accept for payment and
pay for Shares validly tendered and not withdrawn pursuant to the Offer as soon
as practicable after such scheduled expiration. Notwithstanding the foregoing,
Purchaser may, without the consent of the Company, (A) extend the initial
offering period of the Offer if at any scheduled expiration of the initial
offering period any of the Offer Conditions have not been satisfied or waived,
(B) extend the Offer for any period required by any regulation of the Securities
and Exchange Commission (the "SEC") applicable to the Offer or (C) elect to
provide a subsequent offering period for the Offer in accordance with Rule
14d-11 under the Exchange Act. In addition, the Offer Price may be increased 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.
(b) On the date of commencement of the Offer, Parent and Purchaser shall
file or cause to be filed with the SEC a Tender Offer Statement on Schedule TO
(together with all amendments and supplements thereto, the "Schedule TO") with
respect to the Offer which will comply in all material respects with the
provisions of, and satisfy in all material respects the requirements of, such
Schedule TO and all applicable Federal securities laws, and will contain
(including as an exhibit) or incorporate by reference the Offer to Purchase and
forms of the related letter of transmittal and summary advertisement and other
ancillary Offer documents and instruments pursuant to which the Offer will be
made (collectively with any supplements or amendments thereto, the "Offer
Documents"). The Company and its counsel shall be given a reasonable opportunity
to review and comment on the Offer Documents prior to their filing with the SEC.
Parent and Purchaser agree to provide the Company with, and to consult with the
Company regarding, any comments that may be received from the SEC or its staff
with respect to the Offer Documents promptly after receipt thereof. Parent,
Purchaser and the Company each agrees promptly to correct any information
provided by it for use in the Offer Documents if and to the extent that it shall
have become false or misleading in any material respect and Parent and Purchaser
further agree to take all steps necessary to cause the Offer Documents as so
corrected to be filed with the SEC and be disseminated to holders of Shares, in
each case, as and to the extent required by applicable law.
SECTION 1.02 Company Actions. (a) The Company hereby consents to the Offer
and represents and warrants that (i) its Board of Directors (at a meeting or
meetings duly called and held prior to the date hereof) has unanimously (A)
determined that the Offer and the Merger (as hereinafter defined) are advisable
and fair to and in the best interests of, the shareholders of the Company, (B)
resolved to recommend acceptance of the Offer and approval and adoption of an
agreement of merger (as such term is used in Section 251 of the DGCL)
2
<PAGE>
contained in this Agreement by the shareholders of the Company, (C) irrevocably
taken all necessary steps to render Section 203 of the DGCL inapplicable to
Parent and Purchaser and to the Merger and the acquisition of Shares pursuant to
the Offer, (D) irrevocably resolved to elect, to the extent permitted by law,
not to be subject to any "moratorium", "control share acquisition", "business
combination", "fair price" or other form of anti-takeover laws and regulations
(collectively, "Takeover Laws") of any jurisdiction that may purport to be
applicable to this Agreement and (E) irrevocably approved the Rights Agreement
Amendment (as defined below) and (ii) Credit Suisse First Boston Corporation
("CSFB"), the Company's independent financial advisor, has advised the Company's
Board of Directors to the effect that, in its opinion, as of the date of this
Agreement, the cash consideration to be received in the Offer and the Merger,
taken together, by the holders of Shares is fair, from a financial point of
view, to such holders (other than Parent and its affiliates).
(b) Upon commencement of the Offer, the Company shall file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the "Schedule 14D-9") which will comply in
all material respects with the provisions of, and satisfy in all material
respects the requirements of, such Schedule 14D-9 and all applicable Federal
securities laws, and will contain the recommendations of its Board of Directors
described in Section 1.02(a) and hereby consents to the inclusion of such
recommendations in the Offer Documents and to the inclusion of a copy of the
Schedule 14D-9 with the Offer Documents mailed or furnished to the Company's
shareholders. Parent, Purchaser and their counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9 prior to its filing with
the SEC. The Company agrees to provide Parent and Purchaser with, and to consult
with Parent and Purchaser regarding, any comments that may be received from the
SEC or its staff with respect to the Schedule 14D-9 promptly upon receipt
thereof. Parent, Purchaser and the Company each agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false or misleading in any material respect and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and be disseminated to holders of
Shares, in each case, as and to the extent required by applicable law.
SECTION 1.03 Shareholder Lists. In connection with the Offer, the Company
shall promptly furnish Parent and Purchaser with mailing labels, security
position listings and any available listing or computer file containing the
names and addresses of the record holders of the Shares as of the latest
practicable date and shall furnish Parent and Purchaser with such information
and assistance (including periodic updates of such information) as Parent or
Purchaser or their agents may reasonably request in communicating the Offer to
the record and beneficial holders of the Shares.
SECTION 1.04 Directors. (a) Promptly upon the purchase by Purchaser
pursuant to the Offer of Shares, and from time to time thereafter, Purchaser
shall be entitled to designate such number of directors, rounded up to the next
whole number, on the Board of Directors of the Company as will give Purchaser
representation on the Board of Directors of the Company equal to the product of
the number of directors on the Board of Directors of the Company and the
percentage that such number of Shares so purchased bears to the number of Shares
outstanding, and the Company shall, upon request by Purchaser, promptly increase
the size of the Board of Directors of the Company or use its best efforts to
secure the resignations of
3
<PAGE>
such number of directors as is necessary to provide Purchaser with such level of
representation and shall cause Purchaser's designees to be so elected; provided,
however, that the Board of Directors of the Company shall continue to be
comprised of no fewer than two Continuing Directors (as defined below) until the
Effective Time (as defined below). The Company will also use its best efforts to
cause persons designated by Purchaser to constitute the same percentage as is on
the entire Board of Directors of the Company to be on (i) each committee of the
Board of Directors of the Company and (ii) each Board of Directors and each
committee thereof of each Subsidiary of the Company. The Company's obligations
to appoint designees to its Board of Directors shall be subject to Section 14(f)
of the Exchange Act. At the request of Purchaser, the Company shall take all
actions necessary to effect any such election or appointment of Purchaser's
designees, including mailing to its shareholders the information required by
Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder which,
unless Purchaser otherwise elects, shall be so mailed together with the Schedule
14D-9. Parent and Purchaser will supply to the Company, and be solely
responsible for, all information with respect to themselves and their respective
officers, directors and affiliates required by such Section and Rule.
(b) Following the election or appointment of Purchaser's designees pursuant
to Section 1.04(a) and prior to the Effective Time, and so long as there shall
be at least one Continuing Director, any amendment or termination of this
Agreement requiring action by the Company, any extension of time for the
performance of any of the obligations or other acts of Parent or Purchaser under
this Agreement and any exercise or waiver of any of the Company's rights or
remedies under this Agreement will require the affirmative vote of a majority of
the directors of the Company then in office who are directors of the Company on
the date hereof (the "Continuing Directors").
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the relevant provisions of the DGCL, Purchaser
shall be merged with and into the Company (the "Merger") as soon as practicable
following the satisfaction or waiver, if permissible, of the conditions set
forth in Article VII hereof. The Company shall be the surviving corporation in
the Merger (the "Surviving Corporation") under the name "CompUSA Inc." and shall
continue its existence under the laws of the State of Delaware. In connection
with the Merger, the separate corporate existence of Purchaser shall cease. Upon
the election of Parent, the Merger may be structured so that the Company shall
be merged with and into Purchaser, with Purchaser continuing as the Surviving
Corporation.
SECTION 2.02 Consummation of the Merger. Subject to the provisions of this
Agreement, Purchaser and the Company shall cause the Merger to be consummated by
filing with the Secretary of State of the State of Delaware a duly executed and
verified certificate of merger, as required by the DGCL, and shall take all such
other and further actions as may be required by law to make the Merger
effective. Prior to the filing referred to in this Section, a closing (the
"Closing") will be held at the offices of Cleary, Gottlieb, Steen & Hamilton,
One Liberty Plaza, New York, New York (or such other place as the parties may
agree) for the
4
<PAGE>
purpose of confirming all the matters contained herein. The time the Merger
becomes effective in accordance with applicable law is referred to as the
"Effective Time."
SECTION 2.03 Effects of the Merger. The Merger shall have the effects set
forth herein and in the applicable provisions of the DGCL.
SECTION 2.04 Certificate of Incorporation and Bylaws. The Certificate of
Incorporation and the Bylaws of Purchaser, in each case as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation and
Bylaws of the Surviving Corporation; provided, however, that Article I of the
Certificate of Incorporation of the Surviving Corporation shall be amended to
read in its entirety as follows: "ARTICLE I. The name of the Corporation is
CompUSA Inc."
SECTION 2.05 Directors and Officers. The directors of Purchaser immediately
prior to the Effective Time and the officers of the Company immediately prior to
the Effective Time shall be the directors and officers, respectively, of the
Surviving Corporation until their respective death, permanent disability,
resignation or removal or until their respective successors are duly elected and
qualified.
SECTION 2.06 Conversion of Shares. Each Share issued and outstanding
immediately prior to the Effective Time (other than Shares owned by Parent,
Purchaser or any Subsidiary or affiliate of Parent, Purchaser or the Company or
held in the treasury of the Company, all of which shall be canceled without any
consideration being exchanged therefor, and other than Dissenting Shares, as
defined in Section 3.01 hereof) shall, by virtue of the Merger and without any
action on the part of the holder thereof, be converted at the Effective Time
into the right to receive in cash an amount per Share (subject to any applicable
withholding tax specified in Section 2.10 hereof) equal to the Offer Price,
without interest (the "Merger Consideration"), upon the surrender of the
certificate representing such Shares as provided in Section 3.02. At the
Effective Time, each Existing Stock Option (as defined below) shall be converted
into the right to receive the Existing Stock Option Consideration (as defined
below) pursuant to Section 3.04 hereof.
SECTION 2.07 Conversion of Common Stock of Purchaser. Each share of common
stock, no par value, of Purchaser issued and outstanding immediately prior to
the Effective Time shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into and become one share of common
stock of the Surviving Corporation.
SECTION 2.08 Shareholders' Meeting. Unless the Merger is consummated in
accordance with Section 253 of the DGCL as contemplated by Section 2.09, and
subject to applicable law, the Company, acting through its Board of Directors,
shall, in accordance with applicable law, duly call, give notice of, convene and
hold a special meeting (the "Special Meeting") of its shareholders as soon as
practicable following the consummation of the Offer for the purpose of approving
and adopting the agreement of merger (within the meaning of Section 251 of the
DGCL) set forth in this Agreement; and include in the Proxy Statement (as
defined below) the recommendation of its Board of Directors that shareholders of
the Company vote in favor of the adoption of the agreement of merger set forth
in this Agreement. Parent and Purchaser each agree that, at the Special Meeting,
all of the Shares acquired pursuant to the
5
<PAGE>
Offer, the Options or otherwise owned or acquired by Parent or Purchaser or any
of their affiliates will be voted in favor of the Merger.
SECTION 2.09 Merger Without Meeting of Shareholders. If Purchaser, or any
other direct or indirect Subsidiary of Parent, shall hold at least 90 percent of
the outstanding shares of each class of capital stock of the Company, each of
Parent, Purchaser and the Company shall take all necessary and appropriate
action to cause the Merger to become effective, as soon as practicable after the
consummation of the Offer, without a meeting of shareholders of the Company, in
accordance with Section 253 of the DGCL.
SECTION 2.10 Withholding Taxes. Parent, Purchaser and the Surviving
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable to a holder of Shares pursuant to the Offer or the Merger any
stock transfer taxes and such amounts as are required to be withheld under the
Internal Revenue Code of 1986, as amended (the "Code"), or any applicable
provision of state, local or foreign tax law. To the extent that amounts are so
withheld, such withheld amounts shall be treated for all purposes of this
Agreement and the Offer as having been paid to the holder of the Shares in
respect of which such deduction and withholding was made.
ARTICLE III
DISSENTING SHARES; PAYMENT FOR SHARES; OPTIONS
SECTION 3.01 Dissenting Shares. Notwithstanding anything in this Agreement
to the contrary, Shares which are issued and outstanding immediately prior to
the Effective Time and which are held by shareholders exercising appraisal
rights available under Section 262 of the DGCL (the "Dissenting Shares") shall
not be converted into or be exchangeable for the right to receive the Merger
Consideration, unless and until such holders shall have failed to perfect or
shall have effectively withdrawn or lost their rights to appraisal under the
DGCL. Dissenting Shares shall be treated in accordance with Section 262 of the
DGCL. If any such holder shall have failed to perfect or shall have effectively
withdrawn or lost such right to appraisal, such holder's Shares shall thereupon
be converted into and become exchangeable only for the right to receive, as of
the Effective Time, the Merger Consideration without any interest thereon. The
Company shall give Parent and Purchaser (a) prompt notice of any written demands
for appraisal of any Shares, withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by the Company relating to
rights to be paid the "fair value" of Dissenting Shares, as provided in Section
262 of the DGCL and (b) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any demands for appraisals of capital stock of the
Company, offer to settle or settle any demands or approve any withdrawal of any
such demands.
SECTION 3.02 Payment for Shares.
(a) Prior to the Effective Time, Parent will cause Purchaser to make
available to a bank or trust company designated by Parent (the "Paying Agent")
sufficient funds to make the payments pursuant to Section 2.06 hereof on a
timely basis to holders (other than Parent or
6
<PAGE>
Purchaser or any of their respective Subsidiaries) of Shares that are issued and
outstanding immediately prior to the Effective Time (such amounts being
hereinafter referred to as the "Payment Fund"). The Paying Agent shall, pursuant
to irrevocable instructions, make the payments provided for in the preceding
sentence out of the Payment Fund. The Payment Fund shall not be used for any
other purpose, except as provided in this Agreement.
(b) As soon as reasonably practicable after the Effective Time, the
Surviving Corporation shall cause the Paying Agent to mail to each record
holder, as of the Effective Time, of an outstanding certificate or certificates
which immediately prior to the Effective Time represented Shares (the
"Certificates"), a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon proper delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the Certificate and receiving
payment therefor. Following surrender to the Paying Agent of a Certificate,
together with such letter of transmittal duly executed, the holder of such
Certificate shall be paid in exchange therefor cash in an amount (subject to any
applicable withholding tax as specified in Section 2.10 hereof) equal to the
product of the number of Shares represented by such Certificate multiplied by
the Merger Consideration, and such Certificate shall forthwith be canceled. No
interest will be paid or accrued on the cash payable upon the surrender of the
Certificates. If payment is to be made to a Person (as defined below) other than
the Person in whose name the Certificate surrendered is registered, it shall be
a condition of payment that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the Person requesting
such payment pay any transfer or other taxes required by reason of the payment
to a Person other than the registered holder of the Certificate surrendered or
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable. From and after the Effective Time and until
surrendered in accordance with the provisions of this Section 3.02, each
Certificate (other than Certificates representing Shares owned by Parent or
Purchaser or any of their respective Subsidiaries, and certificates representing
Dissenting Shares) shall represent for all purposes solely the right to receive,
in accordance with the terms hereof, the Merger Consideration in cash multiplied
by the number of Shares evidenced by such Certificate, without any interest
thereon.
(c) If any Certificate shall have been lost, stolen or destroyed, upon the
making on an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and, if required by the Surviving Corporation, the
posting by such person of a bond in such reasonable amount as the Surviving
Corporation may direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Paying Agent will deliver in exchange
for such lost, stolen or destroyed Certificate the applicable Merger
Consideration with respect to the Shares formerly represented thereby.
(d) Any portion of the Payment Fund (including the proceeds of any
investments thereof) that remains unclaimed by the former shareholders of the
Company for one year after the Effective Time shall be repaid to the Surviving
Corporation. Any former shareholders of the Company who have not complied with
Section 3.01 hereof prior to the end of such one year period shall thereafter
look only to the Surviving Corporation (subject to abandoned property, escheat
or other similar laws) but only as general creditors thereof for payment of
their claim for the Merger Consideration, without any interest thereon. Neither
Parent nor the Surviving Corporation shall be liable to any holder of Shares for
any monies delivered from the Payment
7
<PAGE>
Fund or otherwise to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Certificates shall not have been
surrendered prior to two years after the Effective Time (or such earlier date as
shall be immediately prior to the date that such unclaimed funds would otherwise
become subject to any abandoned property, escheat or similar law) unclaimed
funds payable with respect to such certificates shall, to the extent permitted
by applicable law, become the property of the Surviving Corporation, free and
clear of all claims or interest of any Person previously entitled thereto.
SECTION 3.03 Closing of the Company's Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed and no transfer of
Shares shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged for
cash as provided in this Article III, subject to applicable law in the case of
Dissenting Shares.
SECTION 3.04 Existing Stock Options. Each option or right to acquire Shares
(the "Existing Stock Options") granted under any stock option or similar plan of
the Company or under any agreement to which the Company or any Subsidiary is a
party (the "Stock Option Plans") which is outstanding on the date that the
amendment to Schedule TO reporting the initial acceptance by the Purchaser of
the Shares tendered in the Offer is filed with the SEC (the "Acceptance Date"),
whether or not then exercisable or vested, shall by virtue of the Merger and
without any action on the part of the Company or the holder thereof, be
converted into and shall become a right to receive an amount in cash, without
interest, with respect to each Share subject thereto equal to the excess, if
any, of the Merger Consideration over the per share exercise or purchase price
of such Existing Stock Option. On the Acceptance Date, each holder of an
Existing Stock Option shall be entitled to receive, on the Acceptance Date, in
full satisfaction of such Existing Stock Option, an amount in cash without
interest in respect thereof equal to the product of (i) the excess, if any, of
the Merger Consideration over the per share exercise or purchase price of such
Existing Stock Option and (ii) the number of Shares subject to such Existing
Stock Option (such amount being hereinafter referred to as the "Option
Consideration"), and each Existing Stock Option shall be canceled on the
Acceptance Date. Such payment shall be reduced by any income or employment tax
withholding required under the Code or any provision of state, local or foreign
tax law. To the extent that amounts are so withheld, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of such Existing Stock Option. The Stock Option Plans shall terminate as of the
Acceptance Date. All administrative and other rights and authorities granted
under any Stock Option Plan to the Company, the Board of Directors of the
Company or any Committee or designee thereof, shall, following the Acceptance
Date, reside with the Surviving Corporation.
SECTION 3.05 Other Equity Based Awards. Each incentive award or other right
relating to, or the value of which is based on the value of, Shares (an "Equity
Award") that was granted under any employee incentive or similar plan of the
Company or under any agreement to which the Company or any Subsidiary is a party
(an "Equity Plan"), and that is outstanding on the Acceptance Date, whether or
not then vested, shall by virtue of the Merger and without any action on the
part of the Company or the holder thereof, be converted into and shall become a
right to receive an amount in cash, without interest, determined pursuant to the
terms thereof based on the value of a Share being equal to the Merger
Consideration. Each holder of an Equity Award shall be entitled to receive, on
the Acceptance Date, in full satisfaction of such Equity
8
<PAGE>
Award, an amount in cash without interest determined pursuant to the terms
thereof (for example, taking into account any exercise price or equivalent
thereof) based on the value of a Share being equal to the Merger Consideration.
Such payment shall be reduced by any income or employment tax withholding
required under the Code or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld, such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of such
Equity Award. The Equity Plans shall terminate as of the Acceptance Date and any
and all rights under any 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 Subsidiary thereof shall be canceled as of
the Acceptance Date. All administrative and other rights and authorities granted
under any Equity Plan to the Company, the Board of Directors of the Company or
any Committee or designee thereof, shall, following the Effective Time, reside
with the Surviving Corporation.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
Except as set forth in (i) the Company SEC Reports (as defined below) filed
and available prior to the date of this Agreement (ii) the written public
disclosures by the Company since September 25, 1999 attached to the Disclosure
Letter (as defined below), or (iii) with respect to any Section of this Article
IV, as set forth in the section of the disclosure letter previously delivered by
the Company to Parent with respect to this Agreement (the "Disclosure Letter")
that specifically relates to such Section, the Company represents and warrants
to Parent and Purchaser as follows:
SECTION 4.01 Organization and Qualification. The Company and each of its
Subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of its jurisdiction of incorporation, with all corporate
power and authority to own its properties and conduct its business as currently
conducted and is duly qualified and in good standing as a foreign corporation
authorized to do business in each of the jurisdictions in which the character of
the properties owned or held under lease by it or the nature of the business
transacted by it makes such qualification necessary, except where the failure to
be so qualified and in good standing, individually or in the aggregate, would
not have a Material Adverse Effect. The Company has heretofore made available to
Parent and Purchaser accurate and complete copies of the Certificate of
Incorporation and Bylaws (or similar governing documents) as currently in effect
of the Company and its Subsidiaries. Neither the Company nor any of its
Subsidiaries, directly or indirectly, owns any interest in any Person other than
in the Company's Subsidiaries.
SECTION 4.02 Capitalization. (a) The authorized capital stock of the
Company consists of 325,000,000 Shares and 10,000 shares of Preferred Stock, par
value $.01 per share (the "Preferred Stock"). As of the close of business on
January 20, 2000: 92,693,889 Shares were issued and outstanding (including all
restricted Shares granted to employees, officers, directors, or other service
providers under any plan, program, arrangement or agreement, whether or not
vested), no shares of Preferred Stock were issued and outstanding and 1,395,643
Shares were held in the Company's treasury. In addition, as of such date, there
were outstanding
9
<PAGE>
Existing Stock Options to purchase an aggregate of : 13,820,871 Shares. Since
such date the Company has not issued any Shares other than upon the exercise of
Existing Stock Options outstanding on such date, has not granted any options,
warrants or rights or entered into other agreements or commitments to purchase
Shares (under the Stock Option Plans or otherwise) and has not split, combined
or reclassified any of its shares of capital stock. All of the outstanding
Shares have been duly authorized and validly issued and are fully paid and
nonassessable and are free of preemptive rights. Section 4.02(a) of the
Disclosure Letter contains a true, accurate and complete list, as of the date
hereof, of the name of each Existing Stock Option holder, the number of
outstanding Existing Stock Options held by such holder, the grant date of each
such Existing Stock Option, the number of Shares such holder is entitled to
receive upon the exercise of each Existing Stock Option and the corresponding
exercise price. Except for the Existing Stock Options, the Rights and the Equity
Awards, there are no outstanding (i) securities of the Company convertible into
or exchangeable for shares of capital stock or voting securities or ownership
interests in the Company, (ii) options, warrants, rights or other agreements or
commitments to acquire from the Company, or obligations of the Company to issue,
any capital stock, voting securities or other ownership interests in (or
securities convertible into or exchangeable for capital stock or voting
securities or other ownership interests in) the Company, (iii) obligations of
the Company to grant, extend or enter into any subscription, warrant, right,
convertible or exchangeable security or other similar agreement or commitment
relating to any capital stock, voting securities or other ownership interests in
the Company (the items in clauses (i), (ii) and (iii), together with the capital
stock of the Company, being referred to collectively as "Company Securities") or
(iv) obligations by the Company or any of its Subsidiaries to make any payments
based on the price or value of the Shares. There are no outstanding obligations
of the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any Company Securities. There are no voting trusts or other agreements
or understandings to which the Company or any of its Subsidiaries is a party
with respect to the voting of capital stock of the Company or any of its
Subsidiaries.
(b) Except as disclosed in Section 4.02(b) of the Disclosure Letter, the
Company or another Subsidiary is the record and beneficial owner of all the
outstanding shares of capital stock of each Company Subsidiary, free and clear
of any lien, mortgage, pledge, charge, security interest or encumbrance of any
kind, and there are no irrevocable proxies with respect to any such shares.
Except as disclosed in Section 4.02(b) of the Disclosure Letter, there are no
outstanding (i) securities of the Company or any of its Subsidiaries convertible
into or exchangeable for shares of capital stock or other voting securities or
ownership interests in any Subsidiary of the Company, (ii) options, warrants,
rights or other agreements or commitments to acquire from the Company or any of
its Subsidiaries (or obligations of the Company or any of its Subsidiaries to
issue) any capital stock, voting securities or other ownership interests in, or
any securities convertible into or exchangeable for any capital stock, voting
securities or ownership interests in, any of its Subsidiaries, (iii) obligations
of the Company or any of its Subsidiaries to grant, extend or enter into any
subscription, warrant, right, convertible or exchangeable security or other
similar agreement or commitment relating to any capital stock, voting securities
or other ownership interests in any of the Company's Subsidiaries (the items in
clauses (i), (ii) and (iii), together with the capital stock of such
Subsidiaries, being referred to collectively as "Subsidiary Securities") or (iv)
obligations of the Company or any of its Subsidiaries to make any payment based
on the value of any shares of any Subsidiary. There are no outstanding
obligations of the
10
<PAGE>
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any outstanding Subsidiary Securities.
SECTION 4.03 Authority for this Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement and, subject
to obtaining any necessary shareholder approval of the agreement of merger (as
such term is used in Section 251 of the DGCL) contained in this Agreement, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or to consummate the
transactions so contemplated, other than, with respect to the Merger, the
approval and adoption of the agreement of merger (as such term is used in
Section 251 of the DGCL) contained in this Agreement by the holders of at least
two-thirds of the outstanding Shares prior to the consummation of the Merger
(unless the Merger is consummated pursuant to Section 253 of the DGCL). This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery of this Agreement by
Purchaser and Parent, constitutes a legal, valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that its enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer, moratorium or other
laws relating to or affecting creditors' rights generally and by general
principles of equity.
SECTION 4.04 Consents and Approvals; No Violation. Neither the execution
and delivery of this Agreement by the Company nor the consummation of the
transactions contemplated hereby will (a) conflict with or result in any breach
of any provision of the respective Articles of Incorporation or Bylaws (or other
similar governing documents) of the Company or any of its Subsidiaries, (b)
require any consent, approval, authorization or permit of, or filing with or
notification to, any foreign, federal, state or local government or subdivision
thereof, or governmental, judicial, legislative, executive, administrative or
regulatory authority, agency, commission, tribunal or body (a "Governmental
Entity") except as may be required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), the Exchange Act and the
DGCL, (c) require any consent, waiver or approval or result in a default (or
give rise to any right of termination, cancellation, modification or
acceleration) under any of the terms, conditions or provisions of any note,
license, agreement, contract, indenture or other instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which the Company
or any of its Subsidiaries or any of their respective assets may be bound, (d)
result in the creation or imposition of any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind on any asset of the Company or any
of its Subsidiaries or (e) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or any of its Subsidiaries or by
which any of their respective assets are bound, except, in the case of clauses
(b), (c), (d) and (e), for any of the foregoing that would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect or a
material adverse effect on the ability of the parties to consummate the Offer or
the Merger.
11
<PAGE>
SECTION 4.05 Reports; Financial Statements.
(a) Since June 26, 1999, the Company has timely filed all forms, reports
and documents required to be filed by it with the SEC, all of which have
complied as of their respective filing dates in all material respects with all
applicable requirements of the Exchange Act and the rules and regulations of the
SEC promulgated thereunder. True and correct copies of all filings, including
exhibits, made by the Company with the SEC since such date and prior to the date
hereof (the "Company SEC Reports"), whether or not required under applicable
laws, rules and regulations and including any registration statement filed by
the Company under the Securities Act of 1933, as amended (the "Securities Act"),
have been furnished or made available to Parent and Purchaser. None of the
Company SEC Reports, including any financial statements or schedules included or
incorporated by reference therein, at the time filed, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(b) The audited and unaudited consolidated financial statements of the
Company included (or incorporated by reference) in the Company SEC Reports were
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and fairly presented the consolidated
financial position of the Company and its Subsidiaries as of their respective
dates, and the consolidated income, shareholders equity, results of operations
and changes in consolidated financial position or cash flows for the periods
presented therein, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which have not been
and are not reasonably likely to be materially adverse to the Company and its
Subsidiaries taken as a whole.
(c) Neither the Company nor any of its Subsidiaries has any such
liabilities of any nature, whether accrued, absolute, fixed, contingent or
otherwise, whether due or to become due and whether or not required to be
recorded or reflected on a balance sheet under United States generally accepted
accounting principles, except liabilities reflected or reserved against or
disclosed in the financial statements of the Company included in the Company SEC
Reports, and except liabilities incurred since June 26,1999 that (i) have been
incurred in the ordinary course of business consistent with past practice and
(ii) have not had and are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 4.06 Absence of Certain Changes. Since June 26,1999, (a) the
Company and its Subsidiaries have not suffered any Material Adverse Effect or
any change, condition, event or development that would reasonably be expected to
have a Material Adverse Effect, (b) the Company and its Subsidiaries have
conducted their respective businesses only in the ordinary course consistent
with past practice, except for the negotiation and execution and delivery of
this Agreement and (c) there has not been (i) any declaration, setting aside or
payment of any dividend or other distribution in respect of the Shares or any
repurchase, redemption or other acquisition by the Company or any of its
Subsidiaries of any outstanding shares of capital stock or other securities in,
or other ownership interests in, the Company or any of its Subsidiaries or any
amendment of (or agreement to amend) the terms of any such shares, securities or
ownership interests), (ii) any entry into any employment, change in control,
deferred
12
<PAGE>
compensation or severance agreement with, or any increase in the rate or terms
(including any acceleration of the right to receive payment) of compensation
payable or to become payable by the Company or any of its Subsidiaries to, their
respective directors, officers or employees, except increases to employees who
are not officers or directors occurring in the ordinary course of business in
accordance with its customary past practices, (iii) any increase in the rate or
terms (including any acceleration of the right to receive payment) of any Plan
(as defined below) or any other bonus, severance, insurance, change in control,
deferred compensation, pension or other employee benefit plan, payment or
arrangement made to, for or with any such directors, officers or employees, (iv)
any action by the Company which, if taken after the date hereof, would
constitute a breach of any of the clauses of Section 6.01 hereof, (v) any change
by the Company in accounting methods, principles or practices except as required
by changes in United States generally accepted accounting principles, (vi) any
labor dispute or other employment related problem, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company or any Subsidiary, which
employees were not then subject to a collective bargaining agreement or any
lockouts, strikes, slowdowns, work stoppages or threats thereof by or with
respect to such employees, (vii) any revaluation by the Company or any of its
Subsidiaries of any of their respective assets, including write-downs of
inventory or of accounts receivable other than in the ordinary course of
business consistent with past practice or (viii) any entry into any agreement,
commitment or transaction by the Company which is material to the Company and
its Subsidiaries taken as a whole.
SECTION 4.07 Schedule 14D-9; Offer Documents and Proxy Statement.
(a) None of the information supplied or to be supplied by or on behalf of
the Company or any affiliate of the Company for inclusion in the Offer Documents
will, at the times such documents are filed with the SEC and are mailed to
shareholders of the Company, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they are
made, not misleading, or to correct any statement made in any communication with
respect to the Offer previously filed with the SEC or disseminated to the
shareholders of the Company. The Schedule 14D-9 will not, at the time the
Schedule 14D-9 is filed with the SEC and at all times prior to the purchase of
Shares by Purchaser pursuant to the Offer, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, except that no representation or warranty
is made by the Company with respect to information supplied in writing by
Parent, Purchaser or an affiliate of Parent or Purchaser expressly for inclusion
therein. The Schedule 14D-9 will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations of the SEC
thereunder.
(b) The Proxy Statement, and any other schedule or document required to be
filed by the Company in connection with the Merger, will not, at the time the
Proxy Statement is first mailed and at the time of the Special Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading, or to
correct any statement made in any earlier communication with respect to the
solicitation of any proxy or
13
<PAGE>
approval for the Merger in connection with which the Proxy Statement shall be
mailed, except that no representation or warranty is made by the Company with
respect to information supplied in writing by Parent, Purchaser or an affiliate
of Parent or Purchaser expressly for inclusion therein. The Proxy Statement will
comply as to form in all material respects with the provisions of the Exchange
Act and the rules and regulations of the SEC promulgated thereunder. The letter
to shareholders, notice of meeting, proxy statement and form of proxy, or the
information statement, as the case may be, that may be provided to shareholders
of the Company in connection with the Merger (including any amendments or
supplements), and any schedules required to be filed with the SEC in connection
therewith, as from time to time amended or supplemented, are collectively
referred to as the "Proxy Statement."
SECTION 4.08 Brokers. No Person or entity (other than CSFB, a true and
complete copy of whose engagement letter as in effect has been furnished to
Parent and Purchaser) is entitled to receive any brokerage, finder's or other
fee or commission in connection with this Agreement or the transactions
contemplated hereby based upon agreements made by or on behalf of the Company,
any of its Subsidiaries or any of their respective officers, directors or
employees.
SECTION 4.09 Employee Benefit Matters. (a) Neither the Company nor any of
its Subsidiaries has or may have any liability with respect to any personal
services arrangement, agreement or commitment providing for compensation in any
one year in excess of $250,000, or under any executive compensation, incentive
bonus or other bonus, employee pension, profit-sharing, savings, retirement,
stock option, stock purchase, severance pay, or change in control plan, program,
arrangement, agreement or commitment (other than a broad based severance program
the benefits of which are not related to a change in control), in each case,
which would reasonably be expected to result in a liability to the Company or a
Subsidiary of $250,000. Each such arrangement, agreement, commitment, plan or
program with respect to which the Company has or may have any liability is
hereinafter referred to as a "Plan". Schedule 4.09 hereto sets forth (i) the
form of each personal services agreement providing for any benefits contingent
upon a change of control of the Company or a Subsidiary and identifies each
person with whom the Company has entered into an agreement in such form and to
the best of the Company's knowledge the aggregate change in control payment
liabilities thereunder and (ii) the potential liability of the Company under the
Company's 1999 Change in Control Termination Plan or any similar plan as of the
date hereof.
(b) No event has occurred, and no circumstance exists, in connection with
which the Company, any of its Subsidiaries or any Plan, directly or indirectly,
could be subject to any liability under the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), the Code or any other law, regulation or
governmental order applicable to any Plan, which would reasonably be expected to
have a Material Adverse Effect. There are no actions, suits or claims pending
(other than routine claims for benefits) or, to the knowledge of the Company,
threatened with respect to such Plan or against the assets of such Plan which
would reasonably be expected to have a Material Adverse Effect. To the best
knowledge of the senior executives of the Company, no Plan is under audit or is
the subject of an investigation by the Internal Revenue Service, the U.S.
Department of Labor or any other Governmental Entity, except routine audits
conducted in the ordinary course which would not reasonably be expected to have
a Material Adverse Effect.
14
<PAGE>
(c) No Plan is subject to Title IV of ERISA. Neither the Company nor any of
its Subsidiaries has any announced plan or commitment, whether or not legally
binding, to create any additional Plans or to amend or modify any existing Plan.
(d) Neither the Company nor any of its Subsidiaries is a party to any
collective bargaining agreement or other agreement or understanding with a labor
union or labor organization. There are no labor unions or other organizations
representing, purporting to represent or attempting to represent, any employee
of the Company or any of its Subsidiaries.
(e) Neither the Company nor any of its Subsidiaries has violated any
provision of federal or state law or any governmental rule or regulation, or any
order, ruling, decree, judgment or arbitration award of any court, arbitrator or
any Governmental Entity regarding the terms and conditions of employment of
employees, former employees or prospective employees or other labor related
matters, including laws, rules, regulations, orders, rulings, decrees, judgments
and awards relating to wages, hours, civil rights, discrimination, fair labor
standards and occupational health and safety, wrongful discharge or violation of
the personal rights of employees, former employees or prospective employees
which, taken alone or together with any other such violation or violations,
would reasonably be expected to have a Material Adverse Effect.
(f) (i) The Aggregate Payments do not exceed one hundred twenty million
dollars ($120,000,000). Except for the Aggregate Payments, neither the Company
nor any of its Subsidiaries has any liability to any current or former employee
of the Company or its Subsidiaries, or any other person by virtue of their
rendering or having rendered personal services to the Company or its
Subsidiaries, the amount of which, the timing of the payment of which or the
other terms or conditions of which are affected by the consummation of the
transactions contemplated herein or the value of equity securities of the
Company or equity securities of or interests in any of its Subsidiaries.
(ii) For purposes of this subsection, the term "Aggregate Payments" means
the sum of (i) the aggregate amount of payments (including, without limitation,
the value of benefits) in the nature of severance pay for which the Company and
its Subsidiaries are liable in connection with any change in control of the
Company or any of its Subsidiaries, other than pursuant to the Company's 1999
Change in Control Termination Plan, (ii) the aggregate liability of the Company
under the Company's Supplemental Bonus and Retention Plan, (iii) the aggregate
liability of the Company and its Subsidiaries related to the imposition on any
person of the additional tax imposed by Section 4999 of the Code, including
potential liability of the Company for income and other taxes in respect of the
indemnification of any such person for such additional taxes and (iv) the
aggregate amount of payments or benefits for which the Company is liable related
to the value of equity securities of the Company or equity securities of or
interests in any of its Subsidiaries (including, without limitation, with regard
to any option to purchase stock of the Company or its Subsidiaries, the excess
of the value of such stock over the exercise price of such option), excluding
awards of restricted Shares that are included in the number of Shares
represented to be issued and outstanding as of the close of business on January
20, 2000 in Section 4.02(a) hereof. Aggregate Payments shall be determined on
the basis (i) that the value of stock of the Company is equal to the Merger
Consideration (without giving effect to any increase to the initial Merger
Consideration), (ii) that the Offer will be consummated on
15
<PAGE>
March 1, 2000, and (iii) of, as specified in Section 280G of the Code, discount
rates equal to 120% of the applicable federal rates (within the meaning of
Section 1274(d) of the Code) for January 2000. "Aggregate Payments" shall not
include payments for any professional costs, expenses or fees incurred or to be
incurred by the Company in connection with, or related to, the transactions
contemplated by this Agreement.
SECTION 4.10 Litigation, etc. There is no claim, action, suit, proceeding
or governmental investigation pending or, to the knowledge of the Company,
threatened against or relating to the Company or any of its Subsidiaries that,
individually or in the aggregate, if adversely determined would reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect
or, as of the date hereof, that in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the Offer or the Merger or any of the other
transactions contemplated hereby. Neither the Company nor any Subsidiary of the
Company is subject to any outstanding order, writ, injunction or decree that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect.
SECTION 4.11 Tax Matters. (a) The Company and its Subsidiaries have timely
filed all returns and reports relating to Taxes (including income taxes,
withholding taxes and estimated taxes) required to be filed by applicable law
with respect to each of the Company and its Subsidiaries or any of their income,
properties or operations as of the date hereof, except for such failure to file
as would not reasonably be expected to have a Material Adverse Effect. If not
yet filed, such Tax returns will be filed within the time prescribed by law
(including extensions of time permitted by the appropriate Taxing Authority (as
defined below). All such returns are true, accurate and complete in all material
respects. The Company and its Subsidiaries have timely paid or will timely pay
all Taxes attributable to each of the Company and its Subsidiaries that were due
and payable without regard to whether such Taxes have been assessed other than
Taxes which (i) are being contested in good faith and (ii) for which an adequate
reserve has been provided in accordance with GAAP.
(b) The Company and its Subsidiaries have made adequate provisions in
accordance with United States generally accepted accounting principles
appropriately and consistently applied to each of the Company and its
Subsidiaries in the consolidated financial statements included in the SEC
Reports for the payment of all material Taxes for which each of the Company and
its Subsidiaries may be liable for the periods covered thereby that were not yet
due and payable as of the dates thereof, regardless of whether the liability for
such Taxes is disputed.
(c) There is no claim or assessment pending, or, to the best of the
Company's or any of its Subsidiaries' knowledge, threatened against the Company
or any of its Subsidiaries for any alleged deficiency in material Taxes, and
none of the Company or any of its Subsidiaries knows of any audit or
investigation with respect to any liability of the Company or any of its
Subsidiaries for Taxes. There are no agreements in effect to extend the period
of limitations for the assessment or collection of any material Tax for which
the Company or any of its Subsidiaries may be liable.
(d) The Company and each of its Subsidiaries have withheld from their
employees (and timely paid to the appropriate Taxing Authority) proper and
accurate amounts
16
<PAGE>
for all periods through the date hereof in compliance with all Tax withholding
provisions of applicable federal, state, local and foreign laws (including,
without limitation, income, social security, and employment tax withholding for
all types of compensation).
(e) The Company and each of its Subsidiaries have withheld (and timely paid
to the appropriate Taxing Authority) proper and accurate amounts for all periods
through the date hereof in compliance with all Tax withholding provisions of
applicable federal, state, local and foreign laws other than provisions of
employee withholding (including, without limitation, withholding of Tax on
dividends, interest, and royalties and similar income earned by nonresident
aliens and foreign corporations and withholding of Tax on United States real
property interests).
(f) There is no contract, agreement or intercompany account system in
existence under which the Company or any of its Subsidiaries has, or may at any
time in the future have, an obligation to contribute to the payment of any
portion of a Tax (or pay any amount calculated with reference to any portion of
a Tax) of any group of corporations of which the Company or any of its
Subsidiaries is or was a part.
(g) To the best knowledge of the Company, no claim has been made in writing
within the last three years by any authority in a jurisdiction where neither the
Company nor any of its Subsidiaries filed Tax returns that it is or may be
subject to taxation by that jurisdiction.
For purposes of this Agreement, "Taxing Authority" shall mean, with respect
to any Tax, the government entity or political subdivision thereof that imposes
such Tax and the agency (if any) charged with the collection of such Tax, or
such entity or subdivision.
SECTION 4.12 Compliance with Law; No Default. Neither the Company nor any
of its Subsidiaries is in conflict with, in default with respect to or in
violation of, (a) any statute, law, ordinance, rule, regulation, order, judgment
or decree applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
or (b) any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries, or any property or asset of the Company or any of its
Subsidiaries, is bound or affected, in each case except for any such conflicts,
defaults or violations that have not had and are not reasonably expected to have
a Material Adverse Effect or a material adverse effect on the ability of the
parties to consummate the Offer or the Merger. The Company and its Subsidiaries
have all permits, licenses, authorizations, consents, approvals and franchises
from Governmental Entities required to conduct their businesses as currently
conducted (the "Company Permits"), except for such permits, licenses,
authorizations, consents, approvals and franchises the absence of which,
individually or in the aggregate, have not had and are not reasonably expected
to have a Material Adverse Effect or a material adverse effect on the ability of
the parties to consummate the Offer or the Merger. The Company and its
Subsidiaries are in compliance with the terms of the Company Permits, except
where the failure so to comply in the aggregate has not had and is not
reasonably expected to have a Material Adverse Effect or a material adverse
effect on the ability of the parties to consummate the Offer or the Merger.
17
<PAGE>
SECTION 4.13 Environmental Matters. (a) (i) The Company and each of its
Subsidiaries have been at all times and are in compliance with all applicable
Environmental Laws (as defined below), except where the failure so to comply in
the aggregate has not had and is not reasonably expected to have a Material
Adverse Effect.
(ii) The Company and each of its Subsidiaries have obtained all
Company Permits that are required with respect to the operation of its
business, property and assets under applicable Environmental Laws and all
such Company Permits are in full force and effect, except for such Company
Permits the absence of which, individually or in the aggregate, have not
had and are not reasonably expected to have a Material Adverse Effect.
(iii) To the knowledge of the Company and each of its Subsidiaries,
and except such as would not have a Material Adverse Effect, there are no
past or present conditions or circumstances at, or arising out of, the
operations of the Company or any of its Subsidiaries, including but not
limited to on-site or off-site Release, which are reasonably likely to
result in: (A) material liabilities or obligations for any cleanup,
remediation or corrective action under any Environmental Law, (B) material
claims arising under any Environmental Law for personal injury, property
damage, or damage to natural resources, or (C) material fines or penalties
arising under any Environmental Law.
(b) For purposes of this Section 4.13, the definition of the Company shall
include all of the Company's former Subsidiaries.
(c) Prior to the Effective Time, the Company shall have made all
notifications, registrations, and filings required to have been made by the
Company under, and have taken all other steps required to have been taken by the
Company to effect the timely transfer of all material environmental
authorizations and to comply with all Environmental Disclosure Requirements (as
defined below) applicable to the Company and will provide a copy of any such
notification, registration, or filing, or make the same available to Purchaser
prior to the Effective Time.
(d) For purposes of this Agreement, "Environmental Law" means any statute,
law (including duties under common law), ordinance, rule, regulation, order,
judgment or decree applicable to the Company or any of its Subsidiaries relating
to (i) the protection or preservation of the environment or human health as it
relates to the environment or natural resources, (ii) Releases or threatened
Releases and (iii) the management (including use, treatment, handling, storage,
disposal, transportation, recycling or remediation) of any Hazardous Substance.
(e) For purposes of this Agreement, "Hazardous Substance" means any
hazardous or toxic substance, pollutant, contaminant, chemical or other material
(including asbestos or asbestos-containing-material, polychlorinated biphenyls,
urea formaldehyde foam insulation) or waste that is identified or regulated as
such under any Environmental Law and petroleum or any fraction thereof.
(f) For purposes of this Agreement, "Release" means any spill, discharge,
leak, emission, disposal, injection, escape, dumping, leaching, dispersal,
emanation, migration or
18
<PAGE>
release of any kind whatsoever of any Hazardous Substance, at, in, on, into or
onto the environment.
(g) For the purposes of this Agreement, "Environmental Disclosure
Requirements" means any Environmental Laws requiring notification, registration,
or filing with any governmental agency, prior to the sale or transfer of control
of an establishment, of the actual or threatened presence or Release into the
environment, or the use, disposal, or handling of Hazardous Substance on, at,
under, or near the establishment for which control is to be transferred.
SECTION 4.14 Intellectual Property. (a) (i) with respect to each of the
Company Intellectual Property Rights, the Company and its Subsidiaries at the
Effective Time will either (A) be the owners of the Company Intellectual
Property Rights free and clear of any royalty or other payment obligation, lien
or charge or (B) have sufficient rights to use such Company Intellectual
Property Rights under a valid and enforceable license agreement, (ii) there are
no agreements which restrict or limit the use by the Company or its Subsidiaries
of the owned Company Intellectual Property Rights, and (iii) to the extent that
the Company Intellectual Property Rights owned or held by the Company or its
Subsidiaries are registered with the applicable authorities, record title to
such Company Intellectual Property Rights is registered (or a registration
application for which has been submitted) in the name of the Company or any of
its Subsidiaries except, in each case, where the failure of such has not had and
would not reasonably be likely to have a Material Adverse Effect.
(b) (i) (A) The Company Intellectual Property Rights are valid and
enforceable, (B) the Company Intellectual Property Rights and the products and
services of the Company and its Subsidiaries do not infringe on Intellectual
Property Rights of any person or entity in any country, (C) all maintenance
taxes, annuities and renewal fees have been paid and all other necessary actions
to maintain the Company Intellectual Property Rights have been taken through the
date hereof and will continue to be paid or taken by the Company or its
Subsidiaries through the Effective Time and (D) there exists no impediment which
would impair the Company's rights to conduct its business or the business of its
Subsidiaries after the Effective Time pursuant to the Company Intellectual
Property Rights except, in each case, where the failure of such has not had and
would not reasonably be likely to have a Material Adverse Effect.
(ii) The Company and its Subsidiaries have taken all reasonable and
appropriate steps to protect the Company Intellectual Property Rights and,
where applicable, to preserve the confidentiality of the Company
Intellectual Property Rights except, in each case, where the failure of
such has not had and would not reasonably be likely to have a Material
Adverse Effect.
(iii) During the two-year period immediately preceding the date of
this Agreement, neither the Company nor any of its Subsidiaries has
received any notice of claim that any of such Company Intellectual Property
Rights is expired, is not valid or enforceable in any country or that it
infringes upon or conflicts with Intellectual Property Rights of any third
party, and no such claim or controversy, whenever filed or threatened,
currently exists, except such as has not had and would not reasonably be
likely to have a Material Adverse Effect.
19
<PAGE>
(iv) During the two-year period immediately preceding the date of this
Agreement, neither the Company nor any of its Subsidiaries has given any
notice of infringement to any third party with respect to any of the
Company Intellectual Property Rights or has become aware of facts or
circumstances evidencing the infringement by any third party of any of the
Company Intellectual Property Rights, and no claim or controversy with
respect to any such alleged infringement currently exists, except such as
has not had and would not reasonably be likely to have a Material Adverse
Effect.
(v) Certificates of registration and renewal, letter patents and
copyright registration certificates and all other instruments evidencing
ownership of the Company Intellectual Property Rights Property are in the
possession of the Company, its Subsidiaries, their agents or authorized
representatives.
(c) The term "Intellectual Property Rights" means all proprietary and other
rights, including rights granted under license, in and to the following:
(i) trademarks, service marks, trademark registrations, service mark
registrations, trade names, applications for registration of trademarks and
service marks, and the goodwill associated therewith ("Trademarks");
(ii) copyrights, copyright registrations and applications for
registration of copyrights ("Copyrights");
(iii) patents, design patents and utility patents, all applications
for grant of any such patents pending as of the date hereof or as of the
Effective Time or filed within five years prior to the date hereof, and all
reissues, divisions, continuations-in-part and extensions thereof
("Patents");
(iv) computer software, including source code, object code,
algorithms, databases, and all related documentation ("Software");
(v) technical documentation, trade secrets, designs, inventions,
processes, formulae, know-how, operating manuals and guides, plans, new
product development, technical and marketing surveys, material
specifications, product specifications, invention records, research
records, labor routings, inspection processes, equipment lists, engineering
reports and drawing, architectural or engineering plans, know-how
agreements and other know-how; marketing and licensing records, sales
literature, customer lists, trade lists, sales forces and distributor
networks lists, advertising and promotional materials, service and parts
records, warranty records, maintenance records and similar records; and
(vi) all rights and incidents of interest in and to all noncompetition
or confidentiality agreements;
in each case including any applications therefor or registrations, renewals,
modifications and extensions thereof.
20
<PAGE>
(d) The term "Company Intellectual Property Rights" shall mean all
Intellectual Property Rights owned or held by the Company or any of its
Subsidiaries or otherwise used in the business of the Company and its
Subsidiaries.
SECTION 4.15 Real Property. (a) Each of the Company and its Subsidiaries
has good and marketable title to each parcel of real property owned in fee by it
free and clear of all mortgages, pledges, liens, encumbrances and security
interests, except (i) those reflected or reserved against in the balance sheet
of the Company dated as of June 26, 1999 and included in the SEC Reports, (ii)
Taxes and general and special assessments not in default and payable without
penalty and interest and (iii) other liens, mortgages, pledges, encumbrances and
security interests which do not materially interfere with the Company's or such
Subsidiary's use and enjoyment of such real property or materially detract from
the value thereof and that individually or in the aggregate have not resulted in
or are not reasonably likely to result in a Material Adverse Effect.
(b) All leases, subleases and other agreements under which the Company or
any of its Subsidiaries uses or occupies or has the right to use or occupy, now
or in the future, any real property (the "Real Property Leases") are valid,
binding and in full force and effect and neither the Company nor any of its
Subsidiaries is currently in default of any of the provisions of any real
property lease, except for such defaults as have not had and are not reasonably
likely to have a Material Adverse Effect. The interests of the Company and its
Subsidiaries in the Real Property Leases are free and clear of all mortgages,
pledges, liens, encumbrances and security interests, except (i) those reflected
or reserved against in the balance sheet of the Company dated as of June 26,
1999, (ii) Taxes and general and special assessments not in default and payable
without penalty and interest and (iii) other liens, mortgages, pledges,
encumbrances and security interests which do not materially interfere with the
Company's use and enjoyment of such real property or materially detract from the
value thereof and that individually or in the aggregate have not resulted in or
are not reasonably likely to result in a Material Adverse Effect..
SECTION 4.16 Year 2000. Prior to the date hereof, the Company has taken
steps to ensure that all internal computer systems that are material to the
business, finances or operations of the Company are (a) able to receive, record,
store, process, calculate, manipulate and output dates from and after January 1,
2000, time periods that include January 1, 2000 and information that is
dependent on or relates to such dates or time periods, in the same manner and
with the same accuracy, functionality, data integrity and performance as when
dates or time periods prior to January 1, 2000 are involved and (b) able to
store and output date information in a manner that is unambiguous as to century.
SECTION 4.17 Material Contracts. Neither the Company nor any of its
Subsidiaries is, or has any knowledge that any other party is, in default in any
respect under any of the contracts, agreements, commitments, arrangements,
leases (including with respect to personal property) and other instruments to
which the Company or any of its Subsidiaries is a party or by which the Company,
any of its Subsidiaries or any of their respective assets is bound, except for
such defaults as have not had and are not reasonably likely to have a Material
Adverse Effect (each, a "Material Contract"), and there has not occurred any
event that with the lapse of time or the giving of notice or both would
constitute such a default.
21
<PAGE>
SECTION 4.18 Related Party Transactions. Except as set forth in the Company
SEC Reports filed and available prior to the date of this Agreement, no director
or officer of the Company or any of its Subsidiaries, nor any affiliate of such
director or officer (a) has borrowed any monies from or has outstanding any
indebtedness or other similar obligations to the Company or any of its
Subsidiaries that is required to be reported under applicable law or in the SEC
Reports or (b) is otherwise a party to any contract, arrangement or
understanding with the Company or any of its Subsidiaries that is required to be
reported under applicable law or in the SEC Reports.
SECTION 4.19 State Takeover Statutes Inapplicable. Section 203 of the DGCL
is inapplicable to the Offer, the Merger and the transactions contemplated
hereby.
SECTION 4.20 Rights Agreement. The Company has irrevocably taken all
necessary action, including, without limitation, amending the Rights Agreement
dated as of April 29,1994 between the Company and Bank One, Texas, N.A. (as
Rights Agent) (the "Rights Agreement"), with respect to all of the outstanding
rights issued pursuant to the Rights Agreement (the "Rights") (the "Rights
Agreement Amendment"), (a) to render the Rights Agreement inapplicable to this
Agreement, the Offer, the Merger and the other transactions contemplated hereby,
(b) to ensure that (i) Parent and Purchaser, or either of them, are not deemed
to be an Acquiring Person (as defined in the Rights Agreement) pursuant to the
Rights Agreement and (ii) no Triggering Event (as such term is defined in the
Rights Agreement) occurs by reason of the execution and delivery of this
Agreement or the consummation of the Offer, the Merger or transactions
contemplated by this Agreement and (c) so that the Company will have no
obligations under the Rights or the Rights Agreement in connection with the
Offer and the Merger and the holders of Shares will have no rights under the
Rights or the Rights Agreement in connection with the Offer and the Merger. The
Rights Agreement, as so amended, has not been further amended or modified.
Copies of all such amendments to the Rights Agreement have been previously
provided or made available to Purchaser.
SECTION 4.21 Required Vote of Company Shareholders. Unless the Merger is
consummated in accordance with Section 253 of the DGCL as contemplated by
Section 2.09, the only vote of the shareholders of the Company required to adopt
the plan of merger contained in this Agreement and approve the Merger is the
affirmative vote of the holders of not less than two-thirds of the outstanding
Shares. No other vote of the shareholders of the Company is required by law, the
Certificate of Incorporation or Bylaws of the Company as currently in effect or
otherwise to adopt the plan of merger contained in this Agreement and approve
the Merger. Purchaser will have full voting power with respect to any Shares
purchased pursuant to the Offer.
22
<PAGE>
ARTICLE V
REPRESENTATIONS AND
WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser, jointly and severally, represent and warrant to the
Company as follows:
SECTION 5.01 Organization and Qualification. Each of Parent and Purchaser
is a duly organized and validly existing corporation in good standing under the
laws of the jurisdiction of its organization. Purchaser is a Subsidiary of
Parent.
SECTION 5.02 Authority for this Agreement. Each of Parent and Purchaser has
all requisite corporate power and authority to execute and deliver this
Agreement and, subject to obtaining the approval of Parent's shareholders as
provided in Section 5.06 below, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Parent and Purchaser and
the consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate proceedings on the part of Parent
and Purchaser. This Agreement has been duly and validly executed and delivered
by Parent and Purchaser and, assuming the due authorization, execution and
delivery of this Agreement by the Company, constitutes a legal, valid and
binding agreement of each of Parent and Purchaser, enforceable against each of
Parent and Purchaser in accordance with its terms, except to the extent that its
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, fraudulent transfer, moratorium or other laws relating to
or affecting creditors' rights generally and by general principles of equity.
SECTION 5.03 Offer Documents; Proxy Statement.
(a) None of the Offer Documents will, at the times such documents are filed
with the SEC and are mailed to the shareholders of the Company, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by Parent or Purchaser with respect to
information supplied in writing by the Company or an affiliate of the Company
expressly for inclusion therein. The Offer Documents will comply as to form in
all material respects with the provisions of the Exchange Act and the rules and
regulations of the SEC thereunder.
(b) None of the information supplied by Parent, Purchaser or any affiliate
of Parent or Purchaser specifically for inclusion in the Proxy Statement or the
Schedule 14D-9 will, at the date of filing with the SEC, and, in the case of the
Proxy Statement, at the time the Proxy Statement is mailed and at the time of
the Special Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading.
SECTION 5.04 Consents and Approvals; No Violation. Neither the execution
and delivery of this Agreement by Parent or Purchaser nor the consummation of
the transactions contemplated hereby will (a) conflict with or result in any
breach of any provision of the
23
<PAGE>
respective Certificates of Incorporation or Bylaws (or other similar governing
documents) of Parent or Purchaser, (b) require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity, except (i) as may be required under the HSR Act, any non-United States
competition, antitrust and investment laws, the Exchange Act, the DGCL and the
"takeover" or "blue sky" laws of various states or (ii) where the failure to
obtain such consent, approval, authorization or permit, or to make such filing
or notification, would not, individually or in the aggregate, have a material
adverse effect on the ability of Parent or Purchaser to consummate the
transactions contemplated hereby, (c) require any consent, waiver or approval or
result in a default (or give rise to any right of termination, cancellation,
modification or acceleration) under any of the terms, conditions or provisions
of any note, license, agreement, contract, indenture or other instrument or
obligation to which Parent or Purchaser or any of their respective Subsidiaries
is a party or by which Parent or any of its Subsidiaries or any of their
respective assets may be bound, except for such defaults (or rights of
termination, cancellation, modification or acceleration) as to which requisite
waivers or consents have been obtained or which would not in the aggregate have
a material adverse effect on the ability of Parent or Purchaser to consummate
the transactions contemplated hereby or (d) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to Parent, Purchaser or any of
their respective Subsidiaries or by which any of their respective assets are
bound, except for violations which would not, individually or in the aggregate,
have a material adverse effect on the ability of Parent or Purchaser to
consummate the transactions contemplated hereby.
SECTION 5.05 Operations of Purchaser. Purchaser was formed solely for the
purpose of engaging in the transactions contemplated hereby, has engaged in no
other business activities and has conducted and will conduct its operations only
as contemplated hereby.
SECTION 5.06 Required Vote of Parent's Shareholders. The only vote of the
shareholders of Parent required to approve the consummation of the Offer and the
Merger is the affirmative vote of the holders of not less than a majority of the
outstanding shares of Parent which are present and voting at a meeting of
Parent's shareholders, and such approval shall be obtained prior to the initial
expiration of the Offer. No other vote of the shareholders of Parent or
Purchaser is required by law, or the constituent documents of Parent or
Purchaser as currently in effect or otherwise to approve the consummation of the
Offer or the Merger. adopt the plan of merger contained in this Agreement and
approve the Merger.
SECTION 5.07 Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of the Purchaser or Parent that is or will be payable by the Company
or any of its Subsidiaries.
SECTION 5.08 . Financial Wherewithal. Parent has or will obtain sufficient
funds necessary to enable it and Purchaser to consummate the Offer by the
Acceptance Date and the Merger by the Expiration Date.
SECTION 5.09. Ownership of Company Shares. As of the date of this
Agreement, Parent and its affiliates, including Purchaser, own 13,750,000
Shares. As of the date of this Agreement, neither Parent nor Purchaser is an
"interested stockholder" as that term is defined in Section 203 of the DGCL.
24
<PAGE>
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business of the Company. Except as expressly
contemplated by this Agreement, during the period from the date of this
Agreement to the earlier of the Effective Time and the date on which a majority
of the Company's directors are designees of Parent or Purchaser, or until the
earlier termination of this Agreement, the Company will conduct and will cause
each of its Subsidiaries to conduct its operations according to its ordinary and
usual course of business and consistent with past practice, and the Company will
use and will cause each of its Subsidiaries to use its reasonable efforts to
preserve substantially intact its business organization, to keep available the
services of its current officers and employees and to preserve the present
relationships with those Persons and entities having significant business
relationships with the Company and its Subsidiaries, except such as would not
have a Material Adverse Effect, and the Company will promptly advise Parent and
Purchaser in writing of any material change in the Company's or any of its
Subsidiaries' condition (financial or otherwise), properties, customer or
supplier relationships, assets, liabilities or results of operations. Without
limiting the generality of the foregoing and except as otherwise expressly
provided in or contemplated by this Agreement, during the period specified in
the preceding sentence, without the prior written consent of Parent, the Company
will not and will not permit any of its Subsidiaries to:
(a) issue, sell, grant options or rights to purchase or receive,
pledge, or authorize or propose the issuance, sale, grant of options or
rights to purchase or receive or pledge of (i) any Company Securities or
Subsidiary Securities, or grant or accelerate any right to convert or
exchange any Company Securities or Subsidiary Securities, other than Shares
issuable upon exercise of the Existing Stock Options or pursuant to the
terms of any Equity Award or (ii) any other securities in respect of, in
lieu of or in substitution for Shares outstanding on the date hereof;
(b) acquire or redeem, directly or indirectly, or amend any Company
Securities or Subsidiary Securities;
(c) split, combine or reclassify its capital stock or declare, set
aside, make or pay any dividend or distribution (whether in cash, stock or
property) on any shares of its capital stock (other than cash dividends
paid to the Company by its wholly-owned Subsidiaries with regard to their
capital stock);
(d) (i) make or offer to make any acquisition, by means of a merger or
otherwise, of assets or securities, or any sale, lease, encumbrance or
other disposition of assets or securities, in each case involving an amount
in excess of $100,000, except for purchases of inventory made in the
ordinary course of business and consistent with past practice or (ii) enter
into a Material Contract or amend any Material Contract or grant any
release or relinquishment of any rights under any Material Contract;
25
<PAGE>
(e) incur or assume any long-term debt or short-term debt except in
the ordinary course of business consistent with past practice or to fund
payments contemplated under this Agreement;
(f) other than in the ordinary course of business and consistent with
past practice, assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the material
obligations of any other Person except wholly-owned Subsidiaries of the
Company;
(g) other than in the ordinary course of business and consistent with
past practice, make any loans, advances or capital contributions to, or
investments in, any other Person (other than wholly-owned Subsidiaries of
the Company);
(h) change any of the material accounting principles or practices used
by it unless required by GAAP;
(i) make any material Tax election or settle or compromise any
material federal, state or local income Tax liability;
(j) propose or adopt any amendments to its Certificate of
Incorporation or Bylaws (or similar documents);
(k) grant any stock-related, performance or similar awards or bonuses
or take any action, whether by Board resolutions or otherwise, that is
inconsistent with Sections 3.04 and 3.05 hereof;
(l) forgive any loans to employees, officers or directors or any of
their respective affiliates or associates;
(m) enter into any new, or amend any existing, employment, severance,
consulting or salary continuation agreements with or for the benefit of any
officers, directors or employees, or grant any increases in the
compensation or benefits to officers, directors and employees (other than
normal increases to persons who are not officers or directors in the
ordinary course of business consistent with past practices and that, in the
aggregate, do not result in a material increase in benefits or compensation
expense of the Company); provided, however, that nothing contained in this
Section 6.01 shall in any manner preclude the Company from extending the
current term of any employment, severance, change in control or similar
agreement, arrangement or program which is effect on the date hereof;
(n) make any deposits or contributions of cash or other property to or
take any other action to fund or in any other way secure the payment of
compensation or benefits under the Plans or agreements subject to the Plans
or any other plan, agreement, contract or arrangement of the Company;
(o) enter into, amend, or extend any collective bargaining or other
labor agreement;
26
<PAGE>
(p) adopt, amend or terminate any Plan or any other bonus, severance,
insurance pension or other employee benefit plan or arrangement ; provided,
however, that nothing contained in this Section 6.01 shall in any manner
preclude the Company from extending the current term of any Plan which is
effect on the date hereof;
(q) other than in the ordinary course of business and consistent with
past practice, settle or agree to settle any suit, action, claim,
proceeding or investigation (including any suit, action, claim, proceeding
or investigation relating to this Agreement or the transactions
contemplated hereby) or, except in the ordinary course of business
consistent with past practice, pay, discharge or satisfy or agree to pay,
discharge or satisfy any claim, liability or obligation (absolute or
accrued, asserted or unasserted, contingent or otherwise) other than the
payment, discharge or satisfaction of liabilities reflected or reserved
against in full in the financial statements as at June 26, 1999 or incurred
in the ordinary course of business subsequent to June 26, 1999;
(r) except as specifically permitted by Section 6.02, take, or agree
to commit to take, or fail to take any action that would result or is
reasonably likely to result in any of the Offer Conditions or any of the
conditions to the Merger set forth in Article VII not being satisfied, or
would make any representation or warranty of the Company contained herein
inaccurate in any material respect at, or as of any time prior to, the
Effective Time, or that would impair the ability to consummate the Offer or
the Merger in accordance with the terms hereof or materially delay such
consummation;
(s) agree in writing or otherwise to take any of the foregoing
actions.
SECTION 6.02 No Solicitation. (a) The Company shall not, and shall cause
its Subsidiaries and its and their respective officers, directors, employees,
representatives (including investment bankers, attorneys and accountants),
agents or affiliates not to, directly or indirectly, encourage, solicit,
initiate or participate in any way in any discussions or negotiations with, or
provide any information to, or afford any access to the properties, books or
records of the Company or any of its Subsidiaries to, or otherwise take any
other action to assist or facilitate, any Person or group (other than Parent or
Purchaser or any affiliate or associate of Parent or Purchaser) concerning any
Acquisition Proposal (as defined below) or the possible making of any
Acquisition Proposal. Notwithstanding the foregoing and subject to compliance
with Section 6.02(c) and the prior execution by such Person or group of a
confidentiality agreement substantially identical to the confidentiality
provisions contained in the confidentiality agreement dated January 23, 2000
between the Company and Purchaser, the Company may furnish information to or
enter into discussions or negotiations with any Person or entity that has made
an unsolicited bona fide Acquisition Proposal that the Board of Directors of the
Company determines constitutes or could constitute a Superior Proposal if, and
only to the extent that, the Board of Directors of the Company, after
consultation with outside legal counsel to the Company, determines in good faith
that failure to do so would be inconsistent with the fiduciary duty of the Board
of Directors of the Company to the shareholders of the Company under applicable
law.
(b) The Company will promptly (and in any event within one business day)
notify Parent and Purchaser, orally and in writing, if any such information is
requested or any
27
<PAGE>
such negotiations or discussions are sought to be initiated and will promptly
communicate to Parent and Purchaser the identity of the Person or group making
such request or inquiry (the "Potential Acquiror") and any other material terms
of such request, inquiry or Acquisition Proposal. Such notification shall
include copies of any written communications received from the Potential
Acquiror. If the Company (or any of its Subsidiaries or its or their respective
officers, directors, employees, representatives, agents or affiliates)
participates in discussions or negotiation with, or provides information to, a
Potential Acquiror, the Company will keep Parent advised on a current basis of
any developments with respect thereto.
(c) The Company will, and will cause its Subsidiaries and its and their
respective officers, directors, employees, representatives, agents and
affiliates to, immediately cease and cause to be terminated any existing
activities, discussions, or negotiations with any Persons other than Parent,
Purchaser or any of their respective affiliates or associates conducted prior to
the date hereof with respect to any Acquisition Proposal.
(d) Unless and until this Agreement has been terminated in accordance with
Section 8.01, the Company shall not (i) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal, (ii) release any
third party from any confidentiality or standstill agreement to which the
Company is a party or fail to enforce to the fullest extent possible any such
agreement in order to facilitate any Acquisition Proposal, (iii) redeem the
Rights or amend, or take any other action with respect to, the Rights Agreement
to facilitate any Acquisition Proposal or (iv) enter into any letter of intent,
agreement in principle, acquisition agreement or other agreement to effect any
Acquisition Proposal. Without limiting any other rights of Parent and Purchaser
under this Agreement in respect of any such action, any withdrawal or
modification by the Company of the approval or recommendation of the Offer or
the Merger shall not have any effect on the approvals of, and other actions
referred to herein for the purpose causing Takeover Laws and the Rights
Agreement to be inapplicable to, this Agreement and the transactions
contemplated hereby, which approvals and actions are irrevocable.
(e) Nothing contained in this Section 6.02 shall prohibit the Company or
its Board of Directors from taking and disclosing to the Company's stockholders
a position with respect to a an Acquisition Proposal by a third party pursuant
to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act.
(f) For purposes of this Agreement, (i) "Acquisition Proposal" means any
offer or proposal, or any indication of interest in making an offer or proposal,
made by a Person or group at any time which is structured to permit such Person
or group to acquire beneficial ownership of 25% of the consolidated assets of,
or at least 25% of the equity interest in the Company pursuant to a merger,
consolidation or other business combination, sale of shares of capital stock,
sale of assets, tender offer or exchange offer or similar transaction, including
any single or multi-step transaction or series of related transactions, in each
case other than the Offer and the Merger and (ii) "Superior Proposal" means any
unsolicited, bona fide Acquisition Proposal made in writing in respect of which
the Board of Directors of the Company has reasonably determined in good faith
after receiving the advice of its outside counsel and independent financial
advisors (A) that the Potential Acquiror has the financial wherewithal to
consummate such Acquisition Proposal, (B) that such Acquisition Proposal would,
if consummated, result in a transaction that is more
28
<PAGE>
favorable to the Company's shareholders (other than Parent and its Affiliates)
than the Offer and the Merger from a financial point of view and (C) that such
Acquisition Proposal is reasonably likely to be consummated.
SECTION 6.03 Access to Information. From and after the date of this
Agreement, the Company will (i) give Parent and Purchaser and their authorized
accountants, investment bankers, counsel and other representatives complete
access (during regular business hours upon reasonable notice) to all employees,
plants, offices, warehouses and other facilities and to all books, contracts,
commitments and records (including Tax returns) of the Company and its
Subsidiaries and cause the Company's and its Subsidiaries' independent public
accountants to provide access to their work papers and such other information as
Parent or Purchaser may reasonably request, (ii) permit Parent and Purchaser to
make such inspections as they may require, (iii) cause its officers and those of
its Subsidiaries to furnish Parent and Purchaser with such financial and
operating data and other information with respect to the business, properties
and personnel of the Company and its Subsidiaries as Parent or Purchaser may
from time to time reasonably request and (iv) furnish promptly to Parent and
Purchaser a copy of each report, schedule and other document filed or received
by the Company during such period pursuant to the requirements of the federal or
state securities laws.
SECTION 6.04 Reasonable Efforts.
(a) Subject to the terms and conditions herein provided for, each of the
parties hereto agrees to use its reasonable efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective, in the most expeditious manner practicable, the
transactions contemplated by this Agreement; provided, however, that nothing in
this Agreement (other than as expressly provided for in Section 1.01) shall
obligate Parent or Purchaser to keep the Offer open beyond the expiration date
set forth in the Offer (as it may be extended from time to time). Without
limiting the foregoing, (i) each of the Company, Parent and Purchaser shall use
its reasonable best efforts to make promptly any required submissions under the
HSR Act which the Company or Parent determines should be made, in each case,
with respect to the Offer, the Merger and the transactions contemplated hereby
and (ii) Parent, Purchaser and the Company shall cooperate with one another (A)
in promptly determining whether any filings are required to be or should be made
or consents, approvals, permits or authorizations are required to be or should
be obtained under any other federal, state or foreign law or regulation or
whether any consents, approvals or waivers are required to be or should be
obtained from other parties to loan agreements or other contracts or instruments
material to the Company's business in connection with the consummation of the
transactions contemplated by this Agreement and (B) in promptly making any such
filings, furnishing information required in connection therewith and seeking to
obtain timely any such consents, permits, authorizations, approvals or waivers.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
(b) In the event that any action, suit, proceeding or investigation
relating hereto or to the transactions contemplated hereby is commenced, whether
before or after the Effective
29
<PAGE>
Time, the parties hereto agree to cooperate and use their reasonable best
efforts to defend vigorously against it and respond thereto.
SECTION 6.05 Indemnification and Insurance.
(a) Parent and Purchaser agree that all rights to indemnification existing
in favor of the present or former directors, officers and employees of the
Company or any of its Subsidiaries as provided in the Company's Certificate of
Incorporation or Bylaws, or the articles of organization, bylaws or similar
documents of any of the Company's Subsidiaries as in effect as of the date
hereof with respect to matters occurring prior to the Effective Time shall
survive the Merger and shall continue in full force and effect for a period of
not less than the statutes of limitations applicable to such matters, and Parent
agrees to cause the Surviving Corporation to comply fully with its obligations
hereunder and thereunder. The Certificate of Incorporation and By-Laws of the
Surviving Corporation shall not be amended, repealed or otherwise modified for a
period of six years after the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who as of the date hereof were
directors, officers, employees, fiduciaries, agents of the Company or otherwise
entitled to indemnification under the Certificate of Incorporation, By-Laws or
indemnification agreements (the "Indemnified Parties") and such Certificate of
Incorporation of the Surviving Corporation shall include provisions providing
for advancement of expenses to such Indemnified Parties in accordance with the
Company's certificate of incorporation and in accordance with Section 145 of
Delaware Law. It is understood and agreed that the Company shall, to the fullest
extent permitted under Delaware Law and regardless of whether the Merger becomes
effective, indemnify, defend and hold harmless, and after the Effective Time,
the Purchaser will cause the Surviving Corporation, to the fullest extent
permitted under Delaware Law, to indemnify, defend and hold harmless, each
Indemnified Party against any costs or expenses (including reasonable attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and amounts paid
in settlement in connection with any claim, action, suit, proceeding or
investigation, including without limitation liabilities arising out of this
transaction, to the extent that it was based on the fact that such Indemnified
Party is or was a director, officer or employee of the Company and arising out
of actions or omissions or alleged actions or omissions occurring at or prior to
the Effective Time, and in the event of any such claim, action, suit, proceeding
or investigation (whether arising before or after the Effective Time), (i) the
Company or the Surviving Corporation, as applicable, shall pay the reasonable
fees and expenses of counsel selected by the Indemnified Parties, which counsel
shall be reasonably satisfactory to the Company or the Surviving Corporation,
promptly as statements therefor are received and (ii) the Company and the
Surviving Corporation will cooperate in the defense of any such matter;
provided, however, that neither the Company nor the Surviving Corporation shall
be liable for any settlement effected without its written consent (which consent
shall not be unreasonably withheld); and further, provided, that neither the
Company nor the Surviving Corporation shall be obliged pursuant to this Section
6.05 to pay the fees and disbursements of more than one counsel for all
Indemnified Parties in any single action except to the extent that, in the
opinion of counsel for the Indemnified Parties, two or more of such Indemnified
Parties have conflicting interests in the outcome of such action.
(b) The Surviving Corporation will cause to be maintained in effect for a
period of six years after the Effective Time, in respect of acts or omissions
occurring prior to the Effective Time (but only in respect thereof), policies of
directors' and officers' liability insurance
30
<PAGE>
covering the persons currently covered by the Company's existing directors' and
officers' liability insurance policies and providing substantially similar
coverage to such existing policies; provided, however, that the Surviving
Corporation will not be required in order to maintain such directors' and
officers' liability insurance policies to pay an annual premium in excess of
200% of the aggregate annual amounts currently paid by the Company to maintain
the existing policies (which amount is approximately $540,000); and provided
further that, if equivalent coverage cannot be obtained, or can be obtained only
by paying an annual premium in excess of 200% of such amount, the Surviving
Corporation shall only be required to obtain as much coverage as can be obtained
by paying an annual premium equal to 200% of such amount.
(c) This Section 6.05 shall survive the consummation of the Merger and is
intended to benefit, and shall be enforceable, by any Person or entity entitled
to be indemnified hereunder (whether or not parties to this Agreement).
SECTION 6.06 Employee Matters. (a) Except as set forth below, the Company
will, and will cause its Subsidiaries to, and from and after the Effective Time,
Parent will, and will cause the Surviving Corporation to, honor, in accordance
with their terms all existing employment and severance agreements between the
Company or any of its Subsidiaries and any officer, director or employee of the
Company or any of its Subsidiaries specified in Section 6.06(a) of the
Disclosure Letter, including the right of the Company to make any payment to any
officer, director or employee on a date that is prior to the Effective Time
pursuant to the terms of any such employment or severance agreements, as are or
may be amended in accordance with the form of amendment attached hereto as Annex
A. Specifically and without limitation, at any time prior to the Effective Time
, the Company shall honor the rights of any officer, director or employee who,
in anticipation of a change in control, terminates his employment in an
"Agreement Termination" as such term is defined in the applicable employment and
severance agreements specified in Section 6.06(a) of the Disclosure Schedule as
they are or may be amended in accordance with the form of amendment attached
hereto as Annex A.
(b) The Company shall take, or cause to be taken, all action necessary, as
promptly hereafter as reasonably practicable, to amend any plan maintained by
the Company or any of its Subsidiaries to eliminate, as of the date hereof, all
provisions for the purchase of Shares directly from the Company or any of its
Subsidiaries or securities of any Subsidiary, other than pursuant to Existing
Stock Options and Equity Awards and other than the outstanding options for the
purchase of Cozone.com common stock granted under the Cozone.com Inc. Long Term
Incentive Plan as described in Section 4.02(b) of the Disclosure Letter. The
Company shall cause the Board of Directors to exercise its authority under the
CompUSA Inc Cozone.com Stock Option Plan to terminate such plan and all options
granted thereunder.
(c) None of the parties to this Agreement shall take any action to deprive
any employee or director of the Company of the benefits of the consideration
payable with respect to the Offer and the Merger with respect to Shares held by
such person on the Acceptance Date.
(d) As of the Effective Time, Parent will, and will cause the Surviving
Corporation to: (i) honor and satisfy all obligations and liabilities that have
accrued as of the Effective Time under the employee benefit plans that are in
effect as of the date hereof, and (ii) continue all such employee benefit plans
(other than, in the case of clauses (i) and (ii), any
31
<PAGE>
employee benefit plan whose termination is required as provided in this
Agreement or under which the value of any awards or benefit is paid in or based
on the equity securities of the Company or any of its Subsidiaries) until the
first anniversary of the Effective Time in accordance with their terms and
applicable law. Subject to the foregoing, the Surviving Corporation may amend or
terminate any of the employee benefit plans described above following the first
anniversary of the Effective Time in accordance with their respective terms and
applicable law.
SECTION 6.07 Takeover Laws. The Company shall, upon the request of Parent
or Purchaser, take all reasonable steps to exclude the applicability of, or to
assist in any challenge by Parent or Purchaser to the validity, or applicability
to the Offer, the Merger or any other transaction contemplated by this Agreement
of, any Takeover Laws.
SECTION 6.08 Proxy Statement. Unless the Merger is consummated in
accordance with Section 253 of the DGCL as contemplated by Section 2.09, the
Company shall prepare and file with the SEC, subject to the prior review and
approval of Parent and Purchaser (which approval shall not be unreasonably
withheld), as soon as practicable after the consummation of the Offer, a
preliminary proxy or information statement (the "Preliminary Proxy Statement")
relating to the Merger as required by the Exchange Act and the rules and
regulations thereunder, with respect to the transactions contemplated hereby.
The Company shall obtain and furnish the information required to be included in
the Preliminary Proxy Statement, shall provide Parent and Purchaser with, and
consult with Parent and Purchaser regarding, any comments that may be received
from the SEC or its staff with respect thereto, shall, subject to the prior
review and approval of Parent and Purchaser (which approval shall not be
unreasonably withheld), respond promptly to any such comments made by the SEC or
its staff with respect to the Preliminary Proxy Statement, shall cause the Proxy
Statement to be mailed to the Company's shareholders at the earliest practicable
date and shall use its best efforts to obtain the necessary approval of the
Merger by its shareholders.
SECTION 6.09 Notification of Certain Matters. The Company shall give prompt
notice to Parent and Purchaser, and Parent or Purchaser, as the case may be,
shall give prompt notice to the Company, of the occurrence, or non-occurrence,
of any event the occurrence, or non-occurrence, of which is likely (a) to cause
any representation or warranty of such party contained in this Agreement
(disregarding any materiality qualification contained therein) to be untrue or
inaccurate in any material respect if made as of any time at or prior to the
Effective Time and (b) to result in any material failure of such party to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied hereunder (including the conditions set forth in Exhibit A); provided,
however, that the delivery of any notice pursuant to this Section 6.09 shall not
limit or otherwise affect the remedies available hereunder to any of the parties
receiving such notice.
SECTION 6.10 Subsequent Filings. Until the Effective Time, the Company will
timely file with the SEC each form, report and document required to be filed by
the Company under the Exchange Act and will promptly deliver to Parent and
Purchaser copies of each such report filed with the SEC. As of their respective
dates, none of such reports shall contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were
32
<PAGE>
made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of the Company included in such reports
shall be prepared in accordance with generally accepted accounting principles in
the United States applied on a consistent basis (except as may be indicated in
the notes thereto) and shall fairly present the financial position of the
Company and its consolidated Subsidiaries as at the dates thereof and the
results of their operations and changes in financial position for the periods
then ended, except that the unaudited interim financial statements were or are
subject to normal and recurring year-end adjustments which should not be
materially adverse to the Company and its Subsidiaries taken as a whole.
SECTION 6.11 Press Releases. Parent, Purchaser and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Offer or the Merger or this Agreement and shall
not issue any such press release or make any such public statement prior to such
consultation (and affording the other party or parties an opportunity to comment
thereon), except as may be required by applicable law or stock exchange rules.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
SECTION 7.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver, where permissible, prior to the proposed Effective Time,
of the following conditions:
(a) unless the Merger is consummated pursuant to Section 253 of the
DGCL as contemplated by Section 2.09, the agreement of merger (as such term
is used in Section 251 of the DGCL) contained in this Agreement shall have
been adopted by the affirmative vote of the shareholders of the Company
required by and in accordance with applicable law;
(b) all necessary waiting periods under the HSR Act applicable to the
Merger shall have expired or been terminated;
(c) no statute, rule, regulation, executive order, judgment, decree or
injunction shall have been enacted, entered, issued, promulgated or
enforced by any court or Governmental Entity against Parent, Purchaser or
the Company and be in effect that prohibits or restricts the consummation
of the Merger or makes such consummation illegal (each party agreeing to
use all reasonable efforts to have such prohibition lifted); and
(d) Purchaser shall have accepted for purchase and paid, or caused to
be paid, for the Shares tendered pursuant to the Offer; provided, that this
condition shall be deemed to have been satisfied with respect to the
obligation of Parent and Purchaser to effect the Merger if Purchaser fails
to accept for payment or pay for Shares pursuant to the Offer in violation
of the terms of the Offer or of this Agreement.
33
<PAGE>
ARTICLE VIII
TERMINATION; AMENDMENT; WAIVER
SECTION 8.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time (notwithstanding approval thereof by the
shareholders of the Company) prior to the Effective Time (with any termination
by Parent also being an effective termination by Purchaser):
(a) by mutual written consent of the Company and Parent;
(b) by Parent or the Company if any court of competent jurisdiction or
other Governmental Entity shall have issued an order, decree or ruling
(which order, decree or ruling the parties hereto shall use reasonable
efforts to lift), or taken any other action restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become
final and non-appealable;
(c) by the Company if (i) Purchaser fails to commence the Offer in
violation of Section 1.01 hereof, (ii) Purchaser shall not have accepted
for payment and paid for Shares pursuant to the Offer in accordance with
the terms thereof on or before May 31, 2000, (iii) Purchaser fails to
purchase validly tendered Shares in violation of the terms of this
Agreement, or (iv) Purchaser or Parent shall have breached any of the
representations, warranties or covenants of this Agreement, which breach
has had or is reasonably likely to have a material adverse effect on the
ability of Parent or Purchaser to consummate the transactions contemplated
hereby;
(d) by Parent if (A) due to an occurrence or circumstance which would
result in a failure to satisfy any of the Offer Conditions contained in
clause (iii) to Exhibit A, Purchaser shall have not commenced the Offer
within the time provided for in Section 1.01 hereof, or (B) due to an
occurrence or circumstance which would result in a failure to satisfy any
of the Offer Conditions, Purchaser shall have either (1) terminated the
Offer without purchasing any Shares pursuant to the Offer or (2) failed to
accept for payment Shares pursuant to the Offer prior to May 31, 2000;
(e) by the Company, prior to the purchase of Shares pursuant to the
Offer, if (i) the Company has given Parent and Purchaser at least two
business days advance notice of its intention to accept or recommend a
Superior Proposal and of all of the material terms and conditions of such
Superior Proposal and (ii) in response to an unsolicited Acquisition
Proposal, the Board of Directors determines, after consultation with and
the receipt of the advice of its financial advisor and outside counsel,
that such Acquisition Proposal is a Superior Proposal and that failure to
terminate this Agreement would be inconsistent with the fiduciary duties of
the Board of Directors under applicable law; provided that the termination
described in this Section 8.01(e) shall not be effective unless and until
the Company shall have paid to Parent all of the Termination Fee; or
(f) by Parent, prior to the purchase of Shares pursuant to the Offer,
if the Company shall have taken or the Board of Directors of the Company
shall have resolved
34
<PAGE>
to take, any of the actions referred to in Section 6.02(d), or if the
Company shall have withdrawn or modified, or proposed publicly to withdraw
or modify, in a manner adverse to Parent or Purchaser, the approval or
recommendation of the Offer or the Merger as set forth in Section 1.02(a).
SECTION 8.02 Effect of Termination. If this Agreement is terminated and the
Merger is abandoned pursuant to Section 8.01 hereof, this Agreement, except for
the provisions of Sections 8.02, 8.03 and Article IX hereof, shall forthwith
become void and have no effect, without any liability on the part of any party
or its directors, officers or shareholders. Nothing in this Section 8.02 shall
relieve any party to this Agreement of liability for any breach of this
Agreement.
SECTION 8.03 Fees and Expenses. (a) Whether or not the Merger is
consummated, except as otherwise specifically provided herein, all costs and
expenses incurred in connection with the Offer, this Agreement and the
transactions contemplated by this Agreement shall be paid by the party incurring
such expenses. Parent and Purchaser acknowledge and agree that the Company shall
be entitled to pay or cause to be paid, at or prior to the Closing, all fees,
costs and expenses incurred by the Company in connection with the Offer, this
Agreement and the transactions contemplated by this Agreement. An estimate of
such amounts has been disclosed in the Disclosure Letter.
(b) In the event that this Agreement is terminated (1) pursuant to Sections
8.01(e) or 8.01(f) or (2) pursuant to Sections 8.01(c)(ii) or 8.01(d) and (in
the case of this clause (2) only) such termination was the result of the failure
of either the Minimum Tender Condition to be satisfied or the condition set
forth in clause (iii)(f) of Exhibit A to be satisfied (provided, in the case of
clause (iii)(f), such condition is not satisfied due to a willful breach by the
Company) and either (A) prior to such termination an Acquisition Proposal (other
than any Acquisition Proposal made by or on behalf of, or encouraged, solicited
or initiated in any respect by, Parent, Purchaser or any of their respective
affiliates or any of such persons' associates) shall have been made or publicly
announced or (B) within six months thereafter an Acquisition Proposal shall have
been consummated, then the Company shall pay Parent a termination fee of $20
million (which shall be deemed to included reimbursement for all fees and
expenses of Parent and the Purchaser related to the Offer, this Agreement, the
transactions contemplated hereby and any related financing) (the "Termination
Fee") in immediately available funds by wire transfer to an account designated
by Parent. If such amounts become payable pursuant to clause (1) or (2)(A) of
this Section 8.03(b), they shall be payable simultaneously with such termination
(in the case of a termination by the Company) or within two business days
thereafter (in the case of a termination by Parent). If such amounts become
payable pursuant to clause (2)(B) of this Section 8.03(b), they shall be payable
simultaneously with completion of such Acquisition Proposal. No Termination Fee
shall be payable pursuant to this Section 8.03 if Parent or Purchaser shall be
in material breach of its obligations under this Agreement.
(c) Without limiting other remedies available to Parent or Purchaser under
this Agreement or otherwise, in the event this Agreement is terminated pursuant
to Section 8.01(c)(ii) or Section 8.01(d) as a result of the failure to satisfy
the conditions set forth in paragraph (f) of Exhibit A, then the Company shall
promptly (and in any event with one business day after such
35
<PAGE>
termination) reimburse Parent for Expenses in immediately available funds by
wire transfer to an account designated by Parent.
(d) For purposes of this Section 8.02, this Agreement shall be deemed
terminated by Parent pursuant to a provision giving rise to the obligation to
pay the Termination Fee if at the time of any termination hereunder Parent was
so entitled to terminate this Agreement pursuant to such provision.
(e) The prevailing party in any legal action undertaken to enforce this
Agreement or any provision hereof shall be entitled to recover from the other
party the costs and expenses (including attorneys' and expert witness fees)
incurred in connection with such action.
SECTION 8.04 Amendment. To the extent permitted by applicable law, this
Agreement may be amended by action taken by or on behalf of the Boards of
Directors of the Company, Parent and Purchaser, subject in the case of the
Company to Section 1.04(b), at any time before or after adoption of this
Agreement by the shareholders of the Company but, after any such stockholder
approval, no amendment shall be made which decreases the Merger Consideration or
which adversely affects the rights of the Company's shareholders hereunder
without the approval of the shareholders of the Company. This Agreement may not
be amended, changed, supplemented or otherwise modified except by an instrument
in writing signed on behalf of all of the parties.
SECTION 8.05 Extension; Waiver; Remedies. (a) At any time prior to the
Effective Time, the parties hereto, by action taken by or on behalf of the
respective Boards of Directors of the Company, Parent and Purchaser, subject in
the case of the Company to Section 1.04(b), may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
(b) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be cumulative
and not alternative, and the exercise of any thereof by any party shall not
preclude the simultaneous or later exercise of any other such right, power or
remedy by such party. The failure of any party hereto to exercise any rights,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Survival of Representations and Warranties. The
representations and warranties made in Articles IV and V shall not survive
beyond the Effective Time. This
36
<PAGE>
Section 9.01 shall not limit any covenant or agreement of the parties hereto
which by its terms contemplates performance after the Effective Time.
SECTION 9.02 Entire Agreement; Assignment. This Agreement, together with
the Disclosure Letter and the Confidentiality Agreement, constitutes the entire
agreement between the parties with respect to subject matter hereof and
supersedes all other prior agreements and understandings, both written and oral,
between the parties with respect to subject matter hereof. The Agreement shall
not be assigned by any party by operation of law or otherwise without the prior
written consent of the other parties, provided, that Parent or Purchaser may
assign any of their respective rights and obligations to any direct or indirect
Subsidiary of Parent, but no such assignment shall relieve Parent or Purchaser,
as the case may be, of its obligations hereunder.
SECTION 9.03 Enforcement of the Agreement; Jurisdiction. The parties agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this Agreement in any
New York state court located in the Borough of Manhattan, City of New York or
any Federal court located in such Borough, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (a) consents to submit itself to the personal jurisdiction of any
New York state court located in the Borough of Manhattan, City of New York or
any Federal court located in such Borough in the event any dispute arises out of
this Agreement or any transaction 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, (c) agrees that it will not
bring any action relating to this Agreement or any transaction contemplated by
this Agreement in any court other than any such court and (d) waives any right
to trial by jury with respect to any action related to or arising out of this
Agreement or any transaction contemplated by this Agreement. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York located in the
Borough of Manhattan, City of New York or in any Federal court located in such
Borough, and hereby further irrevocably and unconditionally waive and agree not
to plead or claim in any such court that any such action, suit or proceeding
brought in any such court has been brought in an inconvenient forum.
SECTION 9.04 Validity. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
SECTION 9.05 Notices. All notices, requests, claims, demands and other
communications hereunder shall be given (and shall be deemed to have been duly
received if
37
<PAGE>
given) by hand delivery in writing or by facsimile transmission with
confirmation of receipt, as follows:
if to Parent or Purchaser:
Grupo Sanborns, S.A. de C.V.
c/o Grupo Financiero Inbursa
Paseo de Las Palmas 736
Col. Lomas de Chapultepec
11000 Mexico, D.F.
Attention: Eduardo Valdes Acra and Javier Cervantes
Facsimile: 011-525-520-5326/011-525-540-7492
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attention: Daniel S. Sternberg and Jorge Juantorena
Facsimile: 212-225-3999
and to:
Franck, Galicia, Duclaud y Robles, S.C.
Torre Optima 405 - 3er Piso
Paseo de Las Palmas Chapultepec
11000 Mexico, D.F.
Attention: Rafael Robles
Facsimile: 011-525-540-9202
if to the Company:
CompUSA, Inc.
14951 N. Dallas Pkwy.
Dallas, TX 75240
Attention: General Counsel
Facsimile: (972) 982-4183
With a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attention: Thomas M. Cerabino and Jeffrey R. Poss
Facsimile: 212-728-8111
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
38
<PAGE>
SECTION 9.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
SECTION 9.07 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 9.08 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, 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 except
for Section 6.05 (which is intended to be for the benefit of the Persons
referred to therein, and may be enforced by any such Persons).
SECTION 9.09 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same agreement.
SECTION 9.10 Certain Definitions.
(a) The terms "affiliate" and "associate" shall have the meanings given to
such terms in Rule 12b-2 under the Exchange Act.
(b) The term "beneficial ownership" shall have the meaning given to such
term in Rule 13d-3 under the Exchange Act.
(c) The term "hereby" shall be deemed to refer to this Agreement in its
entirety, rather than to any Article, Section, or other portion of this
Agreement.
(d) The term "including" shall be deemed to be followed by the phrase
"without limitation."
(e) "Material Adverse Effect" shall mean any change in or effect on the
business of the Company that is or would be reasonably expected to be materially
adverse to any of the condition (financial or otherwise), business, properties,
assets, liabilities or results of operations of the Company and its Subsidiaries
taken as a whole, except as disclosed in 9.10(e) of the Disclosure Schedule.
(f) "Person" shall mean any individual, corporation, limited liability
company, partnership, association, trust, estate or other entity or
organization.
(g) The term "Subsidiary" shall mean, when used with reference to an
entity, any other entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions, or a majority of the outstanding voting
securities of which, are owned directly or indirectly by such entity.
(h) "Tax" shall mean all taxes, charges, fees, levies, imposts, duties, and
other assessments, including any income, alternative minimum or add-on tax,
estimated, gross income,
39
<PAGE>
gross receipts, sales, use, transfer, transactions, intangibles, ad valorem,
value-added, franchise, registration, title, license, capital, paid-up capital,
profits, withholding, employee withholding, payroll, worker's compensation,
unemployment insurance, social security, employment, excise (including the
federal communications excise tax under Section 4251 of the Code), severance,
stamp, transfer occupation, premium, recording, real property, personal
property, federal highway use, commercial rent, environmental (including taxes
under Section 59A of the Code) or windfall profit tax, custom, duty or other
tax, fee or other like assessment or charge of any kind whatsoever, together
with any interest, penalties, related liabilities, fines or additions to tax
that may become payable in respect thereof imposed by any country, any state,
county, provincial or local government or subdivision or agency thereof.
40
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all at or on
the day and year first above written.
GRUPO SANBORNS, S.A. de C.V.
By: /s/ C.P. Jesus Gallardo
------------------------------
Name: C.P. Jesus Gallardo
Title: Attorney-in-Fact
TPC ACQUISITION CORP
By: /s/ Arturo Elia Ayub
------------------------------
Name: Arturo Elia Ayub
Title: President
COMPUSA INC.
By: /s/ James F. Halpin
------------------------------
Name: James F. Halpin
Title: President and Chief
Executive Officer
<PAGE>
EXHIBIT A
---------
CONDITIONS TO THE OFFER
Capitalized terms used in this Exhibit A and not otherwise defined herein
shall have the meanings assigned to them in the Agreement to which it is
attached (the "Merger Agreement").
Notwithstanding any other provision of the Offer, Purchaser shall not be
required to accept for payment, purchase or pay for any Shares tendered in
connection with the Offer and may terminate or, subject to the terms of the
Merger Agreement, amend the Offer as to Shares not then paid for, if (i) there
shall not be validly tendered and not properly withdrawn prior to the expiration
of the initial offering period for the Offer (the "Expiration Date") that number
of Shares which, together with any Shares beneficially owned by Purchaser or
Parent or any of their respective affiliates, represents at least two-thirds of
the total number of outstanding Shares on a fully diluted basis on the date of
purchase (the "Minimum Tender Condition"), (ii) any applicable waiting period
under the HSR Act shall not have expired or been terminated prior to the
Expiration Date or (iii) at any time on or after the date of the Merger
Agreement and prior to the time of payment for any Shares, any of the following
conditions exist:
(a) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction,
proposed, sought, promulgated, enacted, entered, enforced, issued, amended
or deemed applicable to Parent, Purchaser, the Company, any other affiliate
of Parent or the Company, the Offer or the Merger, that would or is
reasonably likely, directly or indirectly, to (1) make the acceptance for
payment of, or payment for or purchase of all or a substantial number of
the Shares pursuant to the Offer illegal, or otherwise restrict or prohibit
the consummation of the Offer or the Merger, (2) result in a significant
delay in or restrict the ability of Purchaser to accept for payment, pay
for or purchase all or a substantial number of the Shares pursuant to the
Offer or to effect the Merger, (3) render Purchaser unable to accept for
payment or pay for or purchase all or a substantial number of the Shares
pursuant to the Offer, (4) impose material limitations on the ability of
Parent, Purchaser or any of their respective Subsidiaries or affiliates to
acquire or hold, transfer or dispose of, or effectively to exercise all
rights of ownership of, all or a substantial number of the Shares including
the right to vote the Shares purchased by it pursuant to the Offer on an
equal basis with all other Shares on all matters properly presented to the
stockholders of the Company, (5) require the divestiture by Parent,
Purchaser or any of their respective Subsidiaries or affiliates of any
Shares, or require Purchaser, Parent, the Company, or any of their
respective Subsidiaries or affiliates to dispose of or hold separate all or
any material portion of their respective businesses, assets or properties
or impose any material limitations on the ability of any of such entities
to conduct their respective businesses or own such assets, properties or
Shares or on the ability of Parent or Purchaser to conduct the business of
the Company and its Subsidiaries and own the assets and properties of the
Company and its Subsidiaries, (6) impose any material limitations on the
ability of Parent, Purchaser or any of their respective Subsidiaries or
affiliates effectively to control the business or operations of the
Company, Parent, Purchaser or any of their respective
A-1
<PAGE>
Subsidiaries or affiliates, or (7) otherwise materially adversely affect
Parent, Purchaser, the Company or any of their respective Subsidiaries or
affiliates, or their business, assets, liabilities, condition (financial or
otherwise) or results of operations, or the value of the Shares;
(b) there shall have been instituted or pending any action, proceeding
or counterclaim by any Governmental Entity, challenging the making of the
Offer or the acquisition by Purchaser of the Shares pursuant to the Offer
or the consummation of the Merger, or seeking to, directly or indirectly,
result in any of the consequences referred to in clauses (1) through (7) of
paragraph (a) above;
(c) there shall have occurred (1) any general suspension of, or
limitation on trading in securities on any national securities exchange or
in the over-the-counter market in the United States (other than any
suspension or limitation on trading in any particular security as a result
of a computerized trading limit or any intraday suspension due to "circuit
breakers"), (2) the declaration of any banking moratorium or any suspension
of payments in respect of banks or any limitation (whether or not
mandatory) on the extension of credit by lending institutions in the United
States, (3) a decline at any time through the initial Expiration Date of
more than 2250 points in the Dow Jones Index measured from the closing
price on the trading day immediately preceding the date of the Merger
Agreement, or (4) in the case of any of the foregoing (other than clause
(3)) existing at the time of the execution of the Merger Agreement, a
material acceleration or worsening thereof;
(d) any Person or "group" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than Parent, Purchaser or any of their respective
affiliates shall have become the beneficial owner (as that term is used in
Rule 13d-3 under the Exchange Act) of more than 20% of the outstanding
Shares;
(e) there shall have occurred any change, condition, event or
development that, individually or in the aggregate, has had or is
reasonably likely to have, a Material Adverse Effect with respect to the
Company;
(f) the Company shall have breached or failed to comply in any
material respect with any of its material obligations, covenants, or
agreements under the Merger Agreement, or any representation or warranty of
the Company contained in the Merger Agreement that is qualified by
reference to a Material Adverse Effect or the representation in Section
4.09(f) shall not be true and correct, or any other such representation or
warranty shall not be true and correct in any respect that (when taken
together with all such other representations and warranties not true and
correct) has had or would reasonably be likely to have a Material Adverse
Effect, in each case either as of when made or at and as of any time
thereafter; or
(g) the Merger Agreement shall have been terminated pursuant to its
terms or shall have been amended pursuant to its terms to provide for such
termination or amendment of the Offer;
A-2
<PAGE>
which, in the good faith judgment of Parent or Purchaser, in any case, and
regardless of the circumstances (including any action or inaction by Parent
or Purchaser or any of their affiliates) giving rise to any such condition,
makes it inadvisable to proceed with the Offer or with acceptance for
payment or payment for Shares.
The foregoing conditions are for the sole benefit of Parent and
Purchaser and may be asserted regardless of the circumstances (including
any action or inaction by Parent or Purchaser or any of their affiliates
giving rise to any such condition) or waived by Parent or Purchaser in
whole or in part at any time or from time to time in its discretion subject
to the terms and conditions of the Merger Agreement. The failure of 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. Any
determination by Parent or Purchaser concerning the events described above
will be final and binding on all parties.
A-3
<PAGE>
ANNEX "A"
- ---------
AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------
This Amendment to Employment Agreement (this "Amendment") is executed
between the undersigned parties as of January 23, 2000.
WHEREAS, CompUSA, Inc., a Delaware corporation (the "Employer"), and
__________________ (the "Employee") have entered into an Employment Agreement,
dated _______________ (the "Agreement"), which provides, among other things, for
certain "Termination Payments" and "Gross Up Payments" (each as defined in the
Agreement) to be paid to Employee upon the occurrence of certain events; and
WHEREAS, the Employee and the Employer desire to amend the Agreement to
provide that the Termination Payments and the Gross Up Payments shall be paid in
two installments as provided herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto hereby agree to amend the Agreement as follows.
1. Defined Terms. Except as hereinafter provided, all defined terms used
herein that are not otherwise defined herein shall have the meaning ascribed to
such terms in the Agreement. As used herein, the term "Cause" has the meaning
ascribed to such term in Section 6(a)(ii) of the Agreement, without regard to
any other provision therein. As used herein, the term "Termination Payment" has
the meaning ascribed to such term in Section 10(b)(i) of the Agreement,
excluding the amounts described in clauses (I), (II) and (III) of Section
10(b)(i)(2) thereof. In addition, the Employee's employment hereunder shall be
"Constructively Terminated" if the Employer (i) demotes the Employee to a lesser
position, either in title or responsibility, than the position the Employee held
immediately prior to the Change in Control, (ii) decreases the Employee's base
salary below the base salary that was in effect immediately prior to the Change
in Control or (iii) requires the Employee to relocate to a principal place of
business more than twenty-five miles from the principal place of business
occupied by the Employer on the date hereof.
2. Installment Payments. (a) Notwithstanding any provision to the contrary
in the Agreement, including, without limitation, the provisions of Section 10
thereof, the Termination Payment and the Gross Up Payment shall be paid in two
installments. The first installment shall be equal to the sum of (i) eighty
percent (80%) of the Termination Payment and (ii) the Gross Up Payment to which
the Employee would be entitled pursuant to the Agreement if the amount of the
Termination Payment were reduced by twenty percent (20%). Such first installment
shall be paid on the date on which the Termination Payment and the Gross Up
Payment would be required to be paid pursuant to the Agreement, without regard
to this Amendment (the "First Payment Date"). The second installment (the
"Deferred Payment") shall be equal to the sum of (i) the remaining twenty
percent (20%) of the Termination Payment and (ii) the excess of (A) the Gross Up
Payment (calculated in accordance with the Agreement and based on the full
amount of the Termination Payment) over (B) the amount determined pursuant to
clause (ii) of the preceding sentence of this Section 2(a). The Deferred Payment
shall be paid on the earlier to occur of (i) the three-month anniversary of the
First Payment Date, if the
<PAGE>
employee is employed by the Employer at such time and (ii) two (2) business days
after the date on which the Employee's employment with the Employer terminates
for any reason other than by the Employer for Cause or the voluntary resignation
of the Employee. If the employment of the Employee is terminated prior to the
three-month anniversary of the First Payment Date by the Employer for Cause or
by the voluntary resignation of the Employee, then the Deferred Payment shall be
irrevocably forfeited without any additional action by the Employer. It is
understood that in the event that the Employee's employment is Constructively
Terminated by the Employer, such termination shall not be considered a voluntary
resignation by the Employee.
(b) In addition to the payments under the preceding subparagraph (a) of
this Section 2, on the First Payment Date, the Employer shall deposit an amount
equal to the Deferred Payment into an interest bearing escrow account
(designated by the Employer) for the benefit of the Employee. In the event the
Employer pays the Deferred Payment to the Employee as provided in subparagraph
(a) of this Section 2, the Employee shall also be entitled to the interest
earned on the amount of the Deferred Payment deposited in such escrow account,
in lieu of any interest payments that the Employee may otherwise have been
entitled to under Section 10(b)(ii) of the Agreement.
(c) Notwithstanding any provision in the Agreement to the contrary,
including without limitation an Agreement Termination, the Employee agrees to
render services to the Employer as an employee on a full-time basis during the
six-month period commencing on the First Payment Date. In consideration for such
services, the Employee shall be entitled to base salary at a rate equal to one
hundred percent (100%) of his rate of "annualized base compensation" within the
meaning of Section 10(b)(i)(1)(I) of the Agreement, plus such vacation,
insurance, car allowance and health club membership benefits as are now provided
under Section 4 of the Agreement. The Employee shall not be entitled to any
additional benefit in the nature of severance pay upon the termination of such
employment, other than the Deferred Payment, subject to the conditions provided
above.
3. Incorporation. Except as expressly provided in this Amendment, the
Agreement shall remain in full force and effect. The provisions of this
Amendment shall be deemed to be a part of the Agreement as if included therein.
Nothing in this Amendment is intended to revise the provisions relating to the
determination and potential adjustment of the Gross Up Payment as provided in
Section 10 of the Agreement, and the Gross Up Payment portions of the
installment payments described herein are subject to such determination and
potential adjustment provisions. In addition, nothing in this Amendment is
intended to affect the Employee's entitlement to the payments described in
Section 10(b)(i)(2)(I), (II) and (III) of the Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the 23 day of January, 2000.
CompUSA Inc.
By:
------------------------------
Name:
Title:
EMPLOYEE
-------------------------------
<PAGE>
4.1
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
-----------------------------------
THIS FIRST AMENDMENT TO RIGHTS AGREEMENT (this "Amendment") is made as of
this 23rd day of January 2000, to the Rights Agreement, dated as of April 29,
1994 (the "Rights Agreement") by and between COMPUSA INC. a Delaware corporation
(the "Corporation"), and AMERICAN STOCK TRANSFER & TRUST COMPANY (formerly Bank
One, Texas, N.A.), as Rights Agent (the "Rights Agent").
WHEREAS, the Corporation has entered into a Merger Agreement (as the same
may be amended from time to time, the "Merger Agreement") among Grupo Sanborns,
S.A. de C.V., a corporation organized under the laws of the United Mexican
States ("Parent"), TPC Acquisition Corp., a Delaware corporation and the
Corporation, providing for a tender offer and merger transaction (collectively,
the "Transaction") pursuant to which the Purchaser has offered to purchase all
of the outstanding shares of common stock, par value $.01 per share (the
"Shares"), of the Corporation;
WHEREAS, pursuant to the terms of the Merger Agreement, the Corporation has
agreed to amend the Rights Agreement as set forth in this Amendment;
WHEREAS, pursuant to Section 27 of the Rights Agreement, this Amendment may
be entered into by the Corporation and the Rights Agent without the approval of
any holder of the Rights (as defined therein) or of the Shares.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
1. Section 1(a) of the Rights Agreement is hereby amended by adding the
following sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary,
neither Parent nor Purchaser shall be or become an Acquiring Person as a result
of (i) the execution of the Merger Agreement, (ii) the announcement or making of
the Offer (as defined in the Merger Agreement), (iii) the acquisition of the
Shares pursuant to the Offer and the consummation of the Merger (as defined in
the Merger Agreement) or (iv) as result of any of the transactions contemplated
by the Merger Agreement."
2. Section 3(a) of the Rights Agreement is amended by adding the following
sentence at the end thereof:
"Notwithstanding anything in this Rights Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred as a result of (i) the
execution of the Merger Agreement, (ii) the announcement or making of the Offer
(as
<PAGE>
defined in the Merger Agreement), (iii) the acquisition of the Shares pursuant
to the Offer and the consummation of the Merger (as defined in the Merger
Agreement) or (iv) as a result of any of the transactions contemplated by the
Merger Agreement."
3. Section 13 of the Rights Agreement is hereby amended to add the
following sentence at the end thereof:
"Notwithstanding anything in the Rights Agreement to the contrary,
none of the following: (i) the execution of the Merger Agreement, (ii) the
announcement or making of the Offer (as defined in the Merger Agreement), (iii)
the acquisition of the Shares pursuant to the Offer and the consummation of the
Merger (as defined in the Merger Agreement) or (iv) the consummation of any of
the transactions contemplated by the Merger Agreement shall be a Section 13
Event nor shall any of such events cause the Rights to be adjusted or become
exercisable in accordance with Section 13 or otherwise."
4. This Amendment shall be effective as of January 23, 2000. The Rights
Agreement, as amended by this Amendment, shall remain in full force and effect
in accordance with its terms.
5. Capitalized terms used but not defined in this Amendment shall have the
respective meanings ascribed thereto in the Rights Agreement.
6. This Amendment shall be governed by the laws of the State of Delaware
and for all purposes shall be construed in accordance with the laws of such
state applicable to contracts to be made and performed entirely within such
state. This Amendment may be executed in any number of counterparts, each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument. If
any provision, covenant or restriction of this Amendment is held by a court of
competent jurisdiction or other authority to be invalid, illegal or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be effected, impaired or invalidated.
7. If any term, provision, covenant or restriction of this Amendment is
held by a court of competent jurisdiction or other authority to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties herein have caused this Agreement to be
duly executed and attested, all as of the date and year first above written.
COMPUSA INC.
By: /s/ James F. Halpin
------------------------------
Name: James F. Halpin
Title: President and
Chief Executive Officer
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By: /s/ Herbert Lemmer
------------------------------
Name: Herbert Lemmer
Title: Vice President
-3-
<PAGE>
For Immediate Release 8:00 am 1/24/00
GRUPO SANBORNS TO ACQUIRE COMPUSA INC. FOR $10.10 PER SHARE
New York and Dallas, January 24, 2000 -- Grupo Sanborns, S.A. de C.V., a leading
Mexican retail group with an expanding presence in e-commerce, and CompUSA Inc.
(NYSE: CPU), announced today that they have reached a definitive agreement for
Grupo Sanborns to acquire all of the outstanding shares of CompUSA for $10.10
per share in cash.
Under the terms of the agreement, Grupo Sanborns will shortly commence a tender
offer to acquire all of the common shares of CompUSA that it does not already
own. Grupo Sanborns currently indirectly owns approximately 14.8 percent of
CompUSA's shares. The agreement has been unanimously approved by the Board of
Directors of CompUSA.
Grupo Sanborns said that it expects to ally itself with strategic business
partners to enhance the value of its investment in CompUSA, including Telefonos
de Mexico, S.A de C.V. (Telmex), Microsoft Corporation, SBC Communications and
Prodigy Communications Corporation. Telmex, Microsoft and SBC are expected to be
minority investors in the company.
"CompUSA is a premier retail brand for computer equipment, consumer technology
and related services in the U.S., and represents a tremendous opportunity to
leverage the management experience of Sanborns in the retail and e-commerce
sectors," said Carlos Slim Domit, Chairman of Grupo Sanborns. "The addition of
strategic partners would also allow us to capitalize on the track records of
Telmex, Microsoft, SBC and Prodigy for marketing consumer technology and
telecommunications products and services."
"We believe that this offer represents a good value for our shareholders and an
exciting new future for our customers, employees and business partners," said
James Halpin, President and Chief Executive Officer of CompUSA. "We look forward
to continuing to grow the company with the support of Grupo Sanborns and its
business partners."
"We believe that we can build CompUSA into an even stronger competitor in the
consumer technologies sector," said Mr. Slim Domit. "We also believe that we can
re-energize the organization by taking the consumer experience of shopping at
CompUSA to a new level, by uniting excellent customer service, whether in-store
or online." Mr. Slim Domit added that among the resources that can be brought to
market are "click-and-brick" initiatives through Prodigy and Microsoft, and new
consumer technology and telecommunications products and services through Telmex
and SBC.
-more-
<PAGE>
Grupo Sanborns has one of the strongest retail brand portfolios in Mexico. It
owns and operates 305 stores in major cities across the country, including
Sanborns, Sanborns Cafe, Sears Roebuck de Mexico, Pasteleria el Globo, Mix-up
and Discolandia as well as manufactures food and household/personal care items
sold throughout Mexico. The group's e-commerce initiatives include a shopping
portal for Sanborns products. The Group has over 30,000 employees. CompUSA Inc.
is one of the nation's leading retailers and resellers of personal computers and
related products and services. The company currently operates 217 CompUSA
Computer Superstores in 84 major metropolitan markets across the United States
that serve retail, corporate, government and education customers and include
technical service departments. Many of the stores also include classroom
training facilities. CompUSA employs approximately 20,000.
Credit Suisse First Boston acted as exclusive financial advisor to CompUSA in
this transaction.
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES OF COMPUSA. AT THE TIME SANBORNS COMMENCES ITS OFFER, IT WILL
FILE A TENDER OFFER STATEMENT WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
AND COMPUSA WILL FILE A SOLICITATION/RECOMMENDATION STATEMENT WITH RESPECT TO
THE OFFER. THE TENDER OFFER STATEMENT (INCLUDING AN OFFER TO PURCHASE, A RELATED
LETTER OF TRANSMITTAL AND OTHER OFFER DOCUMENTS) AND THE
SOLICITATION/RECOMMENDATION STATEMENT WILL CONTAIN IMPORTANT INFORMATION WHICH
SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER OFFER
DOCUMENTS, AS WELL AS THE SOLICITATION/RECOMMENDATION STATEMENT WILL BE MADE
AVAILABLE TO ALL SHAREHOLDERS OF COMPUSA, AT NO EXPENSE TO THEM. THE TENDER
OFFER STATEMENT (INCLUDING THE OFFER TO PURCHASE, THE RELATED LETTER OF
TRANSMITTAL AND ALL OTHER OFFER DOCUMENTS FILED WITH THE COMMISSION) AND THE
SOLICITATION/RECOMMENDATION STATEMENT WILL ALSO BE AVAILABLE FOR FREE AT THE
COMMISSION'S WEBSITE AT WWW.SEC.GOV.
Certain statements in this press release, including statements concerning
expected operations and financial results, are "forward-looking statements" as
defined under the securities laws. CompUSA's operations are subject to a number
of risk factors, which may cause actual results to vary materially from those
anticipated in the forward-looking statements. CompUSA's SEC filings, as updated
from time to time, contain important information identifying a number of these
risk factors. This information can be found under the heading "Management
Discussion and Analysis of Financial Conditions and Results of Operations" in
CompUSA's Annual Report on Form 10-K filed by CompUSA with the SEC as updated by
CompUSA's other SEC filings from time to time. Any forward-looking statements
should be evaluated in light of these important risk factors.
