<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 3, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
THE BISYS GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3532663
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
------------------------
150 CLOVE ROAD, LITTLE FALLS, NEW JERSEY 07424
(973) 812-8600
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
ROBERT J. MCMULLAN
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
THE BISYS GROUP, INC.
150 CLOVE ROAD
LITTLE FALLS, NEW JERSEY 07424
(973) 812-8600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
KEVIN J. DELL, ESQ. STEWART E. LAVEY, ESQ.
VICE PRESIDENT, GENERAL COUNSEL SHANLEY & FISHER, P.C.
AND SECRETARY 131 MADISON AVENUE
THE BISYS GROUP, INC. MORRISTOWN, NEW JERSEY 07962
150 CLOVE ROAD (973) 285-1000
LITTLE FALLS, NEW JERSEY 07424
(973) 812-8600
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
COVER CONTINUED ON NEXT PAGE
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- --------------------------------------------------------------------------------
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $0.02 par value (including
Common Stock purchase rights)(3)......... 1,056,671 shares $31.688 $33,483,791 $10,147
</TABLE>
(1) This Registration Statement shall also cover any additional shares of Common
Stock that become issuable in connection with the shares registered hereby
by reasons of any stock dividend, stock split, recapitalization or other
similar transaction effected without the receipt of consideration that
results in an increase in the number of the Company's outstanding shares of
Common Stock.
(2) Estimated in accordance with Rule 457(c) solely for the purpose of
calculating the registration fee based upon a price of $31.688 per share,
which was the average of the high and low sale prices reported on the Nasdaq
National Market on September 30, 1997.
(3) Prior to the occurrence of certain events, purchase rights for Common Stock
will not be evidenced separately from the Common Stock.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED OCTOBER 3, 1997
PROSPECTUS
THE BISYS GROUP, INC.
1,056,671 SHARES OF COMMON STOCK
This Prospectus relates to the sale of up to 1,056,671 shares (the "Shares")
of the common stock, $.02 par value ("Common Stock"), of The BISYS Group, Inc.
("BISYS" or the "Company") offered hereby for the accounts of the selling
stockholders set forth herein (the "Selling Stockholders"). The Selling
Stockholders acquired the Shares in connection with the Company's acquisition
of: (i) Strategic Solutions Group, Inc. ("SSG") by merger (the "SSG Merger"),
(ii) Charter Systems, Inc. ("Charter") by merger (the "Charter Merger"), (iii)
Dascit/White & Winston, Inc., Group Plan Administrators, Inc. and Krauss &
Trapani Co., Ltd. (the foregoing affiliated companies are hereinafter referred
to as "Dascit") by merger (the "Dascit Merger"), and (iv) Benefit Services, Inc.
("Benefit") by merger (the "Benefit Merger"). See "Selling Stockholders". The
Company is registering the Shares at its expense (other than any selling
commissions) pursuant to certain registration rights granted by the Company to
the Selling Stockholders. See "Selling Stockholders".
SEE "RISK FACTORS", BEGINNING ON PAGE 6 OF THIS PROSPECTUS, FOR INFORMATION
WHICH SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
The Selling Stockholders may sell the Shares from time to time to or through
underwriters or broker-dealers in open market transactions on the Nasdaq
National Market or in privately negotiated transactions at market prices
prevailing at the time of sale or at negotiated prices. Whether or not any such
sale will be made and the timing and amount of any such sale are within the sole
discretion of the Selling Stockholders. See "Plan of Distribution". The Company
will not receive any of the proceeds from the sale of the Shares. See "Use of
Proceeds". The Company has agreed to indemnify the Selling Stockholders against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
Certain persons who sell Shares covered by this Prospectus, and any broker
or dealer to or through whom any such person sells Shares, may be deemed to be
underwriters within the meaning of the Securities Act with respect to the sale
of such Shares.
Common Stock is quoted on the Nasdaq National Market under the symbol
"BSYS". The last per share sale price of Common Stock as reported on the Nasdaq
National Market on September 30, 1997 was $32 1/8.
The date of this Prospectus is , 1997.
<PAGE>
NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY SELLING STOCKHOLDER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information...................................................................................... 3
Documents Incorporated By Reference........................................................................ 4
The Company................................................................................................ 5
Risk Factors............................................................................................... 6
Use of Proceeds............................................................................................ 8
Price Range of Common Stock................................................................................ 8
Selling Stockholders....................................................................................... 9
Plan of Distribution....................................................................................... 12
Legal Matters.............................................................................................. 12
Experts.................................................................................................... 12
</TABLE>
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549; and at the Commission's Regional Offices at Suite 1400, Northwestern
Atrium Center, 500 West Madison Street, Chicago, Illinois 60661; and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material can
be obtained from the Public Reference Section of the Commission at its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
Such materials are also available through the Commission's web site located at
HTTP://www.sec.gov. Reports, proxy statements and other information concerning
the Company may be inspected at the offices of the National Association of
Securities Dealers, Inc. located at 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act
with respect to the Shares offered and sold hereby. As permitted by the rules
and regulations of the Commission, the Prospectus omits certain information
contained in the Registration Statement, and reference is made to the
Registration Statement and the exhibits thereto for further information with
respect to the Company and the Shares offered hereby. Statements herein
contained concerning the provisions of any document are not necessarily
complete, and, in each instance, reference is made to the copy of such document
filed as an exhibit to the Registration Statement. Each such statement is
qualified in its entirety by such reference. Copies of the Registration
Statement and the exhibits thereto are on file at the offices of the Commission
and may be obtained, upon payment of the fee prescribed by the Commission, or
may be examined without charge at the public reference facilities of the
Commission described above.
3
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference in
this Prospectus:
(i) The Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1997; and
(ii) The description of Common Stock and purchase rights for shares of
Common Stock associated with Common Stock set forth in the Company's
registration statements on Form 8-A filed with the Commission pursuant to
Section 12 of the Exchange Act and any amendment or report filed for the purpose
of updating such descriptions.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
completion of the offering being made hereby shall be deemed to be incorporated
by reference in this Prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of any such person, a copy of any or all of the documents incorporated
by reference herein, other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Requests for such
copies should be directed to The BISYS Group, Inc., 150 Clove Road, Little
Falls, New Jersey 07424, Attention: Secretary, (telephone 973-812-8600).
4
<PAGE>
THE COMPANY
The BISYS Group, Inc. and its wholly-owned subsidiaries ("BISYS" or the
"Company") provide outsourcing solutions to and through more than 6,000
financial organizations and corporate clients. BISYS believes that it provides
one of the financial service industry's most technologically advanced family of
image and financial information outsourcing solutions and pricing analysis for
account, item and loan application processing, competitive product pricing
research and marketing services, and growth-enabling loan-by-phone and internet
solutions. BISYS provides network planning, design and implementation along with
round-the-clock network monitoring for multi-vendor local and wide area network
environments. BISYS is an industry leader in the design, administration and
distribution of proprietary mutual funds. BISYS also provides 401(k)
administration services to some of the nation's leading bank and investment
management companies. BISYS also provides outsourcing services for the
distribution of insurance products and services.
BISYS seeks to be the single source of all relevant outsourcing solutions
for its clients in order to improve their performance, profitability and
competitive position. BISYS endeavors to expand the scope of its services
through focused account management, emphasizing services with recurring revenues
and long-term contracts. It increases its business base principally through (i)
direct sales to new clients, (ii) sales of additional products to existing
clients, and (iii) acquisitions of businesses that provide complementary
outsourcing solutions to financial organizations.
BISYS was organized in August 1989 to acquire certain banking and thrift
data processing operations of Automatic Data Processing, Inc. ("ADP"). BISYS'
traditional business was established in 1966 by United Data Processing, Inc.,
the predecessor of the banking and thrift data processing operations of ADP.
Accordingly, together with its predecessors, BISYS has been providing
outsourcing solutions to financial organizations for more than 30 years.
The BISYS Group, Inc. is incorporated under the laws of the State of
Delaware and has its principal executive offices at 150 Clove Road, Little
Falls, New Jersey 07424 (telephone (973) 812-8600). Unless the context otherwise
requires, the term the "Company" refers to The BISYS Group, Inc. and its
consolidated subsidiaries.
5
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING INVESTMENT
CONSIDERATIONS TOGETHER WITH THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS
REGARDING THE COMPANY AND ITS BUSINESS BEFORE PURCHASING THE SHARES OF COMMON
STOCK OFFERED HEREBY.
THE GLASS-STEAGALL ACT
The Glass-Steagall Act, among other things, prohibits banks from engaging in
the underwriting, public sale or principal distribution of and dealing in
securities. Bank holding companies (either directly or through their bank or
non-bank subsidiaries), however, are generally permitted to purchase and sell
securities, as agent, upon the order and for the account of their customers.
Federal bank regulatory agencies, including the Office of the Comptroller of the
Currency, have, by regulatory interpretations, allowed banks to provide a wide
variety of services to mutual funds, including investment advisory,
administrative, stockholder servicing, custodial and transfer agency services.
If current restrictions under the Glass-Steagall Act were further relaxed and
banks were authorized to organize, sponsor and distribute shares of an
investment company, it is possible that the bank clients of BISYS Fund Services
would consider the possibility of performing some or all of the services
currently provided by the Company. Should such an event occur, it could have a
material adverse impact on the Company's business and results of operations.
REGULATION
Certain aspects of the Company's businesses are affected by federal and
state regulation which, depending on the nature of any noncompliance, may result
in the suspension or revocation of licenses or registrations, including
broker/dealer licenses and registrations, as well as the imposition of civil
fines and criminal penalties.
Certain of the Company's subsidiaries are registered as broker-dealers with
the Commission. Much of the federal regulation of broker-dealers has been
delegated to self-regulatory organizations, principally the National Association
of Securities Dealers, Inc. and the national securities exchanges.
Broker-dealers are subject to regulation which covers all aspects of the
securities business, including sales methods, trading practices, use and
safekeeping of customers' funds and securities, capital structure, recordkeeping
and the conduct of directors, officers and employees. Additional legislation,
changes in rules and regulations promulgated by the Commission, the Municipal
Securities Rulemaking Board, the Office of the Comptroller of the Currency, the
Federal Deposit Insurance Corporation, the Federal Reserve Board and the self-
regulatory organizations and changes in the interpretation or enforcement of
existing laws, rules and regulations may directly affect the mode of operation
and profitability of broker-dealers.
Banks and other depository institutions doing business with the Company are
subject to extensive regulation at the federal and state levels under laws,
regulations and other requirements specifically applicable to regulated
financial institutions, and are subject to extensive examination and oversight
by federal and state regulatory agencies. As a result, the activities of the
Company's client banks and financial institutions are subject to comprehensive
regulation and examination, including those activities specifically relating to
the sale by or through them of mutual funds and other investment products.
Changes in laws, rules and regulations affecting the Company's client banks and
financial institutions and the examination of their activities by applicable
regulatory agencies could adversely affect the Company's results of operations.
SENSITIVITY TO CHANGES IN MARKET CONDITIONS
A significant portion of the Company's earnings generated through BISYS Fund
Services are from fees based on the average daily market value of the assets
administered by the Company for its clients. A sharp rise in interest rates or a
sudden decline in the stock market could influence an investor's decision
6
<PAGE>
whether to invest or maintain an investment in a mutual fund. As a result,
fluctuations may occur in assets which the Company has under administration due
to changes in interest rates and other investment considerations. A significant
investor trend seeking alternatives to mutual fund investments could have a
negative impact on the Company's revenues by reducing the assets it administers
through BISYS Fund Services. From time to time, the Company and its bank clients
waive, for competitive reasons, certain fees normally charged to mutual funds to
which it provides services. While the Company has various programs in place, the
objective of which is to insulate itself from disadvantageous interest rate and
stock market movements, no assurances can be made that these efforts will be
successful.
CONSOLIDATION IN BANKING AND FINANCIAL SERVICES INDUSTRY
There has been and continues to be merger, acquisition and consolidation
activity in the banking and financial services industry. Mergers or
consolidations of banks and financial institutions in the future could reduce
the number of the Company's clients or potential clients. A smaller market for
the Company's services could have a material adverse impact on the Company's
businesses and results of operations. Also, it is possible that larger banks or
financial institutions resulting from mergers or consolidations would consider
the possibility of performing some or all of the services which the Company
currently provides or could provide. Should such event occur, it could have a
material adverse impact on the Company's businesses and results of operations.
ACQUISITION STRATEGY
The Company has made several acquisitions since it was formed and may make
additional acquisitions. However, no assurance can be given that the Company
will make additional acquisitions in the future or that such acquisitions will
be successful. The Company may incur substantial debt and non-cash amortization
expenses in making acquisitions. The issuance of Common Stock in connection with
future acquisitions or otherwise to satisfy future capital needs may result in
dilution to stockholders of the Company.
NO ANTICIPATED STOCKHOLDER DISTRIBUTIONS
The Company has not paid dividends to stockholders since its inception and
does not anticipate paying cash dividends in the foreseeable future.
POSSIBLE VOLATILITY OF STOCK PRICES
The market price of Common Stock is subject to fluctuation due to general
market conditions and conditions specific to the Company, and the industries in
which it conducts business, including, among other things, technological
advances, competitive conditions, losses of contracts with clients and the size
of the Company's public float. Common Stock is traded on the Nasdaq National
Market. During the Company's 1997 fiscal year, the market price has ranged from
a low of $27 7/8 per share to a high of $43 3/8 per share. See "Price Range of
Common Stock".
COMPETITION
The industry in which the Company operates is highly competitive. The
Company often competes with well-established corporations, some of which have
financial, technical and operating resources greater than those of the Company.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent upon many management personnel, some of whom are
not parties to employment agreements. The loss or unavailability of certain of
these individuals could have a material adverse effect on the Company's business
prospects. The Company's success will also depend on its ability
7
<PAGE>
to attract and retain highly skilled personnel in all areas of its business. No
assurance can be given that the Company will be able to attract and retain
personnel on acceptable terms in the future.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares. All of the proceeds from the sale of the Shares will be paid directly to
the Selling Stockholders.
PRICE RANGE OF COMMON STOCK
Common Stock is traded on the Nasdaq National Market under the symbol
"BSYS". The following table sets forth the range of high and low sales prices of
Common Stock for the fiscal quarters ended on the date indicated.
Quarter Ended:
<TABLE>
<CAPTION>
FISCAL YEAR 1998 HIGH
- ---------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
September 30, 1997.................................................................................. 42
<CAPTION>
FISCAL YEAR 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
September 30, 1996.................................................................................. 41 1/2
December 31, 1996................................................................................... 43 3/8
March 31, 1997...................................................................................... 37 1/4
June 30, 1997....................................................................................... 42 1/8
<CAPTION>
FISCAL YEAR 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
September 30, 1995.................................................................................. 29
December 31, 1995................................................................................... 31 1/8
March 31, 1996...................................................................................... 33 1/2
June 30, 1996....................................................................................... 38 3/4
<CAPTION>
FISCAL YEAR 1998 LOW
- ---------------------------------------------------------------------------------------------------- -----
<S> <C> <C>
September 30, 1997.................................................................................. 30 3/8
FISCAL YEAR 1997
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
September 30, 1996.................................................................................. 29
December 31, 1996................................................................................... 34 3/4
March 31, 1997...................................................................................... 27 7/8
June 30, 1997....................................................................................... 28 1/4
FISCAL YEAR 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
September 30, 1995.................................................................................. 21 3/4
December 31, 1995................................................................................... 24 3/4
March 31, 1996...................................................................................... 27 1/4
June 30, 1996....................................................................................... 32
</TABLE>
On September 30, 1997, the last per share sale price of a share of Common
Stock on the Nasdaq National Market was $32 1/8.
8
<PAGE>
SELLING STOCKHOLDERS
All of the Shares offered hereby are to be sold for the accounts of the
Selling Stockholders set forth herein. The 1,056,671 Shares offered hereby are
being registered pursuant to registration rights granted by the Company to
former stockholders of SSG, Charter, Dascit and Benefit, in connection with the
SSG Merger, Charter Merger, Dascit Merger and Benefit Merger, respectively
(collectively, the "Mergers").
All of the Selling Stockholders are former stockholders of either SSG,
Charter, Dascit or Benefit. In connection with the SSG Merger, Charter Merger,
Dascit Merger and Benefit Merger, each of the Selling Stockholders represented
to the Company that it was acquiring its Shares without any present intention of
effecting a distribution in those Shares and agreed that it would not sell or
otherwise dispose of its Shares other than pursuant to an effective registration
statement under the Securities Act or pursuant to an exemption from the
registration requirements of the Securities Act.
The Company granted certain registration rights to: (i) the Selling
Stockholders who were formerly SSG stockholders under a Registration Rights
Agreement dated April 22, 1996, as amended, among the Company and such
stockholders, (ii) the Selling Stockholders who were formerly Charter
stockholders under a Registration Rights Agreement dated August 15, 1997 among
the Company and such stockholders, (iii) the Selling Stockholders who were
formerly Dascit stockholders under a Registration Rights Agreement dated August
29, 1997 among the Company and such stockholders and (iv) the Selling
Stockholders who were formerly Benefit stockholders under a Registration Rights
Agreement dated September 16, 1997 among the Company and such stockholders, in
recognition that the Selling Stockholders may wish to be able to sell some or
all of their Shares when they deem it appropriate.
The Company agreed to file at its expense a registration statement with the
Commission covering the Shares held by the Selling Stockholders and to use its
best efforts to keep such registration statement effective until the earlier to
occur of the sale of all Shares covered by the registration statement or (i) six
months after the effective date thereof in the case of former SSG stockholders,
(ii) August 15, 1999, in the case of former Charter stockholders, (iii) August
29, 1999, in the case of former Dascit stockholders and (iv) September 16, 1999
in the case of former Benefit stockholders. The Company will prepare and file at
its expense such amendments and/or supplements to such registration statement as
may be necessary until all of the Shares have been sold pursuant to the
registration statement or until such registration obligations have terminated.
The following table sets forth certain information, as of the date of this
Prospectus, with respect to the Selling Stockholders. The Shares are to be
offered by and for the respective accounts of the Selling Stockholders:
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
COMMON STOCK OWNED
BENEFICIALLY OWNED MAXIMUM AMOUNT AFTER
PRIOR TO OFFERING OFFERED HEREBY(1) OFFERING(2)
------------------ ----------------- ----------------
SELLING STOCKHOLDER AMOUNT PERCENT
- --------------------------------------------------------------- ------ -----
<S> <C> <C> <C> <C>
Melissa H. Barnickel........................................... 3,572 3,572 0 0
Bernard H. Barrie.............................................. 60,732 60,732 0 0
Harris S. Berlack(3)........................................... 102,139 102,139 0 0
Michael Brown and John Thomas Berlack, or their successors, as
Trustees for the Harris S. Berlack Childrens Trust........... 9,179 9,179 0 0
Keith M. Bengtson.............................................. 89 89 0 0
Seth Cohen..................................................... 29 29 0 0
Peter C. Cowie(4).............................................. 248,407(5) 248,407 0 0
Wendy B. Cowie................................................. 8,031 8,031 0 0
Frederick H. Cowie, or his successor, as Trustee for the Cowie
Childrens Trust.............................................. 6,884 6,884 0 0
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
COMMON STOCK
BENEFICIALLY
COMMON STOCK OWNED
BENEFICIALLY OWNED MAXIMUM AMOUNT AFTER
PRIOR TO OFFERING OFFERED HEREBY(1) OFFERING(2)
------------------ ----------------- ----------------
SELLING STOCKHOLDER AMOUNT PERCENT
- --------------------------------------------------------------- ------ -----
<S> <C> <C> <C> <C>
Joseph J. DiTrapani(6)......................................... 62,740(7) 62,740 0 0
Joseph J. DiTrapani, as custodian UTMA Todd DiTrapani.......... 1,486 1,486 0 0
Matthew DiTrapani.............................................. 1,486 1,486 0 0
Scott DiTrapani................................................ 1,486 1,486 0 0
Gilde International Fund, B.V.................................. 669 669 0 0
Charles F. Goetz(8)............................................ 167,700(9) 113,799 53,901(9) *
Paul G. Henry(10).............................................. 37,090(11) 20,167 16,923(11) *
Edward S. Hutman............................................... 7,144 7,144 0 0
Robert M. Jones(12)............................................ 153,760(13) 112,358 41,402(13) *
Byron S. Kopman................................................ 4,590 4,322 268 *
Jeffrey D. Krauss, as Trustee for the Trust for the benefit of
Laura Krauss(14)............................................. 59,768 59,768 0 0
Laura Krauss(15)............................................... 2,972 2,972 0 0
Lea Krauss..................................................... 2,229 2,229 0 0
Michael Krauss................................................. 2,229 2,229 0 0
Lisa Lincoln................................................... 663 663 0 0
James M. Marcella.............................................. 114 114 0 0
Curtis Seth Nichols............................................ 1,203 1,203 0 0
One Liberty Fund III, L.P...................................... 66,320 66,320 0 0
John Owens(16)................................................. 2,309 2,309 0 0
Michael Reagan................................................. 1,106 1,106 0 0
Silicon Valley Bank............................................ 796 796 0 0
Larry Steele................................................... 11,236 11,236 0 0
Technology Leaders II L.P...................................... 70,802 70,802 0 0
Technology Leaders II Offshore C.V............................. 56,243 56,243 0 0
Jean Tempel(17)................................................ 9,240 9,240 0 0
Semmes Walsh................................................... 1,137 1,137 0 0
Jon Whitlock................................................... 1,276 1,276 0 0
Scott Wilson(18)............................................... 2,309 2,309 0 0
</TABLE>
- ------------------------
* Less than 1%.
(1) Also covers any additional shares of Common Stock that become issuable in
connection with the shares of Common Stock offered for sale hereby by
reason of any stock dividend, stock split, recapitalization or other
similar transaction effected without the receipt of consideration that
results in an increase in the number of the Company's outstanding shares of
Common Stock.
(2) Assumes all of the Shares offered hereby are sold.
(3) Until July 1996, Mr. Berlack was a director and officer of Charter.
(4) Mr. Cowie is President of Charter, a wholly owned subsidiary of the
Company. Prior to the Charter Merger, Mr. Cowie was Chief Executive Officer
and a director of Charter.
(5) Excludes 8,031 shares owned by Wendy B. Cowie, Mr. Cowie's wife.
(6) Mr. DiTrapani is Senior Vice President of Dascit/White & Winston, Inc.,
Group Plan Administrators, Inc. and Krauss & Trapani Co., Ltd., wholly
owned subsidiaries of the Company. Prior to the Dascit
10
<PAGE>
Merger, Mr. DiTrapani was President and Treasurer and a director of each of
Dascit/White & Winston, Inc., Group Plan Administrators, Inc. and Krauss &
Trapani Co., Ltd.
(7) Excludes 1,486 shares beneficially owned by Mr. DiTrapani as custodian UTMA
Todd DiTrapani and 2,972 shares owned by other of Mr. DiTrapani's children.
(8) Mr. Goetz is President of BISYS Creative Solutions, Inc., a wholly owned
subsidiary of the Company. Prior to the SSG Merger, Mr. Goetz was Chief
Executive Officer and a director of SSG.
(9) Includes 20,000 shares of Common Stock subject to presently exercisable
stock options.
(10) Mr. Henry is a Vice President of BISYS Creative Solutions, Inc. Prior to
the SSG Merger, Mr. Henry was Secretary, Treasurer and a director of SSG.
(11) Includes 5,000 shares of Common Stock subject to presently exercisable
stock options.
(12) Prior to the SSG Merger, Mr. Jones was President and a director of SSG.
(13) Includes 35,000 shares of Common Stock held as trustee of the Robert and
Laura Jones Charitable Trust.
(14) Prior to the Dascit Merger, Mr. Krauss was Chairman of the Board and
Secretary of each of Dascit/ White & Winston, Inc., Group Plan
Administrators, Inc. and Krauss & Trapani Co., Ltd.
(15) Excludes 59,768 shares beneficially owned by Jeffrey D. Krauss, Mrs.
Krauss' husband, as Trustee for the Trust for the benefit of Laura Krauss
and 4,458 shares owned by Mrs. Krauss' children.
(16) Prior to the Charter Merger, Mr. Owens was a director of Charter.
(17) Prior to the Charter Merger, Mr. Tempel was a director of Charter.
(18) Mr. Wilson is a Managing Director of Shields & Company, Inc., which
provided financial advisory services to Charter in connection with the
Charter Merger.
11
<PAGE>
PLAN OF DISTRIBUTION
The Shares offered hereby may be sold from time to time by the Selling
Stockholders, or by their respective donees and pledgees, for their respective
accounts on the Nasdaq National Market or in negotiated transactions at market
prices prevailing at the time of sale or at negotiated prices.
Such transactions may be effected by the sale of Shares directly to
purchasers, to or through underwriters or broker-dealers acting as agents for
the Selling Stockholders or to underwriters or broker-dealers who may purchase
Shares as principals and thereafter sell the Shares from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Stockholders and/or the purchasers
for whom such broker-dealers may act as agents or to whom they may sell as
principals or both (which compensation as to a particular broker-dealer may be
in excess of customary commissions). Some or all of the Shares offered hereby
may from time to time alternatively be sold pursuant to Rule 144 under the
Securities Act provided the requirements of such rules, including, without
limitation, the holding period and the manner of sale requirements, are met.
Selling Stockholders may pledge Shares as collateral for margin accounts and
such Shares could be resold pursuant to the terms of such accounts. The Selling
Stockholders will pay or assume brokerage and selling commissions or other
charges and expenses incurred in connection with the sale of Shares.
Each Selling Stockholder who was formerly a Charter stockholder, Dascit
stockholder or Benefit stockholder has agreed in connection with the receipt of
Common Stock in the Charter Merger, Dascit Merger or Benefit Merger,
respectively, that such Selling Stockholder will not sell or otherwise reduce
its risk relative to any shares of Common Stock received by such Selling
Stockholder in connection with such merger, except for de minimus transactions,
until the Company has published financial results covering a fiscal quarter that
includes results (including combined sales and net income) for a period of at
least 30 days of post-Charter Merger, Dascit Merger or Benefit Merger
operations, respectively. Such restricted period with respect to former Charter
and Dascit stockholders will terminate upon the publication by the Company of
its financial results for the fiscal quarter ended September 30, 1997. Such
restricted period with respect to former Benefit stockholders will terminate
upon the publication by the Company of its financial results for the fiscal
quarter ending December 31, 1997.
The Selling Stockholders and any broker-dealers acting in connection with
such sales may be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act and any discount, commission or concession received
by them and any profit on the resale of the Shares may be deemed to be
underwriting discounts and commissions under the Securities Act.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Shanley & Fisher, P.C., Morristown, New Jersey.
EXPERTS
The consolidated balance sheets as of June 30, 1997 and 1996 and the
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended June 30, 1997, incorporated by
reference in this Prospectus, have been incorporated herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of such firm as experts in accounting and auditing.
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fee-Securities and Exchange Commission................................ $ 10,147
Accounting Fee and Expenses........................................................ 7,500
Legal Fees and Expenses............................................................ 10,000
Miscellaneous Expenses............................................................. 2,000
---------
TOTAL.......................................................................... $ 29,647
---------
---------
</TABLE>
All of the foregoing estimated expenses are being borne by The BISYS Group,
Inc. (the "Registrant").
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Registrant is organized under the laws of the State of Delaware. Section
145 of the Delaware General Corporation Law permits a Delaware corporation to
indemnify any person who is a party (or is threatened to be made a party) to any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise. A corporation may similarly indemnify such
person in the case of actions or suits brought by or in the right of the
corporation, except (unless otherwise ordered by the court) that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation.
A corporation may indemnify such person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Any indemnification shall be made by the corporation only
as authorized in the specific case upon a determination that indemnification is
proper in the circumstances because the person has met the aforesaid standard of
conduct. Such determination shall be made (1) by a majority vote of the
directors who were not parties to the action, suit, or proceeding, whether or
not a quorum, or (2) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion, or (3) by the
stockholders. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits, or otherwise, in defense of any
action, suit or proceeding described above, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred in connection therewith. The
statute also provides that it is not exclusive of any other rights to which
those seeking indemnification may be entitled under any bylaws, agreement, vote
of stockholders or disinterested directors, or otherwise. The Registrants'
By-Laws provide for the indemnification of its directors and officers to the
fullest extent permitted by law.
Section 102(b)(7) of the Delaware General Corporation Law allows a Delaware
corporation to limit or eliminate the personal liability of directors to the
corporation and its stockholders for monetary damages for breach of fiduciary
duty as a director. However, this provision excludes any limitation on liability
(1) for any breach of the director's duty of loyalty to the corporation or its
stockholders, (2) for acts or omissions not in good faith or which involved
intentional misconduct or a knowing violation of law,
II-1
<PAGE>
(3) for intentional or negligent payment of unlawful dividends or stock
purchases or redemptions or (4) for any transaction from which the director
derived an improper benefit. Moreover, while this provision provides directors
with protection against awards for monetary damages for breaches of their duty
of care, it does not eliminate such duty. Accordingly, this provision will have
no effect on the availability of equitable remedies such as an injunction or
rescission based on a director's breach of his or her duty of care. Finally,
this provision applies to an officer of a corporation only if he or she is a
director of such corporation and is acting in his or her capacity as director,
and does not apply to officers of the corporation who are not directors.
The Registrant's Certificate of Incorporation provides for the limitation on
liability permitted by Section 102(b)(7). The Registrant maintains directors and
officers' liability insurance.
ITEM 16. EXHIBITS
(a) Exhibits
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<C> <S>
4.1 Amended and Restated Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 4.1 to the Registrant's Registration Statement on Form S-8
Registration No. 333-02932).
4.2 Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit
3.2 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June 30,
1997).
4.3 Specimen of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the
Registrant's Registration Statement No. 33-45417).
4.4 Registration Rights Agreement dated April 22, 1996 among the Registrant and the
several persons named on Schedule I thereto (incorporated by reference to Exhibit No.
10.21 to the Registrant's Annual Report on Form 10-K for the fiscal year ended June
30, 1996).
4.5 Amendment No. 1 dated October 15, 1996 to Registration Rights Agreement dated April
22, 1996 among the Registrant and the several persons named therein (incorporated by
reference to Exhibit No. 4.5 to the Registrant's Registration Statement on Form S-3,
Registration No. 333-16813).
4.6* Registration Rights Agreement dated as of August 15, 1997 among the Registrant and the
several persons named on Schedule I thereto.
4.7* Registration Rights Agreement dated as of August 29, 1997 among the Registrant and the
several persons named on Schedule I thereto.
4.8* Registration Rights Agreement dated as of September 16, 1997 among the Registrant and
the several persons named on Schedule I thereto.
5.1* Opinion of Shanley & Fisher, P.C.
23.1* Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Shanley & Fisher, P.C. (included in Exhibit 5.1)
24.1* Powers of Attorney
99.1 Agreement and Plan of Merger dated April 22, 1996 among the Registrant, BISYS
Acquisition Corp., Strategic Solutions Group, Inc. and the stockholders of Strategic
Solutions Group, Inc. (incorporated by reference to Exhibit No. 10.20 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended June 30, 1996).
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
99.2* Agreement and Plan of Merger dated as of August 5, 1997 among the Registrant, BICHART
Acquisition Corp., Charter Systems, Inc. and the stockholders of Charter Systems, Inc.
99.3* Agreement and Plan of Merger dated as of August 29, 1997 among the Registrant, BI-DWW,
Inc., Dascit/White & Winston, Inc. and the stockholders of Dascit/White & Winston,
Inc.
99.4* Agreement and Plan of Merger dated as of August 29, 1997 among the Registrant, BI-GPA,
Inc., Group Plan Administrators, Inc. and the stockholders of Group Plan
Administrators, Inc.
99.5* Agreement and Plan of Merger dated as of August 29, 1997 among the Registrant, BI-KT,
Inc., Krauss & Trapani Co., Ltd. and the stockholders of Krauss & Trapani Co., Ltd.
99.6* Agreement and Plan of Merger dated as of September 16, 1997 among the Registrant,
BI-BSI Acquisition Corp., Benefit Services, Inc. and the stockholders of Benefit
Services, Inc.
</TABLE>
- ------------------------
* Filed herewith
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if
the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee
II-3
<PAGE>
benefit plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Township of Little Falls, State of New Jersey, on October 3,
1997.
THE BISYS GROUP, INC.
BY: /S/ KEVIN J. DELL
-----------------------------------------
Kevin J. Dell,
VICE PRESIDENT, GENERAL COUNSEL AND
SECRETARY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman of the Board,
LYNN J. MANGUM Chief Executive Officer
- ------------------------------ and Director (Principal
Lynn J. Mangum Executive Officer)
Executive Vice President
and Chief Robert J.
ROBERT J. MCMULLAN McMullan Financial
- ------------------------------ Officer (Principal
Robert J. Mcmullan Accounting and Principal
Financial Officer)
* President, Chief Operating
- ------------------------------ Officer and Director
Paul H. Bourke
* Director
- ------------------------------
Robert J. Casale
* Director
- ------------------------------
Thomas A. Cooper
* Director
- ------------------------------
Jay W. Dedapper
* Director
- ------------------------------
John J. Lyons
* Director
- ------------------------------
Thomas E. McInerney
* Director
- ------------------------------
Neil P. Marcous
*Lynn J. Mangum hereby signs this Registration Statement on Form S-3 on behalf
of each of the indicated persons for whom he is attorney-in-fact on October 3,
1997 pursuant to a power of attorney filed herewith.
LYNN J. MANGUM
-----------------------------------------
Lynn J. Mangum
By: Attorney-in-fact
Dated: October 3, 1997
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------------- ---------------------------------------------------------------------------------------------------
<C> <S>
4.6 Registration Rights Agreement dated as of August 15, 1997 among the Registrant and the several
persons named in Schedule I thereto.
4.7 Registration Rights Agreement dated as of August 29, 1997 among the Registrant and the several
persons named in Schedule I thereto.
4.8 Registration Rights Agreement dated as of September 16, 1997 among the Registrant and the several
persons named in Schedule I thereto.
5.1 Opinion of Shanley & Fisher, P.C.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Shanley & Fisher, P.C. (included in Exhibit 5.1)
24.1 Powers of Attorney
99.2 Agreement and Plan of Merger dated as of August 5, 1997 among the Registrant, BICHART Acquisition
Corp., Charter Systems, Inc. and the stockholders of Charter Systems, Inc.
99.3 Agreement and Plan of Merger dated as of August 29, 1997 among the Registrant, BI-DWW, Inc.,
Dascit/White & Winston, Inc. and the stockholders of Dascit/White & Winston, Inc.
99.4 Agreement and Plan of Merger dated as of August 29, 1997 among the Registrant, BI-GPA, Inc., Group
Plan Administrators, Inc. and the stockholders of Group Plan Administrators, Inc.
99.5 Agreement and Plan of Merger dated as of August 29, 1997 among the Registrant, BI-KT, Inc., Krauss
& Trapani Co., Ltd. and the stockholders of Krauss & Trapani Co., Ltd.
99.6 Agreement and Plan of Merger dated as of September 16, 1997 among the Registrant, BI-BSI
Acquisition Corp., Benefit Services, Inc. and the stockholders of Benefit Services, Inc.
</TABLE>
<PAGE>
Exhibit 4.6
REGISTRATION RIGHTS AGREEMENT
August 15, 1997
To each of the persons
named on Schedule I hereto:
Dear Sirs:
This will confirm that, in consideration of the consummation of the merger
of BICHART Acquisition Corp. ("Acquisition"), a wholly-owned subsidiary of The
BISYS Group, Inc. (the "Company"), with and into Charter Systems, Inc.
("Charter"), pursuant to the Agreement and Plan of Merger dated as of August 5,
1997 among the Company, Acquisition, Charter and the shareholders of Charter
named therein, in which an aggregate number of shares of Common Stock, $.02 par
value, of the Company (the "Shares"), set forth on Schedule I hereto opposite
your name will be issuable to you upon conversion of shares of common stock, par
value $.01 per share, of Charter, Series C Convertible Preferred Stock, par
value $.01 per share, of Charter and/or Series E Convertible Preferred Stock,
par value $.01 per share, of Charter held by you, the Company hereby covenants
and agrees with each of you, as follows:
1. Certain Definitions. As used herein, the following terms shall have the
following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.02 par value, of the
Company, as constituted as of the date of this Agreement.
"Distribution Period" shall mean the period commencing upon the
termination of the restrictions imposed by Section 7.11 of the Merger
Agreement and ending on the earlier to occur of (i) the sale by the
holders of Registerable Stock of all of the Registerable Stock covered by
the registration statement referred to in Sections 2 and 3 below or (ii)
the second anniversary of the Effective Time.
"Effective Time" shall mean the Effective Time of the Merger, as
defined in the Merger Agreement.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Merger" shall mean the merger of Acquisition with and into Charter
pursuant to the Merger Agreement.
"Merger Agreement" shall mean the Agreement and Plan of Merger dated
as of August __, 1997 among the Company, Acquisition, Charter and the
shareholders of Charter named therein.
"Registerable Stock" shall mean any shares of Common Stock issued to
you in the Merger, and not transferred or otherwise disposed of by you.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
2. Registration of Registerable Stock.
Promptly after the Effective Time, the Company shall use its best efforts
to register under the Securities Act for public sale by the Holders of shares of
Registerable Stock the shares of Registerable Stock held by them. The Company
shall not be obligated to effect registration of Registerable Stock pursuant to
this Section 2 on more than one occasion.
3. Registration Procedures. The Company will, as expeditiously as
practicable after the Effective Time:
(a) prepare, submit to you and to one counsel for the selling
shareholders for a reasonable opportunity to review not more than thirty
(30) days after the Effective Time, and thereafter file with the
Commission, as soon as practicable, a registration statement with respect
to such securities (which shall be on Form S-3 if the Company is then
eligible to use such form and otherwise on Form S-1 or such other form of
general applicability acceptable to the Company), and shall use its best
efforts to cause such registration statement to become and remain
effective during the Distribution Period;
2
<PAGE>
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective during the Distribution Period;
(c) furnish to each seller such number of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus) and any amendment or supplement thereto as such person may
reasonably request in order to facilitate the public sale of the
Registerable Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Registerable
Stock covered by such registration statement under the securities or blue
sky laws of a reasonable number of jurisdictions (provided that the
Company will not be required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but
for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any
jurisdiction):
(e) promptly notify each seller of Registerable Stock and (if
requested by any such seller) confirm such notice in writing, (i) when
such registration statement or any amendment or supplement thereto or to
the prospectus or preliminary prospectus contained therein has been filed,
(ii) of any request by the Commission for amendments or supplements to
such registration statement or prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of
proceedings for that purpose, or (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registerable Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose;
(f) immediately notify each seller under such registration
statement, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus contained in such registration statement,
as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading
3
<PAGE>
in the light of the circumstances then existing, and promptly thereafter
prepare and file with the Commission a supplement or amendment to such
prospectus, such registration statement or any document incorporated
therein by reference, or make such other filing, such that as thereafter
delivered to the purchasers of Registerable Stock, the prospectus will not
contain an untrue statement of material fact or omit to state any material
fact necessary to make the statements therein not misleading;
(g) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement;
(h) make available for inspection by each seller, and any attorney,
accountant or other agent retained by such seller, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, attorney, accountant
or agent in connection with such registration statement and permit such
seller, attorney, accountant or agent to review and comment on such
registration statement.
In connection with each registration hereunder, each selling holder of
Registerable Stock shall furnish to the Company in writing such information with
respect to himself and the proposed distribution by him as shall be reasonably
necessary in order to assure compliance with federal and applicable state
securities laws.
4. Expenses. All expenses incurred by the Company in complying with
Sections 2 and 3 hereof, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, the reasonable fees and
disbursements of one counsel for the selling shareholders (which shall be
included in the Merger Expenses, as defined in the Merger Agreement), fees of
the National Association of Securities Dealers, Inc., transfer taxes and fees of
transfer agents and registrars, will be paid by the Company in connection with
the registration statement filed pursuant to Sections 2 and 3 hereof.
5. Indemnification. The Company will indemnify and hold harmless each
seller of such Registerable Stock under the registration statement filed
pursuant to Sections 2 and 3 hereof, each partner, officer and director of each
such seller, and each other person, if any, who controls such seller within the
meaning of the Securities Act, against any losses, claims, damages or
4
<PAGE>
liabilities, joint or several, to which such seller, partner, officer, director
or controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
filed pursuant to Sections 2 and 3 hereof, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under any of the same in connection with the offering covered by such
registration statement, and the Company will reimburse each such seller,
partner, officer and director and each such controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in reliance upon and in conformity with information furnished by such
seller or any of its partners, officers, directors or such controlling person in
writing specifically for use in such registration statement or prospectus.
Each seller of such Registerable Stock under the registration statement
filed pursuant to Sections 2 and 3 hereof, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act, each officer of the
Company who signs the registration statement, each director of the Company, and
each person who controls any of the foregoing within the meaning of the
Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer or director or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the registration statement filed pursuant to Sections
2 and 3 hereof, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under any of the same
in connection with the offering covered by such registration statement, and each
5
<PAGE>
such seller will reimburse the Company and each such officer, director and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that such seller will be liable
hereunder in any such case if and only to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information furnished in writing to the Company by such
seller specifically for use in such registration statement or prospectus.
Notwithstanding the foregoing, (i) no seller shall be liable for payments of
amounts paid in settlement of any loss, claim, damage, liability or action if
such settlement is effected without the consent of such seller (which consent
shall not be unreasonably withheld), and (ii) in no event shall the liability of
any seller of Registerable Stock under this Section 5 in connection with any
registration exceed the proceeds received by such seller from the sale of shares
of Registerable Stock in such registration.
Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 5. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party, shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party, if it shall actually undertake the defense thereof, shall not be liable
to such indemnified party under this Section 5 for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party, or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as
6
<PAGE>
incurred.
Notwithstanding the foregoing, any indemnified party shall have the right
to retain its own counsel in any such action, but the fees and disbursements of
such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party shall have failed to retain counsel for the indemnified
person as aforesaid or shall have failed to defend such action in accordance
with preceding paragraph or (ii) the indemnifying party and such indemnified
party shall have mutually agreed to the retention of such counsel. It is
understood that the indemnifying party shall not, in connection with any action
or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
If the indemnification provided for in the first two paragraphs of this
Section 5 is unavailable or insufficient to hold harmless an indemnified party
under such paragraphs in respect of any losses, claims, damages or liabilities
or actions in respect thereof referred to therein, then each indemnifying party
shall in lieu of indemnifying such indemnified party contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or actions in such proportion as appropriate to reflect the
relative fault of the Company, on the one hand, and the sellers of such
Registerable Stock, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations, including the failure to give
any notice under the third paragraph of this Section 5. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the sellers of such Registerable Stock, on the
other, and to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
each of you agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by pro rata allocation (even if all
of the sellers of such Registerable Stock were treated as one entity for such
purpose) or by any other method of allocation which did not take account of the
equitable considerations referred to above in this paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or action in respect thereof, referred to above in this paragraph,
shall be deemed to include any legal or
7
<PAGE>
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this paragraph, the sellers of such Registerable Stock shall not
be required to contribute any amount in excess of the amount, if any, by which
the total price at which the Common Stock sold by each of them was offered to
the public exceeds the amount of any damages which they would have otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission. No person guilty of fraudulent misrepresentations (within the meaning
of Section 11(f) of the Securities Act), shall be entitled to contribution from
any person who is not guilty of such fraudulent misrepresentation.
6. Current Public Information. The Company agrees with you as follows:
(a) The Company shall use its best efforts to make and keep public
information available, as those terms are understood and defined in Rule
144 under the Securities Act, at all times from and after the date hereof.
(b) The Company shall use its best efforts to file with the
Commission in a timely manner all reports and other documents as the
Commission may prescribe under Section 13(a) or 15(d) of the Exchange Act.
(c) The Company shall furnish to each holder of Registerable Stock
forthwith upon request, (i) a copy of the most recent annual or quarterly
report of the Company, and (ii) such other reports and documents so filed
as a holder may reasonably request to avail itself of any rule or
regulation of the Commission allowing a holder of Registerable Stock to
sell any such securities without registration.
7. Effectiveness of this Agreement. This Agreement shall become effective
at the Effective Time. If the Effective Time shall not occur, this Agreement
shall be of no force and effect.
8. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not, provided, however, that the obligations of the Company hereunder shall
inure only to the benefit of you and a person who shall become a holder of
Registerable Stock by will or the laws of descent and distribution, and the term
"Registerable Stock" as used herein
8
<PAGE>
shall be limited to Registerable Stock held by you or any such person.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class registered
mail, postage prepaid, addressed as follows:
if to the Company, to it at Overlook at Great Notch, 150 Clove Road,
Little Falls, New Jersey 07424, Attention: Chairman and Chief Executive
Officer;
if to any holder of Registerable Stock, at its address as set forth in
Annex I hereto;
if to any subsequent holder of Registerable Stock pursuant to
Section 10(a) hereof to it at such address as may have been furnished to
the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of
Registerable Stock or to such holders of Registerable Stock (in the case
of the Company).
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except in writing signed by the holders of not less than a majority of the
Registerable Stock.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this letter (herein sometimes
called "this Agreement") shall be a binding agreement between the Company and
you.
9
<PAGE>
Very truly yours,
THE BISYS GROUP, INC.
By: /s/ Lynn J. Mangum
-------------------------
Name: Lynn J. Mangum
Title: Chairman and Chief
Executive Officer
AGREED TO AND ACCEPTED
as of the date first
above written:
/s/ Peter C. Cowie
- ----------------------------------
Peter C. Cowie
/s/ Wendy B. Cowie
- ----------------------------------
Wendy B. Cowie
/s/ Harris S. Berlack, by Diane
L. Cooper, Attorney-in-Fact
- ----------------------------------
Harris S. Berlack
TECHNOLOGY LEADERS II L.P.
By: /s/ Jean C. Tempel
------------------------------
Name: Jean C. Tempel
Title: Special Limited Partner
TECHNOLOGY LEADERS II OFFSHORE C.V.
By: /s/ Jean C. Tempel
------------------------------
Name: Jean C. Tempel
Title: Special Limited Partner
ONE LIBERTY FUND III, L.P.
By: /s/ Stephen J. Ricci
------------------------------
Name: Stephen J. Ricci
Title: General Partner
[signatures continued on next page]
10
<PAGE>
[signatures continued from preceding page]
GILDE INTERNATIONAL FUND, B.V.
By: /s/ Stephen J. Ricci
------------------------------
Name: Stephen J. Ricci
Title: Attorney-in-Fact
/s/ Jean Tempel
- ----------------------------------
Jean Tempel
/s/ John Owens
- ----------------------------------
John Owens
/s/ Scott Wilson
- ----------------------------------
Scott Wilson
MICHAEL BROWN and JOHN THOMAS
BERLACK, or their successors,
as TRUSTEES for the HARRIS S.
BERLACK CHILDREN'S TRUST
By: /s/ John T. Berlack
------------------------------
John T. Berlack, Trustee
By: /s/ Michael Brown
------------------------------
Michael Brown, Trustee
FREDERICK H. COWIE, or his
successor, as TRUSTEE of the
COWIE CHILDREN'__S TRUST
By: /s/ Frederick H. Cowie
------------------------------
Frederick H. Cowie, Trustee
[signatures continued on next page]
11
<PAGE>
[signatures continued from preceding page]
- ----------------------------------
Keith Bengston
- --------------------------------
Seth Cohen
/s/ Lisa Lincoln
- --------------------------------
Lisa Lincoln
/s/ Seth Nichols
- --------------------------------
Seth Nichols
/s/ Michael Reagan
- --------------------------------
Michael Reagan
/s/ Semmes Walsh
- --------------------------------
Semmes Walsh
/s/ John Whitlock
- --------------------------------
John Whitlock
/s/ James M. Marcella
- --------------------------------
James M. Marcella
Silicon Valley Bank
By:
-----------------------------
Name:
Title:
12
<PAGE>
SCHEDULE I
Number of Shares
Name and Address of Common Stock
- ---------------- ----------------
Peter C. Cowie 248,407
49 Salem Street
Andover, MA 01801
Wendy B. Cowie 8,031
49 Salem Street
Andover, MA 01810
Frederick H. Cowie, or his Successor, 6,884
as Trustee of the Cowie Children's Trust
49 Salem Street
Andover, MA 01810
Harris S. Berlack 102,139
4 King Philip Road
Sudbury, MA 01776
Michael Brown and John Thomas Berlack, 9,179
or their Successors, as Trustees of the
Harris S. Berlack Children's Trust
c/o Michael Brown
Brown & Brown
9 Canal Street
Boston, MA 02108
Technology Leaders II L.P. 70,802
Ten Post Office Square, Suite 1325
Boston, MA 02109
Technology Leaders II (Offshore) C.V. 56,243
Ten Post Office Square, Suite 1325
Boston, MA 02109
One Liberty Fund III, L.P. 66,320
One Liberty Square
Boston, MA 02109
Gilde International Fund, B.V. 669
One Liberty Square
Boston, MA 02109
Jean Tempel 9,240
c/o TL Ventures
Ten Post Office Square
Suite 1325
Boston, MA 02109
John Owens 2,309
181 Hunt Valley
Berwyn, PA 19312
Scott Wilson 2,309
c/o Shields & Company, Inc.
150 Federal Street
Boston, MA 02110
<PAGE>
Number of Shares
Name and Address of Common Stock
- ---------------- ----------------
Keith Bengston 89
1455 Shawsheen Street
Tewksbury, MA 01876
Seth Cohen 29
113 Seawall Street-Apt. 2
Brookline, MA 02146
Lisa Lincoln 663
382 Stone Street
Walpole, MA 02081
Seth Nichols 1,203
48 South Street
Medfield, MA 02052
Michael Regan 1,106
3150 Iris Avenue, #10
Boulder, CO 80301
Semmes Walsh 1,137
38 Atwood Street
Wellesley, MA 02181
John Whitlock 1,276
P.O. Box 521
Colchester, VT 05446
James M. Marcella 114
223 Hanover Street
Boston, MA 02113
Silicon Valley Bank 796
3003 Tasman Drive
NC 821
Santa Clara, CA 95054
Attn: David Jacques
<PAGE>
Exhibit 4.7
REGISTRATION RIGHTS AGREEMENT
August 29, 1997
To each of the persons
named on Schedule I hereto:
Dear Sirs:
This will confirm that, in consideration of the consummation of (i) the
merger of BI-DWW, Inc. ("BI-DWW"), a wholly owned subsidiary of The BISYS Group,
Inc. (the "Company"), with and into Dascit/White & Winston, Inc. ("DWW"), (ii)
the merger of BI-GPA, Inc. ("BI-GPA"), a wholly-owned subsidiary of the Company,
with and into Group Plan Administrators, Inc. ("GPA") and/or (iii) the merger of
BI-KT, Inc. ("BI-KT"), a wholly-owned subsidiary of the Company, with and into
Krauss & Trapani Co., Ltd. ("KT"), pursuant to the separate Agreements and Plans
of Merger dated as of August 29, 1997 among (i) the Company, BI-DWW, DWW and the
other persons named therein, (ii) the Company, BI-GPA, GPA and the other persons
named therein, and (iii) the Company, BI-KT, KT and the other persons named
therein, in which an aggregate number of shares of Common Stock, $.02 par value,
of the Company (the "Shares"), set forth on Schedule I hereto opposite your name
will be issuable to you upon conversion of shares of common stock of DWW, GPA
and/or KT, as the case may be, held by you, the Company hereby covenants and
agrees with each of you, as follows:
1. Certain Definitions. As used herein, the following terms shall have the
following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.02 par value, of the
Company, as constituted as of the date of this Agreement.
"Distribution Period" shall mean the period commencing upon the
termination of the restrictions imposed by Section 7.06(a) of the Merger
Agreement and ending on the earlier to occur of (i) the sale by the
holders of Registerable Stock of all of the Registerable Stock covered by
the registration statement referred to in Sections 2 and 3 below or (ii)
the second anniversary of the Effective Time.
<PAGE>
"Effective Time" shall mean the Effective Time of the Merger, as
defined in the Merger Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Merger" shall mean, as applicable, (i) the merger of BI-DWW with
and into DWW, (ii) the merger of BI-GPA with and into GPA and/or (iii) the
merger of BI-KT with and into KT.
"Merger Agreement" shall mean, as applicable, the Agreement and Plan
of Merger dated as of August 29, 1997 among (i) the Company, BI-DWW, DWW
and the other persons named therein, (ii) the Company, BI-GPA, GPA and the
other persons named therein, and (iii) the Company, BI-KT, KT and the
other persons named therein, to which you are a party.
"Registerable Stock" shall mean any shares of Common Stock issued to
you in any Merger, and not transferred or otherwise disposed of by you.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
2. Registration of Registerable Stock.
Promptly after the Effective Time, the Company shall use its best efforts
to register under the Securities Act for public sale by the Holders of shares of
Registerable Stock the shares of Registerable Stock held by them. The Company
shall not be obligated to effect registration of Registerable Stock pursuant to
this Section 2 on more than one occasion.
3. Registration Procedures. The Company will, as expeditiously as
practicable after the Effective Time:
(a) prepare, submit to you and to one counsel for the selling
shareholders for a reasonable opportunity to review, and thereafter file
with the Commission, as soon as practicable, a registration statement with
respect to such securities (which shall be on Form S-3 if the Company is
then eligible to use such form and otherwise on Form S-1 or such other
form of general applicability acceptable to the Company), and shall use
its best efforts to cause such registration statement to become and remain
effective during the Distribution Period;
2
<PAGE>
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective during the Distribution Period;
(c) furnish to each seller such number of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus) and any amendment or supplement thereto as such person may
reasonably request in order to facilitate the public sale of the
Registerable Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Registerable
Stock covered by such registration statement under the securities or blue
sky laws of a reasonable number of jurisdictions (provided that the
Company will not be required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but
for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any
jurisdiction):
(e) promptly notify each seller of Registerable Stock and (if
requested by any such seller) confirm such notice in writing, (i) when
such registration statement or any amendment or supplement thereto or to
the prospectus or preliminary prospectus contained therein has been filed,
(ii) of any request by the Commission for amendments or supplements to
such registration statement or prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of
proceedings for that purpose, or (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registerable Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose;
(f) immediately notify each seller under such registration
statement, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus contained in such registration statement,
as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading
3
<PAGE>
in the light of the circumstances then existing, and promptly thereafter
prepare and file with the Commission a supplement or amendment to such
prospectus, such registration statement or any document incorporated
therein by reference, or make such other filing, such that as thereafter
delivered to the purchasers of Registerable Stock, the prospectus will not
contain an untrue statement of material fact or omit to state any material
fact necessary to make the statements therein not misleading;
(g) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement;
(h) make available for inspection by each seller, and any attorney,
accountant or other agent retained by such seller, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, attorney, accountant
or agent in connection with such registration statement and permit such
seller, attorney, accountant or agent to review and comment on such
registration statement.
In connection with each registration hereunder, each selling holder of
Registerable Stock shall furnish to the Company in writing such information with
respect to himself and the proposed distribution by him as shall be reasonably
necessary in order to assure compliance with federal and applicable state
securities laws.
4. Expenses. All expenses incurred by the Company in complying with
Sections 2 and 3 hereof, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees of the National Association
of Securities Dealers, Inc., transfer taxes and fees of transfer agents and
registrars, will be paid by the Company in connection with the registration
statement filed pursuant to Sections 2 and 3 hereof.
5. Indemnification. The Company will indemnify and hold harmless each
seller of such Registerable Stock under the registration statement filed
pursuant to Sections 2 and 3 hereof, each partner, officer and director of each
such seller, and each other person, if any, who controls such seller within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller, partner, officer, director
or controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims,
4
<PAGE>
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any material fact
contained in the registration statement filed pursuant to Sections 2 and 3
hereof, any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, (ii) the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and (iii) any violation or alleged violation
by the Company of the Securities Act, the Exchange Act, any state securities law
or any rule or regulation promulgated under any of the same in connection with
the offering covered by such registration statement, and the Company will
reimburse each such seller, partner, officer and director and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in reliance upon and in
conformity with information furnished by such seller or any of its partners,
officers, directors or such controlling person in writing specifically for use
in such registration statement or prospectus.
Each seller of such Registerable Stock under the registration statement
filed pursuant to Sections 2 and 3 hereof, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act, each officer of the
Company who signs the registration statement, each director of the Company, and
each person who controls any of the foregoing within the meaning of the
Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer or director or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the registration statement filed pursuant to Sections
2 and 3 hereof, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under any of the same
in connection with the offering covered by such registration statement, and each
such seller will reimburse the Company and each such officer, director and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action;
5
<PAGE>
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
furnished in writing to the Company by such seller specifically for use in such
registration statement or prospectus. Notwithstanding the foregoing, (i) no
seller shall be liable for payments of amounts paid in settlement of any loss,
claim, damage, liability or action if such settlement is effected without the
consent of such seller (which consent shall not be unreasonably withheld), and
(ii) in no event shall the liability of any seller of Registerable Stock under
this Section 5 in connection with any registration exceed the proceeds received
by such seller from the sale of shares of Registerable Stock in such
registration.
Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 5. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party, if it shall actually undertake the defense thereof, shall not be liable
to such indemnified party under this Section 5 for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party, or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
6
<PAGE>
Notwithstanding the foregoing, any indemnified party shall have the right
to retain its own counsel in any such action, but the fees and disbursements of
such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party shall have failed to retain counsel for the indemnified
person as aforesaid or shall have failed to defend such action in accordance
with the preceding paragraph or (ii) the indemnifying party and such indemnified
party shall have mutually agreed to the retention of such counsel. It is
understood that the indemnifying party shall not, in connection with any action
or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
If the indemnification provided for in the first two paragraphs of this
Section 5 is unavailable or insufficient to hold harmless an indemnified party
under such paragraphs in respect of any losses, claims, damages or liabilities
or actions in respect thereof referred to therein, then each indemnifying party
shall in lieu of indemnifying such indemnified party contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or actions in such proportion as appropriate to reflect the
relative fault of the Company, on the one hand, and the sellers of such
Registerable Stock, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations, including the failure to give
any notice under the third paragraph of this Section 5. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the sellers of such Registerable Stock, on the
other, and to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
each of you agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by pro rata allocation (even if all
of the sellers of such Registerable Stock were treated as one entity for such
purpose) or by any other method of allocation which did not take account of the
equitable considerations referred to above in this paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or action in respect thereof, referred to above in this paragraph,
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this paragraph, the
7
<PAGE>
sellers of such Registerable Stock shall not be required to contribute any
amount in excess of the amount, if any, by which the total price at which the
Common Stock sold by each of them was offered to the public exceeds the amount
of any damages which they would have otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission. No person guilty of
fraudulent misrepresentations (within the meaning of Section 11(f) of the
Securities Act), shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
6. Current Public Information. The Company agrees with you as follows:
(a) The Company shall use its best efforts to make and keep public
information available, as those terms are understood and defined in Rule
144 under the Securities Act, at all times from and after the date hereof.
(b) The Company shall use its best efforts to file with the
Commission in a timely manner all reports and other documents as the
Commission may prescribe under Section 13(a) or 15(d) of the Exchange Act.
(c) The Company shall furnish to each holder of Registerable Stock
forthwith upon request, (i) a copy of the most recent annual or quarterly
report of the Company, and (ii) such other reports and documents so filed
as a holder may reasonably request to avail itself of any rule or
regulation of the Commission allowing a holder of Registerable Stock to
sell any such securities without registration.
7. Effectiveness of this Agreement. This Agreement shall become effective
at the Effective Time. If the Effective Time shall not occur, this Agreement
shall be of no force and effect.
8. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not, provided, however, that the obligations of the Company hereunder shall
inure only to the benefit of you and a person who shall become a holder of
Registerable Stock by will or the laws of descent and distribution, and the term
"Registerable Stock" as used herein shall be limited to Registerable Stock held
by you or any such person.
8
<PAGE>
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class registered
mail, postage prepaid, addressed as follows:
if to the Company, to it at Overlook at Great Notch, 150 Clove Road,
Little Falls, New Jersey 07424, Attention: Chairman and Chief Executive
Officer;
if to any holder of Registerable Stock, at its address as set forth in
Annex I hereto;
if to any subsequent holder of Registerable Stock pursuant to
Section 10(a) hereof to it at such address as may have been furnished to
the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of
Registerable Stock or to such holders of Registerable Stock (in the case
of the Company).
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except in writing signed by the holders of not less than a majority of the
Registerable Stock.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter, whereupon this letter (herein sometimes
called "this Agreement") shall be a binding agreement between the Company and
you.
Very truly yours,
THE BISYS GROUP, INC.
By: /s/ Lynn J. Mangum
--------------------------
Name: Lynn J. Mangum
Title: Chairman and Chief
Executive Officer
9
<PAGE>
AGREED TO AND ACCEPTED
as of the date first
above written:
/s/ Joseph J. DiTrapani
- ----------------------------------
Joseph J. DiTrapani
/s/ Scott DiTrapani
- ----------------------------------
Scott DiTrapani
/s/ Matthew DiTrapani
- ----------------------------------
Matthew DiTrapani
/s/ Joseph J. DiTrapani
- ----------------------------------
Joseph J. DiTrapani, as Custodian
for Todd DiTrapani under the
Uniform Gifts to Minors Act
/s/ Jeffrey D. Krauss
- ----------------------------------
Jeffrey D. Krauss, as Trustee
/s/ Lea Krauss
- ----------------------------------
Lea Krauss
/s/ Michael Krauss
- ----------------------------------
Michael Krauss
/s/ Laura Krauss
- ----------------------------------
Laura Krauss
10
<PAGE>
SCHEDULE I
Name and No. of Shares of
Address Registerable Stock
- -------- ------------------
Joseph J. DiTrapani 62,740
860 Cranford Avenue
North Woodmere, NY 11581
Scott DiTrapani 1,486
860 Cranford Avenue
North Woodmere, NY 11581
Matthew DiTrapani 1,486
860 Cranford Avenue
Woodmere, NY 11581
Joseph J. DiTrapani, as Custodian 1,486
for Todd DiTrapani under the
Uniform Transfers to Minors Act
860 Cranford Avenue
Woodmere, NY 11581
Jeffrey D. Krauss, as Trustee of the 59,768
Trust for the Benefit of Laura Krauss
2649 Rebecca Street
Bellmore, NY 11710
Lea Krauss 2,229
2649 Rebecca Street
Bellmore, NY 11710
Michael Krauss 2,229
2649 Rebecca Street
Bellmore, NY 11710
Laura Krauss 2,972
2649 Rebecca Street
Bellmore, NY 11710
11
<PAGE>
EXHIBIT 4.8
REGISTRATION RIGHTS AGREEMENT
September 16, 1997
To each of the persons
named on Schedule I hereto:
Dear Sirs:
This will confirm that, in consideration of the consummation of the merger
of BI-BSI Acquisition Corp. ("BI-BSI"), a wholly owned subsidiary of The BISYS
Group, Inc. (the "Company"), with and into Benefit Services, Inc. ("BSI")
pursuant to the Agreement and Plan of Merger dated as of September 16, 1997
among the Company, BI-BSI, BSI and the shareholders of BSI, in which an
aggregate number of shares of Common Stock, $.02 par value, of the Company (the
"Shares") set forth on Schedule I hereto opposite your name will be issuable to
you upon conversion of shares of common stock of BSI held by you, the Company
hereby covenants and agrees with each of you, as follows:
1. Certain Definitions. As used herein, the following terms shall have the
following respective meanings:
"Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Common Stock, $.02 par value, of the
Company, as constituted as of the date of this Agreement.
"Distribution Period" shall mean the period commencing upon the
termination of the restrictions imposed by Section 7.11(a) of the Merger
Agreement and ending on the earlier to occur of (i) the sale by the
holders of Registerable Stock of all of the Registerable Stock covered by
the registration statement referred to in Sections 2 and 3 below or (ii)
the second anniversary of the Effective Time.
"Effective Time" shall mean the Effective Time of the Merger, as
defined in the Merger Agreement.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934 or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Merger" shall mean the merger of BI-BSI into BSI.
"Merger Agreement" shall mean the Agreement and Plan of Merger dated
as of September 16, 1997 among the Company, BI-BSI, BSI and the
shareholders of BSI, to which you are a party.
"Registerable Stock" shall mean any shares of Common Stock issued to
you in any Merger, and not transferred or otherwise disposed of by you.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
2. Registration of Registerable Stock.
Promptly after the Effective Time, the Company shall use its best efforts
to register under the Securities Act for public sale by the Holders of shares of
Registerable Stock the shares of Registerable Stock held by them. The Company
shall not be obligated to effect registration of Registerable Stock pursuant to
this Section 2 on more than one occasion.
3. Registration Procedures. The Company will, as expeditiously as
practicable after the Effective Time:
(a) prepare, submit to you and to one counsel for the selling
shareholders for a reasonable opportunity to review, and thereafter file
with the Commission, as soon as practicable, a registration statement with
respect to such securities (which shall be on Form S-3 if the Company is
then eligible to use such form and otherwise on Form S-1 or such other
form of general applicability acceptable to the Company), and shall use
its best efforts to cause such registration statement to become and remain
effective during the Distribution Period;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective during the Distribution Period;
2
<PAGE>
(c) furnish to each seller such number of copies of the registration
statement and the prospectus included therein (including each preliminary
prospectus) and any amendment or supplement thereto as such person may
reasonably request in order to facilitate the public sale of the
Registerable Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Registerable
Stock covered by such registration statement under the securities or blue
sky laws of a reasonable number of jurisdictions (provided that the
Company will not be required to (i) qualify generally to do business in
any jurisdiction where it would not otherwise be required to qualify but
for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any
jurisdiction):
(e) promptly notify each seller of Registerable Stock and (if
requested by any such seller) confirm such notice in writing, (i) when
such registration statement or any amendment or supplement thereto or to
the prospectus or preliminary prospectus contained therein has been filed,
(ii) of any request by the Commission for amendments or supplements to
such registration statement or prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of
proceedings for that purpose, or (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registerable Stock for sale in any jurisdiction or the initiation or
threatening of any proceeding for that purpose;
(f) immediately notify each seller under such registration
statement, at any time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening of any event as a
result of which the prospectus contained in such registration statement,
as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing, and promptly thereafter prepare and file
with the Commission a supplement or amendment to such prospectus, such
registration statement or any document incorporated
3
<PAGE>
therein by reference, or make such other filing, such that as thereafter
delivered to the purchasers of Registerable Stock, the prospectus will not
contain an untrue statement of material fact or omit to state any material
fact necessary to make the statements therein not misleading;
(g) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement;
(h) make available for inspection by each seller, and any attorney,
accountant or other agent retained by such seller, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such seller, attorney, accountant
or agent in connection with such registration statement and permit such
seller, attorney, accountant or agent to review and comment on such
registration statement.
In connection with each registration hereunder, each selling holder of
Registerable Stock shall furnish to the Company in writing such information with
respect to himself and the proposed distribution by him as shall be reasonably
necessary in order to assure compliance with federal and applicable state
securities laws.
4. Expenses. All expenses incurred by the Company in complying with
Sections 2 and 3 hereof, including, without limitation, all registration and
filing fees, printing expenses, fees and disbursements of counsel and
independent public accountants for the Company, fees of the National Association
of Securities Dealers, Inc., transfer taxes and fees of transfer agents and
registrars, will be paid by the Company in connection with the registration
statement filed pursuant to Sections 2 and 3 hereof.
5. Indemnification. The Company will indemnify and hold harmless each
seller of such Registerable Stock under the registration statement filed
pursuant to Sections 2 and 3 hereof, each partner, officer and director of each
such seller, and each other person, if any, who controls such seller within the
meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller, partner, officer, director
or controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) any untrue statement or alleged
untrue
4
<PAGE>
statement of any material fact contained in the registration statement filed
pursuant to Sections 2 and 3 hereof, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereof, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under any of the same in connection with the offering covered by such
registration statement, and the Company will reimburse each such seller,
partner, officer and director and each such controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the Company will not be liable in any such case if and to the extent that
any such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in reliance upon and in conformity with information furnished by such
seller or any of its partners, officers, directors or such controlling person in
writing specifically for use in such registration statement or prospectus.
Each seller of such Registerable Stock under the registration statement
filed pursuant to Sections 2 and 3 hereof, severally and not jointly, will
indemnify and hold harmless the Company and each person, if any, who controls
the Company within the meaning of the Securities Act, each officer of the
Company who signs the registration statement, each director of the Company, and
each person who controls any of the foregoing within the meaning of the
Securities Act, against all losses, claims, damages or liabilities, joint or
several, to which the Company or such officer or director or controlling person
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (i) any untrue statement or alleged untrue statement of any
material fact contained in the registration statement filed pursuant to Sections
2 and 3 hereof, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, (ii) the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or (iii) any violation
or alleged violation by the Company of the Securities Act, the Exchange Act, any
state securities law or any rule or regulation promulgated under any of the same
in connection with the offering covered by such registration statement, and each
such seller will reimburse the Company and each such officer, director and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action;
5
<PAGE>
provided, however, that such seller will be liable hereunder in any such case if
and only to the extent that any such loss, claim, damage or liability arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in reliance upon and in conformity with information
furnished in writing to the Company by such seller specifically for use in such
registration statement or prospectus. Notwithstanding the foregoing, (i) no
seller shall be liable for payments of amounts paid in settlement of any loss,
claim, damage, liability or action if such settlement is effected without the
consent of such seller (which consent shall not be unreasonably withheld), and
(ii) in no event shall the liability of any seller of Registerable Stock under
this Section 5 in connection with any registration exceed the proceeds received
by such seller from the sale of shares of Registerable Stock in such
registration.
Promptly after receipt by an indemnified party hereunder of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party hereunder, notify the
indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party other than under this Section 5. In case any such action
shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate in and, to the extent it shall wish, to assume and
undertake the defense thereof with counsel satisfactory to such indemnified
party, and, after notice from the indemnifying party to such indemnified party
of its election so to assume and undertake the defense thereof, the indemnifying
party, if it shall actually undertake the defense thereof, shall not be liable
to such indemnified party under this Section 5 for any legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be reasonable
defenses available to it which are different from or additional to those
available to the indemnifying party, or if the interests of the indemnified
party reasonably may be deemed to conflict with the interests of the
indemnifying party, the indemnified party shall have the right to select a
separate counsel and to assume such legal defenses and otherwise to participate
in the defense of such action, with the expenses and fees of such separate
counsel and other expenses related to such participation to be reimbursed by the
indemnifying party as incurred.
6
<PAGE>
Notwithstanding the foregoing, any indemnified party shall have the right
to retain its own counsel in any such action, but the fees and disbursements of
such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party shall have failed to retain counsel for the indemnified
person as aforesaid or shall have failed to defend such action in accordance
with the preceding paragraph or (ii) the indemnifying party and such indemnified
party shall have mutually agreed to the retention of such counsel. It is
understood that the indemnifying party shall not, in connection with any action
or related actions in the same jurisdiction, be liable for the fees and
disbursements of more than one separate firm qualified in such jurisdiction to
act as counsel for the indemnified party. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
If the indemnification provided for in the first two paragraphs of this
Section 5 is unavailable or insufficient to hold harmless an indemnified party
under such paragraphs in respect of any losses, claims, damages or liabilities
or actions in respect thereof referred to therein, then each indemnifying party
shall in lieu of indemnifying such indemnified party contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or actions in such proportion as appropriate to reflect the
relative fault of the Company, on the one hand, and the sellers of such
Registerable Stock, on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or actions as well
as any other relevant equitable considerations, including the failure to give
any notice under the third paragraph of this Section 5. The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact relates to information supplied by the
Company, on the one hand, or the sellers of such Registerable Stock, on the
other, and to the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
each of you agree that it would not be just and equitable if contributions
pursuant to this paragraph were determined by pro rata allocation (even if all
of the sellers of such Registerable Stock were treated as one entity for such
purpose) or by any other method of allocation which did not take account of the
equitable considerations referred to above in this paragraph. The amount paid or
payable by an indemnified party as a result of the losses, claims, damages,
liabilities or action in respect thereof, referred to above in this paragraph,
shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in
7
<PAGE>
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this paragraph, the sellers of such
Registerable Stock shall not be required to contribute any amount in excess of
the amount, if any, by which the total price at which the Common Stock sold by
each of them was offered to the public exceeds the amount of any damages which
they would have otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission. No person guilty of fraudulent
misrepresentations (within the meaning of Section 11(f) of the Securities Act),
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
6. Current Public Information. The Company agrees with you as follows:
(a) The Company shall use its best efforts to make and keep public
information available, as those terms are understood and defined in Rule
144 under the Securities Act, at all times from and after the date hereof.
(b) The Company shall use its best efforts to file with the
Commission in a timely manner all reports and other documents as the
Commission may prescribe under Section 13(a) or 15(d) of the Exchange Act.
(c) The Company shall furnish to each holder of Registerable Stock
forthwith upon request, (i) a copy of the most recent annual or quarterly
report of the Company, and (ii) such other reports and documents so filed
as a holder may reasonably request to avail itself of any rule or
regulation of the Commission allowing a holder of Registerable Stock to
sell any such securities without registration.
7. Effectiveness of this Agreement. This Agreement shall become effective
at the Effective Time. If the Effective Time shall not occur, this Agreement
shall be of no force and effect.
8. Miscellaneous.
(a) All covenants and agreements contained in this Agreement by or
on behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not, provided, however, that the obligations of the Company hereunder shall
inure only to the benefit of you and a person who shall become a holder of
Registerable Stock by will or the laws of descent and distribution, and the term
"Registerable Stock" as used herein
8
<PAGE>
shall be limited to Registerable Stock held by you or any such person.
(b) All notices, requests, consents and other communications
hereunder shall be in writing and shall be mailed by first class registered
mail, postage prepaid, addressed as follows:
if to the Company, to it at Overlook at Great Notch, 150 Clove Road,
Little Falls, New Jersey 07424, Attention: Chairman and Chief Executive
Officer;
if to any holder of Registerable Stock, at its address as set forth in
Annex I hereto;
if to any subsequent holder of Registerable Stock pursuant to
Section 10(a) hereof to it at such address as may have been furnished to
the Company in writing by such holder;
or, in any case, at such other address or addresses as shall have been
furnished in writing to the Company (in the case of a holder of
Registerable Stock or to such holders of Registerable Stock (in the case
of the Company).
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
(d) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and may not be modified or amended
except in writing signed by the holders of not less than a majority of the
Registerable Stock.
(e) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
Please indicate your acceptance of the foregoing by signing and returning
the enclosed counterpart of this letter,
9
<PAGE>
whereupon this letter (herein sometimes called "this Agreement") shall be a
binding agreement between the Company and you.
Very truly yours,
THE BISYS GROUP, INC.
By: /s/ Lynn J. Mangum
----------------------------
Name: Lynn J. Mangum
Title: Chairman and Chief
Executive Officer
AGREED TO AND ACCEPTED
as of the date first
above written:
/s/ Bernard H. Barrie
- -----------------------------
Bernard H. Barrie
/s/ Edward S. Hutman
- -----------------------------
Edward S. Hutman
/s/ Melissa H. Barnickel
- -----------------------------
Melissa H. Barnickel
10
<PAGE>
SCHEDULE I
Name and No. of Shares of
Address Registerable Stock
- -------- ------------------
Bernard H. Barrie 60,732
132 Business Center Drive
P.O. Box 1017
Reistertown, MD 21136
Edward S. Hutman 7,144
132 Business Center Drive
P.O. Box 1017
Reistertown, MD 21136
Melissa H. Barnickel 3,572
132 Business Center Drive
P.O. Box 1017
Reistertown, MD 21136
11
<PAGE>
Exhibit No. 5.1
Shanley & Fisher, P.C.
131 Madison Avenue
Morristown, New Jersey 07962-1979
October 2, 1997
The BISYS Group, Inc.
150 Clove Road
Little Falls, New Jersey 07424
Re: The BISYS Group, Inc.
Ladies and Gentlemen:
We have acted as special counsel to The BISYS Group, Inc., a Delaware
corporation (the "Company"), in connection with the preparation and filing with
the Securities and Exchange Commission (the "Commission") of a registration
statement on Form S-3 (the "Registration Statement") relating to the offer and
sale of up to 1,056,671 shares of the Company's common stock, par value $.02 per
share, presently issued and outstanding (the "Shares"). The Shares are to be
offered and sold for the accounts of the selling stockholders named in the
prospectus constituting a part of the Registration Statement.
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the
"Act").
For purposes of this opinion, we have examined originals or copies,
certified or otherwise, identified to our satisfaction, of the Registration
Statement, together with exhibits filed as a part thereof and all such other
documents, records, certificates, including certificates of public officials,
and other instruments as we have deemed necessary or appropriate.
<PAGE>
The BISYS Group, Inc.
October 2, 1997
Page 2
Based upon and subject to the foregoing, we are of the opinion that the
Shares have been duly authorized, validly issued and are fully paid and
non-assessable, and will, when sold, be validly issued, fully paid and
non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name therein and in the prospectus
constituting a part thereof under the caption "Legal Matters". By giving the
foregoing consent, we do not admit that we are persons whose consent is required
under Section 7 of the Act.
Very truly yours,
Shanley & Fisher, P.C.
<PAGE>
[COOPERS & LYBRAND LETTERHEAD]
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement of
The BISYS Group, Inc. (the "Company") on Form S-3 of our report dated
August 15, 1997, on our audits of the consolidated financial statements of
The BISYS Group, Inc. and subsidiaries as of June 30, 1997 and 1996, and for
each of the three years in the period ended June 30, 1997, which report is
incorporated by reference into the Company's Annual Report on Form 10-K.
We also consent to the reference to our firm under the caption "Experts".
/s/ COOPERS & LYBRAND LLP
New York, New York
October 3, 1997
<PAGE>
EXHIBIT NO. 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints Robert J. McMullan and Kevin J. Dell, and each of them, as his true and
lawful attorney-in-fact and agent, with full power of substitution, for him and
in his name, place and stead, in any and all capacities, to do any and all acts
and things and to execute any and all instruments and documents which said
attorney-in-fact and agent may deem necessary or desirable to enable The BISYS
Group, Inc. (the "Company") to comply with the Securities Act of 1933, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") thereunder, in connection
with the registration under the Act of shares of common stock of the Company,
par value $.02 ("Common Stock"), to be offered and sold by selling stockholders
of the Company, in connection with certain transactions approved by the Board of
Directors of the Company, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned to a registration statement under the Act on an appropriate form
covering said shares of Common Stock, and any amendments to such registration
statement, to be filed with the Commission, and to any and all instruments or
documents filed as part of or in connection with such registration statement or
any amendments thereto; and the undersigned hereby ratifies and confirms all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 14th day of August, 1997.
/s/ Lynn J. Mangum
------------------------------------
Name: Lynn J. Mangum
Title: Chairman of the Board,
Chief Executive Officer
and Director
<PAGE>
EXHIBIT NO. 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints Lynn J. Mangum and Kevin J. Dell, and each of them, as his true and
lawful attorney-in-fact and agent, with full power of substitution, for him and
in his name, place and stead, in any and all capacities, to do any and all acts
and things and to execute any and all instruments and documents which said
attorney-in-fact and agent may deem necessary or desirable to enable The BISYS
Group, Inc. (the "Company") to comply with the Securities Act of 1933, as
amended (the "Act"), and any rules, regulations and requirements of the
Securities and Exchange Commission (the "Commission") thereunder, in connection
with the registration under the Act of shares of common stock of the Company,
par value $.02 ("Common Stock"), to be offered and sold by selling stockholders
of the Company, in connection with certain transactions approved by the Board of
Directors of the Company, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned to a registration statement under the Act on an appropriate form
covering said shares of Common Stock, and any amendments to such registration
statement, to be filed with the Commission, and to any and all instruments or
documents filed as part of or in connection with such registration statement or
any amendments thereto; and the undersigned hereby ratifies and confirms all
that said attorney and agent shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 14th day of August, 1997.
/s/ Robert J. McMullan
------------------------------------
Name: Robert J. McMullan
Title: Executive Vice President
and Chief Financial Officer
<PAGE>
EXHIBIT NO. 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints Lynn J. Mangum, Robert J. McMullan and Kevin J. Dell, and each of them,
as his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to do any and all acts and things and to execute any and all
instruments and documents which said attorney-in-fact and agent may deem
necessary or desirable to enable The BISYS Group, Inc. (the "Company") to comply
with the Securities Act of 1933, as amended (the "Act"), and any rules,
regulations and requirements of the Securities and Exchange Commission (the
"Commission") thereunder, in connection with the registration under the Act of
shares of common stock of the Company, par value $.02 ("Common Stock"), to be
offered and sold by selling stockholders of the Company, in connection with
certain transactions approved by the Board of Directors of the Company,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned to a registration
statement under the Act on an appropriate form covering said shares of Common
Stock, and any amendments to such registration statement, to be filed with the
Commission, and to any and all instruments or documents filed as part of or in
connection with such registration statement or any amendments thereto; and the
undersigned hereby ratifies and confirms all that said attorney and agent shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 14th day of August, 1997.
/s/ Paul H. Bourke
------------------------------------
Name: Paul H. Bourke
Title: Director
<PAGE>
EXHIBIT NO. 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints Lynn J. Mangum, Robert J. McMullan and Kevin J. Dell, and each of them,
as his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to do any and all acts and things and to execute any and all
instruments and documents which said attorney-in-fact and agent may deem
necessary or desirable to enable The BISYS Group, Inc. (the "Company") to comply
with the Securities Act of 1933, as amended (the "Act"), and any rules,
regulations and requirements of the Securities and Exchange Commission (the
"Commission") thereunder, in connection with the registration under the Act of
shares of common stock of the Company, par value $.02 ("Common Stock"), to be
offered and sold by selling stockholders of the Company, in connection with
certain transactions approved by the Board of Directors of the Company,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned to a registration
statement under the Act on an appropriate form covering said shares of Common
Stock, and any amendments to such registration statement, to be filed with the
Commission, and to any and all instruments or documents filed as part of or in
connection with such registration statement or any amendments thereto; and the
undersigned hereby ratifies and confirms all that said attorney and agent shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 14th day of August, 1997.
/s/ Robert J. Casale
------------------------------------
Name: Robert J. Casale
Title: Director
<PAGE>
EXHIBIT NO. 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints Lynn J. Mangum, Robert J. McMullan and Kevin J. Dell, and each of them,
as his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to do any and all acts and things and to execute any and all
instruments and documents which said attorney-in-fact and agent may deem
necessary or desirable to enable The BISYS Group, Inc. (the "Company") to comply
with the Securities Act of 1933, as amended (the "Act"), and any rules,
regulations and requirements of the Securities and Exchange Commission (the
"Commission") thereunder, in connection with the registration under the Act of
shares of common stock of the Company, par value $.02 ("Common Stock"), to be
offered and sold by selling stockholders of the Company, in connection with
certain transactions approved by the Board of Directors of the Company,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned to a registration
statement under the Act on an appropriate form covering said shares of Common
Stock, and any amendments to such registration statement, to be filed with the
Commission, and to any and all instruments or documents filed as part of or in
connection with such registration statement or any amendments thereto; and the
undersigned hereby ratifies and confirms all that said attorney and agent shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 14th day of August, 1997.
/s/ Thomas A. Cooper
------------------------------------
Name: Thomas A. Cooper
Title: Director
<PAGE>
EXHIBIT NO. 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints Lynn J. Mangum, Robert J. McMullan and Kevin J. Dell, and each of them,
as his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to do any and all acts and things and to execute any and all
instruments and documents which said attorney-in-fact and agent may deem
necessary or desirable to enable The BISYS Group, Inc. (the "Company") to comply
with the Securities Act of 1933, as amended (the "Act"), and any rules,
regulations and requirements of the Securities and Exchange Commission (the
"Commission") thereunder, in connection with the registration under the Act of
shares of common stock of the Company, par value $.02 ("Common Stock"), to be
offered and sold by selling stockholders of the Company, in connection with
certain transactions approved by the Board of Directors of the Company,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned to a registration
statement under the Act on an appropriate form covering said shares of Common
Stock, and any amendments to such registration statement, to be filed with the
Commission, and to any and all instruments or documents filed as part of or in
connection with such registration statement or any amendments thereto; and the
undersigned hereby ratifies and confirms all that said attorney and agent shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 14th day of August, 1997.
/s/ Jay DeDapper
------------------------------------
Name: Jay DeDapper
Title: Director
<PAGE>
EXHIBIT NO. 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints Lynn J. Mangum, Robert J. McMullan and Kevin J. Dell, and each of them,
as his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to do any and all acts and things and to execute any and all
instruments and documents which said attorney-in-fact and agent may deem
necessary or desirable to enable The BISYS Group, Inc. (the "Company") to comply
with the Securities Act of 1933, as amended (the "Act"), and any rules,
regulations and requirements of the Securities and Exchange Commission (the
"Commission") thereunder, in connection with the registration under the Act of
shares of common stock of the Company, par value $.02 ("Common Stock"), to be
offered and sold by selling stockholders of the Company, in connection with
certain transactions approved by the Board of Directors of the Company,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned to a registration
statement under the Act on an appropriate form covering said shares of Common
Stock, and any amendments to such registration statement, to be filed with the
Commission, and to any and all instruments or documents filed as part of or in
connection with such registration statement or any amendments thereto; and the
undersigned hereby ratifies and confirms all that said attorney and agent shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 14th day of August, 1997.
/s/ John J. Lyons
------------------------------------
Name: John J. Lyons
Title: Director
<PAGE>
EXHIBIT NO. 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints Lynn J. Mangum, Robert J. McMullan and Kevin J. Dell, and each of them,
as his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to do any and all acts and things and to execute any and all
instruments and documents which said attorney-in-fact and agent may deem
necessary or desirable to enable The BISYS Group, Inc. (the "Company") to comply
with the Securities Act of 1933, as amended (the "Act"), and any rules,
regulations and requirements of the Securities and Exchange Commission (the
"Commission") thereunder, in connection with the registration under the Act of
shares of common stock of the Company, par value $.02 ("Common Stock"), to be
offered and sold by selling stockholders of the Company, in connection with
certain transactions approved by the Board of Directors of the Company,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned to a registration
statement under the Act on an appropriate form covering said shares of Common
Stock, and any amendments to such registration statement, to be filed with the
Commission, and to any and all instruments or documents filed as part of or in
connection with such registration statement or any amendments thereto; and the
undersigned hereby ratifies and confirms all that said attorney and agent shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 14th day of August, 1997.
/s/ Neil P. Marcous
------------------------------------
Name: Neil P. Marcous
Title: Director
<PAGE>
EXHIBIT NO. 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that the undersigned hereby constitutes and
appoints Lynn J. Mangum, Robert J. McMullan and Kevin J. Dell, and each of them,
as his true and lawful attorney-in-fact and agent, with full power of
substitution, for him and in his name, place and stead, in any and all
capacities, to do any and all acts and things and to execute any and all
instruments and documents which said attorney-in-fact and agent may deem
necessary or desirable to enable The BISYS Group, Inc. (the "Company") to comply
with the Securities Act of 1933, as amended (the "Act"), and any rules,
regulations and requirements of the Securities and Exchange Commission (the
"Commission") thereunder, in connection with the registration under the Act of
shares of common stock of the Company, par value $.02 ("Common Stock"), to be
offered and sold by selling stockholders of the Company, in connection with
certain transactions approved by the Board of Directors of the Company,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned to a registration
statement under the Act on an appropriate form covering said shares of Common
Stock, and any amendments to such registration statement, to be filed with the
Commission, and to any and all instruments or documents filed as part of or in
connection with such registration statement or any amendments thereto; and the
undersigned hereby ratifies and confirms all that said attorney and agent shall
do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney
this 14th day of August, 1997.
/s/ Thomas E. McInerney
------------------------------------
Name: Thomas E. McInerney
Title: Director
<PAGE>
Exhibit 99.2
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
THE BISYS GROUP, INC.,
BICHART ACQUISITION CORP.,
CHARTER SYSTEMS, INC.,
PETER C. COWIE, WENDY B. COWIE, HARRIS S. BERLACK,
TECHNOLOGY LEADERS II L.P., TECHNOLOGY LEADERS II OFFSHORE C.V., ONE LIBERTY
FUND III, L.P., GILDE INTERNATIONAL FUND, B.V.,
JEAN TEMPEL, JOHN OWENS, SCOTT WILSON,
MICHAEL BROWN AND JOHN THOMAS BERLACK, OR THEIR SUCCESSORS,
AS TRUSTEES FOR THE HARRIS S. BERLACK CHILDREN'S TRUST and
FREDERICK H. COWIE, OR HIS SUCCESSOR, AS TRUSTEE OF THE COWIE CHILDREN'S
TRUST
Dated as of August 5, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGER............................................... 2
SECTION 1.01 The Merger.................................. 2
SECTION 1.02 Effect Of the Merger........................ 3
SECTION 1.03 Consummation of the Merger.................. 3
SECTION 1.04 Charter; By-Laws; Directors
and Officers.............................. 3
SECTION 1.05 Further Assurances.......................... 4
ARTICLE II CONVERSION OF SECURITIES................................. 4
SECTION 2.01 Conversion of Securities
of the Company............................ 4
SECTION 2.02 Company Stock Options....................... 7
SECTION 2.03 Acquisition Common Stock.................... 8
SECTION 2.04 Exchange of Certificates; Surrender
of Warrant................................ 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND COWIE....................................11
SECTION 3.01 Authority Relative to Agreement.............11
SECTION 3.02 Shareholders' Title to Stock................11
SECTION 3.03 Organization, Standing
and Qualification.........................12
SECTION 3.04 Stock of the Company; Options...............12
SECTION 3.05 Subsidiaries................................13
SECTION 3.06 Articles of Organization
and By-Laws...............................13
SECTION 3.07 Execution and Performance of
Agreement; Validity and Binding
Nature....................................13
SECTION 3.08 Financial Statements........................14
SECTION 3.09 Intellectual Rights.........................14
SECTION 3.10 Software....................................15
SECTION 3.11 Contract Parties, Suppliers
and Consultants...........................16
SECTION 3.12 Employment, Deferred Compensation
or Similar Agreements;
Collective Bargaining Agreements;
Employee Benefit Plans....................17
SECTION 3.13 Inventory...................................18
SECTION 3.14 Real Estate.................................19
SECTION 3.15 Title to and Condition of
Personal Property.........................19
<PAGE>
TABLE OF CONTENTS
(continued)
SECTION 3.16 Accounts Receivable.........................19
SECTION 3.17 Consignment and Return Items................19
SECTION 3.18 Taxes.......................................20
SECTION 3.19 Litigation..................................20
SECTION 3.20 Other Material Contracts
and Commitments...........................20
SECTION 3.21 Labor Relations.............................21
SECTION 3.22 Insurance...................................22
SECTION 3.23 Conduct of Business and Absence
of Changes................................22
SECTION 3.24 Compliance with Laws;
Governmental Authorizations...............22
SECTION 3.25 Officers, Directors and
Depositories..............................23
SECTION 3.26 Environmental Matters.......................23
SECTION 3.27 Third Party and Governmental
Consents..................................23
SECTION 3.28 Licenses and Permits........................24
SECTION 3.29 Absence of Undisclosed Liabilities..........24
SECTION 3.30 Marketable Securities and Other
Investments...............................24
SECTION 3.31 Loans to or from Officers,
Directors, Shareholders
or Employees..............................24
SECTION 3.32 Service Warranties; Contract
Losses....................................25
SECTION 3.33 Backlog.....................................25
SECTION 3.34 Representations and Warranties
True; No Misleading Statements............25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
THE SHAREHOLDERS.........................................25
SECTION 4.01 Authority and Capacity Relative
to Agreement..............................25
SECTION 4.02 Execution and Performance
of Agreement; Validity and
Binding Nature............................26
SECTION 4.03 Stock of the Company........................26
SECTION 4.04 Additional Representations and
Covenants of Shareholders.................27
SECTION 4.05 Representations and Warranties True;
No Misleading Statements..................30
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT.................30
SECTION 5.01 Organization and Qualification..............31
SECTION 5.02 Subsidiaries................................31
<PAGE>
TABLE OF CONTENTS
(continued)
SECTION 5.03 Capitalization..............................31
SECTION 5.04 Authority Relative to Agreement.............32
SECTION 5.05 Non-Contravention...........................32
SECTION 5.06 Parent Public Information...................32
SECTION 5.07 Financial Statements........................32
SECTION 5.08 Absence of Certain Changes or
Events....................................33
SECTION 5.09 Governmental Consents.......................33
SECTION 5.10 Compliance with Law.........................34
SECTION 5.11 Litigation..................................34
SECTION 5.12 Tax-Free Reorganization.....................34
SECTION 5.13 Representations and Warranties True;
No Misleading Statements..................36
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF ACQUISITION............37
SECTION 6.01 Organization and Qualification..............37
SECTION 6.02 Capitalization..............................37
SECTION 6.03 Authority Relative to Agreement.............37
SECTION 6.04 Non-Contravention...........................38
SECTION 6.05 Governmental Consents.......................38
SECTION 6.06 Tax-Free Reorganization.....................38
SECTION 6.07 Other Matters...............................40
SECTION 6.08 Representations and Warranties True;
No Misleading Statements..................40
ARTICLE VII COVENANTS................................................40
SECTION 7.01 Conduct of the Company's Business...........40
SECTION 7.02 Certain Covenants of Parent.................43
SECTION 7.03 Access to Information.......................43
SECTION 7.04 Further Assurances..........................44
SECTION 7.05 Inquiries and Negotiations..................44
SECTION 7.06 Employment and Non-Competition
Agreements................................45
SECTION 7.07 Notification of Certain Matters.............45
SECTION 7.08 Indemnification.............................45
SECTION 7.09 Confidentiality.............................47
SECTION 7.10 Covenants of Shareholders...................48
SECTION 7.11 Transfer Restrictions After
the Effective Time........................49
SECTION 7.12 Registration Rights Agreements..............49
SECTION 7.13 Conversion of Preferred Stock ..............50
SECTION 7.14 Conversion of Stock Options.................50
SECTION 7.15 Repayment of Loans to Officers
and Directors.............................50
SECTION 7.16 Directors and Officers Liability
Insurance.................................50
<PAGE>
TABLE OF CONTENTS
(continued)
SECTION 7.17 Berlack Release.............................50
ARTICLE VIII CONDITIONS TO THE MERGER.................................51
SECTION 8.01 Conditions to Each Party's
Obligation to Effect the Merger...........51
SECTION 8.02 Conditions to the Obligation
of the Company to Effect the
Merger....................................51
SECTION 8.03 Conditions to the Obligation of
Parent and Acquisition to
Effect the Merger.........................51
ARTICLE IX TERMINATION AND ABANDONMENT..............................54
SECTION 9.01 Termination and Abandonment.................54
SECTION 9.02 Effect of Termination.......................54
ARTICLE X MISCELLANEOUS............................................55
SECTION 10.01 Survival of Representations
and Warranties...........................55
SECTION 10.02 Expenses, Etc..............................55
SECTION 10.03 Publicity..................................56
SECTION 10.04 Execution in Counterparts..................56
SECTION 10.05 Notices....................................56
SECTION 10.06 Waivers....................................57
SECTION 10.07 Entire Agreement...........................57
SECTION 10.08 Applicable Law.............................58
SECTION 10.09 Binding Effect, Benefits...................58
SECTION 10.10 Assignability..............................58
SECTION 10.11 Amendments.................................58
<PAGE>
INDEX TO SCHEDULES AND EXHIBITS
Schedule Description
-------- -----------
3.02(a) Shareholders Agreements
3.03 States and Jurisdictions in which
the Company does Business
3.04(a) Stock of the Company
3.04(b) Stock Options
3.05 Subsidiaries
3.06 Articles of Organization and By-Laws of
the Company
3.09 Intellectual Rights
3.10(a) Software
3.10(c) Copies of Owned Source Codes
3.11(a) Contract Parties
3.11(b) Major Suppliers
3.12(a) Employment Contracts and Deferred
Compensation Agreements
3.12(b) Employee Benefit Plans
3.12(c) Multi-Employer Plans
3.14(b) Real Estate Leases
3.15 Security Interest
3.16 Accounts Receivable
3.17 Consignment and Return Items
3.18 Tax Audits
3.19 Litigation
3.20 Material Contracts/Affiliates
3.22 Insurance
3.23 Changes Since June 30, 1997
3.25 Officers, Directors and Depositories
3.27 Consents
3.28 Approvals
3.30 Marketable Securities and Other
Investments
3.31 Related Party Loans
3.33 Backlog of Services
4.04(l) Shareholder Interests
8.03(d) Certain Employees
Exhibit ss. Ref. Description
- ------- -------- -----------
A Recitals Affiliate Agreement
B 4.04(e) Form of Accredited Investor
Certificate
<PAGE>
C 7.12 Form of Registration Rights
Agreement
D 8.02(d) Form of Opinion of Parent's
Counsel to the Company and the
Shareholders
E 8.03(i) Form of Opinion of Company's
Counsel to Parent and Acquisition
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August
5, 1997, among THE BISYS GROUP, INC., a Delaware corporation, with an address at
150 Clove Road, Little Falls, New Jersey 07424 ("Parent"), BICHART ACQUISITION
CORP., a Delaware corporation and a wholly-owned subsidiary of Parent, with an
address at 150 Clove Road, Little Falls, New Jersey 07424 ("Acquisition"),
CHARTER SYSTEMS, INC., a Massachusetts corporation, with an address at 1210
Washington Street, West Newton, Massachusetts 02165 (the "Company"), PETER C.
COWIE, with an address at 49 Salem Street, Andover, Massachusetts 01810
("Cowie"), WENDY B. COWIE, with an address at 49 Salem Street, Andover,
Massachusetts 01810, HARRIS S. BERLACK, with an address at P.O. Box 631,
Franconia, New Hampshire 03580 ("Berlack"), TECHNOLOGY LEADERS II L.P., with an
address at Ten Post Office Square, Boston, Massachusetts 02109, TECHNOLOGY
LEADERS II OFFSHORE C.V., with an address at Ten Post Office Square, Boston,
Massachusetts 02109, ONE LIBERTY FUND III, L.P., with an address at One Liberty
Square, Boston, Massachusetts 02109, GILDE INTERNATIONAL FUND, B.V., with an
address at One Liberty Square, Boston, Massachusetts 02109, JEAN TEMPEL, with an
address at c/o TL Ventures, Ten Post Office Square, Boston, Massachusetts 02109,
JOHN OWENS, with an address at 181 Hunt Valley, Berwyn, Pennsylvania 19312,
SCOTT WILSON, with an address at c/o Shields & Company, Inc., 150 Federal
Street, Boston, Massachusetts 02110, MICHAEL BROWN AND JOHN THOMAS BERLACK, OR
THEIR SUCCESSORS, AS TRUSTEES FOR THE HARRIS S. BERLACK CHILDREN'S TRUST (the
"Berlack Trust"), with an address at c/o Brown & Brown, 9 Canal Street, Boston,
Massachusetts 02109 and FREDERICK H. COWIE, OR HIS SUCCESSOR, AS TRUSTEE OF THE
COWIE CHILDREN'S TRUST (the "Cowie Trust"), with an address at 49 Salem Street,
Andover, Massachusetts 01810 (together with Cowie and Berlack, the
"Shareholders"). The Company and Acquisition are hereinafter sometimes referred
to as the "Constituent Corporations" and the Company as the "Surviving
Corporation."
WHEREAS, the Company is engaged in the business of providing design,
consulting, implementation, project management and support services for the
multi-vendor networks of corporate and public agency clients;
WHEREAS, Parent, Acquisition and the Company desire that Acquisition
merge with and into the Company (the "Merger"), upon the terms and conditions
set forth herein and in accordance with the Massachusetts Business Corporation
Law (the "Massachusetts BCL") and the General Corporation Law of the State of
Delaware (the "Delaware GCL"), with the result that the Company shall continue
as
<PAGE>
the surviving corporation and the separate existence of Acquisition (except as
it may be continued by operation of law) shall cease;
WHEREAS, Parent, Acquisition and the Company desire that upon the
Merger, at the Effective Time (as hereinafter defined), all outstanding shares
of the capital stock of the Company be converted into the right to receive fully
paid and nonassessable shares of Common Stock, $.02 par value, of Parent
("Parent Common Stock") and the outstanding shares of Acquisition be converted
into the right to receive fully paid and nonassessable shares of Common Stock,
$.01 par value, of the Surviving Corporation, as hereinafter provided;
WHEREAS, Parent, Acquisition and the Company desire that,
immediately after the Effective Time and solely as a result of the Merger,
Parent will own all the issued and outstanding shares of the capital stock of
the Surviving Corporation;
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger
shall be accounted for as a "pooling-of-interests";
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as an inducement to Parent and Acquisition to enter into this
Agreement, certain persons, including members of the management of the Company,
have entered into an agreement with Parent, dated the date hereof, in the form
attached hereto as Exhibit A (the "Affiliate Agreement"); and
WHEREAS, the respective Boards of Directors of the Company, Parent
and Acquisition have approved the Merger;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereto hereby agree as follows:
ARTICLE I
ARTICLE I THE MERGER
SECTION 1.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, in accordance with this Agreement, the
Massachusetts BCL and the Delaware GCL, Acquisition shall be merged with and
into the Company, the separate
2
<PAGE>
existence of Acquisition (except as it may be continued by operation of law)
shall cease, and the Company shall continue as the surviving corporation under
the name Charter Systems, Inc. unless and until the Articles of Organization
(hereinafter defined) shall be further amended to change the name of the
Surviving Corporation.
SECTION 1.02 Effect Of the Merger. Upon the effectiveness of the
Merger, the Surviving Corporation shall succeed to and assume all the rights and
obligations of the Company and Acquisition in accordance with the Massachusetts
BCL and the Delaware GCL, and the Merger shall otherwise have the effects set
forth in Section 80 of the Massachusetts BCL.
SECTION 1.03 Consummation of the Merger. As soon as practicable
after the satisfaction or waiver of the conditions to the obligations of the
parties to effect the Merger set forth herein, provided that this Agreement has
not been terminated previously, the parties hereto will cause the Merger to be
consummated by filing (a) with the Secretary of State of the Commonwealth of
Massachusetts properly executed Articles of Merger in accordance with the
Massachusetts BCL and (b) with the Secretary of State of the State of Delaware a
properly executed Certificate of Merger in accordance with the Delaware GCL. The
Merger shall be effective upon filing of such certificates or on such later date
as may be specified therein (the time of such effectiveness being the "Effective
Time").
SECTION 1.04 Charter; By-Laws; Directors and Officers. Immediately
after the Effective Time, the Articles of Organization of the Company shall be
the Articles of Organization of the Surviving Corporation until thereafter
amended in accordance with the provisions thereof and as provided by the
Massachusetts BCL. As of the Effective Time, the By-Laws of the Surviving
Corporation shall be the By-Laws of the Company as in effect immediately prior
to the Effective Time, until thereafter amended in accordance with the
provisions thereof and the Articles of Organization of the Surviving Corporation
and as provided by the Massachusetts BCL. The initial directors and officers of
the Surviving Corporation shall be the directors and officers set forth below,
in each case until their respective successors are duly elected and qualified.
Directors
Lynn J. Mangum
Robert J. McMullan
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Officers
Lynn J. Mangum Chairman and Chief Executive Officer
Peter C. Cowie President
Robert J. McMullan Executive Vice President, Chief
Financial Officer and Treasurer
Dennis R. Sheehan Senior Vice President
Mark J. Rybarcyzk Senior Vice President
Kevin J. Dell Vice President, General Counsel and
Clerk
Annamaria Porcaro Assistant Clerk
SECTION 1.05 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of such Constituent Corporation, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Corporation and otherwise to carry out
the purposes of this Agreement.
ARTICLE II CONVERSION OF SECURITIES
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities of the Company. By virtue of
the Merger and without any action on the part of the (1) holders of the common
stock, $.01 par value, of the Company ("Company Common Stock"), (2) holders of
Series C Convertible Preferred Stock, $.01 par value, of the Company ("Series C
Stock") or (3) holders of Series E Convertible Preferred Stock, $.01 par value,
of the Company ("Series E Stock"), at the Effective Time all outstanding shares
of the Company Common Stock, Series C Stock and Series E Stock (subject to the
terms of Section 2.04(c) below) shall be converted into the right to receive
fully paid and nonassessable shares of Parent Common Stock on the following
basis:
(a) Net Merger Price. The aggregate consideration to be paid in
connection with the Merger shall be paid in the form
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of Parent Common Stock valued, as set forth below, at Thirty-Three Million Four
Hundred and Fifty Thousand Dollars ($33,450,000) less the following amounts: (i)
the outstanding liquidation value, if any, as of the Effective Time, of any and
all shares of outstanding preferred stock of the Company, of whatever class or
series (the "Company Preferred Stock"), including, without limitation, the
Series C Stock and the Series E Stock; (ii) the aggregate amount of all
outstanding obligations of the Company for borrowed money as of the Effective
Time (the "Borrowings"); (iii) the amount in excess of $750,000 paid or payable
by the Company to the Company's financial advisors, brokers, consultants,
appraisers, employees, attorneys and accountants in connection with and/or as a
result of the Merger and the transactions related thereto or contemplated hereby
(collectively, the "Company Merger Expenses"); and (iv) the ascribed value (as
set forth in Section 2.02(d) below) of the outstanding Company Common Stock
Options (hereinafter defined) and Series C Stock Options (hereinafter defined)
granted to employees of the Company, which stock options shall be converted to
options to purchase Parent Common Stock pursuant to the terms hereof as of the
Effective Time (the "Net Merger Price"). The Net Merger Price shall be divided
by the average of the closing price per share of Parent Common Stock (the
"Average Price") as reported by the National Association of Securities Dealers
Inc. Automated Quotation System ("NASDAQ") each trading day during the period
commencing July 1, 1997 and ending the day which is two business days prior to
the Effective Time in order to determine, subject to Sections 2.01(b) and (c)
below, the number of shares of Parent Common Stock into which the outstanding
shares of Company Common Stock, Series C Stock and Series E Stock shall be
converted in the Merger (the "Aggregate Parent Common Stock Consideration").
(b) Exchange Value. Each share of Company Common Stock, Series C
Stock and Series E Stock issued and outstanding immediately prior to the
Effective Time (excluding such shares of Company Common Stock which are deemed
to result from the exercise or conversion of the Warrant (hereinafter defined)
pursuant to Section 2.01(c) below and excluding any such shares held in the
treasury of the Company, which shall be cancelled as provided in paragraph (d)
below) (all such shares collectively referred to herein as the "Exchange
Shares") shall be converted into the right to receive the number of shares of
Parent Common Stock (the "Exchange Value"), determined by dividing the Aggregate
Parent Common Stock Consideration by the sum of (a) the aggregate number of
Exchange Shares multiplied by the appropriate conversion factor as set forth
below, plus (b) 26,667:
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Conversion Factor
-----------------
Company Common Stock 1
Series C Stock 3
Series E Stock 2
If, prior to the Effective Time, Parent should split or combine the outstanding
shares of Parent Common Stock, or pay a stock dividend or other stock
distribution in Parent Common Stock, then the determination of the Exchange
Value shall be appropriately adjusted to reflect such split, combination,
dividend or other distribution.
(c) Warrant. The Company's outstanding Warrant to Purchase 26,667
shares of Company Common Stock dated May 7, 1997 issued to Silicon Valley Bank
(the "Warrant") shall not be assumed by Parent or Acquisition. In the event that
the Warrant is exercised in full for cash in accordance with its terms at least
two (2) business days prior to the Effective Time, the shares of Company Common
Stock received upon such exercise of the Warrant shall be converted into the
right to receive the number of shares of Parent Common Stock determined by
multiplying 26,667 by the Exchange Value. In the event that the Warrant is not
exercised in full for cash at least two (2) business days prior to the Effective
Time, all shares of Company Common Stock subject to the Warrant shall be deemed
to be converted, at the Effective Time, into the right to receive a number of
shares of Parent Common Stock, determined as follows:
(1) 26,667 shall first be multiplied by the Exchange Value;
(2) the product of the multiplication in subparagraph (1) shall then be
multiplied by the Average Price;
(3) the amount of $80,000 shall then be deducted from the product of the
multiplication in subparagraph (2); and
(4) the result of the subtraction in subparagraph (3) shall then be
divided by the Average Price, the quotient of which shall constitute the number
of shares of Parent Common Stock issuable to the holder of the Warrant.
(d) Treasury Stock. In the event of the conversion of any shares of
any series of Company Preferred Stock into Company Common Stock prior to the
Effective Time, the Company shall utilize all of the shares of its common stock
held in the treasury of the Company to effect any such conversions before
utilizing any authorized but unissued shares of its common stock. Any shares of
capital stock held in the treasury of the Company as of the Effective Time shall
be cancelled and retired as of the Effective Time and no capital stock of
Parent, cash or other consideration shall be paid or delivered in exchange
therefor.
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SECTION 2.02 Company Stock Options.
(a) Each stock option to purchase shares of Company Common Stock
outstanding immediately prior to the Effective Time (each, a "Company Common
Stock Option"), whether or not then exercisable or vested, shall, at and after
the Effective Time, remain outstanding and shall be converted, subject to the
terms of Section 2.02(d) below, into and become the right to purchase, subject
to the satisfaction of the vesting provisions and other terms of such Company
Common Stock Option, that number of shares of Parent Common Stock as shall equal
the number of shares of Company Common Stock subject to such Company Common
Stock Option immediately prior to such conversion multiplied by the Exchange
Value and rounded to the nearest whole share of Parent Common Stock. The
Surviving Corporation shall assume, as of the Effective Time, all obligations
and liabilities with respect to the Company Common Stock Options.
(b) Each stock option to purchase shares of Series C Stock
outstanding immediately prior to the Effective Time (each, a "Series C Stock
Option"), whether or not then exercisable or vested, shall, at the Effective
Time, be converted, subject to the terms of Section 2.02(d) below, into and
become the right to purchase, subject to the satisfaction of the vesting
provisions and other terms of such Series C Stock Option, the number of shares
of Parent Common Stock that shall equal the product of (x) the number of shares
of Company Common Stock into which the number of shares of Series C Stock
subject to such Series C Stock Option would have been convertible immediately
prior to such conversion using the conversion factor applicable to the
conversion of Series C Stock to Company Common Stock in effect immediately prior
to the Effective Time multiplied by (y) the Exchange Value and rounded to the
nearest whole share of Parent Common Stock.
(c) Notwithstanding anything herein or pursuant to the terms of the
Company Common Stock Options or Series C Stock Options to the contrary, the
exercise price applicable to each Company Common Stock Option and Series C Stock
Option shall, upon such conversion to an option to purchase Parent Common Stock
(each such converted option hereinafter referred to as a "Parent Stock Option"),
be adjusted as follows: (i) the option exercise price applicable to each Company
Common Stock Option shall, upon conversion to a Parent Stock Option, be adjusted
to an exercise price per share of Parent Common Stock calculated by dividing (x)
the aggregate exercise price for all shares of Company Common Stock subject to
such Company Common Stock Option immediately prior to such conversion by (y) the
number of shares of Parent Common Stock subject to such Parent Stock Option
immediately
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after such conversion and rounded down to the nearest $.01 and (ii) the option
exercise price applicable to each Series C Stock Option shall, upon such
conversion to a Parent Stock Option, be adjusted to an exercise price per share
of Parent Common Stock calculated by dividing (x) the aggregate exercise price
for all shares of Series C Stock subject to such Series C Stock Option
immediately prior to such conversion by (y) the number of shares of Parent
Common Stock subject to such Parent Stock Option immediately after such
conversion and rounded down to the nearest $.01.
(d) The ascribed value of the Company Common Stock Options and
Series C Stock Options for the purposes of clause (iv) of Section 2.01(a) shall
be the product calculated by multiplying (A) Thirty-Three Million Four Hundred
and Fifty Thousand Dollars ($33,450,000), less the sum of the amounts determined
under clause (i), clause (ii) and clause (iii) of Section 2.01(a), by (B) a
fraction, the numerator of which is (X) the sum (the "Number of Option Shares")
of (i) the number of shares of Company Common Stock subject to Company Common
Stock Options outstanding immediately prior to the Effective Time, plus (ii) the
number of shares of Company Common Stock into which the number of shares of
Series C Stock subject to Series C Stock Options outstanding immediately prior
to the Effective Time would be convertible using the conversion factor in effect
immediately prior to the Effective Time, and the denominator of which is (y) the
sum of (i) the number of shares of Company Common Stock outstanding immediately
prior to the Effective Time, plus (ii) the number of shares of Company Common
Stock into which the Series C Stock outstanding immediately prior to the
Effective Time would be convertible using the conversion factor in effect
immediately prior to the Effective Time, plus (iii) the number of shares of
Company Common Stock into which the Series E Stock outstanding immediately prior
to the Effective Time would be convertible using the conversion factor in effect
immediately prior to the Effective Time, plus (iv) the Number of Option Shares,
plus (v) in the event the Warrant is not exercised in full for cash in
accordance with its terms at least two (2) business days prior to the Effective
Time, the 26,667 shares of Company Common Stock which would have been issuable
upon exercise of the Warrant.
(e) Parent shall take such action as is necessary so as to enable
holders of Company Common Stock Options and Series C Stock Options to receive
registered shares of Parent Common Stock upon exercise of any such Parent Stock
Options in accordance with their terms from and after the Effective Time.
SECTION 2.03 Acquisition Common Stock. At the Effective Time, each
share of Common Stock, $.01 par value, of
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Acquisition issued and outstanding immediately prior to the Effective Time shall
be converted into the right to receive one (1) share of the common stock, $.01
par value, of the Surviving Corporation, which shall constitute all of the
issued and outstanding shares of the Surviving Corporation after the Effective
Time.
SECTION 2.04 Exchange of Certificates; Surrender of Warrant. (a)
Promptly after the Effective Time, each of the shareholders of the Company shall
deliver to Parent the certificate or certificates representing their shares of
Company Common Stock, Series C Stock and/or Series E Stock (each, a
"Certificate") in form sufficient for transfer and cancellation pursuant thereto
and, if the Warrant shall not have been exercised for cash, the holder of the
Warrant shall surrender same to Parent. As a condition to the issuance of Parent
Common Stock hereunder, each holder of shares of Company Common Stock, Series C
Stock or Series E Stock who is not a party to this Agreement, including, without
limitation the holder of the Warrant, shall submit the Certificate (or
Certificates) for such shares (or, in the case of the holder of the Warrant, the
Warrant) to Parent together with a letter of transmittal, in form and substance
satisfactory to Parent, containing such investment representations and
warranties and covenants, respectively, consistent with Section 4.04 (other than
Section 4.04(e)) and Section 7.11, respectively, of this Agreement, as shall be
required by Parent. The approval of the Merger by each such shareholder in
accordance with Section 8.03(j) and/or the surrender by such shareholder of
Certificate(s) of Company Common Stock or Company Preferred Stock for
cancellation and exchange shall be deemed an agreement by such shareholder to be
bound by the terms of Section 7.08 hereof. Upon surrender of a Certificate (or
Certificates) for cancellation to Parent in form sufficient for transfer and
cancellation pursuant hereto and delivery to Parent of such other documents as
may reasonably be required by Parent, the shareholder surrendering such
Certificate (or Certificates) (or, in the case of the Warrant, the holder
surrendering the Warrant), along with the letter of transmittal, if applicable,
shall be entitled to receive in exchange therefor (x) a certificate evidencing
that number of whole shares of Parent Common Stock which such holder has the
right to receive in respect of the shares of Company Common Stock, Series C
Stock and/or Series E Stock formerly evidenced by such Certificate (or
Certificates) or the Warrant (after taking into account all shares of Company
Common Stock, Series C Stock and/or Series E Stock then held of record by such
holder) and (y) a check representing the amount of cash in lieu of fractional
shares of Parent Common Stock, if any, and unpaid dividends or other
distributions, if any, to which such holder is entitled pursuant to the
provisions of this Section 2.04, after giving effect to any applicable
withholding tax, and the Certificate (or Certificates) so surrendered shall
forthwith be
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cancelled. No interest will be paid or accrued on the cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to the
shareholders.
(b) No dividends or other distributions declared after the Effective
Time with respect to Parent Common Stock shall be paid with respect to any
shares of Company Common Stock, Series C Stock and/or Series E Stock represented
by a Certificate until such Certificate is surrendered for exchange as provided
herein. After surrender of any such Certificate, there shall be paid to the
holder of the certificate representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore declared with respect to such whole shares
of Parent Common Stock and not paid, less the amount of any applicable
withholding taxes thereon, and (ii) at the appropriate payment date, the amount
of dividends or other distributions with a record date after the Effective Time
but prior to the date of such surrender and with a payment date subsequent to
the date of such surrender payable with respect to such whole shares of Parent
Common Stock, less the amount of any applicable withholding taxes thereon.
(c) No certificates or scrip representing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a shareholder of Parent. Each holder of
shares of Company Common Stock, Series C Stock and/or Series E Stock who would
otherwise have been entitled to receive in the Merger a fraction of a share of
Parent Common Stock (after taking into account all certificates surrendered by
such holder) shall be entitled to receive, in lieu thereof, a check in an amount
(without interest) equal to such fractional part of a share of Parent Common
Stock multiplied by the Average Price.
(d) From and after the date of this Agreement, the stock transfer
books of the Company shall be closed except in respect of the exercise of the
Warrant and/or stock options to purchase 264,600 shares of Series C Stock
outstanding on the date hereof (the "Series C Stock Options"), the exercise of
Company Common Stock Options and conversion of Company Preferred Stock to
Company Common Stock, and there shall be no further registrations of transfers
of shares of Company Common Stock, Series C Stock or Series E Stock on the
records of the Company, except in respect of the exercise of the Warrant and/or
the Series C Stock Options and conversion of Company Preferred Stock to Company
Common Stock.
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(e) In the event that any Certificate shall have been lost, stolen
or destroyed, upon the making of 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 of a bond in such reasonable amount as
the Surviving Corporation may direct, Parent shall issue in exchange for such
Certificate the shares of Parent Common Stock and, if any, cash in lieu of
fractional shares and unpaid dividends and distributions on shares of Parent
Common Stock deliverable in respect thereof as provided herein.
(f) Promptly after the Effective Time, the Surviving Corporation
shall issue to Parent a certificate representing One Hundred (100) shares of the
common stock of the Surviving Corporation, and Parent shall cause the
certificate representing the shares of the capital stock of Acquisition to be
cancelled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND COWIE
Each of the Company and Cowie, jointly and severally, hereby
represents and warrants to Parent and Acquisition, knowing and intending that
each of Parent and Acquisition is relying hereon in entering into the
transactions contemplated hereby, as follows:
SECTION 3.01 Authority Relative to Agreement. The Company has all
requisite power and authority to enter into and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly 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
and the transactions contemplated hereby other than approval thereof by the
holders of Company Common Stock, Series C Stock and Series E Stock. The
valuation of Company Common Stock for the purposes of Section 2.01(c) has been
duly authorized by the Board of Directors of the Company pursuant to Section 1.4
of the Warrant.
SECTION 3.02 Shareholders' Title to Stock. The shares of Company
Common Stock, Series C Stock and Series E Stock identified on Schedule 3.04(a)
represent, collectively, all of the issued and/or outstanding shares of capital
stock or other equity interests in the Company, other than the Warrant, the
Company Common Stock Options and the Series C Stock Options. Except as listed in
Schedule 3.02(a), neither the Company nor the Shareholders are parties to any
shareholders agreement, buy-sell agreement or similar agreement or arrangement.
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SECTION 3.03 Organization, Standing and Qualification. The Company
is a corporation, duly organized, validly existing and in good standing under
the laws of the Commonwealth of Massachusetts and has the corporate power and
lawful authority to own and hold its properties and conduct its business as now
owned, held and conducted in its state of incorporation and the states in which
it has qualified to do business. The Company is qualified and in good standing
in all states (or other jurisdictions) in which such qualification is required
by reason of the nature or extent of business conducted by the Company therein,
except where the failure to be so qualified would not have Material Adverse
Effect (hereinafter defined). Such states (and jurisdictions) are specified in
Schedule 3.03 attached hereto. As used in this Agreement, the term "Material
Adverse Effect" shall mean, with respect to any party, a material adverse effect
on the assets, financial condition, operating results or business of such party
and its subsidiaries, taken as a whole.
SECTION 3.04 Stock of the Company; Options.
(a) The authorized capital stock of the Company consists in its
entirety of Twenty Million (20,000,000) shares of Company Common Stock and Two
Million Six Hundred Forty Four Thousand Three Hundred Sixty Seven (2,644,367)
shares of Preferred Stock, of which Nine Hundred Forty Seven Thousand Nine
Hundred Eighty-Seven (947,987) shares of Company Common Stock are validly issued
and outstanding, fully paid and nonassessable, and Seven Hundred Eighty Eight
Thousand Four Hundred (788,400) shares of Series C Stock and Nine Hundred Five
Thousand Nine Hundred Sixty Two (905,962) shares of Series E Stock are validly
issued and outstanding, fully paid and nonassessable. The number of shares of
Company Common Stock and Preferred Stock owned of record by each holder thereof
is set forth in Schedule 3.04(a) hereof. Each class and series of Preferred
Stock and the holders of record thereof are further identified on Schedule
3.04(a) hereto. Each share of Company Common Stock and Preferred Stock which has
been or shall have been redeemed or repurchased by the Company prior to the
Effective Time has been or shall have been validly repurchased or redeemed, and
each share of Preferred Stock which has been or shall have been converted to
Company Common Stock prior to the Effective Time has been or shall have been
validly converted. Except for (i) options granted pursuant to the Company's
Omnibus Stock Option (the "Omnibus Plan") to purchase an aggregate of 1,463,118
shares of Company Common Stock; (ii) options to purchase an aggregate of 264,600
shares of Series C Stock; (iii) the Warrant and (iv) the Company Preferred
Stock, the Company does not have any outstanding subscription, warrants,
convertible securities, obligations, options, or rights entitling others to
acquire shares of capital stock of the Company, or any outstanding securities,
options,
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warrants, rights or other instruments convertible into shares of capital stock
of the Company. Except as disclosed in Schedule 3.04(a), none of the options
granted pursuant to the Omnibus Plan will accelerate their vesting date as a
result of the Merger.
(b) Schedule 3.04(b) accurately and completely sets forth and
identifies the respective record owners of all outstanding Company Common Stock
Options and Series C Stock Options outstanding on the date hereof and the
applicable exercise price and other material terms with respect thereto. True,
complete and correct copies of all agreements relating to said Common Stock
Options and Series C Stock Options have been delivered to Parent. Each of the
Company Common Stock Options which shall remain outstanding after the Effective
Time shall be converted to an option to acquire Parent Common Stock as
contemplated by Section 2.02 hereof. Each of the Series C Stock Options which
shall remain outstanding as of the Effective Time shall be converted into an
option to acquire Parent Common Stock as contemplated by Section 2.02 hereof.
The Company has given, or shall have given prior to the Effective Time, such
timely notices of the Merger as are required pursuant to the terms and
conditions of all agreements relating to or defining the rights of the holders
of the Company Common Stock Options, the Series C Stock Options and the Warrant.
(c) The applicable conversion factors in effect for the conversion
of Series C Stock and the Series E Stock, respectively, into Company Common
Stock are, and will be at the Effective Time, 3 and 2, respectively.
SECTION 3.05 Subsidiaries. There is no corporation, partnership,
joint venture, or other entity in which the Company has, directly or indirectly,
any investment or to which the Company has made an advance of cash other than as
listed on Schedule 3.05 attached hereto. The Company is not under any obligation
to acquire any securities from any person or entity.
SECTION 3.06 Articles of Organization and By-Laws. True and complete
copies of the Company's Restated Articles of Organization, as amended (the
"Articles of Organization") and By-Laws (together with any amendments thereto)
are attached hereto as Schedule 3.06.
SECTION 3.07 Execution and Performance of Agreement; Validity and
Binding Nature. The execution and delivery of this Agreement, and the
performance by the Company of the terms of this Agreement and the transactions
contemplated hereby, will not result in a breach of any of the terms of, or
constitute a violation of or default under, the Restated Articles of
Organization or By-Laws of the Company or any statute, contract, indenture or
other instrument by which the Company or any of its properties are bound, and,
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except as provided in Section 3.27 hereof, no consent, approval, authorization
or order of any court or governmental authority is required in connection with
the execution and delivery of this Agreement by the Company and the performance
by the Company of the terms of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company. This
Agreement is, and the documents and agreements executed and delivered by the
Company pursuant to the terms hereof, when duly executed and delivered by all
parties whose execution and delivery thereof is required, will be, legal, valid,
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except to the extent that enforceability
may be limited by bankruptcy, receivership, moratorium, conservatorship,
reorganization or other laws of general application affecting the rights of
creditors generally or by general principles of equity.
SECTION 3.08 Financial Statements. The Company has delivered to
Parent the balance sheets of the Company as at June 30, 1997, 1996 and 1995,
respectively, and the related statements of operations, statements of changes in
stockholders' equity (deficit) and statements of cash flows and notes thereto
for the fiscal years then ended, in each case audited by Arthur Andersen LLP
(such audited balance sheet of the Company as at June 30, 1997 being hereinafter
referred to as the "Balance Sheet" and such balance sheets and related financial
statements and notes thereto for such three fiscal years being hereinafter
referred to collectively as the "Financial Statements"). Each of the Financial
Statements (a) has been prepared from the books and records of the Company, (b)
has been prepared in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis with prior periods covered thereby, and
(c) presents fairly in all material respects the financial position of the
Company as at its respective date and the results of the Company's operations,
changes in stockholders' equity (deficit) and cash flows for such period in all
respects. All prepaid expenses included therein as assets represent payments
theretofore made by the Company, the benefit and advantage of which may be
obtained and enjoyed by the business of the Company. The accounting books and
records of the Company have been kept, and will be kept to the Effective Time,
in reasonable detail and in accordance with the same accounting principles
heretofore used consistently applied and fairly and accurately reflect, and will
fairly and accurately reflect to the Effective Time, all of the transactions of
the Company, and are and will be complete and correct in all material respects.
SECTION 3.09 Intellectual Rights. Schedule 3.09 attached hereto
contains a complete and correct list and accurate description of all trademarks,
trademark and service mark applications, trade names, service marks, logos and
other
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identifying symbols, names or marks, copyrights, patents, patent applications
and, to the extent material to the Company's business, inventions, processes,
designs, formulas, trade secrets, and other intellectual and/or proprietary
rights or interests (collectively, "Intellectual Rights") (i) owned by the
Company, free and clear of all licenses, liens, charges or encumbrances, except
as specified in such Schedule, or (ii) licensed to the Company under valid and
enforceable agreements, exclusive of the Software (hereinafter defined)
identified on Schedule 3.10 hereof. The Company owns, or possesses adequate
rights to use, all Intellectual Rights necessary for the conduct of its
business. To the knowledge of the Company and its directors and officers, there
are no infringements by any third parties upon any Intellectual Rights. There is
no conflict with or infringement by the Company of the rights of others with
respect to same.
SECTION 3.10 Software.
(a) Schedule 3.10 hereto contains a true, complete and accurate list
and summary description of (i) all computer software and related programs owned
by the Company, including all software, source codes and object codes and (ii)
all computer software and related programs licensed by the Company for use in
connection with the business of the Company other than off-the-shelf software
licensed to the Company which is not material to the operation of the Company's
business or the services provided by the Company (collectively, the "Software").
The Company either owns or has a valid license to use and sublicense all of the
Software, and upon consummation of the Merger the Surviving Corporation shall
have the right to use and authorize others to use all of the Software, free from
any claim, security interest or other lien or encumbrance whatsoever, except as
set forth on Schedule 3.10(a). The Company is the exclusive licensee of the
Software indicated on Schedule 3.10(a) as being exclusively licensed by the
Company. The Software constitutes the only computer software or programs
necessary for the operation of the Company's business as presently conducted
other than off-the-shelf software licensed to the Company which is not material
to the operation of the Company's business or the services provided by the
Company.
(b) The Company has provided to Parent true and complete copies of
all licenses, leases, contracts and other written instruments giving the Company
rights in any Software and/or source codes thereof which are not owned by the
Company (collectively, the "Software Contracts"), all of which Software
Contracts are legally valid and binding and enforceable in accordance with their
respective terms. Neither the Company, nor, to the knowledge of the Company or
any of the Company's directors or officers, any other party thereto, is in
violation
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of any term or provision of any Software Contract. The use of the owned Software
by the Company does not, and upon consummation of the Merger the use of such
owned Software by the Surviving Corporation will not, infringe upon any rights
of any third parties. To the knowledge of the Company and the directors and
officers of the Company, the use of any source codes related to Software which
is not owned by the Company, and the exercise of the rights of the Company in
and to such source codes, as provided in any of the Software Contracts, does
not, and upon consummation of the Merger the use of any such source codes and
exercise of such rights by the Surviving Corporation pursuant to the terms of
the Software Contracts will not infringe upon the rights of any third parties.
(c) All source codes relating to the Software which is owned by the
Company (the "Owned Source Codes") are in the possession of the Company and
constitute trade secret information of the Company, and, except as set forth on
Schedule 3.10(c), no third party has any copy of any of the Owned Source Codes
or any right, title, interest or license, conditional or otherwise, with respect
to any of the Owned Source Codes under any circumstances whatsoever. Upon
consummation of the Merger, the Surviving Corporation shall own and have
possession of, and shall have the right to use, the Owned Source Codes, free
from any claim, security interest or other lien or encumbrance whatsoever.
(d) The Company owns in respect of all Software owned by the Company
and has possession of, and the Surviving Corporation will own in respect of all
Software owned by the Company and have possession of immediately after the
Effective Time, complete and adequate documentation in all material respects,
including without limitation, documentation of source codes, object codes and
engineering change notices, reflecting the current versions of all Software
listed on Schedule 3.10(a) so as to enable the Surviving Corporation to conduct
fully after the Effective Time the business conducted by the Company prior to
Effective Time in the same manner as theretofore conducted.
SECTION 3.11 Contract Parties, Suppliers and Consultants.
(a) Schedule 3.11(a) contains the names and business addresses of
the customers of the Company with which the Company presently has contracts or
arrangements to provide services (collectively, the "Contract Parties").
Schedule 3.20 identifies the respective contracts or arrangements the Company
has entered into with respect to the Contract Parties which will remain to be
performed, in whole or in part, after the Effective Time. True and complete
copies of those contracts or arrangements which are in writing have been
heretofore made available to Parent, and
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summary descriptions of those contracts or arrangements which are oral have been
heretofore made available to Parent. Except as described in Schedule 3.11(a), no
Contract Party listed in Schedule 3.11(a) has expressed to the Company or to any
director or officer of the Company its intention to cancel or otherwise
terminate its relationship with the Company, and, to the best knowledge of the
Company and each director and officer of the Company, all of such contracts and
arrangements will continue in full force and effect after the Effective Time and
a continuing relationship with each such Contract Party is not in jeopardy.
(b) Schedule 3.11(b) contains the names and business addresses
of all of the suppliers and consultants from whom the Company purchased, during
the twelve (12) month period ending June 30, 1997, goods and/or services, the
aggregate cost of which exceeded Twenty Five Thousand Dollars ($25,000) or which
suppliers or consultants are in any event material to the continued operation of
the Company's business in the ordinary course (collectively, the "Major
Suppliers"). Except as disclosed on Schedule 3.11(b), the Company has no other
suppliers or consultants which are material to the business of the Company as
presently conducted. Except as described in Schedule 3.11(b), no Major Supplier
listed in Schedule 3.11(b) has expressed to the Company or to any director or
officer of the Company its intention to cancel or otherwise terminate its
relationship with the Company, and, to the knowledge of the Company and each
director and officer of the Company, a continuing relationship with each such
supplier is not in jeopardy.
SECTION 3.12 Employment, Deferred Compensation or Similar
Agreements; Collective Bargaining Agreements; Employee Benefit Plans.
(a) Except as disclosed in Schedule 3.12(a), the Company is not a
party to any agreement or employment contract or deferred compensation or
similar arrangement with any of its employees or former employees. There are no
collective bargaining agreements covering any employees of the Company. The
business of the Company is not affected by any present strike or other labor
disturbance involving the Company's employees nor, to the best knowledge of the
Company or any Shareholder, is any union attempting to represent, as collective
bargaining agent, any person employed by the Company.
(b) Except as disclosed in Schedule 3.12(b), the Company does not
sponsor or maintain and is not otherwise a party to or liable under any plan,
program, fund or arrangement (whether or not qualified for Federal income tax
purposes), whether benefiting a single individual or multiple individuals, and
whether funded or not, that is an "employee pension benefit plan," or an
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"employee welfare benefit plan," as such terms are defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any incentive
or other benefit arrangement for its employees, their dependents and
beneficiaries.
(c) Except as disclosed in Schedule 3.12(c) hereto, the Company has
not and does not contribute to any multi-employer plan (as defined in Section
3(37) of ERISA), has not incurred any liability under Section 4201 of ERISA for
any complete or partial withdrawal from any multi-employer plan and has not
assumed any such liability by any prior owner of any of its assets or
properties.
(d) Each employee pension benefit plan maintained by the Company and
listed on Schedule 3.12(b) complies in all material respects with the
requirements of ERISA. No "reportable event" within the meaning of Section 403
of ERISA has occurred with respect to any such plan and Seller has not engaged
in any "prohibited transaction" within the meaning of Section 406(a) or (b) of
ERISA or of Section 4975(c) of the Code, with respect to any such plan; and no
such plan has been terminated in accordance with the procedures set forth in
Section 4041 or 4042 of ERISA.
(e) No liability has been incurred by the Company for any tax
imposed by Section 4975 of the Code with respect to any plan described in
Schedule 3.12(b). The Company has, and shall have, for all periods ending on or
prior to the Effective Time, administered each employee pension benefit plan and
each employee welfare benefit plan described in Schedule 3.12(b) in all material
respects in compliance with the reporting, disclosure and all other requirements
applicable thereto under ERISA, the Code or any other applicable law.
SECTION 3.13 Inventory. The value shown for inventory on the Balance
Sheet fairly presents the Company's inventory as of the date of the Balance
Sheet in accordance with GAAP at the lower of cost or market value thereof based
on the first in, first out method of inventory valuation and all inventory
acquired since that date has been reflected on the Company's books pursuant to
such method, subject to adjustments in accordance with the Company's practices
with respect thereto (but in any event pursuant to GAAP) consistently applied.
The inventory of the Company is in good and merchantable condition exclusive of
reserves shown on the Balance Sheet for obsolete items as determined in
accordance with GAAP. No write-downs of the Company's inventory have occurred
since June 30, 1997. The Company does not currently use, nor has it within the
past five (5) years used, the last in, first out method of inventory valuation.
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SECTION 3.14 Real Estate.
(a) The Company owns no real estate and has no ownership interest,
directly or indirectly, in any real estate.
(b) Schedule 3.14(b) contains a true and correct list and summary
description of all leases, subleases or other agreements under which the Company
is lessee or subtenant or lessor or sublessor of real estate.
(c) All such leased real estate (and improvements thereon) is in
good operating condition and repair and, to the knowledge of the Company and
each director and officer of the Company, conforms in all material respects with
all applicable building, zoning, planning, environmental and other regulations,
ordinances or laws, and the Company has the right to use all real estate
necessary to the conduct of its business as currently conducted.
SECTION 3.15 Title to and Condition of Personal Property. The
Company has merchantable title to all personal property reflected in the Balance
Sheet or acquired subsequent to the date of the Balance Sheet (other than
inventory disposed of since that date in the ordinary course of business), free
and clear of all liens or encumbrances except for the security interest of
Silicon Valley Bank described in Schedule 3.15 and encumbrances which,
individually and in the aggregate, are immaterial to the conduct of the
Company's business. All of the personal property owned by the Company and
material to the conduct of its business is in good operating condition and
repair. The Company owns or has the right to use all such personal property
necessary to the conduct of its business as currently conducted.
SECTION 3.16 Accounts Receivable. The accounts receivable of the
Company reflected in the Balance Sheet or acquired by the Company subsequent to
the date of the Balance Sheet (a) are true, bona fide accounts receivable of the
Company, created in the ordinary course of business; (b) have been collected or,
except as disclosed in Schedule 3.16, are fully collectible in amounts not less
than the aggregate amount thereof, net of reserves established therefor on the
books of the Company and reflected in the Balance Sheet; (c) except as disclosed
in Schedule 3.16, are not subject to any offsets, credits or counterclaims; and
(d) have not at any time been placed for collection with any attorney,
collection agency or similar individual or firm.
SECTION 3.17 Consignment and Return Items. Except as reflected on
the Balance Sheet or incurred since the date of the Balance Sheet in the
ordinary course of business and consistent with past practices and disclosed in
Schedule 3.17, the Company has
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no obligation (other than warranty obligations) to accept a return for credit of
any products shipped to customers or distributors or others prior to the date
hereof or to be shipped prior to the Effective Time.
SECTION 3.18 Taxes. The Company has properly completed and filed all
federal, state, county, municipal and other tax returns, reports and
declarations which are required to be filed by it and has paid all taxes,
penalties and interest which have become (or may hereafter become) due pursuant
thereto or which became (or may hereafter become) due pursuant to assessments.
The Company has not received any notice of deficiency or assessment of
additional taxes, and no tax audits are in process. The last year for which the
federal or state income taxes or other taxes of the Company have been examined
is set forth accurately and completely on Schedule 3.18 hereto. The Company has
not granted any waiver of any statute of limitation with respect to, or any
extension of a period for the assessment of, any federal, state, county,
municipal or other tax. The accruals and reserves for taxes reflected in the
Balance Sheet are adequate to cover all taxes (including interest and penalties,
if any, thereon) due and payable or accrued in accordance with generally
accepted accounting principles as a result of the operations of the Company for
all periods prior to the date of the Balance Sheet. The Company has not filed an
election under Section 1362(a) of the Code to be taxed as an S Corporation.
SECTION 3.19 Litigation. Except as disclosed in Schedule 3.19, there
is no litigation, investigation or proceeding pending or, to the knowledge of
the Company and each director and officer of the Company, threatened, involving
the Company or any of its properties. There are no outstanding orders, writs,
injunctions or decrees of any court, governmental agency or arbitration tribunal
materially affecting or materially limiting the conduct of the business of the
Company.
SECTION 3.20 Other Material Contracts and Commitments. Schedule 3.20
lists all contracts or commitments to which the Company is a party, which
contracts and commitments are material to the business of the Company and are
not disclosed in another Schedule hereto. Except as disclosed in Schedule 3.20
or in another Schedule hereto, the Company is not a party to and none of its
properties are bound by any of the following types of contracts or commitments,
written or oral: (i) mortgages, indentures, security agreements and other
agreements and instruments relating to the borrowing of money or extension of
credit or imposition of an encumbrance on any of the assets of the Company, (ii)
agreements with any labor union or other collective bargaining unit, (iii) bonus
or compensation agreements (including nonqualified deferred compensation) which
have not been incurred in the ordinary course
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of business of the Company consistent with past practices, (iv) profit-sharing,
stock option, pension, or retirement agreements, shareholder or similar
agreements or arrangements, trusts, or funds for the benefit of employees, (v)
sales agency, manufacturer's representative, distributorship or supply
agreements, (vi) other contracts and commitments which in any case involve
payments or receipts of more than $25,000, (vii) contracts for the purchase,
sale or lease of real or personal property, either as lessor or lessee, which
contracts have not been fully performed as of the date hereof, (viii) any
contract with any officer, director or with any employee of the Company (other
than agreements relating to current wage or salary payments terminable by the
Company on notice of thirty (30) days or less), (ix) any contract or promissory
note or other instrument with any Affiliate (as hereinafter defined) of the
Company, or (x) any guarantee or obligation to provide funds or assume the debt
of any person or entity. The Company has delivered to Parent complete and
correct copies of all written contracts and commitments, together with all
amendments thereto, and accurate descriptions of all oral agreements, described
in Schedule 3.20 or any other Schedule hereto. The Company is not in default
with respect to any such contract, and no other party to any such contract is in
default with respect thereto. Except as disclosed in Schedule 3.20, each such
contract will continue in full force and effect after the Effective Time without
any right on the part of any party thereto to terminate the same as a result of
the occurrence of the Merger. For purposes of this Agreement, "Affiliate" of the
Company means (i) any corporation, partnership, trust or other entity in control
of, controlled by or under common control with the Company; and (ii) any
officer, director, trustee, general partner of any corporation, partnership,
trust or other entity in control of, controlled by or under common control with
the Company. Schedule 3.20 discloses all Affiliates of the Company other than
persons unrelated to the Company which may be deemed to be under common control
with the Company solely by reason of equity interests in such persons being held
by shareholders of the Company which are business entities currently in
existence.
SECTION 3.21 Labor Relations. Except as disclosed in Schedule 3.19,
the Company, in the conduct of its affairs, has substantially complied with all
applicable laws (including, without limitation, labor and tax laws), and
regulations relating to the hiring and employment of employees and independent
contractors, including, without limitation, those related to discrimination,
wages, hours, collective bargaining, employee pension and welfare benefit plans,
and the payment of (and withholding for) income, Social Security and other
taxes, and the Company is not liable for any penalties or damages for failure to
comply with any of the foregoing. There are no unfair labor practice claims or
charges pending or threatened involving the Company.
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SECTION 3.22 Insurance. Schedule 3.22 hereto contains a list and
description (including the name of the insurer, coverage and expiration date) of
all insurance policies maintained by the Company. Schedule 3.22 further lists
all claims presently pending or threatened which are covered by such policies.
The Company has not received notice of cancellation or non-renewal of any of
such policies.
SECTION 3.23 Conduct of Business and Absence of Changes. Except as
disclosed in Schedule 3.23, since June 30, 1997, the Company has conducted its
business in the regular and ordinary course and has not (i) undergone any
material adverse change in its condition (financial or otherwise), assets,
liabilities, business, or operations, (ii) declared, set aside, made or paid any
cash or stock dividend or distribution or purchased, issued or sold any shares
of its capital stock, (iii) incurred any indebtedness for borrowed money or
issued or sold any debt securities, except for borrowings in the ordinary course
of business under the Company's existing revolving credit agreement with Silicon
Valley Bank, (iv) instituted any increase in the compensation payable or to
become payable to any officers or employees or any changes in personnel policies
or employees benefits, except for regularly scheduled increases, effective July
1, 1997, in employee salaries in the ordinary course of business, the aggregate
of which will in no event represent (a) an increase in excess of eight (8%)
percent of the compensation expense shown on the statement of operations for the
fiscal year ending June 30, 1997 included in the Financial Statements, as
adjusted for employee terminations between June 30, 1997 and the date such
increases are actually granted and/or (b) increases in compensation in excess of
those provided for in the Company's business plan for the fiscal year ending
June 30, 1998, or (v) made any payment to any Shareholder except for payments
described in a Schedule hereto and regular salary and ordinary and necessary
business expenses.
SECTION 3.24 Compliance with Laws; Governmental Authorizations. The
Company is in compliance, in all material respects, with all statutes, laws,
ordinances, rules, regulations, judgments, orders, decrees, governmental permits
and other governmental authorizations or approvals applicable to it or any of
its properties, and all governmental authorizations or approvals necessary in
any material respect for the conduct of the business of the Company have been
duly and lawfully obtained and are in full force and effect, and there are no
proceedings pending or, to the knowledge of the Company and each of its
directors and officers, threatened which may result in the revocation,
cancellation or suspension, or any materially adverse modification, of any
thereof. The Company has not received notice of any alleged violation of any
applicable statute, law, ordinance, rule, regulation, judgment, order, decree,
governmental permit or other governmental
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authorization or approval necessary in any material respect for the conduct of
the business of the Company.
SECTION 3.25 Officers, Directors and Depositories. Schedule 3.25
hereto contains the names of all the officers and directors of the Company and
the names of all depositories of its funds and the names of the officers and
other persons empowered to sign instruments withdrawing funds from said
depositories.
SECTION 3.26 Environmental Matters.
(a) The business and operations of the Company comply with all
Federal, state and local laws, rules, regulations and directives pertaining to
the environment. No governmental agency has asserted any claim or threatened to
assert any claim against the Company in respect of its business, any assets
owned or leased by it, real properties leased by it, or the condition, use or
operation thereof by the Company, arising out of any Federal, state or local
law, rule, regulation or directive pertaining to the environment.
(b) To the knowledge of the Company and each of the directors and
officers of the Company, there are nowhere on any real property leased, used or
otherwise under the control of the Company any deposits, dumps, or tanks of
toxic or other poisonous, dangerous or noxious waste, fluids, solvents,
chemicals or effluents, all of which chemicals, fuels and fluids are properly
and safely stored, identified, labelled and maintained in accordance with
applicable industrial standards and all governmental or other laws or
regulations relating thereto. The Company does not discharge and has not
discharged from any real property leased, used or otherwise under its control,
whether by effluent, emission or other means, any noxious, toxic, hazardous or
deleterious matter or gases. All discharges of waste material and other
substances from the Company's operating facilities are in compliance with
applicable law and covered by valid permits and licenses, where required.
SECTION 3.27 Third Party and Governmental Consents. Except as
disclosed in Schedule 3.27 hereto, and except for the filing of a Certificate of
Merger with the Secretary of State of Delaware in accordance with the Delaware
GCL and the filing of Articles of Merger with the Secretary of the Commonwealth
of Massachusetts in accordance with the Massachusetts BCL, no consent,
authorization, approval, order, license, certificate or permit of or from, or
registration, declaration or filing with, any governmental authority or any
court or other tribunal or any other person, firm or entity, nor under any
contract, indenture, mortgage, lease, license or other agreement or instrument
to which the Company is a party or by which the Company or any of its assets
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or properties is subject or bound, is required by or with respect to the Company
in connection with the execution, delivery or performance of this Agreement or
of any other agreement, document or instrument to be executed and delivered by
the Company pursuant hereto or in connection herewith or the consummation of the
transactions contemplated hereby.
SECTION 3.28 Licenses and Permits. The Company has obtained all
governmental consents, approvals, waivers and permits and all consents,
approvals or waivers of third parties required in connection with the ownership
of the assets of the Company and the operation of the Company's business as
presently and heretofore conducted (herein collectively referred to as the
"Approvals"). The Approvals are listed on Schedule 3.28 attached hereto. No
other Approvals are required to conduct or operate the Company's business as
presently conducted.
SECTION 3.29 Absence of Undisclosed Liabilities. Except as and to
the extent disclosed or accrued on the Financial Statements submitted to Parent
pursuant to the terms hereof, there exist no liabilities or obligations of any
nature whatsoever (whether absolute, contingent or otherwise, matured or
unmatured, or known or unknown) in respect of the Company's business or assets
of the type customarily reflected in financial statements prepared in accordance
with GAAP, except for liabilities or obligations incurred in the ordinary course
of business after the date of the Balance Sheet.
SECTION 3.30 Marketable Securities and Other Investments. Schedule
3.30 lists all of the marketable securities and other investments included in
the Balance Sheet (the "Company Investments"), all of which are owned by the
Company free and clear of all liens, encumbrances or claims, except as disclosed
in Schedule 3.30. The value ascribed to each of the Company Investments is in
accordance with GAAP, and the Financial Statements are in conformity with the
requirements of Financial Accounting Standards Board Statement No. 115. All of
the Company Investments are readily marketable except as described in Schedule
3.30. Since the date of the Balance Sheet, there has been no material decline in
the aggregate market value of the Company Investments.
SECTION 3.31 Loans to or from Officers, Directors, Shareholders or
Employees. Except as set forth in Schedule 3.31, the Company does not have
outstanding any loans, advances or other indebtedness incurred by any director,
officer, Shareholder or employee of the Company or any member of their
respective families, and there are no loans or advances made to the Company by
or indebtedness incurred by the Company to any, director, officer, Shareholder
or employee of the Company or any member of
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their respective families ("Related Party Loans"). True and complete copies of
all promissory notes or other agreements or documents evidencing the Related
Party Loans have been heretofore delivered to Parent.
SECTION 3.32 Service Warranties; Contract Losses. Adequate provision
in accordance with GAAP has been made in the Financial Statements for claims
under warranties provided for in all contracts with Contract Parties. The
Financial Statements adequately reflect the known and anticipated losses, if
any, for any outstanding and uncompleted contracts with Contract Parties, and
there are no such known or anticipated losses that are not so reflected in the
Financial Statements.
SECTION 3.33 Backlog. Schedule 3.33 discloses the backlog of
services to be provided by the Company pursuant to each contract with a Contract
Party, the reasonably anticipated value of such services and the date by which
performance by the Company of each such contract is anticipated to be completed.
SECTION 3.34 Representations and Warranties True; No Misleading
Statements. All of the representations and warranties set forth in this Article
III shall be true and correct as of the Effective Time as if made at that time.
The representations and warranties made herein and in any Schedule, list or
other document specifically referred to herein and delivered by the Company or
the Shareholders pursuant hereto, and all information provided by the Company
for inclusion in the Merger Information (hereinafter defined), taken as a whole,
do not contain any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements herein or therein, in
light of the circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder hereby represents and warrants to Parent and
Acquisition, as to itself, severally and not jointly, as follows, knowing and
intending that each of Parent and Acquisition is relying hereon in entering into
the transactions contemplated hereby:
SECTION 4.01 Authority and Capacity Relative to Agreement. Such
Shareholder has all requisite power, authority and legal capacity to enter into
and perform each of its obligations hereunder.
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SECTION 4.02 Execution and Performance of Agreement; Validity and
Binding Nature. The execution and delivery of this Agreement, and the
performance by such Shareholder of the terms of this Agreement and the
transactions contemplated hereby, will not result in a material breach of any of
the terms of, or constitute a violation or default under, any statute or
contract, indenture or other instrument by which such Shareholder or any of its
respective properties are bound, and no consent, approval, authorization or
order of any court or governmental authority is required in connection with the
execution and delivery of this Agreement by such Shareholder and the performance
by such Shareholder of the terms of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
Shareholder and, together with the other documents and agreements to be executed
by all parties whose execution and delivery thereof is required, constitutes the
legal, valid and binding obligations of such Shareholder, enforceable against
such Shareholder in accordance with their respective terms, except to the extent
that enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by general principles of equity. Such
Shareholder has the legal right and authority to vote the shares of Company
Common Stock and/or Preferred Stock held of record by it in favor of the
execution, delivery and performance of this Agreement and the consummation of
the Merger in accordance with the provisions hereof.
SECTION 4.03 Stock of the Company. The number of shares of Company
Common Stock, shares of Preferred Stock, Company Common Stock Options and Series
C Stock Options, as applicable, beneficially owned by such Shareholder is as
identified on Schedule 3.04(a) and Schedule 3.04(b), respectively, opposite the
respective Shareholder's name. The shares of Company Common Stock, shares of
Preferred Stock, Company Common Stock Options and Series C Stock Options, as
applicable, beneficially owned by such Shareholder are owned free and clear of
all liens, claims, options, encumbrances or restrictions whatsoever. Such
Shareholder has the full legal right and power and all authorizations and
approvals required by law or otherwise to sell, transfer and deliver such shares
as contemplated hereunder and to make the representations, warranties and
agreements set forth in this Agreement. Except with respect to the shares of the
Company Common Stock, shares of Preferred Stock, Company Common Stock Options
and Series C Stock Options, as applicable, identified on Schedule 3.04(a) and
Schedule 3.04(b), respectively, opposite the respective Shareholder's name, such
Shareholder has no outstanding claim against the Company or any right whatsoever
with respect to any shares of the capital stock of the Company, including
without
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limitation any other option, warrant or other right to acquire shares of the
capital stock of the Company or any securities, options or other instruments
convertible or exchangeable into shares of capital stock of the Company. Except
as set forth in Schedule 3.02(a), no Shareholder is a party to any shareholders
agreement, buy-sell agreement or similar agreement or arrangement with respect
to the Company Common Stock or other equity interest in the Company.
SECTION 4.04 Additional Representations and Covenants of
Shareholders.
(a) Each Shareholder understands that the shares of Parent Common
Stock which are the subject of this Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended (the "Securities Act")
by virtue of Section 4(2) based, in part, upon the representations, warranties
and agreements of such Shareholder contained in this Agreement.
(b) Neither the Securities and Exchange Commission (the "SEC") nor
any state securities commission has approved the Parent Common Stock or passed
upon or endorsed the merits of an investment therein or confirmed the accuracy
or adequacy of any information provided by Parent to the Shareholders or the
accuracy or adequacy of any of the representations, warranties and agreements of
Parent contained herein.
(c) Except as contemplated pursuant to Section 7.12 hereof, such
Shareholder is acquiring Parent Common Stock solely for its own account for
investment and not with a view to resale or distribution thereof, in whole or in
part. Such Shareholder has no agreement or arrangement, formal or informal,
written or oral, with any person to sell or transfer or otherwise dispose of all
or any part of the Parent Common Stock, and has no present plans to enter into
any such agreement or arrangement.
(d) Such Shareholder did not become aware of the offer and sale of
Parent Common Stock through or as a result of any form of general solicitation
or general advertising including, without limitation, any article, notice,
advertisement or other communication published in any newspaper, magazine or
other media in connection with the offer and sale of Parent Common Stock
contemplated hereby and is not purchasing Parent Common Stock through or as a
result of any seminar or meeting to which such Shareholder was invited.
(e) Such Shareholder (other than the Berlack Trust and the Cowie
Trust) meets the requirements of at least one of the categories of an
"accredited investor", as defined in Rule 501(a) promulgated under the
Securities Act and as set forth in the form
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of Accredited Investor Certification attached hereto as Exhibit B. In connection
with the closing of the transactions contemplated by this Agreement, such
Shareholder (other than the Berlack Trust and the Cowie Trust) shall certify to
Parent, in the form of the certification set forth in Exhibit B, as to which
category (or categories) of accredited investor is applicable to such
Shareholder.
(f) Such Shareholder, or such Shareholder together with its
purchaser representative, if any, has such knowledge and experience in
financial, tax, and business matters in general, and investments in securities
in particular, so as to enable such Shareholder to evaluate the merits and risks
of an investment in Parent Common Stock and to make an informed investment
decision with respect thereto.
(g) Such Shareholder recognizes that it must bear the substantial
economic risks of the investment in Parent Common Stock indefinitely, because
none of the Parent Common Stock may be sold, transferred, hypothecated or
otherwise disposed of unless such Parent Common Stock is registered under the
Securities Act and applicable state securities laws or an exemption from such
registration is available. Legends shall be placed on the certificates
representing Parent Common Stock issuable stating that the shares represented
thereby have not been registered under the Securities Act or applicable state
securities laws, and appropriate notations thereof will be made in Parent's
stock books.
(h) Such Shareholder has adequate means of providing for its current
financial needs and foreseeable contingencies and has no need for liquidity of
its investment in Parent Common Stock for an indefinite period of time. Such
Shareholder's overall commitment to investments which are not readily marketable
is not excessive in view of its net worth and financial circumstances and the
purchase of the Parent Common Stock will not cause such commitment to become
excessive.
(i) Such Shareholder is not relying on Parent or any of its
employees or agents with respect to the legal, tax, economic and related
considerations of an investment in Parent Common Stock, other than as expressly
contained in the representations and warranties of Parent contained in Article V
hereof. There has been delivered to each Shareholder copies of this Agreement,
Parent's Annual Report on Form 10-K for the Fiscal Year Ended June 30, 1996,
Parent's 1996 Annual Report to Stockholders, Parent Quarterly Reports on Form
10-Q for the Quarters ended September 30, 1996, December 31, 1996 and March 31,
1997, Parent's Proxy Statement for its Annual Meeting held on November 14, 1996,
Parent's press release dated July 17, 1997, the Financial Statements and a
summary description of the Company's
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business (collectively, the "Merger Information"). Each Shareholder has read and
fully understands the Merger Information.
(j) Such Shareholder (i) has had the opportunity to obtain all
information requested by it for the purpose of verifying the Merger Information
or for any other purpose related hereto and (ii) has had the opportunity to meet
with representatives of Parent and to have them answer any questions and provide
such additional information regarding the terms and conditions of the
transactions contemplated hereby, the information with respect to Parent
included in the Merger Information and the business and prospects of Parent
deemed relevant by such Shareholder, all of which questions have been answered
and all of which requested information has been provided to the full
satisfaction of such Shareholder. Such Shareholder is aware that an investment
in Parent Common Stock is speculative and involves significant risks, including,
among other things, the risk of the loss of such Shareholder's entire investment
in Parent Common Stock.
(k) In evaluating the suitability of an investment in Parent, and in
deciding to enter into this Agreement, such Shareholder has not relied upon any
representation or other information (whether oral or written) other than as set
forth in the representations and warranties of Parent contained in Article V of
this Agreement and in the Merger Information. No oral or written representations
have been made, or oral or written information furnished, to such Shareholder or
such Shareholder together with its purchaser representative, if any, in
connection with the offer and sale of Parent Common Stock that are in any way
inconsistent with the representations and warranties of Parent contained herein
or any of the information contained in the Merger Information.
(l) Except as described in Schedule 4.04(l) hereto, such Shareholder
has no beneficial interest, directly or indirectly, in any person, firm,
corporation, partnership or other entity which is or within the past two years
has been a supplier of any goods or services to the Company, including, without
limitation, any Major Supplier, or from which the Company has received fees,
including, without limitation, any Contract Party, other than as the beneficial
owner of 1% or less of the voting securities of a publicly held corporation. The
nature and amount of any such beneficial interest is disclosed in Schedule
4.04(l).
(m) Such Shareholder is familiar with the business, historical
financial performance and prospects of the Company, including the risks
associated therewith. None of the information provided by such Shareholder for
insertion in the Merger
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Information contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances in which they were made,
not misleading.
(n) Such Shareholder has no plan or intention to sell, exchange, or
otherwise dispose of a number of shares of Parent Common Stock received in the
Merger that would reduce such Shareholder's ownership of Parent Common Stock to
a number of shares having a value, as of the date of the Merger, of less than
fifty (50%) percent of the value of all of the formerly outstanding Company
Common Stock and Company Preferred Stock held by such Shareholder as of the same
date. For purposes of this representation, shares of Company Common Stock and
Company Preferred Stock exchanged for cash or other property, surrendered by a
dissenter or exchanged for cash in lieu of fractional shares of Parent Common
Stock will be treated as outstanding Company Common Stock and/or Company
Preferred Stock on the date of the Merger. Moreover, shares of Parent Common
Stock held by a Shareholder and otherwise sold, redeemed, or disposed of prior
or subsequent to the Merger will be considered in making this representation.
(o) Such Shareholder, if an individual person, is not required to
obtain any spousal consent in connection with the transactions contemplated
hereby.
(p) Such Shareholder hereby represents that it will pay its own
expenses, if any, incurred in connection with the Merger and will not pay
expenses, if any, incurred by the Company, Parent, or Acquisition in connection
with the Merger.
SECTION 4.05 Representations and Warranties True; No Misleading
Statements. All of the representations and warranties set forth in this Article
IV shall be true and correct as of the Effective Time as if made at that time.
The representations and warranties made in this Article IV or other document
specifically referred to in this Article IV and delivered by such Shareholder
pursuant hereto do not contain any untrue statements of a material fact or omit
to state a material fact necessary in order to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company and each Shareholder
as follows:
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SECTION 5.01 Organization and Qualification. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own or
lease and operate its properties and assets and to carry on its business as it
is now being conducted. Parent is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect on Parent.
SECTION 5.02 Subsidiaries. Each subsidiary of Parent is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has all requisite corporate power and
authority to own or lease and operate its properties and to carry on its
business as it is now being conducted. Each such subsidiary is duly qualified as
a foreign corporation to do business, and is in good standing, in each
jurisdiction in which the character of its properties owned or leased or the
nature of its activities makes such qualification necessary, except where the
failure to be so qualified would not have a Material Adverse Effect on Parent.
All the outstanding shares of capital stock of Parent's subsidiaries are validly
issued, fully paid and nonassessable and are owned by Parent or by a
wholly-owned subsidiary of Parent.
SECTION 5.03 Capitalization. The authorized capital stock of Parent
consists of 80,000,000 shares of Parent Common Stock, and, as of June 30, 1997,
25,235,288 shares of Parent Common Stock were issued and outstanding, all of
which were validly issued and are fully paid and nonassessable. Except as
contemplated hereby and except for options and stock purchase rights outstanding
under Parent's employee stock purchase and stock option plans, and rights
outstanding under the Rights Agreement dated May 7, 1997 between Parent and Bank
of New York, as rights agent, no subscription, warrant, option, convertible
security, stock appreciation or other right (contingent or other) to purchase or
acquire any shares of any class of capital stock of Parent is authorized or
outstanding and there is not any agreement of Parent to issue any shares,
warrants, options or other such rights or to distribute to holders of any class
of its capital stock any evidences of indebtedness or assets. Parent does not
have any obligation (contingent or other) to purchase, redeem or otherwise
acquire any shares of its capital stock or any interest therein or to pay any
dividend or make any other distribution in respect thereof. At the Effective
Time, Parent will have sufficient authorized but unissued shares of Parent
Common Stock available for issuance in accordance with Article II hereof.
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SECTION 5.04 Authority Relative to Agreement. Parent has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Parent and the consummation by Parent of the transactions contemplated hereby
have been duly authorized by the Board of Directors of Parent, and no other
corporate proceedings on the part of Parent are necessary to authorize this
Agreement and the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and constitutes the legal, valid and binding
obligation of Parent, enforceable against Parent in accordance with its terms,
except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by general
principles of equity.
SECTION 5.05 Non-Contravention. The execution and delivery of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby will not (i) conflict with any provision of the Certificate
of Incorporation or By-Laws of Parent or any of its subsidiaries or (ii) result
(with the giving of notice or the lapse of time or both) in any violation of or
default or loss of a benefit under, or permit the acceleration of any obligation
under, any mortgage, indenture, lease, agreement or other instrument, permit,
concession, grant, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent or any of its subsidiaries or
any of their respective properties, other than any such violation, default, loss
or acceleration that would not materially adversely affect the ability of Parent
to consummate the transactions contemplated hereby or to conduct the business of
the Company and its subsidiaries after the Effective Time.
SECTION 5.06 Parent Public Information. Parent has provided to each
Shareholder, or will provide each Shareholder prior to the shareholders' meeting
referred to in Section 7.01(j) hereof, a copy of that portion of the Merger
Information consisting of a summary of the Merger, a summary of risk factors
associated with an investment in Parent Common Stock and the public reports of
Parent referred to in Section 4.04(i) (the "Parent Public Information"). The
Parent Public Information does not, and will not, as of the Effective Time,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
SECTION 5.07 Financial Statements. The consolidated financial
statements of Parent included in the Parent Public Information (a) have been
prepared from the books and records of
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Parent and its consolidated subsidiaries and (b) have been prepared in
accordance with GAAP consistently applied and consistent with prior periods,
subject, in the case of unaudited interim consolidated financial statements, to
year-end adjustments (which consist of normal recurring accruals) and the
absence of certain footnote disclosures. The consolidated financial statements
of Parent included in the Parent Public Information fairly present in all
material respects the financial position of Parent and its subsidiaries as of
their respective dates, and the related consolidated statements of operations,
shareholders' equity and cash flows included in the Parent Public Information
fairly present in all material respects the results of operations of Parent and
its subsidiaries for the respective periods then ended, subject, in the case of
unaudited interim financial statements, to year-end adjustments (which consist
of normal recurring accruals) and the absence of certain footnote disclosures.
SECTION 5.08 Absence of Certain Changes or Events. Except as
contemplated hereby and except for the issuance of Parent Common Stock pursuant
to employee benefit plans of Parent described in Section 5.03 above, since March
31, 1997, Parent has not (i) issued any Parent Common Stock or securities or
obligations convertible into or exchangeable for Parent Common Stock, (ii)
incurred any material liabilities (absolute or contingent), except in the
ordinary course of business or (iii) suffered any Material Adverse Effect on
Parent and its consolidated subsidiaries taken as a whole.
SECTION 5.09 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign governmental or regulatory authority is required to be
made or obtained by Parent in connection with the execution and delivery of this
Agreement by Parent or the consummation by Parent of the transactions
contemplated hereby, except for (i) filings pursuant to the Securities Act and
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations promulgated by the SEC thereunder, if applicable, (ii)
filings with state securities agencies under state securities or blue sky laws,
if applicable,(iii) the filing with Nasdaq of an application for the listing on
the Nasdaq National Market of shares of Parent Common Stock to be issued in
connection with the Merger, (iv) the filing of a Certificate of Merger with the
Secretary of State of Delaware in accordance with the Delaware GCL, (v) the
filing of Articles of Merger with the Secretary of State of the Commonwealth of
Massachusetts in accordance with the Massachusetts BCL, (vi) any licenses,
permits, franchises or other governmental authorizations pertaining to the
business of the Company and its subsidiaries that are required as a result of
the consummation of the transactions contemplated hereby and (vii) such
consents, approvals, orders or
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authorizations which if not obtained, or registrations, declarations or filings
which if not made, would not materially adversely affect the ability of Parent
to consummate the transactions contemplated hereby or to conduct the business of
the Company and its subsidiaries, if any, after the Effective Time.
SECTION 5.10 Compliance with Law. Neither Parent nor any of its
subsidiaries is in default under any order of any court, governmental authority
or arbitration board or tribunal. Neither Parent nor any such subsidiary has
received notice of any alleged violation of any applicable laws, ordinances and
governmental rules and regulations to which Parent or any such subsidiary is
subject, including, without limitation, federal securities and banking laws.
Neither Parent nor any subsidiary has failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business, except where the failure to
obtain such licenses, permits, franchises or other governmental authorizations
would not have a Material Adverse Effect on Parent.
SECTION 5.11 Litigation. There is no litigation, investigation or
proceeding pending or, to the knowledge of Parent, threatened, involving Parent,
any subsidiary of Parent, including, without limitation, Acquisition, or any of
their respective properties, other than litigation disclosed in the Parent
Public Information, which, if decided adversely to Parent, would result in a
Material Adverse Effect. There are no outstanding orders, writs, injunctions or
decrees of any court, governmental agency or arbitration tribunal materially
affecting or materially limiting the conduct of the business of Parent and its
subsidiaries taken as a whole.
SECTION 5.12 Tax-Free Reorganization.
(a) It is Parent's intention that the fair market value of the
Parent Common Stock and other consideration received by each Company shareholder
will be approximately equal to the fair market value of the Company Common Stock
and Company Preferred Stock surrendered in the Merger.
(b) The aggregate amount of cash distributed to shareholders of the
Company in exchange for their shares of Company Common Stock and Company
Preferred Stock (including amounts of cash distributed in lieu of fractional
shares of Parent Common Stock) will not exceed 20 percent of the sum of (i) the
fair market value of the Parent Common Stock issued in exchange for Company
Common Stock and Company Preferred Stock and (ii) the amount of such cash.
(c) To the knowledge of Parent, there is no plan or intention by the
shareholders of the Company who own five percent or more of the Company Common
Stock and Company Preferred Stock
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to sell, exchange, or otherwise dispose of a number of shares of Parent Common
Stock received in the Merger that would reduce the Company shareholders'
ownership of Parent Common Stock to a number of shares having a value, as of the
date of the Merger, of less than fifty (50%) percent of the value of all of the
formerly outstanding Company Common Stock and Company Preferred Stock as of the
same date. For purposes of making this representation and warranty, shares of
Company Common Stock and Company Preferred Stock exchanged for cash or other
property, surrendered by dissenters or exchanged for cash in lieu of fractional
shares of Parent Common Stock will be treated as outstanding Company Common
Stock and Company Preferred Stock on the date of the Merger. For purposes of
making this representation and warranty, shares of Parent Common Stock held by
Company shareholders and otherwise sold, redeemed, or disposed of prior or
subsequent to the Merger are considered.
(d) Prior to the Effective Time, Parent will be in control of
Acquisition within the meaning of Section 368(c) of the Code.
(e) Parent has no present plan or intention to cause the Surviving
Corporation to issue additional shares of its capital stock that would result in
Parent losing control of the Surviving Corporation within the meaning of Section
368(c) of the Code.
(f) Parent has no present plan or intention to reacquire any Parent
Common Stock issued in the Merger other than such shares as may be received by
Parent pursuant to the satisfaction of indemnification obligations under Section
7.08 hereof.
(g) Parent has no present plan or intention to liquidate the
Surviving Corporation; to merge the Surviving Corporation with or into another
corporation other than a corporation controlled by Parent; to sell or otherwise
dispose of the capital stock of the Surviving Corporation, except for transfers
of stock to corporations controlled by Parent; or to cause the Surviving
Corporation to sell or otherwise dispose of any of its assets or of any of the
assets acquired from Acquisition, except for dispositions made in the ordinary
course of business or transfers of assets to a corporation controlled by the
Surviving Corporation.
(h) Following the Merger, Parent will cause the Surviving
Corporation to continue the Company's historic business or to use a significant
portion of its historic business assets in a business.
(i) Parent will pay its own expenses, if any, incurred in connection
with the Merger. Parent will not pay expenses, if any, incurred by the Company's
shareholders, or Acquisition in connection with the Merger. If Parent pays or
assumes any
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expenses which the Company incurred in connection with the Merger, Parent will
pay or assume only those expenses that are solely and directly related to the
Merger, as contemplated by this Agreement.
(j) There is no intercorporate indebtedness existing between Parent
and the Company or between Acquisition and the Company that was issued, acquired
or is intended to be settled at a discount.
(k) In the Merger, shares of Company Common Stock and Company
Preferred Stock representing control of the Company as defined in Section 368(c)
of the Code, will be exchanged solely for voting stock of Parent.
(l) Immediately prior to the Effective Time, Parent will not own,
nor will it have owned during the past five years, any shares of the stock of
the Company.
(m) Parent is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
(n) The payment of cash in lieu of fractional shares of Parent
Common Stock is solely for the purpose of avoiding the expense and inconvenience
to Parent of issuing fractional shares and does not represent separately
bargained-for consideration. The total cash consideration that will be paid in
the Merger to the Company's shareholders instead of issuing fractional shares of
Parent Common Stock will not exceed one percent of the total consideration that
will be issued in the Merger to the Company's shareholders in exchange for their
shares of Company Common Stock and Company Preferred Stock. The fractional share
interests of each shareholder of the Company in the Merger will be aggregated,
and no Company shareholder will receive cash in exchange for fractional shares
in an amount equal to or greater than the value of one full share of Parent
Common Stock.
(o) None of the compensation paid to any shareholder-employee of the
Surviving Corporation after the Effective Time will be separate consideration
for, or allocable to, any of their shares of Company Common Stock or Company
Preferred Stock. None of the shares of Parent Common Stock received by any
shareholder-employee of the Company will be separate consideration for, or
allocable to, any employment agreement. The compensation paid to any
shareholder-employee of the Surviving Corporation after the Effective Time will
be solely for services actually rendered and will have been bargained for at
arm's length.
SECTION 5.13 Representations and Warranties True; No Misleading
Statements. All of the representations and warranties set forth in this Article
V shall be true and correct as of the Effective Time as if made at that time.
The representations and warranties made herein and in any Schedule, list or
other document
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specifically referred to herein and delivered by the Parent pursuant hereto, and
all information provided by the Parent for inclusion in the Merger Information,
taken as a whole, do not contain any untrue statements of a material fact or
omit to state a material fact necessary in order to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ACQUISITION
Acquisition represents and warrants to the Company and each
Shareholder as follows:
SECTION 6.01 Organization and Qualification. Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own or lease and operate its properties and assets and to carry on its business
as it is now being conducted. Acquisition is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect on the financial condition,
operating results or business of Acquisition.
SECTION 6.02 Capitalization. The authorized capital stock of
Acquisition consists of 3,000 shares of common stock, $.01 par value. As of the
date hereof, 100 shares of such common stock are validly issued and outstanding,
fully paid and nonassessable and are owned of record and beneficially by Parent,
and no shares of such common stock are held in the treasury of Acquisition.
Acquisition has no commitments to issue or sell any shares of such common stock
or any securities or obligations convertible into or exchangeable for, or giving
any person any right to subscribe for or acquire from Acquisition, any shares of
such common stock, and no securities or obligations evidencing any such rights
are outstanding.
SECTION 6.03 Authority Relative to Agreement. Acquisition has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Acquisition and by Parent as its sole stockholder, and no other corporate
proceedings on the part of Acquisition are necessary to authorize this Agreement
and the transactions contemplated hereby. This
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Agreement has been duly executed and delivered by Acquisition and constitutes
the legal, valid and binding obligation of Acquisition, enforceable against
Acquisition in accordance with its terms except to the extent that
enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by principals of equity.
SECTION 6.04 Non-Contravention. The execution and delivery of this
Agreement by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby will not (i) conflict with any provision of the Certificate
of Incorporation or By-Laws of Acquisition or (ii) result (with the giving of
notice or the lapse of time or both) in any violation of or default or loss of a
benefit under, or permit the acceleration of any obligation under, any mortgage,
indenture, lease, agreement, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquisition or its properties, other
than any such violation, default, loss or acceleration that would not adversely
affect the ability of Acquisition to consummate the transactions contemplated
hereby.
SECTION 6.05 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign governmental or regulatory authority is required to be
made or obtained by Acquisition in connection with the execution and delivery of
this Agreement by Acquisition or the consummation by Acquisition of the
transactions contemplated hereby, except for (i) the filing of a Certificate of
Merger with the Secretary of State of the State of Delaware in accordance with
the Delaware GCL and the filing of Articles of Merger with the Secretary of
State of the Commonwealth of Massachusetts in accordance with the Massachusetts
BCL, (ii) any licenses, permits, franchises or other governmental authorizations
pertaining to the business of Acquisition that are required as a result of the
consummation of the transactions contemplated hereby and (iii) such consents,
approvals, orders or authorizations which if not obtained, or registrations,
declarations or filings which if not made, would not adversely affect the
ability of Acquisition to consummate the transactions contemplated hereby.
SECTION 6.06 Tax-Free Reorganization.
(a) It is Acquisition's intention that the fair market value of the
Parent Common Stock and other consideration received by each Company shareholder
will be approximately equal to the fair market value of the Company Common Stock
and Company Preferred Stock surrendered in the Merger.
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(b) To the knowledge of Acquisition, there is no plan or intention
by the shareholders of the Company who own five percent (5%) or more of the
Company Common Stock and Company Preferred Stock to sell, exchange, or otherwise
dispose of a number of shares of Parent Common Stock received in the Merger that
would reduce the Company shareholders' ownership of Parent Common Stock to a
number of shares having a value, as of the date of the Merger, of less than
fifty percent (50%) of the value of all of the formerly outstanding Company
Common Stock and Company Preferred Stock as of the same date. For purposes of
making this representation and warranty, shares of Company Common Stock and
Company Preferred Stock exchanged for cash or other property, surrendered by
dissenters or exchanged for cash in lieu of fractional shares of Parent Common
Stock will be treated as outstanding Company Common Stock and Company Preferred
Stock on the date of the Merger. For purposes of making this representation and
warranty, shares of Parent Common Stock held by Company shareholders and
otherwise sold, redeemed, or disposed of prior or subsequent to the Merger are
considered.
(c) Pursuant to the Merger, Acquisition will transfer to the Company
at least ninety percent (90%) of the fair market value of its net assets and at
least seventy percent (70%) of the fair market value of its gross assets held
immediately prior to the Merger. For purposes of this representation, amounts
paid by Acquisition to dissenters, amounts used by Acquisition to pay
reorganization expenses, and amounts paid by Acquisition to shareholders who
receive cash or other property in lieu of fractional shares of Parent Common
Stock will be included as assets held by Acquisition immediately prior to the
Merger.
(d) Prior to the Effective Time, Parent will be in control of
Acquisition within the meaning of Section 368(c) of the Code.
(e) The liabilities of Acquisition assumed by the Company and the
liabilities to which the transferred assets of Acquisition are subject were
incurred by Acquisition in the ordinary course of its business.
(f) Acquisition will pay its own expenses, if any, incurred in
connection with the Merger. Acquisition will not pay expenses, if any, incurred
by Parent, the Company, or the Company's shareholders in connection with the
Merger.
(g) There is no intercorporate indebtedness existing between
Acquisition and the Company that was issued, acquired or will be settled at a
discount.
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(h) Acquisition is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code.
SECTION 6.07 Other Matters. Acquisition has been formed for the sole
purpose of effecting the Merger and, except as contemplated by this Agreement,
Acquisition has not conducted any business activities and does not have any
material liabilities or obligations.
SECTION 6.08 Representations and Warranties True; No Misleading
Statements. All of the representations and warranties set forth in this Article
VI shall be true and correct as of the Effective Time as if made at that time.
The representations and warranties made herein and in any Schedule, list or
other document specifically referred to herein and delivered by Acquisition
pursuant hereto, and all information provided by Acquisition for inclusion in
the Merger Information, taken as a whole, do not contain any untrue statements
of a material fact or omit to state a material fact necessary in order to make
the statements herein or therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE VII
COVENANTS
SECTION 7.01 Conduct of the Company's Business. The Company and each
Shareholder covenants and agrees that, prior to the Effective Time, unless
Parent shall otherwise consent in writing or as otherwise expressly contemplated
by this Agreement:
(a) the business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of
business and consistent with past practice; and
(b) The Company shall not, directly or indirectly, do any of the
following:
(i) sell, pledge, dispose of or encumber (or permit any of its
subsidiaries to sell, pledge, dispose of or encumber) any assets of the
Company or any of its subsidiaries, except inventory and immaterial assets
in the ordinary course of business and except the granting of licenses
with respect to the Inframax(R) product in the ordinary course of
business; (ii) amend or propose to amend its Restated Articles of
Organization or By-Laws; (iii) split, combine or reclassify any
outstanding shares of its capital stock, or declare, set aside or pay any
dividend payable in cash, stock, property or otherwise with respect to
such shares; (iv) redeem, purchase,
40
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acquire or offer to acquire (or permit any of its subsidiaries to redeem,
purchase, acquire or offer to acquire) any shares of its capital stock of
any class; or (v) enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this paragraph
(b);
(c) The Company shall not (i) issue, sell, pledge or dispose of, or
agree to issue, sell, pledge or dispose of, any additional shares of, or
securities convertible or exchangeable for, or any options, warrants or
rights of any kind to acquire any shares of, its capital stock of any
class or other property or assets, except in respect of the exercise of
Company Common Stock Options, Series C Stock Options and/or the Warrant in
accordance with their respective terms; (ii) acquire (by merger,
consolidation or acquisition of stock or assets) any corporation,
partnership or other business organization or division thereof (except an
existing wholly-owned subsidiary); (iii) incur any indebtedness for
borrowed money or issue any debt securities except for borrowings in the
ordinary course of business under the Company's revolving credit agreement
with Silicon Valley Bank; (iv) enter into or modify any contract, lease,
agreement or commitment, except in the ordinary course of business and
consistent with past practice; (v) terminate, modify, assign, waive,
release or relinquish any contract rights or amend any rights or claims
not in the ordinary course of business or (vi) settle or compromise any
claim, action, suit or proceeding pending or threatened against the
Company, or, if the Company may be liable or obligated to provide
indemnification, against the Company's directors or officers, before any
court, governmental agency or arbitrator; provided that nothing herein
shall require any action that might impair or otherwise affect the
obligation of any insurance carrier under any insurance policy maintained
by the Company;
(d) The Company shall not grant any increase in the salary or other
compensation of its employees, except pursuant to the terms of employment
agreements in effect on the date hereof and listed on a Schedule hereto,
or grant any bonus to any employee or enter into any employment agreement
or make any loan to or enter into any material transaction of any other
nature with any employee of the Company or any subsidiary;
(e) The Company shall not take any action to institute any new
severance or termination pay practices with respect to any directors,
officers or employees of the Company or its subsidiaries or to increase
the benefits payable under its severance or termination pay practices;
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(f) The Company shall not adopt or amend, in any respect, except as
contemplated hereby or as may be required by applicable law or regulation,
any collective bargaining, bonus, profit sharing, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund, plan or
arrangement for the benefit or welfare of any directors, officers or
employees;
(g) The Company shall not intentionally take any action which might
in any manner prevent the business combination to be effected by the
Merger from being accounted for as a pooling-of-interests by Parent for
the purposes of its consolidated financial statements under GAAP and
applicable SEC rules and regulations;
(h) The Company shall use reasonable good faith, to the extent not
prohibited by the foregoing provisions of this Section 7.01, to maintain
its relationships with its distributors, suppliers and customers, and if
and as requested by Parent or Acquisition, (i) the Company shall use
reasonable good faith efforts to make reasonable arrangements for
representatives of Parent or Acquisition to meet, together with
representatives of the Company, with customers and suppliers of the
Company requested by Parent in order to ensure that the Company's
relationships with such customers and suppliers will remain in force under
substantially the same terms following the Effective Time as are in effect
on the date hereof, and (ii) the Company shall schedule, and the
management of the Company shall participate in, meetings of
representatives of Parent or Acquisition with employees of the Company or
any of its subsidiaries;
(i) The Company and the other parties thereto shall terminate,
effective as of the Effective Time, each of the agreements disclosed in
Schedule 3.02(a) to which they are parties, except as otherwise set forth
in such Schedule 3.02(a);
(j) The Company shall hold a shareholders' meeting for the purpose
of authorizing and approving the consummation of the Merger in accordance
with the provisions hereof no later than August 27, 1997;
(k) The Company shall use good faith efforts, dedicating all
resources required, to complete the Merger so that the Effective Time
shall occur not later than August 29, 1997; and
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(l) The Company shall use reasonable efforts to obtain, prior to the
Effective Time, a written undertaking of Silicon Valley Bank to be bound
by the provisions of Section 7.11 hereof.
SECTION 7.02 Certain Covenants of Parent.
(a) Parent covenants and agrees that, prior to the Effective Time,
unless the Company shall otherwise consent in writing or as otherwise
expressly contemplated by this Agreement, Parent shall not amend its
Certificate of Incorporation or By-Laws in a manner that could reasonably
be expected to be materially adverse to the Shareholders. Parent shall use
good faith efforts, dedicating all resources required, to complete the
Merger so that the Effective Time shall occur not later than August 29,
1997.
(b) Parent covenants and agrees that, after the Effective Time,
Parent shall reserve and make available to certain employees of the
Surviving Corporation a pool of options exercisable for an aggregate of
120,000 shares of Parent Common Stock, not including options granted to
Cowie pursuant to the Employment Agreement (hereinafter defined), all in
accordance with the terms and provisions of Parent's 1995 Stock Option
Plan and/or Parent's 1996 Stock Option Plan.
(c) Parent covenants and agrees that, prior to the Effective Time,
Parent shall not intentionally take any action so as to impact Parent's
ability to account for the business combination to be effected by the
Merger as a pooling-of-interests for purposes of its consolidated
financial statements under GAAP and applicable SEC rules and regulations.
SECTION 7.03 Access to Information. (a) The Company shall, and shall
cause its officers, directors, employees, representatives and agents to, afford,
from the date hereof to the Effective Time, the officers, employees,
accountants, attorneys and other representatives and agents of Parent reasonable
and complete access, upon reasonable notice, during regular business hours to
its premises and its officers, employees, agents, properties, books, records and
workpapers, and shall furnish Parent all financial, operating and other
information and data as Parent, through its officers, accountants, attorneys and
other employees or agents, may reasonably request.
(b) Parent shall, and shall cause its officers, directors,
employees, representatives and agents to, afford, from the date hereof to the
Effective Time, the officers, employees, representatives and agents of the
Company reasonable access during
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regular business hours to its officers, employees, agents, properties, books,
records and workpapers, and shall furnish the Company all financial, operating
and other information and data as the Company, through its officers, employees
or agents, may reasonably request.
(c) No investigation pursuant to this Section 7.03 shall affect, add
to or subtract from any representations or warranties of the parties hereto or
the conditions to the obligations of the parties hereto to effect the Merger.
SECTION 7.04 Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings; provided that the foregoing shall not require Parent
or the Company to agree to make, or to permit Parent or the Company to make, any
divestiture of a significant asset in order to obtain any waiver, consent or
approval.
SECTION 7.05 Inquiries and Negotiations. (a) Neither the Company nor
any of its affiliates, shareholders, directors, officers, employees,
representatives or agents shall, from July 1, through the Effective Time
directly or indirectly, (i) solicit or initiate any discussions, submissions of
proposals or offers or negotiations with, or (ii) participate in any
negotiations or discussions with, or provide any information or data of any
nature whatsoever to, or otherwise cooperate in any other way with, or assist or
participate in, facilitate or encourage any effort or attempt by, any person,
other than Parent and its affiliates, representatives and agents, concerning any
merger, consolidation, sale of substantial assets, sale of shares of capital
stock (other than pursuant to the exercise of Company Common Stock Options,
Series C Stock Options or the Warrant) or other securities, recapitalization,
debt restructuring or similar transaction involving the Company or any
subsidiary, or any division of the Company or any subsidiary. The Company shall
immediately notify Parent if any proposal, offer, inquiry or other contact is
received by, any information is requested from, or any discussions or
negotiations are sought to be initiated or continued with, the Company in
respect of any such transaction, and shall, in any such notice to Parent,
indicate the identity of the offeror and the terms and conditions of any
proposals or offers or the nature of any inquiries or contacts, and thereafter,
without engaging in any conduct prohibited hereby, shall keep Parent informed of
the status
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and terms of any such proposals or offers. The Company shall not release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which the Company is a party.
SECTION 7.06 Employment and Non-Competition Agreements.
Contemporaneously herewith, the Company shall terminate, effective immediately
prior to the Effective Time, (a) the Company's employment agreement with Cowie
and (b) employment of Paul U. Bergeron under his employment agreement with the
Company. Contemporaneously herewith, Cowie shall enter into, effective as of the
Effective Time, an employment agreement with Parent and/or the Surviving
Corporation (the "Employment Agreement") and a non-competition and
confidentiality agreement for the benefit of Parent and the Surviving
Corporation (the "Non-Competition Agreement").
SECTION 7.07 Notification of Certain Matters. The Company shall give
prompt notice to Parent and Acquisition, and Parent and Acquisition shall give
prompt notice to the Company, of (i) the occurrence, or failure to occur, of any
event that such party believes would be likely to cause any of its
representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date hereof to the
Effective Time and (ii) any material failure of the Company, Parent or
Acquisition, as the case may be, or any officer, director, employee or agent
thereof, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that failure to
give such notice shall not constitute a waiver of any defense that may be
validly asserted.
SECTION 7.08 Indemnification. Solely for purposes of this Section
7.08, the term "Shareholders" shall be deemed to mean, in addition to the
Shareholders identified in the Preamble of this Agreement, all other holders of
Company Common Stock or Company Preferred Stock as of the Effective Time who are
not parties to this Agreement.
(a) Indemnifiable Breaches. Each Shareholder shall be severally
liable to, and shall severally indemnify, protect, defend and hold harmless
Parent and its successors and the Surviving Corporation and its successors,
pursuant to the terms of this Section 7.08, against any and all claims, damages,
liabilities and expenses (including reasonable attorneys' fees) sustained by
Parent or the Surviving Corporation, in excess of insurance proceeds actually
received by Parent or the Surviving Corporation, resulting from or in connection
with the breach of any representation, warranty, covenant or other agreement
made by the Company or any Shareholder in or pursuant to this Agreement or any
other agreement or instrument executed and delivered by or on behalf of the
Company and/or such Shareholder pursuant hereto or in connection herewith (such
breaches or failures being hereinafter referred to
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individually as an "Indemnifiable Breach" and collectively as "Indemnifiable
Breaches"); provided, however, that no Shareholder shall be required to pay
Parent and/or the Surviving Corporation, as the case may be, pursuant to this
Section 7.08, (i) subject to clause (iii) below, with respect to any one or
group of related Indemnifiable Breaches, an amount in excess of such
Shareholder's Percentage Share (as hereinafter defined) of damages in connection
with such Indemnifiable Breach or group of related Indemnifiable Breaches; (ii)
subject to clause (iii) below, with respect to all Indemnifiable Breaches, an
amount in excess of such Shareholder's Percentage Share of the aggregate amount
of all damages resulting from all Indemnifiable Breaches; and (iii) in any
event, in the aggregate, an amount in excess of fifty (50%) percent of the
dollar value equivalent of Parent Common Stock, valued at the Average Price,
received by such Shareholder upon consummation of the Merger pursuant to the
terms hereof. For purposes of this Agreement, each "Shareholder's Percentage
Share" shall mean the percentage determined by dividing (x) the number of shares
of Parent Common Stock issuable to such Shareholder in the Merger by (y) the
total number of shares of Parent Common Stock issuable to all Shareholders in
the Merger. The indemnification obligations of the Shareholders under this
Section 7.08 shall apply to claims, damages, liabilities and expenses sustained
by Parent and/or the Surviving Corporation in respect of Indemnifiable Breaches
if and when the aggregate amount of such claims, damages, liabilities and
expenses in respect of such Indemnifiable Breaches, including insurance proceeds
actually received by Parent or the Surviving Corporation in connection
therewith, exceeds One Hundred Fifty Thousand Dollars ($150,000) (the "Basket")
and in the event the aggregate amount of the claims, damages, liabilities and
expenses sustained by Parent and/or the Surviving Corporation in respect of
Indemnifiable Breaches exceeds the Basket, the indemnification obligations of
the Shareholders under this Section 7.08 shall apply to all claims, damages,
liabilities and expenses actually sustained by Parent and/or the Surviving
Corporation in respect of Indemnifiable Breaches. For purposes of this Section
7.08, Indemnifiable Breaches shall be deemed to be a group of related
Indemnifiable Breaches if (i) they pertain to obligations of the Company or any
Shareholder to a single party or group of affiliated parties or obligations of a
single party or group of affiliated parties to the Company or any Shareholder,
(ii) they pertain to the same or similar transactions or (iii) they involve the
same or similar legal or factual issues.
(b) Satisfaction of Claims. Subject to the terms of the second
sentence of Section 7.08(d) below, any Shareholder shall be permitted to satisfy
such Shareholder's obligation(s) under this Section 7.08(b) in cash or by
delivering to Parent or the Surviving Corporation, as the case may be, shares of
Parent Common Stock in an amount equal to such Shareholder's liability based on
a per share value equal to the Average Price.
(c) Indemnification by Parent. Parent and Acquisition
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shall be jointly and severally liable to, and shall jointly and severally
indemnify, protect, defend and hold harmless each Shareholder and its respective
successors against any and all claims, damages, liabilities and expenses
(including reasonable attorneys' fees) sustained by any Shareholder, resulting
from or in connection with the breach of any representation, warranty, covenant
or other agreement made by Parent or Acquisition in or pursuant to this
Agreement or any other agreement or instrument executed and delivered by or on
behalf of Parent and/or Acquisition pursuant hereto or in connection herewith.
(d) Other Remedies. Notwithstanding anything herein to the contrary,
any party hereto shall be entitled to (i) seek specific enforcement of the terms
and provisions of this Agreement in the event of a breach thereof and (ii) sue
for damages in the event of a wrongful termination of this Agreement in
violation of Article IX hereof or the failure to consummate the transactions
contemplated hereby through no fault of such party. In the event Parent and/or
the Surviving Corporation becomes entitled to any sums under the terms hereof,
Parent and/or the Surviving Corporation shall have the right but not the
obligation to set off such liabilities of the Shareholders against any existing
or future liabilities of Parent or the Surviving Corporation to the Shareholders
or any of them individually other than against amounts owed by the Surviving
Corporation to any such Shareholders as compensation for employment or
otherwise. The terms of this Section 7.08 are intended to benefit the parties
hereto and any and all claims for indemnification hereunder must be made during
the period commencing on the date hereof and continuing until the earlier to
occur of (i) one (1) year after the Effective Time or (ii) the publication of
the independent audit report on the consolidated financial statements of Parent
for the fiscal year ending June 30, 1998.
SECTION 7.09 Confidentiality. Except as otherwise provided in that
certain Confidentiality Agreement dated December 10, 1996 between the Company
and the Parent with regard to information about the Company (the
"Confidentiality Agreement"), Parent and Acquisition, on the one hand, and the
Company and the Shareholders, on the other, shall hold, and shall use their
respective best efforts to cause their respective officers, directors,
employees, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other parties furnished to such party in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (i) previously known on a nonconfidential basis by the
receiving party; (ii) in the public domain through no fault of the receiving
party; (iii) later lawfully acquired by such party from sources other than the
other
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parties; or (iv) independently developed by such party without the use of such
information; provided that each party may disclose such information to its
affiliates and its affiliates' officers, directors, employees, consultants,
advisors and agents, lenders and other investors in connection with the
transactions contemplated by this Agreement so long as such persons are informed
by such party of the confidential nature of such information and are directed by
such party to treat such information confidentially. If the transactions
contemplated by this Agreement are abandoned, such confidentiality shall be
maintained and each party shall, and shall use its best efforts to cause its
respective officers, directors, employees, consultants, advisors and agents to,
destroy or deliver to the other party(s), upon request, all documents and other
materials, and all copies thereof, obtained by such party or on its behalf from
the other party(s) in connection with this Agreement that are subject to such
confidentiality. The terms of this Section 7.09 shall survive indefinitely.
SECTION 7.10 Covenants of Shareholders. (a) Each Shareholder hereby
agrees not to:
(i) sell, transfer, pledge, encumber, assign or otherwise dispose
of, or enter into any contract, option or other arrangement or
understanding with respect to the sale, transfer, pledge, encumbrance,
assignment or other disposition of, any shares of Company Common Stock
owned by such Shareholder, other than as provided herein;
(ii) grant any proxies or enter into a voting agreement or other
arrangement with respect to any shares of Company Common Stock owned by
such Shareholder, other than as provided herein; or
(iii) deposit any shares of Company Common Stock owned by such
Shareholder into a voting trust.
(b) Each Shareholder hereby agrees not to take any action that would
make any representation or warranty herein of such Shareholder untrue or
incorrect in any material respect or that would have the effect of preventing or
disabling such Shareholder from performing its obligations under this Agreement.
(c) Each Shareholder hereby waives any and all dissenter's rights
with respect to Company Common Stock granted pursuant to Sections 86-98 of the
Massachusetts BCL.
(d) Each Shareholder hereby agrees to surrender the Certificates
owned by such Shareholder in exchange for certificates representing shares of
Parent Common Stock and cash, if applicable, within five (5) business days after
the Effective Time.
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(e) Each Shareholder agrees to vote the shares of Company Common
Stock and/or Company Preferred Stock held by such Shareholder in favor of the
execution, delivery and performance of this Agreement and the consummation of
the Merger in accordance with the provisions hereof, and each Shareholder
holding Series E Stock further agrees to vote its shares of Series E Stock,
voting as a separate series, for the approval of the receipt of Parent Common
Stock in the Merger instead of electing to treat the Merger as a liquidation.
(f) Each Shareholder hereby agrees not to intentionally take any
action which might in any manner prevent the business combination to be effected
by the Merger from being accounted for as a pooling-of-interests by Parent for
the purposes of its consolidated financial statements under GAAP and applicable
SEC rules and regulations.
SECTION 7.11 Transfer Restrictions After the Effective Time. Each
Shareholder hereby agrees that, from and after the Effective Time:
(a) Lock-Up. Such Shareholder shall not sell or otherwise reduce its
risk relative to any shares of Parent Common Stock received by it in the
Merger (within the meaning of Financial Reporting Policy, Section 201.01),
except as permitted by Staff Accounting Bulletin No. 76 issued by the SEC,
until Parent has published financial results covering a fiscal quarter
that includes results (including combined sales and net income) for a
period of at least 30 days of post-Merger operations. Parent agrees to use
its good faith efforts to issue such financial results as soon as
practicable.
(b) Securities Act Compliance. Such Shareholder shall not offer,
sell, or otherwise dispose of the shares of Parent Common Stock received
by such Shareholder in connection with the Merger other than (i) pursuant
to an effective registration statement under the Securities Act, or (ii)
otherwise pursuant to an exemption from the registration requirements of
the Securities Act.
SECTION 7.12 Registration Rights Agreements. Parent and each shareholder
of the Company who receives Parent Common Stock in connection with the Merger
shall be entitled to certain registration rights, as provided in the
registration rights agreement in the form of Exhibit C hereto (the "Registration
Rights Agreement"), provided such shareholder executes and delivers to Parent a
Registration Rights Agreement and delivers
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such further information as shall be required by Parent in connection with any
registration statement provided for therein.
SECTION 7.13 Conversion of Preferred Stock. Schedule 3.04(a) hereto
completely and accurately sets forth any and all shares of Preferred Stock
outstanding as of the date hereof and the respective owners of same. The Company
covenants and agrees to use its reasonable efforts to cause holders of Series C
Stock and holders of Series E Stock to convert their respective shares into
Common Stock prior to the Effective Time such that as of the Effective Time,
there shall be outstanding no shares of Company Preferred Stock whatsoever.
SECTION 7.14 Conversion of Stock Options. Each of the Company and
Cowie shall use their respective reasonable efforts to cause each holder of
Company Common Stock Options who is an employee of the Company on and after the
date hereof to refrain from exercising any such options prior to the Effective
Time.
SECTION 7.15 Repayment of Loans to Officers and Directors. Any loan
of the Company to any officer or director of the Company which is outstanding as
of the Effective Time shall be repaid to the Surviving Corporation on or before
the first to occur of (a) the maturity date pursuant to the terms of such loan
or (b) upon the first sale or other disposition by such officer or director of
Parent Common Stock received in the Merger or received pursuant to the exercise
of a Parent Stock Option.
SECTION 7.16 Directors and Officers Liability Insurance. From the
date hereof through the date immediately preceding the date on which the
Effective Time occurs, Parent shall use reasonable efforts to arrange for the
purchase, for the benefit of the directors and officers of the Company,
directors and officers liability insurance in customary form and in reasonable
amounts, at a cost not to exceed $25,000 in the aggregate ("D&O Insurance"),
which D&O Insurance shall be effective commencing on the Effective Time and
shall cover acts of the directors and officers of the Company prior to the
Effective Time. The cost of said insurance shall be included in the Company
Merger Expenses for the purpose of Section 2.01(a) hereof but only to the extent
the Company Merger Expenses, in the aggregate, do not exceed $750,000. Any
excess shall be deducted from the aggregate consideration to be paid in the
Merger pursuant to Section 2.01(a).
SECTION 7.17 Berlack Release. Berlack hereby releases the Company,
Parent and the Surviving Corporation from any and all claims, damages,
liabilities and expenses (including reasonable attorneys' fees) resulting from
or incurred in connection with the conversion, redemption or repurchase of any
security of the Company prior to the Effective Time.
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ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at the Effective Time of the following condition:
(a) no preliminary or permanent injunction or other order, decree or
ruling issued by any court of competent jurisdiction nor any statute,
rule, regulation or order entered, promulgated or enacted by any
governmental, regulatory or administrative agency or authority shall be in
effect that would prevent the consummation of the Merger as contemplated
hereby.
SECTION 8.02 Conditions to the Obligation of the Company to Effect
the Merger. The obligation of the Company to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Parent and Acquistion shall have performed and complied in all
material respects with all obligations and agreements required to be
performed and complied with by it under this Agreement at or prior to the
Effective Time;
(b) the representations and warranties of Parent and Acquisition
contained in this Agreement shall be true and correct in all material
respects at and as of the Effective Time as if made at and as of such
date, except as otherwise contemplated or permitted by this Agreement;
(c) the Company shall have received a certificate signed by the
Chief Executive Officer of Parent, dated as of the Effective Time, to the
effect that the conditions set forth in paragraphs (a) and (b) above have
been satisfied;
(d) the Merger shall have been duly approved by holders of (i)
Company Common Stock and (ii) Company Preferred Stock; and
(e) the Company shall have received the opinion of Shanley & Fisher,
P.C., counsel to Parent and Acquisition, substantially in the form of
Exhibit D attached hereto.
SECTION 8.03 Conditions to the Obligation of Parent and Acquisition
to Effect the Merger. The obligation of Parent and
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Acquisition to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following additional conditions:
(a) The Company shall have performed and complied in all material
respects with all obligations and agreements required to be performed and
complied with by it under this Agreement at or prior to the Effective
Time;
(b) The representations and warranties of the Company and the
Shareholders contained in this Agreement shall be true and correct in all
material respects at and as of the Effective Time as if made at and as of
such date, except as otherwise contemplated or permitted by this
Agreement;
(c) Parent shall have received a certificate signed by the Chairman
and Chief Executive Officer of the Company, dated as of the Effective
Time, (i) to the effect that the conditions set forth in paragraphs (a)
and (b) above have been satisfied and (ii) certifying with respect to the
amount of Borrowings as of the Effective Time;
(d) Parent shall have received reasonable assurance that all
relationships with Contract Parties and Major Suppliers shall remain in
force after the Effective Time upon substantially the same terms in effect
prior to the Merger, except where any failure to receive such assurance
would not have a Material Adverse Effect on the Company or the Surviving
Corporation, and that the employees identified on Schedule 8.03(d) shall
continue their employment with the Surviving Corporation after the
Effective Time, as set forth in Schedule 8.03(d).
(e) The Company's employment of Paul U. Bergeron shall have been
terminated, any and all existing employment agreements between the Company
and other senior management employees of the Company (other than Mark
Emerick) with a term extending beyond June 30, 1998 shall have been
terminated, and Parent and/or the Surviving Corporation and Cowie shall
have executed and delivered the Employment Agreement and the
Noncompetition Agreement;
(f) Each Shareholder who is an accredited investor shall have
executed and delivered an Accredited Investor Certification in the form of
Exhibit E attached hereto;
(g) Parent shall have determined, in its reasonable opinion, that
the business combination to be effected by the Merger may be accounted for
as a pooling-of-interests by Parent for purposes of its consolidated
financial statements
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under GAAP and applicable SEC rules and regulations, provided that Parent
shall not deem or assert the survival of claims for indemnification
pursuant to Section 7.08(d) hereof or the survival of any covenant or
agreement of the parties pursuant to Section 10.01 hereof as an impediment
to the accounting for the business combination to be effected by the
Merger as such pooling-of-interests ;
(h) Parent and Acquisition shall have received the opinion of Foley,
Hoag & Eliot, LLP, counsel to the Company, substantially in the form of
Exhibit F attached hereto;
(i) Parent shall have determined, in its good faith judgment, that
the business of the Company shall have been operated, from June 30, 1997
through the Effective Time, in the normal and ordinary course including,
without limitation that no dividends shall have been declared and/or
issued by the Company and no stock options or bonuses granted, declared or
issued for the officers or employees of the Company and that the Company,
Cowie and other management employees shall have used their reasonable good
faith efforts to preserve the goodwill of the business of the Company and
to maintain and keep the assets intact and that no additional liabilities
have been incurred, other than in the normal course of business;
(j) The Merger shall have been approved by holders of shares
representing, immediately prior the Effective Time, at least (1)
ninety-four (94%) percent of the outstanding Company Common Stock; (2)
100% of the outstanding Series C Stock; and (3) 100% of the outstanding
Series E Stock;
(k) Parent shall have received a pay-off letter from Silicon Valley
Bank, in customary form, stating the amount of all outstanding
indebtedness of the Company to Silicon Valley Bank, including accrued
interest to the Effective Time, and acknowledging that any and all amounts
outstanding under any and all loans to the Company may be pre-paid and
satisfied in full by Parent without any prepayment penalty or premium, and
that upon such prepayment Silicon Valley Bank will release its security
interest and return all loan documents marked "cancelled";
(l) The Company shall have received from Arthur Andersen LLP,
independent accountants of the Company, a letter dated on the date of the
Effective Time, in form and substance satisfactory to Parent, to the
effect that the Company qualifies as an entity that may be a party to a
business combination for which the pooling-of-interests method of
accounting would be available for the purposes of consolidated
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financial statements under GAAP and applicable SEC rules and regulations;
(m) Parent shall have received duly executed resignation letters
from all of the officers and directors of the Company; and
(n) The Affiliate Agreement shall be in full force and effect as of
the Effective Time.
ARTICLE IX
TERMINATION AND ABANDONMENT
SECTION 9.01 Termination and Abandonment. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time:
(a) by mutual action of the Boards of Directors of Parent and
the Company;
(b) by the Company, if all of the conditions set forth in
Section 8.03 shall have been complied with and performed and one or
more of the conditions set forth in Sections 8.01 and 8.02 shall not
have been complied with or performed in any material respect and
such noncompliance or nonperformance shall not have been cured or
eliminated (or by its nature cannot be cured or eliminated) by
Parent and Acquisition on or before September 30, 1997 (the "Drop
Dead Date"), subject to the Company's right to extend the Drop Dead
Date for up to two successive thirty (30) day periods; or
(c) by Parent or Acquisition, if all of the conditions set
forth in Section 8.02 shall have been complied with and performed
and one or more of the conditions set forth in Sections 8.01 and
8.03 shall not have been complied with or performed in any material
respect and such noncompliance or nonperformance shall not have been
cured or eliminated (or by its nature cannot be cured or eliminated)
by the Company on or before the Drop Dead Date, subject to Parent's
and Acquisition's right to extend the Drop Dead Date for up to two
successive thirty (30) day periods.
SECTION 9.02 Effect of Termination. Except as provided in Section
7.09 with respect to confidential information and except as provided in Section
10.02 hereof with respect to expenses, in the event of the termination of this
Agreement and the abandonment of the Merger pursuant to Section 9.01, this
Agreement
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shall thereafter become void and have no effect, and no party hereto shall have
any liability to any other party hereto or its shareholders or directors or
officers in respect thereof, except that nothing herein shall relieve any party
from liability for any willful breach hereof.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Survival of Representations and Warranties. The
representations and warranties of Shareholders in this Agreement and in any
instrument delivered pursuant hereto shall survive the Effective Time until the
earlier to occur of (i) one (1) year after the Effective Time or (ii) the
publication of the independent audit report on the consolidated financial
statements of Parent for the fiscal year ending June 30, 1998, provided that
this Section 10.01 shall not limit any other covenant or agreement of the
parties that by its terms contemplates performances beyond such period.
SECTION 10.02 Expenses, Etc. (a) Whether or not the transactions
contemplated by this Agreement are consummated, neither the Company and the
Shareholders, on the one hand, and Parent and Acquisition, on the other hand,
shall have any obligation to pay any of the fees and expenses of the other
incident to the negotiation, preparation and execution of this Agreement,
including, without limitation, the fees and expenses of counsel, accountants,
investment bankers and other experts, except as otherwise provided in Section
2.01(a) with regard to Company Merger Expenses in excess of $750,000 in the
event the Merger is consummated, provided that if this Agreement shall have been
terminated as a result of the willful and material misrepresentations by a party
or the willful and material breach by a party of any of its covenants and
agreements contained herein, such party shall pay the costs and expenses
incurred by the other parties in connection with this Agreement.
(b) Except for the advisors fee to Shields & Company, Inc. pursuant
to an engagement letter with the Company dated May 23, 1997 and the advisors fee
to Adams, Harkness & Hill, Inc. pursuant to an engagement letter with Parent
dated May 30, 1997, no person or entity is entitled to receive from the Company
or Parent any investment banking, brokerage or finder's fee or fees for
financial consulting or advisory services in connection with this Agreement or
the transactions contemplated hereby. The Company, on the one hand, and Parent
and Acquisition, on the other hand, shall indemnify the other and hold it
harmless from and against any claims for finders' fees or brokerage commissions
in relation to or in connection with such transactions as a result of any
agreement
55
<PAGE>
or understanding between such indemnifying party and any third party.
SECTION 10.03 Publicity. The Company and Parent agree that they will
not issue any press release or make any other public announcement concerning
this Agreement or the transactions contemplated hereby without the prior written
consent of the other party, except that the Company or Parent may make such
public disclosure that it believes in good faith to be required by law (in which
event such party shall consult with the other prior to making such disclosure).
SECTION 10.04 Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 10.05 Notices. All notices that are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient if given in writing and delivered by hand or national overnight
courier service, transmitted by telecopy or mailed by registered or certified
mail, postage prepaid, as follows:
If to Parent and/or Acquisition, to:
The BISYS Group, Inc.
Overlook at Great Notch
150 Clove Road
Little Falls, New Jersey 07424
Attention: Chairman and Chief Executive Officer
with a copy to:
The BISYS Group, Inc.
Overlook at Great Notch
150 Clove Road
Little Falls, New Jersey 07424
Attention: General Counsel
If to the Company or the Shareholders, to:
Charter Systems, Inc.
1210 Washington Street
West Newton, Massachusetts 02165
Attention: Peter C. Cowie, Chairman
with a copy to:
56
<PAGE>
Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Peter Rosenblum, Esq.
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 10.06 Waivers. The Company, on the one hand, and Parent and
Acquisition, on the other hand, may, by written notice to the other, (i) extend
the time for the performance of any of the obligations or other actions of the
other under this Agreement; (ii) waive any inaccuracies in the representations
or warranties of the other contained in this Agreement or in any document
delivered pursuant to this Agreement; (iii) waive compliance with any of the
conditions of the other contained in this Agreement; or (iv) waive performance
of any of the obligations of the other under this Agreement. Except as provided
in the preceding sentence, no action taken pursuant to this Agreement,
including, without limitation, any investigation by or on behalf of any party,
shall be deemed to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants or agreements
contained in this Agreement. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
SECTION 10.07 Entire Agreement. This Agreement, its Schedules, the
documents executed at the Effective Time in connection herewith, including
without limitation the documents included as Exhibits hereto, and the
Confidentiality Agreement constitute the entire agreement among the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof. No representation, warranty, promise,
inducement or statement of intention has been made by any party that is not
embodied in this Agreement or such other documents, and none of the parties
shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement of intention not embodied herein or therein.
SECTION 10.08 Applicable Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware, without
regard to principles of conflict of laws.
SECTION 10.09 Binding Effect, Benefits. This Agreement shall inure
to the benefit of and be binding upon the parties hereto and their respective
legal representatives and
57
<PAGE>
permitted successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective permitted successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
SECTION 10.10 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
SECTION 10.11 Amendments. This Agreement may be modified, amended or
supplemented at any time by action of the respective Boards of Directors of the
Company, Parent and Acquisition, and the Shareholders. Without limiting the
generality of the foregoing, this Agreement may only be amended, varied or
supplemented by an instrument in writing, signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement and Plan of Merger as of the day and year first above written.
THE BISYS GROUP, INC.
By: /s/ Lynn J. Mangum
-----------------------------
Lynn J. Mangum
Chairman and Chief Executive
Officer
BICHART ACQUISITION CORP.
By: /s/ Lynn J. Mangum
-----------------------------
Lynn J. Mangum
Chairman and Chief Executive
Officer
[Signatures continue on next page]
58
<PAGE>
[Signatures continued from prior page]
CHARTER SYSTEMS, INC.
(SEAL)
By: /s/ Paul U. Bergeron
-----------------------------
Paul U. Bergeron
President and Treasurer
SHAREHOLDERS
/s/ Peter C. Cowie
-----------------------------
Peter C. Cowie
/s/ Wendy B. Cowie
-----------------------------
Wendy B. Cowie
/s/ Harris S. Berlack, by Diane
L. Cooper, Attorney-in-Fact
-----------------------------
Harris S. Berlack
TECHNOLOGY LEADERS II L.P.
By: /s/ Jean C. Tempel
-----------------------------
Name: Jean C. Tempel
Title: Special Limited
Partner
TECHNOLOGY LEADERS II OFFSHORE
C.V.
By: /s/ Jean C. Tempel
-----------------------------
Name: Jean C. Tempel
Title: Special Limited
Partner
[Signatures continue on next page]
59
<PAGE>
[Signatures continued from prior page]
ONE LIBERTY FUND III, L.P.
By: /s/ Stephen J. Ricci
-----------------------------
Name: Stephen J. Ricci
Title: General Partner
GILDE INTERNATIONAL FUND, B.V.
By: /s/ Stephen J. Ricci
-----------------------------
Name: Stephen J. Ricci
Title: Attorney-in-Fact
/s/ Jean Tempel
-----------------------------
Jean Tempel
/s/ John Owens
-----------------------------
John Owens
/s/ Scott Wilson
-----------------------------
Scott Wilson
MICHAEL BROWN and JOHN THOMAS
BERLACK, or their successors,
as TRUSTEES for the HARRIS S.
BERLACK CHILDREN'S TRUST
By: /s/ John T. Berlack
-----------------------------
John T. Berlack, Trustee
By: /s/ Michael Brown
-----------------------------
Michael Brown, Trustee
FREDERICK H. COWIE, or his
successor, as TRUSTEE of the
COWIE CHILDREN'S TRUST
By: /s/ Frederick H. Cowie
-----------------------------
Frederick H. Cowie, Trustee
60
<PAGE>
INDEX TO DEFINED TERMS
Term ss. Reference
---- -------------
"Acquisition" Recitals
"Affiliate" 3.20
"Affiliate Agreement" Recitals
"Agreement" Recitals
"Aggregate Parent Common Stock 2.01(a)
Consideration"
"Approvals" 3.28
"Articles of Organization" 3.06
"Average Price" 2.01(a)
"Balance Sheet" 3.08
"Basket" 7.08(a)
"Berlack Trust" Preamble
"Borrowings" 2.01(a)
"Certificate" 2.03
"Code" Recitals
"Company" Recitals
"Company Common Stock" 2.01
"Company Common Stock Option" 2.02(a)
"Company Investments" 3.30
"Company Merger Expenses" 2.01(a)
"Company Preferred Stock" 2.01(a)
"Confidentiality Agreement" 7.09
"Constituent Corporations" Recitals
"Contract Parties" 3.11(a)
"Cowie" Preamble
"Cowie Trust" Preamble
"Delaware GCL" Recitals
"Drop Dead Date" 9.01(b)
"Effective Time" 1.03
"Employment Agreement" 7.06
"ERISA" 3.12(b)
"Exchange Act" 5.09
"Exchange Value" 2.01(b)
"Financial Statements" 3.08
"GAAP" 3.08
"Indemnifiable Breach" 7.08(a)
"Intellectual Rights" 3.09
"Major Suppliers" 3.11(b)
"Massachusetts BCL" Recitals
"Material Adverse Effect" 3.03
"Merger" Recitals
"Merger Information" 4.04(i)
"NASDAQ" 2.01(a)
"Net Merger Price" 2.01(a)
"Non-Competition Agreement" 7.06
"Number of Option Shares" 2.02(c)
"Omnibus Plan" 3.04(a)
"Owned Source Codes" 3.10(c)
"Parent" Recitals
"Parent Common Stock" Recitals
"Parent Note" 7.16
"Parent Public Information" 5.06(b)
<PAGE>
INDEX TO DEFINED TERMS (continued)
Term ss. Reference
- ---- -------------
"Parent Stock Options" 2.02(c)
"Registration Rights Agreement" 7.12
"Related Party Loans" 3.31
"SEC" 4.04(b)
"Securities Act" 4.04(a)
"Series C Stock Options" 2.01(a)
"Series C Stock" 2.01
"Series E Stock 2.01
"Shareholders" Recitals
"Shareholder's Percentage Share" 7.08(a)
"Software" 3.10(a)
"Software Contracts" 3.10(b)
"Surviving Corporation" Recitals
"Warrant" 2.01(c)
<PAGE>
Exhibit 99.3
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
THE BISYS GROUP, INC.,
BI-DWW, INC., DASCIT/WHITE & WINSTON, INC.,
THE SHAREHOLDERS OF DASCIT/WHITE & WINSTON, INC.
JEFFREY D. KRAUSS AND JOSEPH J. DITRAPANI
Dated as of August 29, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER....................................................2
SECTION 1.01 The Merger....................................................2
SECTION 1.02 Effect Of the Merger..........................................2
SECTION 1.03 Consummation of the Merger....................................2
SECTION 1.04 Charter; By-Laws; Directors and Officers......................2
SECTION 1.05 Further Assurances............................................3
ARTICLE II CONVERSION OF SECURITIES......................................4
SECTION 2.01 Conversion of Securities of the Company.......................4
SECTION 2.02 Acquisition Common Stock......................................4
SECTION 2.03 Exchange of Certificates......................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND KRAUSS AND TRAPANI............................6
SECTION 3.01 Authority Relative to Agreement...............................6
SECTION 3.02 Shareholders' Title to Stock..................................6
SECTION 3.03 Organization, Standing and Qualification......................6
SECTION 3.04 Stock of the Company..........................................6
SECTION 3.05 Subsidiaries and Other Investments............................7
SECTION 3.06 Certification of Incorporation and By-Laws....................7
SECTION 3.07 Execution and Performance of Agreement;
Validity and Binding Nature...................................7
SECTION 3.08 Financial Statements..........................................8
SECTION 3.09 Intellectual Property Rights..................................8
SECTION 3.10 Contracts and Contract Parties................................9
SECTION 3.11 Major Suppliers..............................................10
SECTION 3.12 Employment, Deferred Compensation or
Similar Agreements; Collective Bargaining
Agreements; Employee Benefit Plans...........................10
SECTION 3.13 Inventory....................................................11
SECTION 3.14 Real Estate..................................................11
SECTION 3.15 Title to and Condition of Personal
Property.....................................................11
SECTION 3.16 Accounts and Notes Receivable................................12
SECTION 3.17 Marketable Securities and Other Investments..................12
SECTION 3.18 Taxes........................................................12
SECTION 3.19 Litigation...................................................13
SECTION 3.20 Other Material Contracts and Commitments.....................13
SECTION 3.21 Labor Relations..............................................14
SECTION 3.22 Insurance....................................................14
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
SECTION 3.23 Conduct of Business and Absence of
Changes......................................................14
SECTION 3.24 Compliance with Laws; Governmental
Authorizations...............................................15
SECTION 3.25 Officers, Directors and Depositories.........................15
SECTION 3.26 Environmental Matters........................................15
SECTION 3.27 Third Party and Governmental
Consents.....................................................16
SECTION 3.28 Licenses and Permits.........................................16
SECTION 3.29 Software.....................................................17
SECTION 3.30 Loans to or from Shareholders or Employees...................17
SECTION 3.31 Absence of Undisclosed Liabilities...........................17
SECTION 3.32 Shareholders' and Similar Agreements.........................17
SECTION 3.33 Approval of Merger...........................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS.................................................18
SECTION 4.01 Authority and Capacity Relative to
Agreement....................................................18
SECTION 4.02 Execution and Performance of Agreement;
Validity and Binding Nature..................................18
SECTION 4.03 Stock of the Company.........................................19
SECTION 4.04 Additional Representations and Covenants
of Shareholders..............................................19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT.....................22
SECTION 5.01 Organization and Qualification...............................22
SECTION 5.02 Acquisition..................................................22
SECTION 5.03 Capitalization...............................................23
SECTION 5.04 Authority Relative to Agreement..............................23
SECTION 5.05 Non-Contravention............................................23
SECTION 5.06 Parent Public Information....................................24
SECTION 5.07 Financial Statements.........................................24
SECTION 5.08 Absence of Certain Changes or Events.........................24
SECTION 5.09 Governmental Consents........................................25
SECTION 5.10 Compliance with Law..........................................25
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND
ACQUISITION..................................................26
SECTION 6.01 Organization and Qualification...............................26
SECTION 6.02 Capitalization...............................................26
SECTION 6.03 Authority Relative to Agreement..............................26
SECTION 6.04 Non-Contravention............................................27
SECTION 6.05 Governmental Consents........................................27
SECTION 6.06 Other Matters................................................27
ARTICLE VII COVENANTS AND OTHER AGREEMENTS...............................27
SECTION 7.01 Non-Competition Agreements...................................27
SECTION 7.02 Employment Agreement.........................................27
SECTION 7.03 Certain Life Insurance Policies..............................28
SECTION 7.04 Indemnification..............................................28
SECTION 7.05 Confidentiality..............................................30
SECTION 7.06 Transfer Restrictions After the
Effective Time...............................................30
SECTION 7.07 Registration Rights Agreements...............................31
SECTION 7.08 Termination of Shareholders' Agreements......................31
SECTION 7.09 Shareholder Sub-S Tax Liability..............................31
SECTION 7.10 Payments under FILCO Agreement...............................32
SECTION 7.11 Closing Deliveries...........................................32
SECTION 7.12 No Recission.................................................33
ARTICLE VIII MISCELLANEOUS................................................33
SECTION 8.01 Survival of Certain Representations and
Warranties...................................................33
SECTION 8.02 Fees and Expenses............................................33
SECTION 8.03 Publicity....................................................34
SECTION 8.04 Execution in Counterparts....................................34
SECTION 8.05 Notices......................................................34
SECTION 8.06 Waivers......................................................35
SECTION 8.07 Entire Agreement.............................................35
SECTION 8.08 Applicable Law...............................................36
SECTION 8.09 Binding Effect, Benefits.....................................36
SECTION 8.10 Assignability................................................36
SECTION 8.11 Amendments...................................................36
SECTION 8.12 Applicable Disclosures.......................................36
iii
<PAGE>
INDEX TO SCHEDULES AND EXHIBITS
Schedule Description
-------- -----------
3.02 Shareholder's Agreements
3.03 Qualifications
3.05 Subsidiaries/Other Investments
3.06 Certificate of Incorporation and
By-Laws of the Company
3.09 Intellectual Property Rights
3.10 Contracts and Contract Parties
3.11 Major Suppliers
3.12(a) Employment Contracts and
Other Compensation Agreements
3.12(b) Employee Benefit Plans
3.13 Inventory
3.14(b) Real Estate Leased
3.15 Liens and Encumbrances on
Personal Property
3.16 Accounts and Notes Receivable
3.17 Company Investments
3.18 Tax Matters
3.19 Litigation
3.20 Other Contracts
3.21 Compliance with Employment
Related Laws
3.22 Insurance
3.23 Changes in Conduct of Business
3.25 Officers, Directors and Depositories
3.27 Consents and Waivers
3.28 Licenses and Permits
4.04(e) Accredited Investors
4.04(m) Shareholder Interests
7.03 Certain Life Insurance Policies
iv
<PAGE>
Exhibit Ref. Description
- ------- ---- -----------
A 7.13 Form of Registration Rights
Agreement
v
<PAGE>
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August
29, 1997, among The BISYS Group, Inc., a Delaware corporation, with an address
at 150 Clove Road, Little Falls, New Jersey 07424 ("Parent"), BI-DWW, Inc., a
Delaware corporation and a wholly-owned subsidiary of Parent, with an address at
150 Clove Road, Little Falls, New Jersey 07424 ("Acquisition"), Dascit/White &
Winston, Inc., a New York corporation, with an address at 99 Madison Avenue, New
York, New York 10016 (the "Company"), Jeffrey D. Krauss, with an address at 2649
Rebecca Street, Bellmore, New York 11710 ("Krauss"), Joseph J. DiTrapani (a/k/a
Joseph J. Trapani), with an address at 860 Cranford Avenue, North Woodmere, New
York 11581 ("Trapani"), and the shareholders of the Company, whose names and
addresses are set forth on the signature pages hereto (all of said persons and
Trapani being sometimes referred to herein individually as a "Shareholder", and
collectively, together with Trapani, as the "Shareholders"). Jeffrey D. Krauss,
as Trustee of the Trust for the Benefit of Laura Krauss, a Shareholder, is
sometimes referred to herein as the "Krauss Trustee Shareholder." The Company
and Acquisition are hereinafter sometimes referred to as the "Constituent
Corporations" and the Company as the "Surviving Corporation.
WHEREAS, the Company is a general insurance agency;
WHEREAS, Parent, Acquisition and the Company desire that Acquisition
merge with and into the Company (the "Merger"), upon the terms and conditions
set forth herein and in accordance with the Business Corporation Law of the
State of New York (the "New York BCL") and the General Corporation Law of the
State of Delaware (the "Delaware GCL"), with the result that the Company shall
continue as the Surviving Corporation and the separate existence of Acquisition
(except as it may be continued by operation of law) shall cease;
WHEREAS, Parent, Acquisition and the Company desire that upon the
Merger, at the Effective Time (as hereinafter defined), the outstanding shares
of the capital stock of the Company be converted into the right to receive fully
paid and nonassessable shares of Common Stock, $.02 par value, of Parent
("Parent Common Stock"), and the outstanding shares of Acquisition be converted
into the right to receive fully paid and nonassessable shares of the Common
Stock, $.01 par value, of the Surviving Corporation, as hereinafter provided;
WHEREAS, Parent, Acquisition and the Company desire that, immediately
after the Effective Time and solely as a result of the Merger, Parent will own
all the issued and outstanding shares of the capital stock of the Surviving
Corporation;
<PAGE>
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that
the Merger shall be accounted for as a "pooling-of-interests"; and
WHEREAS, the respective Boards of Directors of the Company, Parent
and Acquisition and the shareholders of the Company have approved the Merger;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, in accordance with this Agreement, the New
York BCL and the Delaware GCL, Acquisition shall be merged with and into the
Company, the separate existence of Acquisition (except as it may be continued by
operation of law) shall cease, and the Company shall continue as the Surviving
Corporation.
SECTION 1.02 Effect Of the Merger. Upon the effectiveness of the
Merger, the Surviving Corporation shall succeed to and assume all the rights and
obligations of the Company and Acquisition in accordance with the New York BCL
and the Delaware GCL and the Merger shall otherwise have the effects set forth
in Section 906 of the New York BCL.
SECTION 1.03 Consummation of the Merger. Simultaneously herewith, the
parties hereto are causing the Merger to be consummated by filing (a) with the
Secretary of State of the State of New York a properly executed Certificate of
Merger in accordance with the New York BCL, and (b) with the Secretary of State
of the State of Delaware a properly executed certificate of merger in accordance
with the Delaware GCL. The effective time of the Merger is referred to herein as
the "Effective Time".
SECTION 1.04 Charter; By-Laws; Directors and Officers. As of the
Effective Time, the Certificate of Incorporation of the Surviving Corporation
shall be the Certificate of Incorporation of
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<PAGE>
the Company unless and until thereafter amended or restated in accordance with
the provisions thereof and as provided by the New York BCL. As of the Effective
Time, the By-Laws of the Surviving Corporation shall be the By-Laws of the
Company as in effect immediately prior to the Effective Time, unless and until
thereafter amended in accordance with the provisions thereof and as provided by
the New York BCL. The initial directors and officers of the Surviving
Corporation shall be the directors and officers set forth below, in each case
until their respective successors are duly elected and qualified.
Directors:
Lynn J. Mangum
Robert J. McMullan
Officers:
Lynn J. Mangum - Chairman
Anthony A. Pascotti - President
Robert J. McMullan - Executive Vice President and
Treasurer
J. Randall Grespin - Executive Vice President
Thomas G. Veal - Executive Vice President
Joseph J. Trapani - Senior Vice President
Mark J. Rybarczyk - Senior Vice President
Dennis R. Sheehan - Senior Vice President
Kevin J. Dell - Vice President, General Counsel and
Secretary
Annamaria Porcaro - Assistant Secretary
Patricia A. Heins - Assistant Secretary
SECTION 1.05 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of such Constituent Corporation, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such
-3-
<PAGE>
Constituent Corporation and otherwise to carry out the purposes of this
Agreement.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities of the Company. (a) Net Merger
Price. By virtue of the Merger and without any action on the part of the holders
of the common stock, without par value, of the Company ("Company Common Stock"),
at the Effective Time all outstanding shares of the Company Common Stock
(subject to Section 2.03(b) hereof) shall be converted into the right to receive
58,223.7087 fully paid and nonassessable shares of Parent Common Stock on the
following basis:
The aggregate consideration being paid in connection with the Merger
is being paid in the form of Parent Common Stock valued, as set forth below, at
Two Million Sixty Two Thousand Five Hundred Dollars ($2,062,500.00) less the
amount of $104,000 (the "FILCO Obligation"), representing the maximum amount
payable by the Company as of the Effective Time pursuant to that certain
agreement dated March 26, 1996 among FILCO Intermediary, Ltd. ("FILCO"), the
Company, Krauss, Trapani, William Pappas and Philip Fina (the "FILCO Agreement")
(the "Net Merger Price"). The Net Merger Price is divided by $33.6375, which is
the average of the daily closing price per share of Parent Common Stock (the
"Average Price"), as reported on the Nasdaq National Market for the 30 trading
day period immediately preceding the day which is three business days prior to
the Effective Time, in order to determine the number of shares of Parent Common
Stock into which the outstanding shares of Company Common Stock are being
converted in the Merger (the "Aggregate Parent Common Stock Consideration").
(b) Exchange Value. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any such shares
held in the treasury of the Company, which are being canceled as provided in
paragraph (c) below) are being converted into the right to receive 582.2371
shares of Parent Common Stock, which represents the quotient obtained by
dividing the number of outstanding shares of Company Common Stock by the
Aggregate Parent Common Stock Consideration.
(c) Treasury Stock. Each share of capital stock that is held in the
treasury of the Company is being canceled and retired and no capital stock of
Parent, cash or other consideration shall be paid or delivered in exchange
therefor.
SECTION 2.02 Acquisition Common Stock. At the Effective Time, each
share of Common Stock, $.01 par value, of
-4-
<PAGE>
Acquisition issued and outstanding immediately prior to the Effective Time is
being converted into a right to receive one (1) share of the common stock of the
Surviving Corporation, which shall constitute all of the issued and outstanding
shares of the Surviving Corporation after the Effective Time.
SECTION 2.03 Exchange of Certificates. (a) Simultaneously herewith,
each Shareholder is delivering to Parent the certificate or certificates
representing its shares of Company Common Stock (each, a "Certificate") in form
sufficient for transfer and cancellation pursuant hereto. Each Shareholder
surrendering such Certificate shall be entitled to receive in exchange therefor,
without any further payment of consideration by such Shareholder, (i) a
certificate evidencing that number of whole shares of Parent Common Stock which
such holder has the right to receive in respect of the shares of Company Common
Stock formerly evidenced by such Certificate (after taking into account all
shares of Company Common Stock then held of record by such holder) and (ii) a
check representing the amount of cash in lieu of fractional shares of Parent
Common Stock, if any, and unpaid dividends or other distributions, if any, to
which such holder is entitled pursuant to the provisions of this Section 2.03,
after giving effect to any applicable withholding tax, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash in lieu of fractional shares and unpaid dividends and distributions, if
any, payable to the Shareholders.
(b) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a shareholder of Parent. Each holder of shares of Company
Common Stock who would otherwise have been entitled to receive in the Merger a
fraction of a share of Parent Common Stock (after taking into account all
certificates surrendered by such holder) shall be entitled to receive, in lieu
thereof, a check in an amount (without interest) equal to such fractional part
of a share of Parent Common Stock multiplied by the Average Price.
(c) Promptly after the Effective Time, the Surviving Corporation
shall issue to Parent a certificate representing One Hundred (100) shares of the
common stock of the Surviving Corporation, and Parent shall cause the
certificate representing the shares of the capital stock of Acquisition to be
canceled.
-5-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND KRAUSS AND TRAPANI
Each of the Company and each of Krauss and Trapani, jointly and
severally, hereby represents and warrants to Parent and Acquisition, knowing and
intending that each of Parent and Acquisition is relying hereon in entering into
the transactions contemplated hereby, as follows:
SECTION 3.01 Authority Relative to Agreement. The Company has all
requisite power and authority to enter into and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by the Board of Directors and shareholders of the Company, and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the transactions contemplated hereby.
SECTION 3.02 Shareholders' Title to Stock. The shares of Company
Common Stock identified on the signature page(s) hereof opposite the respective
names of the holders thereof have been duly and validly issued to the respective
holders. The shares of Company Common Stock owned by them represent,
collectively, all of the issued and outstanding shares of capital stock (or
other equity interests) in the Company. Except with respect to such agreements
set forth on Schedule 3.02 hereto (the "Shareholders' Agreements"), each of
which is terminated as of the Effective Time, neither the Company nor the
Shareholders are party to any shareholders' agreement, buy-sell agreement or
similar agreement or arrangement.
SECTION 3.03 Organization, Standing and Qualification. The Company is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of New York and has the corporate power and lawful authority
to own and hold its properties and conduct its business as now owned, held and
conducted in its state of incorporation and the states (or other jurisdictions)
in which it has qualified to do business. The Company is qualified to do
business and is in good standing in all states (or other jurisdictions) in which
such qualification is required by reason of the nature or extent of business
conducted by the Company therein, except where the failure to so qualify would
not have a material adverse effect on the business, results of operations or
financial condition of the Company, and such states (and jurisdictions) are
specified in Schedule 3.03 attached hereto
SECTION 3.04 Stock of the Company. (a) The authorized capital stock
of the Company consists in its entirety of
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Two Hundred (200) shares of Company Common Stock, of which One Hundred (100)
shares of Company Common Stock are validly issued and outstanding, fully paid
and nonassessable. The Company does not have any outstanding subscription,
warrants, convertible securities, obligations, options or rights entitling
others to acquire shares of capital stock of the Company, or any outstanding
securities, options, warrants, rights or other instruments convertible into
shares of capital stock of the Company.
(b) Except with respect to the shares of Company Common Stock
identified on the signature page(s) hereof, none of the Shareholders or any
other person or entity has any outstanding claim against the Company or any
right whatsoever against the Company with respect to any shares of capital stock
of the Company, including, without limitation, any option, warrant or other
right to acquire from the Company shares of the capital stock of the Company or
any securities, options or other instruments convertible into or exchangeable
for shares of capital stock of the Company.
SECTION 3.05 Subsidiaries and Other Investments. Other than as listed
on Schedule 3.05 hereto, and other than FILCO, there is no corporation,
partnership, joint venture, or other entity in which the Company has, directly
or indirectly, made any investment or to which the Company has made an advance
of cash. The Company is not under any obligation to acquire any securities from
any person or entity, and, other than pursuant to the FILCO Agreement, the
Company is not under any obligation to make any investment, loan, cash
contribution or other advance to any person or entity, including, but not
limited to, International Benefits Administrators, L.L.C. or any member thereof.
SECTION 3.06 Certificate of Incorporation and By-Laws. True and
complete copies of the Company's Certificate of Incorporation and By-Laws
(together with any amendments thereto) are attached hereto as Schedule 3.06. The
Company has provided to Parent true and complete copies of the Certificate of
Incorporation and By-Laws of the Company and the Certificate of Incorporation
and By-Laws or other organizational agreements and documents of each Subsidiary,
together with all amendments thereto.
SECTION 3.07 Execution and Performance of Agreement; Validity and
Binding Nature. The execution and delivery of this Agreement, and the
performance by the Company, Krauss, Trapani and the Shareholders of the terms of
this Agreement and the transactions contemplated hereby, will not result in a
breach of any of the terms of, or constitute a violation of or default under,
the Certificate of Incorporation or By-Laws of the Company or any statute or
contract, indenture or other instrument by which the Company, Krauss, Trapani,
or the Shareholders or any of their respective properties are bound, and except
as provided in Section
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3.27 and disclosed in Schedule 3.27 hereof, no consent, approval, authorization
or order of any court or governmental authority is required in connection with
the execution and delivery of the Agreement by the Company, Krauss, Trapani and
the Shareholders and the performance by the Company, Krauss, Trapani and the
Shareholders of the terms of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company,
Krauss, Trapani and the Shareholders. This Agreement is, and the documents and
agreements executed and delivered by the Company, Krauss, Trapani and the
Shareholders pursuant to the terms hereof, when duly executed and delivered by
all parties whose execution and delivery thereof is required, will be legal,
valid, and binding obligations of the Company, Krauss, Trapani and the
Shareholders, enforceable against the Company, Krauss, Trapani and the
Shareholders in accordance with their respective terms, except to the extent
that enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by general principles of equity.
SECTION 3.08 Financial Statements. Parent has caused Coopers &
Lybrand L.L.C. to audit the combined balance sheet of the Company and its
affiliated entities, Krauss & Trapani Co., Ltd. and Group Plan Administrators,
Inc., as of April 30, 1997 (the "April 1997 Combined Balance Sheet"), and notes
thereto. The Company has delivered to Parent (i) the unaudited balance sheet of
the Company as of April 30, 1997 (the "April 1997 Balance Sheet") used for
purposes of preparing the April 1997 Combined Balance Sheet and included
therein, and the related unaudited statements of income, stockholders' equity
and cash flows for the period then ended, and notes thereto, and (ii) the
unaudited balance sheet of the Company as of December 31, 1996 (the "December
1996 Balance Sheet"), and the related unaudited statements of income,
stockholders' equity and cash flows for the fiscal year then ended, and notes
thereto, herein referred to collectively as the "Financial Statements". All
prepaid expenses included in the Financial Statements as assets represent
payments theretofore made by the Company, the benefit and advantage of which may
be obtained and enjoyed by the Surviving Corporation. The books and records of
the Company have been kept, and will be kept to the Effective Time, in
reasonable detail and in accordance with the same accounting principles
heretofore used and consistently applied.
SECTION 3.09 Intellectual Property Rights. Schedule 3.09 attached
hereto contains a complete and correct list and accurate description of all
trademarks, trade names, service marks, logos and other identifying symbols,
names or marks, copyrights, inventions, processes, designs, formulas, trade
secrets, patents, patent applications and other intellectual and/or proprietary
rights or interests (collectively, "Intellectual Property Rights")
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(a) owned by the Company free and clear of all licenses, liens, charges or
encumbrances, except as specified in such Schedule, or (b) licensed to the
Company under valid and enforceable agreements. The Company owns, or possesses
adequate rights to use, all Intellectual Property Rights necessary for the
conduct of the business of the Company, and the protection of patents is not
material to the conduct of the business of the Company. There are no
infringements by any third parties upon any Intellectual Property Rights or any
conflict with or infringement by the Company of the rights of others with
respect to same.
SECTION 3.10 Contracts and Contract Parties. Schedule 3.10 contains a
complete list of (a) each joint venture, co-marketing, co-brokerage or similar
contract or arrangement, whether written or oral, to which the Company is a
party, (b) each contract or arrangement, whether written or oral, with an
insurance company, general insurance agency, distributor or broker to which the
Company is a party, and under which the Company is authorized or obligated to
sell or broker insurance or related products or services, (c) each contract or
arrangement, whether written or oral, under which the Company receives
commissions or other income in connection with the conduct of its business, (d)
each lease or capital lease of equipment or other personal property, whether
written or oral, to which the Company is a party and (e) each consulting or
similar agreement, whether written or oral, to which the Company is a party, all
of the foregoing including the names and addresses of each party thereto other
than the Company (collectively, the "Contract Parties"), in each case under
which the Company's revenues or expenses exceeded $10,000.00 for the twelve
months ended June 30, 1997 or under which the Company reasonably anticipates
that its revenues or expenses will exceed $10,000.00 in the twelve months ending
June 30, 1998. True and complete copies of those contracts or arrangements
described in this Section 3.10 which are in writing have been made available to
Parent, and accurate descriptions of those contracts or arrangements described
in this Section 3.10 which are oral have been made available to Parent. Except
as described in Schedule 3.10, none of the contracts or arrangements listed in
Schedule 3.10 require the Company to purchase any product or service exclusively
from a Contract Party, require the Company to deal exclusively with a Contract
Party with respect to any customer or class of customers of the Company, or
otherwise limit the Company from selling or purchasing any product or service to
or from any person or entity. No Contract Party listed in Schedule 3.10 has
expressed to the Company, Krauss or Trapani its intention to cancel or otherwise
terminate its relationship with the Company, and, to the knowledge of the
Company, Krauss and Trapani, all of such contracts and arrangements will
continue in full force and effect after the Effective Time and a continuing
relationship with each such Contract Party is not in jeopardy.
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SECTION 3.11 Major Suppliers. Except as disclosed in Schedule 3.11,
and other than insurance companies or insurance brokers, there are no suppliers
or consultants from whom the Company has purchased goods and/or services
(collectively, the "Major Suppliers"), the loss of which would cause a material
adverse effect on the business, results of operations or financial condition of
the Company or the Surviving Corporation. No Major Supplier has expressed to the
Company, Krauss or Trapani its intention to cancel or otherwise terminate its
relationship with the Company or the Surviving Corporation.
SECTION 3.12 Employment, Deferred Compensation or Similar Agreements;
Collective Bargaining Agreements; Employee Benefit Plans. (a) Except as
disclosed in Schedule 3.12(a), the Company is not a party to any agreement or
employment contract or deferred compensation or similar employment or incentive
compensation arrangement with any of its respective employees or former
employees. There are no collective bargaining agreements or any agreements with
any labor union covering any employees of the Company. The business of the
Company is not affected by any present strike or other labor disturbance
involving the employees of the Company nor, to the best knowledge of the Company
or any Management Shareholder, is any union attempting to represent, as
collective bargaining agent, any person employed by the Company.
(b) Except as disclosed in Schedule 3.12(b), the Company does not
sponsor or maintain and is not otherwise a party to or liable under any plan,
program, fund or arrangement (whether or not qualified for Federal income tax
purposes), whether benefiting a single individual or multiple individuals, and
whether funded or not, that is an "employee pension benefit plan," or an
"employee welfare benefit plan," as such terms are defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any other
benefit arrangement for its employees, their dependents and beneficiaries.
(c) Except as disclosed in Schedule 3.12(b) hereto, the Company has
not and does not contribute to any multi-employer plan (as defined in Section
3(37) of ERISA), incurred any liability under Section 4201 of ERISA for any
complete or partial withdrawal from any multi-employer plan and has not assumed
any such liability by any prior owner of any of its assets or properties.
(d) Each employee pension benefit plan maintained by the Company and
listed in Schedule 3.12(b) complies in all material respects with the
requirements of ERISA. No "reportable event" within the meaning of Section 403
of ERISA has occurred with respect to any such plan and the Company has not
engaged in any "prohibited transaction" within the meaning of Section 406(a) or
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(b) of ERISA or of Section 4975(c) of the Code, with respect to any such plan;
and no such plan has been terminated in accordance with the procedures set forth
in Section 4041 or 4042 of ERISA.
(e) No liability has been incurred by the Company or any Subsidiary
for any tax imposed by Section 4975 of the Code with respect to any plan
described in Schedule 3.12(b). The Company has, and shall have, for all periods
ending on or prior to the Effective Time, administered each employee pension
benefit plan and each employee welfare benefit plan described in Schedule
3.12(b) in all material respects in compliance with the reporting, disclosure
and all other requirements applicable thereto under ERISA, the Code or any other
applicable law.
SECTION 3.13 Inventory. Except as disclosed in Schedule 3.13 or in
the April 1997 Balance Sheet, the Company does not own any inventory, and the
ownership and maintenance of inventory is not significant to the conduct of the
business of the Company.
SECTION 3.14 Real Estate. (a) The Company owns no real property. The
Company is not a party to any agreement involving the purchase or sale of real
or personal property except as disclosed in this Agreement or a Schedule hereto.
(b) Schedule 3.14 (b) contains a true and correct list and
description of all leases, subleases or other agreements under which the Company
is lessee or subtenant or lessor or sublessor of real estate. The Company has
provided to Parent true and complete copies of all such leases, subleases and
agreements, all of which leases, subleases and agreements are valid, binding and
enforceable. The Company has no oral leases of real estate.
(c) All leased real property (and improvements thereon) described in
Schedule 3.14(b) is in good operating condition and repair and conforms in all
material respects with all applicable building, zoning, planning and other
regulations, ordinances or laws, and the Company has the right to use all real
estate necessary to the conduct of its business as currently conducted.
SECTION 3.15 Title to and Condition of Personal Property. The Company
has merchantable title to all personal property reflected in the April 1997
Balance Sheet or acquired subsequent to the date of the April 1997 Balance
Sheet, free and clear of all liens or encumbrances, except as disclosed in
Schedule 3.15 hereto. No representation or warranty as to the condition of any
such personal property is made in this Agreement. The Company owns or has the
right to use all such properties necessary to the conduct of its business as
currently conducted.
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SECTION 3.16 Accounts and Notes Receivable. Except as disclosed in
Schedule 3.16, the accounts and notes receivable of the Company reflected in the
April 1997 Balance Sheet or acquired by the Company subsequent to the date of
the April 1997 Balance Sheet (a) are true, bona fide accounts or notes
receivable of the Company created in the ordinary course of business; (b) have
been collected or are fully collectible in amounts not less than the aggregate
amount thereof, net of reserves established therefor, on the books of the
Company and reflected in the April 1997 Balance Sheet; (c) are not subject to
any offsets, credits or counterclaims; and (d) have not at any time been placed
for collection with any attorney, collection agency or similar individual or
firm.
SECTION 3.17 Marketable Securities and Other Investments. Schedule
3.17 lists all of the marketable securities and other investments shown on the
April 1997 Balance Sheet (the "Company Investments"), all of which are owned by
the Company free and clear of any liens, encumbrances or claims, except as shown
in Schedule 3.17. The value of each of the Company Investments shown on the
April 1997 Balance Sheet reflect the fair market value thereof on the date of
the April 1997 Balance Sheet, as applicable, and the Financial Statements are in
conformity with the requirements of Financial Accounting Standards Board
Statement No. 115. All of the Company Investments are readily marketable except
as described in Schedule 3.17, and, since the date of the April 1997 Balance
Sheet, as applicable, there has been no material decline in the aggregate market
value of the Company Investments.
SECTION 3.18 Taxes. The Company has properly completed and filed all
federal, state, county, municipal and other tax returns, reports and
declarations which are required to be filed by it and has paid all taxes,
penalties and interest which have become due pursuant thereto or which became
due pursuant to asserted deficiencies or assessments. The Company has reported
its income for tax purposes on the cash method of accounting and will be
required pursuant to the Code to change to the accrual method of accounting at
the Effective Time. By reason of such change in the method of accounting, the
Surviving Corporation may be required to make certain adjustments to its taxable
income and may be required to pay additional taxes in respect of income which
the Company would have been required to report had it used the accrual method of
accounting prior to the Effective Time, it being understood and agreed hereunder
that such additional taxes, if any, shall be the exclusive liability of the
Surviving Corporation. Except as set forth in Schedule 3.18 hereto, the Company
has not received any notice of deficiency or assessment of additional taxes, all
such deficiencies or assessments set forth in Schedule 3.18 are being
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contested in good faith and through appropriate proceedings, and no tax audits
are in process. The last year for which the federal or state income taxes or
other taxes of the Company have been examined is set forth accurately and
completely on Schedule 3.18 hereto. The Company has not granted any waiver of
any statute of limitation with respect to, or any extension of a period for the
assessment of, any federal, state, county, municipal or other tax. The Company
filed an election under Section 1362(a) of the Code to be taxed as an S
Corporation on the date indicated on Schedule 3.18, and said election is in
effect on and as of the date hereof.
SECTION 3.19 Litigation. Except as disclosed in Schedule 3.19, there
is no litigation, investigation or proceeding pending or, to the knowledge of
the Company, Krauss or Trapani, threatened, involving the Company or any of its
properties. There are no outstanding orders, writs, injunctions or decrees of
any court, governmental agency or arbitration tribunal materially affecting or
materially limiting the conduct of the business of the Company.
SECTION 3.20 Other Material Contracts and Commitments. Except as
disclosed in Schedule 3.20 or another Schedule hereto, the Company is not a
party to and none of its properties are bound by any of the following types of
contracts or commitments, written or oral: (a) mortgages, indentures, security
agreements and other agreements and instruments relating to the borrowing of
money in excess of $10,000.00 in the aggregate or extension of credit in excess
of $10,000.00 in the aggregate or imposition of an encumbrance on any of the
assets of the Company; (b) any contract with any officer, director or with any
employee of the Company (other than agreements relating to current wage or
salary payments terminable by the Company on notice of thirty (30) days or
less); (c) any contract or promissory note or other instrument with any
Affiliate (as hereinafter defined) of the Company; (d) any guarantee of the
obligations of any person or entity or obligation to provide funds or assume the
debt of any person or entity; (e) any option or right to acquire any assets of
the Company outside of the ordinary course of business; or (f) profit-sharing,
stock option, pension, or retirement agreements, shareholder or similar
agreements or arrangements, trusts, or funds for the benefit of employees
(collectively, the "Other Contracts"). The Company has delivered to Parent
complete and correct copies of all of the Other Contracts as are in writing,
together with all amendments thereto, and accurate descriptions of all of the
other Contracts which are oral. The Company is not in default with respect to
any of the Other Contracts, and to the knowledge of the Company, Krauss and
Trapani, no other party to any of the Other Contracts is in default with respect
thereto. Except as specifically set forth on Schedule 3.20, each of the Other
Contracts will continue in full force and effect after the Effective Time
without any right on the part of
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any party thereto, other than the Surviving Corporation, to terminate it as a
result of the occurrence of the Merger. For purposes of this Agreement, an
"Affiliate" of the Company means (a) any corporation, partnership, trust or
other entity in control of, controlled by or under common control with the
Company; and (b) any officer, director, trustee, general partner or employee of
any corporation, partnership, trust or other entity in control of, controlled by
or under common control with the Company. For purposes of this Agreement, the
term "control" (including the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract, or otherwise.
Schedule 3.20 discloses all Affiliates of the Company which are business
entities currently in existence.
SECTION 3.21 Labor Relations. Except as disclosed in Schedule 3.21,
the Company, in the conduct of its affairs, has complied in all material
respects with all applicable laws (including, without limitation, labor and tax
laws), and regulations relating to the hiring and employment of employees and
independent contractors, including, without limitation, those related to
discrimination, wages, hours, collective bargaining, employee pension and
welfare benefit plans, and the payment of (and withholding for) income, Social
Security and other employment related taxes, and the Company is not liable for
any penalties or damages for failure to comply with any of the foregoing. There
are no unfair labor practice claims or charges pending or threatened involving
the Company.
SECTION 3.22 Insurance. Schedule 3.22 hereto contains a list and
description (including the name of the insurer, coverage and expiration date) of
all insurance policies maintained by the Company. Schedule 3.22 further lists
all claims presently pending or threatened which are covered by such policies.
The Company has not received notice of cancellation or non-renewal of any of
such policies.
SECTION 3.23 Conduct of Business and Absence of Changes. Except as
disclosed in Schedule 3.23, since April 30, 1997, the Company has conducted its
business in the regular and ordinary course and has not (a) undergone any
material adverse change in its condition (financial or otherwise), assets,
liabilities, business, or operations, (b) declared, set aside, made or paid any
cash or stock dividend or distribution or purchased, issued or sold any shares
of its capital stock, (c) incurred any indebtedness for borrowed money other
than as disclosed in Schedule 3.20 or issued or sold any debt securities, (d)
instituted any increase in the compensation or bonuses payable or to become
payable to any officers or employees, or any changes in personnel
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policies or employees benefits, or (e) made any payment to any Shareholder
except for payments described in a Schedule hereto and regular salary and
ordinary and necessary business expense reimbursements.
SECTION 3.24 Compliance with Laws; Governmental Authorizations. The
Company is in compliance, in all material respects, with all statutes, laws,
ordinances, rules, regulations, judgments, orders, decrees, governmental
licenses or permits and other governmental licenses, permits, authorizations or
approvals applicable to it or any of its properties. All governmental licenses,
permits, authorizations or approvals necessary for the conduct of its business
have been duly and lawfully obtained and are in full force and effect, except
where the failure to obtain and/or maintain the same would not have a material
adverse effect on the business, results of operations or financial condition of
the Company, and none of the Company, Krauss or Trapani have knowledge of any
proceedings pending or threatened which may result in the revocation,
cancellation or suspension, or any materially adverse modification, of any
thereof.
SECTION 3.25 Officers, Directors and Depositories. Schedule 3.25
hereto contains the names of all the officers and directors of the Company, the
names of all depositories of the funds of the Company and the names of the
officers and other persons empowered to sign instruments withdrawing funds from
said depositories.
SECTION 3.26 Environmental Matters. (a) The business and operations
of the Company comply in all material respects with all federal, state and local
laws, rules, regulations and directives pertaining to the environment. No
governmental agency has asserted any claim or given notice of any possible claim
or, to the knowledge of the Company, Krauss or Trapani, threatened to assert any
claim against the Company in respect of its business, any assets owned or leased
by it, real properties owned or leased by it, or the condition, use or operation
thereof, arising out of any federal, state or local law, rule, regulation or
directive pertaining to the environment.
(b) To the best knowledge of the Company and Krauss and Trapani,
there are nowhere on any real property leased by, used by or otherwise under the
control of the Company any deposits, dumps, or tanks of toxic or other
poisonous, dangerous or noxious waste, fluids, solvents, chemicals or effluents,
all of which chemicals, fuels and fluids are properly and safely stored,
identified, labeled and maintained in accordance with applicable industrial
standards and all governmental or other laws or regulations relating thereto.
The Company does not discharge from any real property leased, used or otherwise
under its control, whether by
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effluent, emission or other means, any noxious, toxic, hazardous or deleterious
matter or gases. All discharges of waste material and other substances from the
operating facilities of the Company are in full compliance with applicable law
and covered by valid permits and licenses, where required.
SECTION 3.27 Third Party and Governmental Consents. Except as
disclosed in Schedule 3.27 hereto, and except for (i) consents of or filings
with governmental agencies and (ii) consents of insurance carriers or other
parties under contracts terminable at will or on notice of 60 days or less, no
consent, waiver, authorization, approval, order, license, certificate or permit
of or from, or registration, declaration or filing with, any court or other
tribunal or any other person, firm or entity, nor under any contract, indenture,
mortgage, lease, license or other agreement or instrument to which the Company,
Krauss or any Shareholder is a party or by which the Company, Krauss or any
Shareholder, or any of their respective assets or properties, is subject or
bound, is required by or with respect to the Company, Krauss or any Shareholder
in connection with the execution, delivery or performance of this Agreement or
of any other agreement, document or instrument to be executed and delivered by
the Company, Krauss or any Shareholder pursuant hereto or in connection herewith
or the consummation of the transactions contemplated hereby. The Company,
Krauss, Trapani or a Shareholder, as applicable, has obtained all consents and
waivers listed in Schedule 3.27 on or prior to the date hereof, including,
without limitation, the consent of American Mayflower Life Insurance Company and
the consent of First Colony Life Insurance Company.
SECTION 3.28 Licenses and Permits. The Company has obtained all
consents, approvals, waivers, licenses and permits from governmental authorities
required to have been obtained by it in connection with the ownership of the
assets of the Company and the operation of the business of the Company as
presently and heretofore conducted, including, without limitation, all insurance
producer and similar licenses required to have been obtained by it (herein
collectively referred to as the "Company Licenses"), except where the failure to
obtain the same would not have a material adverse effect on the business,
results of operations or financial condition of the Company. Except as disclosed
in Schedule 3.28 hereto, the Company, Krauss or Trapani is not aware of any
failure by any employee and agent of the Company to obtain all approvals,
licenses and permits from governmental authorities required in connection with
the operation of the business of the Company and the services provided by such
employee or agent to the Company, including, without limitation, insurance
producer licenses and similar licenses (herein collectively referred to as the
"Employee and Other Licenses"). The Company Licenses and the Employee and Other
Licenses are listed on Schedule 3.28 hereto and, except as
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otherwise set forth in Schedule 3.28 hereto, no other licenses or permits are
required to conduct or operate the business of the Company as presently
conducted, except where the failure to obtain the same would not have a material
adverse effect on the business, results of operations or financial condition of
the Company. None of the Company Licenses or the Employee and Other Licenses are
threatened to be revoked or suspended, and there are no disciplinary proceedings
pending or threatened by, any issuer of any such license or any other
governmental authority against the holder thereof.
SECTION 3.29 Software. The Company does not own or license any
computer software or related programs other than off-the-shelf software licensed
to the Company and used in the ordinary course of the Company's business.
SECTION 3.30 Loans to or from Shareholders or Employees. The Company
does not have outstanding any loans, advances or other indebtedness incurred by
Krauss, Trapani or any Shareholder or any employee, former employee or former
shareholder of the Company or any member of their respective families, and there
are no loans or advances made to the Company by or indebtedness incurred by the
Company to Krauss, Trapani or any Shareholder or any employee, former employee
or former shareholder of the Company, or any member of their respective
families.
SECTION 3.31 Absence of Undisclosed Liabilities. Except as and to the
extent disclosed or accrued on the Financial Statements or incurred in the
ordinary course of business since the date of the April 1997 Balance Sheet,
there exist no liabilities or obligations of any nature whatsoever (whether
absolute, contingent or otherwise) known to the Company, Krauss or Trapani in
respect of the business or assets of the Company of the type customarily
reflected in financial statements prepared in accordance with generally accepted
accounting principles. None of the Company, Krauss or Trapani knows or has any
reasonable grounds to know after due inquiry of any basis for assertion against
the Company of any claim or liability of any nature in any amount not fully
disclosed in the Financial Statements or otherwise pursuant to the terms hereof.
SECTION 3.32 Shareholders' and Similar Agreements. Except as set
forth in Schedule 3.02, neither any Shareholder, nor any other person or entity,
nor the Company, Krauss or Trapani are parties to any shareholders' agreement,
buy-sell agreement, stock rights agreement or any similar agreement or
arrangement related to the purchase and sale of any shares of Company Common
Stock. As of the Effective Time, each of the agreements listed in Schedule 3.02
is terminated and will be of no further effect, and, as of the Effective Time,
the Company has no obligation to any Shareholder or
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74y other person or entity for the purchase of any shares of Company Common
Stock or for the payment of any consideration in respect of the purchase, sale
or other disposition of shares of Company Common Stock.
SECTION 3.33 Approval of Merger. The Merger has been duly and validly
authorized and approved by the holders of 100% of the outstanding shares of
Company Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder hereby represents and warrants to Parent and
Acquisition, as to itself, severally and not jointly, as follows, knowing and
intending that each of Parent and Acquisition is relying hereon in entering into
the transactions contemplated hereby:
SECTION 4.01 Authority and Capacity Relative to Agreement. Such
Shareholder has all requisite power, authority and legal capacity to enter into
and perform each of its obligations hereunder.
SECTION 4.02 Execution and Performance of Agreement; Validity and
Binding Nature. The execution and delivery of this Agreement, and the
performance by such Shareholder of the terms of this Agreement and the
transactions contemplated hereby, will not result in a material breach of any of
the terms of, or constitute a violation or default under, any statute or
contract, indenture or other instrument by which such Shareholder or any of its
respective properties are bound, and no consent, approval, authorization or
order of any court or governmental authority is required in connection with the
execution and delivery of this Agreement by such Shareholder and the performance
by such Shareholder of the terms of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
Shareholder and, together with the other documents and agreements to be executed
by all parties whose execution and delivery thereof is required, constitutes the
legal, valid and binding obligations of such Shareholder, enforceable against
such Shareholder in accordance with their respective terms, except to the extent
that enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by general principles of equity.
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SECTION 4.03 Stock of the Company. The number of shares of Company
Common Stock beneficially owned by such Shareholder is as identified on the
signature page(s) hereof opposite the respective Shareholder's name. The shares
of Company Common Stock beneficially owned by such Shareholder are owned free
and clear of all liens, claims, options, encumbrances or restrictions
whatsoever. Such Shareholder has the full legal right and power and all
authorizations and approvals required by law or otherwise to sell, transfer and
deliver such shares hereunder and to make the representations, warranties and
agreements set forth in this Agreement. Except with respect to the shares of
Company Common Stock identified on the signature page(s) hereof opposite such
Shareholder's name, such Shareholder has no outstanding claim against the
Company or any right whatsoever with respect to any shares of the capital stock
of the Company, including without limitation any option, warrant or other right
to acquire shares of the capital stock of the Company or any securities, options
or other instruments convertible or exchangeable into shares of capital stock of
the Company. Except as set forth in that certain Shareholders' Agreement of
Company disclosed on Schedule 3.32, no Shareholder has granted any option or
other right to acquire from such other Shareholder any shares of Company Common
Stock.
SECTION 4.04 Additional Representations and Covenants of
Shareholders. Each Shareholder hereby acknowledges, represents and warrants to
Parent, as to itself, severally and not jointly and agrees as follows, knowing
and intending that Parent is relying hereon in entering into the transaction
contemplated hereby:
(a) Such Shareholder understands that the shares of Parent Common
Stock which are the subject of this Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended (the "Securities Act")
by virtue of Section 4(2) thereof, based, in part, upon the representations,
warranties and agreements of each Shareholder contained in this Agreement.
(b) Neither the Securities and Exchange Commission (the "SEC") nor
any state securities commission has approved the Parent Common Stock or passed
upon or endorsed the merits of an investment therein or confirmed the accuracy
or adequacy of any information provided by Parent to the Shareholders or the
accuracy or adequacy of any of the representations, warranties and agreements of
Parent contained herein.
(c) Such Shareholder is acquiring Parent Common Stock solely for its
own account for investment and not with any present view to resale or
distribution thereof, in whole or in part. No Shareholder has any agreement or
arrangement, formal or informal, written or oral, with any person to sell or
transfer or otherwise dispose of all or any part of the Parent Common Stock, and
none has
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any present plans to enter into any such agreement or arrangement.
(d) No Shareholder became aware of the offer and sale of Parent
Common Stock through or as a result of any form of general solicitation or
general advertising including, without limitation, any article, notice,
advertisement or other communication published in any newspaper, magazine or
other media in connection with the offer and sale of Parent Common Stock
contemplated hereby and no Shareholder is purchasing Parent Common Stock through
or as a result of any seminar or meeting to which any Shareholder was invited.
(e) Such Shareholder, if listed in Schedule 4.04(e), meets the
requirements of at least one of the categories of an "accredited investor", as
defined in Rule 501(a) under the Securities Act.
(f) Such Shareholder, or such Shareholder together with its Purchaser
Representative (hereinafter defined), has such knowledge and experience in
financial, tax, and business matters in general, and investments in securities
in particular, so as to enable such Shareholder to evaluate the merits and risks
of an investment in Parent Common Stock and to make an informed investment
decision with respect thereto.
(g) Such Shareholder, or such Shareholder together with its Purchaser
Representative, is familiar with the business, historical financial performance
and prospects of the Company, including the risks associated therewith. All
information, including, without limitation, financial information and the
Financial Statements, provided by the Company or such Shareholder for insertion
in the Merger Information (hereafter defined) does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances in which they were made, not misleading, it being
understood and acknowledged that such information has not been independently
verified by Parent or Acquisition.
(h) Such Shareholder recognizes that it must bear the substantial
economic risks of the investment in Parent Common Stock indefinitely, because
none of the Parent Common Stock may be sold, transferred, hypothecated or
otherwise disposed of unless such Parent Common Stock is registered under the
Securities Act and applicable state securities laws or an exemption from such
registration is available. Legends shall be placed on the certificates
representing Parent Common Stock issuable stating that the shares represented
thereby have not been registered under the Securities Act or applicable state
securities laws, and appropriate notations thereof will be made in Parent's
stock books.
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(i) Such Shareholder has adequate means of providing for its current
financial needs and foreseeable contingencies and has no need for liquidity of
its investment in Parent Common Stock for an indefinite period of time. Such
Shareholder's overall commitment to investments which are not readily marketable
is not excessive in view of its net worth and financial circumstances and the
purchase of the Parent Common Stock will not cause such commitment to become
excessive.
(j) Such Shareholder is not relying on Parent or any of its employees
or agents with respect to the legal, tax, economic and related considerations of
an investment in Parent Common Stock, other than as expressly contained in the
representations and warranties of Parent contained in Article V hereof. There
has been delivered to such Shareholder copies of this Agreement, Parent's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996, Parent's 1996
Annual Report to Stockholders, Parent's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1996, December 31, 1996 and March 31, 1997,
Parent's Proxy Statement for its Annual Meeting held on November 14, 1996,
Parents Press Releases dated July 17, 1997 and August 5, 1997, the Financial
Statements and a summary description of the Company's business (collectively,
the "Merger Information"). Such Shareholder, or such Shareholder together with
its Purchaser Representative, has read and fully understands the Merger
Information.
(k) Such Shareholder, or such Shareholder together with its Purchaser
Representative, (i) has had the opportunity to obtain all information requested
by him for the purposes of verifying the Merger Information or for any other
purpose related hereto and (ii) has had the opportunity to meet with
representatives of Parent and the Company and to have them answer any questions
and provide such additional information regarding the terms and conditions of
the transactions contemplated hereby, the information with respect to Parent
included in the Merger Information and the business and prospects of Parent
deemed relevant by such Shareholder, or such Shareholder together with its
Purchaser Representative, all of which questions have been answered and all of
which requested information has been provided to the full satisfaction of such
Shareholder. Such Shareholder is aware that an investment in Parent Common Stock
is speculative and involves significant risks, including, among other things,
the risk of the loss of such Shareholder's entire investment in Parent Common
Stock.
(l) In evaluating the suitability of an investment in Parent, and in
deciding to enter into this Agreement, no Shareholder, nor any Shareholder
together with its Purchaser Representative, has relied upon any representation
or other information (whether oral or written) other than as set forth in
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the representations and warranties of Parent contained in Article V of this
Agreement and the Merger Information. No oral or written representations have
been made, or oral or written information furnished, to any Shareholder in
connection with the offer and sale of Parent Common Stock that are in any way
inconsistent with the representations and warranties of Parent contained herein
or any of the information contained in the Merger Information.
(m) Except as described in Schedule 4.04(m) hereto, no Shareholder
has any beneficial interest, directly or indirectly, in any person, firm,
corporation, partnership or other entity which is or within the past two years
has been a supplier of any goods or services to the Company, including, without
limitation, any Major Supplier, or from which the Company has received fees,
including, without limitation, any Contract Party, other than as the beneficial
owner of 1% or less of the voting securities of a publicly held corporation. The
nature and amount of any such beneficial interest is disclosed in Schedule
4.04(m).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company and each Shareholder as
follows:
SECTION 5.01 Organization and Qualification. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own or
lease and operate its properties and assets and to carry on its business as it
is now being conducted. Parent is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, results of operations or
financial condition of Parent and its subsidiaries, taken as a whole.
SECTION 5.02 Acquisition. Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as it is now being
conducted. Acquisition is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on business, results of operations or financial
condition of Parent and its
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subsidiaries, taken as a whole. All the outstanding shares of capital stock of
Acquisition are validly issued, fully paid and nonassessable and are owned by
Parent.
SECTION 5.03 Capitalization. The authorized capital stock of Parent
consists of 80,000,000 shares of Parent Common Stock, and, as of June 30, 1997,
25,235,288 shares of Parent Common Stock were issued and outstanding, all of
which were validly issued and are fully paid and nonassessable. Except as
contemplated hereby and except for rights or options outstanding under Parent's
employee stock purchase and stock options plans, and rights outstanding under
the Rights Agreement dated May 7, 1997 between Parent and Bank of New York, as
rights agent, no subscription, warrant, option, convertible security, stock
appreciation or other right (contingent or other) to purchase or acquire any
shares of any class of capital stock of Parent is authorized or outstanding and
there is not any agreement of Parent to issue any shares, warrants, options or
other such rights or to distribute to holders of any class of its capital stock
any evidences of indebtedness or assets. Parent does not have any obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. At the Effective Time, Parent will have
sufficient authorized and unissued shares of Parent Common Stock available for
issuance in accordance with Article II hereof. When issued to the Shareholders
hereunder, such shares of Parent Common Stock will have been duly authorized by
Parent and, upon receipt of consideration therefor in accordance with the terms
hereof, such shares will be validly issued, fully paid and nonassessable shares
of Parent Common Stock.
SECTION 5.04 Authority Relative to Agreement. Parent has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Parent and the consummation by Parent of the transactions contemplated hereby
(including issuance of Parent Common Stock to the Shareholders pursuant to the
terms hereof) have been duly authorized by the Board of Directors of Parent, and
no other corporate proceedings on the part of Parent are necessary to authorize
this Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and constitutes the legal, valid and
binding obligation of Parent, enforceable against Parent in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by general
principles of equity.
SECTION 5.05 Non-Contravention. The execution and delivery of this
Agreement by Parent and the consummation by Parent
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of the transactions contemplated hereby will not (a) conflict with any provision
of the Certificate of Incorporation or By-Laws of Parent or (b) result (with or
without the giving of notice or the lapse of time or both) in any violation of
or default or loss of a benefit under, or permit the acceleration of any
obligation under, any mortgage, indenture, lease, agreement or other instrument,
permit, concession, grant, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or any of its
subsidiaries or any of their respective properties, other than any such
violation, default, loss or acceleration that would not have a material adverse
effect on the business, results of operations or financial condition of Parent
and its subsidiaries, taken as a whole.
SECTION 5.06 Parent Public Information. Parent has provided to each
Shareholder a copy of that portion of the Merger Information consisting of the
public reports and press releases of Parent referred to in Section 4.04(j) the
"Parent Public Information"). The Parent Public Information does not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 5.07 Financial Statements. The consolidated financial
statements of Parent included in the Parent Public Information have been
prepared in accordance with GAAP consistently applied and consistent with prior
periods, subject, in the case of unaudited interim consolidated financial
statements, to year-end adjustments (which consist of normal recurring accruals)
and the absence of certain footnote disclosures. The consolidated balance sheets
of Parent included in the Parent Public Information fairly present in all
material respects the financial position of Parent and its subsidiaries as of
their respective dates, and the related consolidated statements of operations,
shareholders' equity and cash flows included in the Parent Public Information
fairly present in all material respects the results of operations of Parent and
its subsidiaries for the respective periods then ended, subject, in the case of
unaudited interim financial statements, to year-end adjustments (which consist
of normal recurring accruals) and the absence of certain footnote disclosures.
SECTION 5.08 Absence of Certain Changes or Events. Except as
contemplated hereby or disclosed in Parent's press releases dated July 17, 1997
and August 5, 1997, and except for the issuance of Parent Common Stock pursuant
to employee benefit plans of Parent described in Section 5.03 above, since March
31, 1997, Parent has not (a) issued any Parent Common Stock or securities or
obligations convertible into or exchangeable for Parent Common Stock, (b)
incurred any material liabilities (absolute or contin-
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gent), except in the ordinary course of business or (c) suffered any material
adverse effect on the business, results of operations or financial condition of
Parent and its subsidiaries, taken as a whole.
SECTION 5.09 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign governmental or regulatory authority is required to be
made or obtained by Parent in connection with the execution and delivery of this
Agreement by Parent or the consummation by Parent of the transactions
contemplated hereby, except for (a) filings pursuant to the Securities Act and
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations promulgated by the SEC thereunder, if applicable, (b)
filings with state securities agencies under state securities or blue sky laws,
if applicable, (c) the filing of a listing application with the Nasdaq National
Market with respect to shares of Parent Common Stock issuable in the Merger, (d)
the filing of a Certificate of Merger with the Secretary of State of the State
of New York in accordance with the New York BCL, (e) the filing of a Certificate
of Merger with the Secretary of State of the State of Delaware in accordance
with the Delaware GCL, (f) filings of notices required to be filed with state
insurance departments, (g) any licenses, permits, franchises or other
governmental authorizations pertaining to the business of the Company and its
subsidiaries that are required as a result of the consummation of the
transactions contemplated hereby and (h) such consents, approvals, orders or
authorizations which if not obtained, or registrations, declarations or filings
which if not made, would not have a material adverse effect on the business,
results of operations or financial condition of Parent and its subsidiaries,
taken as a whole.
SECTION 5.10 Compliance with Law. Neither Parent nor any of its
subsidiaries is in default under any order of any court, governmental authority
or arbitration board or tribunal. Neither Parent nor any such subsidiary has
received notice of any alleged violation of any applicable laws, ordinances and
governmental rules and regulations to which Parent or any such subsidiary is
subject, including, without limitation, federal securities and banking laws.
Neither Parent nor any subsidiary has failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business, except where the failure to
obtain such licenses, permits, franchises or other governmental authorizations
would not have a material adverse effect on business, results of operations or
financial condition of Parent and its subsidiaries, taken as a whole.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Each of Parent and Acquisition, jointly and severally, represents and
warrants to the Company and each Shareholder, knowing and intending that the
Company and each Shareholder is relying thereon in entering into the
transactions contemplated hereby, as follows:
SECTION 6.01 Organization and Qualification. Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own or lease and operate its properties and assets and to carry on its business
as it is now being conducted. Acquisition is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect with respect to Acquisition.
SECTION 6.02 Capitalization. The authorized capital stock of
Acquisition consists of 3,000 shares of common stock, $.01 par value. As of the
date hereof, 100 shares of such common stock are validly issued and outstanding,
fully paid and nonassessable and are owned of record and beneficially by Parent,
and no shares of such common stock are held in the treasury of Acquisition.
Acquisition has no commitments to issue or sell any shares of such common stock
or any securities or obligations convertible into or exchangeable for, or giving
any person any right to subscribe for or acquire from Acquisition, any shares of
such common stock, and no securities or obligations evidencing any such rights
are outstanding.
SECTION 6.03 Authority Relative to Agreement. Acquisition has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Acquisition and by Parent as its sole shareholder, and no other corporate
proceedings on the part of Acquisition are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Acquisition and constitutes the legal, valid and binding
obligation of Acquisition, enforceable against Acquisition in accordance with
its terms except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors
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generally or by principles of equity.
SECTION 6.04 Non-Contravention. The execution and delivery of this
Agreement by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby will not (a) conflict with any provision of the Certificate
of Incorporation or By-Laws of Acquisition or (b) result (with the giving of
notice or the lapse of time or both) in any violation of or default or loss of a
benefit under, or permit the acceleration of any obligation under, any mortgage,
indenture, lease, agreement, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquisition or its properties.
SECTION 6.05 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign governmental or regulatory authority is required to be
made or obtained by Acquisition in connection with the execution and delivery of
this Agreement by Acquisition or the consummation by Acquisition of the
transactions contemplated hereby, except for (a) the filing of Certificate of
Merger with the Secretary of State of the State of New York in accordance with
the New York BCL, (b) the filing of a Certificate of Merger with the Secretary
of State of the State of Delaware in accordance with the Delaware GCL, (c) any
licenses, permits, franchises or other governmental authorizations pertaining to
the business of Acquisition that are required as a result of the consummation of
the transactions contemplated hereby and (d) the filing of notices required to
be filed with state insurance departments.
SECTION 6.06 Other Matters. Acquisition has been formed for the sole
purpose of effecting the Merger and, except as contemplated by this Agreement,
Acquisition has not conducted any business activities and does not have any
material liabilities or obligations.
ARTICLE VII
COVENANTS AND OTHER AGREEMENTS
SECTION 7.01 Non-Competition Agreements. Simultaneously with the
execution and delivery hereof, Krauss and Trapani are each entering into a
non-competition and confidentiality agreement, effective as of the Effective
Time, for the benefit of Parent and the Surviving Corporation, in form and
substance satisfactory to the parties thereto.
SECTION 7.02 Employment Agreement. Simultaneously with the execution
and delivery hereof, Trapani is entering into a three-year employment contract
with Parent, effective as of the
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Effective Time in form and substance satisfactory to the parties thereto.
SECTION 7.03 Certain Life Insurance Policies. Schedule 7.03 sets
forth certain life insurance policies maintained in force by the Company in
respect of employees of the Company. As soon as practicable, the Surviving
Corporation will transfer and assign each such insurance policy to the insured
employee, to the extent transferrable and assignable, provided that such
employee shall undertake and assume in writing all obligations of the Surviving
Corporation thereunder. Any such life insurance policy which is not transferable
and assignable will be terminated.
SECTION 7.04 Indemnification. (a) The Shareholders shall be severally
liable to, and shall severally indemnify, protect, defend and hold harmless
Parent and its successors and the Surviving Corporation and its successors
against any and all claims, damages, liabilities and expenses (including
reasonable attorneys' fees) sustained by Parent or the Surviving Corporation,
resulting from or in connection with the breach of any representation, warranty,
covenant or other agreement made by the Company, Krauss, Trapani or any
Shareholder in or pursuant to this Agreement or any other agreement or
instrument executed and delivered by or on behalf of the Company, Krauss,
Trapani or any Shareholder pursuant hereto or in connection herewith (such
breaches or failures being hereinafter referred to individually as an
"Indemnifiable Breach" and collectively as "Indemnifiable Breaches"); provided,
however, that (i) neither the Krauss Trustee Shareholder, individually, nor
Trapani, individually, shall be required to pay Parent and/or the Surviving
Corporation, as the case may be, pursuant to this Section 7.04(a), an amount in
excess of fifty percent (50%) of any amount required to be paid to Parent and/or
the Surviving Corporation in respect of any Indemnifiable Breach, and (ii)
neither the Krauss Trustee Shareholder, individually, nor Trapani, individually,
shall be required to pay Parent and/or the Surviving Corporation, as the case
may be, pursuant to this Section 7.04, an aggregate amount in excess of the
dollar value equivalent of Parent Common Stock valued at the Average Price
received by them upon consummation of the Merger pursuant to the terms hereof.
The indemnification obligations of the Shareholders under this Section 7.04
shall apply to claims, damages, liabilities and expenses sustained by Parent
and/or the Surviving Corporation in respect of Indemnifiable Breaches if and
when the aggregate amount of such claims, damages, liabilities and expenses
exceeds $25,000.00, or $30,000.00 in the aggregate in respect of indemnifiable
claims, damages, liabilities and expenses for Indemnifiable Breaches and
indemnifiable claims, damages, liabilities and expenses payable by shareholders
of Group Plan Administrators, Inc. and/or Krauss & Trapani Co., Ltd. under the
separate Agreements and Plans of Merger executed simultaneously
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herewith among Parent, the certain acquisition subsidiaries of Parent, said
corporations and said shareholders of said corporations (the "Affiliate Merger
Agreements"). In the event the aggregate amount of the claims, damages,
liabilities and expenses sustained by Parent and/or the Surviving Corporation in
respect of Indemnifiable Breaches and/or Indemnifiable Breaches together with
indemnifiable claims, damages, liabilities and expenses in respect of the
Affiliate Merger Agreements exceeds said amount, the indemnification obligations
of the Shareholders under this Section 7.04 shall apply to all claims, damages,
liabilities and expenses actually sustained by Parent and/or the Surviving
Corporation in respect of Indemnifiable Breaches.
(b) Notwithstanding anything herein to the contrary, and except for
the payment by Parent or the Surviving Corporation of the FILCO Obligation after
the Effective Time pursuant to Section 7.10 hereof, each of Krauss and Trapani
shall be jointly and severally liable to, and shall jointly and severally
indemnify, protect, defend and hold harmless Parent and its successors and the
Surviving Corporation and its successors, against any and all claims, damages,
liabilities and expenses (including reasonable attorneys' fees) arising from or
in connection with (i) any obligation to advance, loan or contribute any amounts
to FILCO or International Benefits Administrators L.L.C. not expressly
undertaken by the Surviving Corporation after the Effective Time and (ii) any
obligation of Krauss and/or Trapani as shareholders of FILCO or as members of
International Benefits Administrators L.L.C. The indemnification obligation set
forth in this Section 7.04(b) shall be unlimited in dollar amount as to Krauss
and Trapani.
(c) The Shareholders shall each be permitted to satisfy any
obligation under Section 7.04(a) or Section 7.04(b) in cash or by delivering to
Parent shares of Parent Common Stock in an amount equal to his obligation
thereunder based on a per share value equal to the Average Price.
(d) Parent and Acquisition shall be jointly and severally liable to,
and shall jointly and severally indemnify, protect, defend and hold harmless
each Shareholder and its respective successors against any and all claims,
damages, liabilities and expenses (including reasonable attorneys' fees)
sustained by any Shareholder, resulting from or in connection with the breach of
any representation, warranty, covenant or other agreement made by Parent or
Acquisition in or pursuant to this Agreement or any other agreement or
instrument executed and delivered by or on behalf of Parent and/or Acquisition
pursuant hereto or in connection herewith.
(e) Notwithstanding anything herein to the contrary, any party hereto
shall be entitled to seek specific enforcement of
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this Agreement. In the event Parent and/or the Surviving Corporation becomes
entitled to any sums under the terms hereof, Parent and/or the Surviving
Corporation shall have the right but not the obligation to set off such
liabilities of the Krauss Trustee Shareholder and/or Trapani against any
existing or future liabilities of Parent or the Surviving Corporation to the
Krauss Trustee Shareholder and/or Trapani other than against amounts owed by the
Company to Krauss and/or Trapani as compensation for employment.
(f) The terms of this Section 7.04 are intended to benefit the
parties hereto, and any and all claims for indemnification under this Section
7.04 must be made during the period commencing at the Effective Time and ending
on the earlier to occur of (i) one (1) year after the Effective Time or (ii)
publication of the independent audit report on the consolidated financial
statements of Parent for the fiscal year ending June 30, 1998.
SECTION 7.05 Confidentiality. Except as otherwise provided in the
certain Confidentiality Agreement dated December 4, 1996 between the Company and
Parent with regard to information about the Company and Parent (the
"Confidentiality Agreement"), Parent and Acquisition, on the one hand, and the
Company and each Shareholder, on the other, shall hold, and shall use their
respective best efforts to cause their respective officers, directors,
employees, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other parties furnished to such party in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (a) previously known on a nonconfidential basis by such
party; (b) in the public domain through no fault of such party; or (c) later
lawfully acquired by such party from sources other than the other parties;
provided that each party may disclose such information to its Affiliates and its
Affiliates' officers, directors, employees, consultants, advisors and agents,
lenders and other investors in connection with the transactions contemplated by
this Agreement so long as such persons are informed by such party of the
confidential nature of such information and are directed by such party to treat
such information confidentially.
SECTION 7.06 Transfer Restrictions After the Effective Time. Each
Shareholder hereby agrees that, from and after the Effective Time:
(a) Lock-Up. Such Shareholder shall not sell or otherwise reduce its
risk relative to any shares of Parent Common
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Stock received by it in the Merger (within the meaning of Financial Reporting
Policy, Section 201.01), except as permitted by Staff Accounting Bulletin No. 76
issued by the SEC, until Parent has published financial results covering a
fiscal quarter that includes results (including combined sales and net income)
for a period of at least 30 days of post-Merger operations.
(b) Securities Act Compliance. Such Shareholder shall not offer,
sell, or otherwise dispose of the shares of Parent Common Stock received by such
Shareholder in connection with the Merger other than (i) pursuant to an
effective registration statement under the Securities Act, or (ii) otherwise
pursuant to an exemption from the registration requirements of the Securities
Act.
SECTION 7.07 Registration Rights Agreements. Simultaneously with the
execution hereof, Parent and each Shareholder are executing and delivering a
registration rights agreement in the form of Exhibit A hereto (the "Registration
Rights Agreement"), which agreement shall be effective as of the Effective Time.
SECTION 7.08 Termination of Shareholders' Agreements. Simultaneously
with the execution and delivery hereof, the Company and each Shareholder which
is a party to a shareholders' or similar agreement disclosed in Schedule 3.02 is
entering into a written agreement terminating such agreement, as of the
Effective Time, without further obligation of the Company or the Surviving
Corporation thereunder.
SECTION 7.09 Shareholder Sub-S Tax Liability. Simultaneously
herewith, the Company is remitting to each Shareholder that amount reasonably
estimated by the Company to represent such Shareholder's tax obligation for the
undistributed profits of the Company from October 1, 1996 through the Effective
Time, calculated using the anticipated marginal tax rate of 43.9%. The Company
has provided to Parent a written schedule showing the calculation thereof. Such
amount paid to each Shareholder simultaneously herewith shall be adjusted upward
or downward, as the case may be, as hereinafter set forth in this Section 7.09.
In the event that the actual undistributed profits of the Company from January
1, 1997 through the Effective Date (the "Actual Undistributed Profits") shall
exceed the amount of undistributed profits estimated for the calculation of
amounts paid to the Shareholders simultaneously herewith (the "Estimated
Undistributed Profits"), an amount equal to 43.9% of the amount by which the
Actual Undistributed Profits exceed the Estimated Undistributed Profits shall be
paid by Parent or the Surviving Corporation to the Shareholders in proportion to
their respective equity interests in the Company immediately prior to the
Effective Time. In the event
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<PAGE>
that the Actual Undistributed Profits shall be less than the Estimated
Undistributed Profits, the Shareholders shall remit to Parent an amount equal to
43.9% of the amount by which the Actual Undistributed Profits are less than the
Estimated Undistributed Profits. Parent or the Surviving Corporation shall
notify the Shareholders in writing of its good faith determination of the Actual
Undistributed Profits and any amount to be paid to the Shareholders or remitted
by the Shareholders under this Section 7.09, which determination shall be
binding on the parties hereto. The obligations of the parties under this Section
7.09 shall survive the Effective Time.
SECTION 7.10 Payments under FILCO Agreement. Parent and/or the
Surviving Corporation covenant and agree with the Shareholders, Krauss and
Trapani to make all payments required to be made by the Surviving Corporation
under the FILCO Agreement after the Effective Time. In the event that aggregate
amount required to be paid by Parent and/or the Surviving Corporation under the
FILCO Agreement is less than $104,000.00, the amount by which the amount of
$104,000.00 exceeds the aggregate amount required to be paid by Parent and/or
the Surviving Corporation shall be paid to the Shareholders in proportion to
their respective equity interests in the Company immediately prior to the
Effective Time. The obligations of Parent and/or the Surviving Corporation under
this Section 7.10 shall survive the Effective Time.
SECTION 7.11 Closing Deliveries. The Company and the Shareholders are
simultaneously herewith delivering to Parent and Acquisition, the following:
(i) A copy of resolutions duly adopted by the Board of Directors
of the Company and the Shareholders, certified by the Secretary or
Assistant Secretary of the Company, approving the execution, delivery
and performance of this Agreement and the transactions contemplated
hereby;
(ii) the opinion of counsel to the Company and the
Shareholders in form and substance satisfactory to Parent and its
counsel; and
(iii) a good standing certificate issued by the Secretary of State of
New York as to the good standing of the Company in such jurisdiction.
(b) Parent and Acquisition are simultaneously herewith
delivering to the Company and the Shareholders, the following:
(i) A copy of resolutions duly adopted by the Board of Directors
of Parent and by the Board of
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<PAGE>
Directors of Acquisition, certified by the Secretary or Assistant
Secretary of Parent and Acquisition, respectively, approving the
execution, delivery and performance of this Agreement and the
transactions contemplated hereby;
(ii) the opinion of the Vice President and General Counsel of
Parent in form and substance satisfactory to the Company and its
counsel; and
(iii) good standing certificates issued by the Secretary of
State of Delaware as to the good standing of Parent and Acquisition
in such jurisdictions.
SECTION 7.12 No Recission. The parties hereto covenant and agree that
none of them will seek recission of the Merger in the event that the
pooling-of-interests method of accounting is unavailable for the Merger.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Survival of Certain Representations and Warranties. The
representations and warranties of the Company and the Shareholders in this
Agreement and in any instrument delivered pursuant hereto shall survive the
Effective Time until the earlier to occur of (i) one (1) year after the
Effective Time or (ii) publication of the independent audit report on the
consolidated financial statements of Parent for the fiscal year ending June 30,
1998, provided that this Section 10.01 shall not limit any other covenant or
agreement of the parties that by its terms contemplates performances beyond such
period.
SECTION 8.02 Fees and Expenses. (a) The Company shall pay the
reasonable attorney's and accountant's fees of the Company, Krauss, Trapani and
the Shareholders actually incurred by them in connection with the negotiation,
preparation and execution of this Agreement up to a maximum aggregate amount of
$60,000.00 for this Agreement and the Affiliate Merger Agreements. Except as
provided in the foregoing sentence, none of the Company, Krauss, Trapani or the
Shareholders, on the one hand, and Parent and Acquisition, on the other hand,
shall have any obligation to pay any of the fees and expenses of the other
incident to the negotiation, preparation and execution of this Agreement,
including, without limitations, the fees and expenses of counsel, accountants,
advisors, investment bankers and other experts.
(b) The Shareholders, on the one hand, and Parent and Acquisition, on
the other hand, shall indemnify the other and hold
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<PAGE>
it or them, as the case may be, harmless from and against any claims for
advisor's fees, finders' fees or brokerage commissions, in relation to or in
connection with the transactions contemplated by this Agreement as a result of
any agreement or understanding between the Company or any of the Shareholders,
on the one hand, or Parent and Acquisition, on the other hand, and any third
party.
SECTION 8.03 Publicity. The Company, Krauss, Trapani, the
Shareholders and Parent agree that they will not issue any press release or make
any other public announcement concerning this Agreement or the transactions
contemplated hereby without the prior consent of the other party, except that
the Company or Parent may make such public disclosure that it believes in good
faith to be required by law.
SECTION 8.04 Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 8.05 Notices. All notices that are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or national
overnight courier service, transmitted by telecopy or mailed by registered or
certified mail, postage prepaid, as follows:
If to Parent and/or Acquisition, to:
The BISYS Group, Inc.
Overlook at Great Notch
150 Clove Road
Little Falls, New Jersey 07424
Attention: Chairman and Chief Executive Officer
with a copy to:
The BISYS Group, Inc.
Overlook at Great Notch
150 Clove Road
Little Falls, New Jersey 07424
Attention: General Counsel
If to the Company and/or the Shareholders, to:
-34-
<PAGE>
Dascit/White & Winston, Inc.
99 Madison Avenue
New York, NY 10016
Attention: Chairman
with a copy to:
Todtman, Young, Nachamie,
Hendler & Spizz, P.C.
425 Park Avenue
New York, New York 10022
Attention: Alex Spizz, Esq.
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 8.06 Waivers. The Company, Krauss and Trapani, on the one
hand, and Parent and Acquisition, on the other hand, may, by written notice to
the other, (a) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement; (b) waive any inaccuracies in
the representations or warranties of the other contained in this Agreement or in
any document delivered pursuant to this Agreement; or (c) waive compliance with
any of the covenants and agreements of the other contained in this Agreement.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
SECTION 8.07 Entire Agreement. This Agreement, its Schedules and the
agreements and documents executed at the Effective Time in connection herewith
and the Confidentiality Agreement constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof. No representation, warranty, promise,
inducement or statement of intention has been made by any party that is not
embodied in this Agreement or such other documents, and none of the parties
shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement of intention not embodied herein or therein.
-35-
<PAGE>
SECTION 8.08 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflict of laws.
SECTION 8.09 Binding Effect, Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
permitted successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective permitted successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
SECTION 8.10 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
SECTION 8.11 Amendments. This Agreement may be modified, amended or
supplemented at any time by action of the respective Boards of Directors of the
Company, Parent and Acquisition, and by Krauss, Trapani and the Shareholders.
Without limiting the generality of the foregoing, this Agreement may only be
amended, varied or supplemented by an instrument in writing, signed by the
parties hereto.
SECTION 8.12 Applicable Disclosures. For purposes of this Agreement,
any disclosure made in any provision hereof, in any Schedule annexed hereto or
in any Agreement and Plan of Merger bearing even date herewith providing for the
merger of a subsidiary of Parent into any Affiliate of the Company shall be
deemed to be disclosed under a Section of this Agreement.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed and delivered this Agreement and Plan of Merger as of the day and
year first above written.
THE BISYS GROUP, INC.
By:/s/ Lynn J. Mangum
------------------------
Lynn J. Mangum
Chairman and
Chief Executive Officer
[signatures continued on next page]
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<PAGE>
[signatures continued from previous page]
BI-DWW, INC.
By:/s/ Lynn J. Mangum
------------------------
Lynn J. Mangum
Chairman
DASCIT/WHITE & WINSTON, INC.
By:/s/ Jeffrey D. Krauss
------------------------
Jeffrey D. Krauss
Chairman
/s/ Jeffrey D. Krauss
------------------------
Jeffrey D. Krauss
Number of
Shares of Company
Common Stock Owned: SHAREHOLDERS:
50 /s/ Joseph J. DiTrapani
------------------------
Joseph J. DiTrapani
860 Cranford Avenue
North Woodmere, NY 11581
50 /s/ Jeffrey D. Krauss
------------------------
Jeffrey D. Krauss, as
Trustee of the Trust for
the Benefit of Laura Krauss
2649 Rebecca Street
Bellmore, NY 11710
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<PAGE>
INDEX TO DEFINED TERMS
Term Reference
---- ---------
"Acquisition" Preamble
"Actual Undistributed Profits" 7.09
"Affiliate" 3.20
"Affiliate Merger Agreements" 7.04(a)
"Aggregate Parent Common Stock
Consideration" 2.01(a)
"Agreement" Preamble
"April 1997 Balance Sheet" 3.08
"April 1997 Combined Balance Sheet 3.08
"Average Price" 2.01(a)
"Balance Sheet" 3.08(a)
"Certificate" 2.03(a)
"Code" Recitals
"Combined Balance Sheet" 3.08
"Company" Preamble
"Company Common Stock" 2.01(a)
"Company Investments" 3.17
"Company Licenses" 3.28
"Confidentiality Agreement" 3.05
"Constituent Corporations" Preamble
"Contract Parties" 3.10
"Control" 3.20
"December 1996 Balance Sheet" 3.08
"Delaware GCL" Recitals
"Effective Time" 1.03
"Employee and Other Licenses" 3.28
"ERISA" 3.12(b)
"Estimated Undistributed Profits" 7.09
"Exchange Act" 5.09
"FILCO" 2.01(a)
"FILCO Agreement" 2.01(a)
"FILCO Obligation" 2.01(a)
"Financial Statements" 3.08(a)
"Indemnifiable Breaches" 7.04(a)
"Intellectual Property Rights" 3.09
"Krauss" Preamble
"Krauss Trustee Shareholder" Preamble
"Major Suppliers" 3.11
"Merger" Recitals
"Merger Information" 4.04(j)
"Net Merger Price" 2.01(a)
"New York BCL" Recitals
"Other Contracts" 3.20
"Parent" Preamble
"Parent Common Stock" Recitals
"Parent Public Information" 5.06
<PAGE>
"Registration Rights Agreement" 7.07
"SEC" 4.04(b)
"Securities Act" 4.04(a)
"Shareholders" Preamble
"Shareholders' Agreements" 3.02
"Surviving Corporation" Preamble
"Trapani" Preamble
<PAGE>
Exhibit 99.4
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
THE BISYS GROUP, INC.,
BI-GPA, INC., GROUP PLAN ADMINISTRATORS, INC.,
THE SHAREHOLDERS OF GROUP PLAN ADMINISTRATORS, INC.,
JEFFREY D. KRAUSS AND JOSEPH J. DITRAPANI
Dated as of August 29, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER....................................................2
SECTION 1.01 The Merger....................................................2
SECTION 1.02 Effect Of the Merger..........................................2
SECTION 1.03 Consummation of the Merger....................................2
SECTION 1.04 Charter; By-Laws; Directors and Officers......................2
SECTION 1.05 Further Assurances............................................3
ARTICLE II CONVERSION OF SECURITIES......................................4
SECTION 2.01 Conversion of Securities of the Company.......................4
SECTION 2.02 Acquisition Common Stock......................................4
SECTION 2.03 Exchange of Certificates......................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND KRAUSS AND TRAPANI............................5
SECTION 3.01 Authority Relative to Agreement...............................6
SECTION 3.02 Shareholders' Title to Stock..................................6
SECTION 3.03 Organization, Standing and Qualification......................6
SECTION 3.04 Stock of the Company..........................................6
SECTION 3.05 Subsidiaries and Other Investments............................7
SECTION 3.06 Certification of Incorporation and By-Laws....................7
SECTION 3.07 Execution and Performance of Agreement;
Validity and Binding Nature...................................7
SECTION 3.08 Financial Statements..........................................8
SECTION 3.09 Intellectual Property Rights..................................8
SECTION 3.10 Contracts and Contract Parties................................9
SECTION 3.11 Major Suppliers...............................................9
SECTION 3.12 Employment, Deferred Compensation or
Similar Agreements; Collective Bargaining
Agreements; Employee Benefit Plans...........................10
SECTION 3.13 Inventory....................................................11
SECTION 3.14 Real Estate..................................................11
SECTION 3.15 Title to and Condition of Personal
Property.....................................................11
SECTION 3.16 Accounts and Notes Receivable................................11
SECTION 3.17 Marketable Securities and Other Investments..................12
SECTION 3.18 Taxes........................................................12
SECTION 3.19 Litigation...................................................13
SECTION 3.20 Other Material Contracts and Commitments.....................13
SECTION 3.21 Labor Relations..............................................14
SECTION 3.22 Insurance....................................................14
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
SECTION 3.23 Conduct of Business and Absence of
Changes......................................................14
SECTION 3.24 Compliance with Laws; Governmental
Authorizations...............................................14
SECTION 3.25 Officers, Directors and Depositories.........................15
SECTION 3.26 Environmental Matters........................................15
SECTION 3.27 Third Party and Governmental
Consents.....................................................15
SECTION 3.28 Licenses and Permits.........................................16
SECTION 3.29 Software.....................................................17
SECTION 3.30 Loans to or from Shareholders or Employees...................17
SECTION 3.31 Absence of Undisclosed Liabilities...........................17
SECTION 3.32 Shareholders' and Similar Agreements.........................17
SECTION 3.33 Approval of Merger...........................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS.................................................18
SECTION 4.01 Authority and Capacity Relative to
Agreement....................................................18
SECTION 4.02 Execution and Performance of Agreement;
Validity and Binding Nature..................................18
SECTION 4.03 Stock of the Company.........................................18
SECTION 4.04 Additional Representations and Covenants
of Shareholders..............................................19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT.....................22
SECTION 5.01 Organization and Qualification...............................22
SECTION 5.02 Acquisition..................................................22
SECTION 5.03 Capitalization...............................................22
SECTION 5.04 Authority Relative to Agreement..............................23
SECTION 5.05 Non-Contravention............................................23
SECTION 5.06 Parent Public Information....................................24
SECTION 5.07 Financial Statements.........................................24
SECTION 5.08 Absence of Certain Changes or Events.........................24
SECTION 5.09 Governmental Consents........................................24
SECTION 5.10 Compliance with Law..........................................25
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND
ACQUISITION..................................................25
SECTION 6.01 Organization and Qualification...............................26
SECTION 6.02 Capitalization...............................................26
SECTION 6.03 Authority Relative to Agreement..............................26
SECTION 6.04 Non-Contravention............................................26
SECTION 6.05 Governmental Consents........................................27
SECTION 6.06 Other Matters................................................27
ARTICLE VII COVENANTS AND OTHER AGREEMENTS...............................27
SECTION 7.01 Non-Competition Agreements...................................27
SECTION 7.02 Employment Agreements........................................27
SECTION 7.03 Certain Life Insurance Policies..............................27
SECTION 7.04 Indemnification..............................................28
SECTION 7.05 Confidentiality..............................................29
SECTION 7.06 Transfer Restrictions After the
Effective Time...............................................30
SECTION 7.07 Registration Rights Agreements...............................30
SECTION 7.08 Termination of Shareholders' Agreements......................30
SECTION 7.09 Shareholder Sub-S Tax Liability..............................31
SECTION 7.10 OMITTED......................................................31
SECTION 7.11 Closing Deliveries...........................................31
SECTION 7.12 No Recission.................................................32
ARTICLE VIII MISCELLANEOUS................................................32
SECTION 8.01 Survival of Certain Representations and
Warranties...................................................32
SECTION 8.02 Fees and Expenses............................................32
SECTION 8.03 Publicity....................................................33
SECTION 8.04 Execution in Counterparts....................................33
SECTION 8.05 Notices......................................................33
SECTION 8.06 Waivers......................................................34
SECTION 8.07 Entire Agreement.............................................34
SECTION 8.08 Applicable Law...............................................35
SECTION 8.09 Binding Effect, Benefits.....................................35
SECTION 8.10 Assignability................................................35
SECTION 8.11 Amendments...................................................35
SECTION 8.12 Applicable Disclosures.......................................35
iii
<PAGE>
INDEX TO SCHEDULES AND EXHIBITS
Schedule Description
-------- -----------
3.02 Shareholder's Agreements
3.03 Qualifications
3.05 Subsidiaries/Other Investments
3.06 Certificate of Incorporation and
By-Laws of the Company
3.09 Intellectual Property Rights
3.10 Contracts and Contract Parties
3.11 Major Suppliers
3.12(a) Employment Contracts and
Other Compensation Agreements
3.12(b) Employee Benefit Plans
3.13 Inventory
3.14(b) Real Estate Leased
3.15 Liens and Encumbrances on
Personal Property
3.16 Accounts and Notes Receivable
3.17 Company Investments
3.18 Tax Matters
3.19 Litigation
3.20 Other Contracts
3.21 Compliance with Employment
Related Laws
3.22 Insurance
3.23 Changes in Conduct of Business
3.25 Officers, Directors and Depositories
3.27 Consents and Waivers
3.28 Licenses and Permits
4.04(e) Accredited Investors
4.04(m) Shareholder Interests
7.03 Certain Life Insurance Policies
iv
<PAGE>
Exhibit Ref. Description
- ------- ---- -----------
A 7.13 Form of Registration Rights
Agreement
v
<PAGE>
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August
29, 1997, among The BISYS Group, Inc., a Delaware corporation, with an address
at 150 Clove Road, Little Falls, New Jersey 07424 ("Parent"), BI-GPA, Inc., a
Delaware corporation and a wholly-owned subsidiary of Parent, with an address at
150 Clove Road, Little Falls, New Jersey 07424 ("Acquisition"), Group Plan
Administrators, Inc., a New York corporation, with an address at 99 Madison
Avenue, New York, New York 10016 (the "Company"), Jeffrey D. Krauss, with an
address at 2649 Rebecca Street, Bellmore, New York 11710 ("Krauss"), Joseph J.
DiTrapani (a/k/a Joseph J. Trapani), with an address at 860 Cranford Avenue,
North Woodmere, New York 11581 ("Trapani"), and the shareholders of the Company,
whose names and addresses are set forth on the signature pages hereto (all of
said persons and Trapani being sometimes referred to herein individually as a
"Shareholder", and collectively, together with Trapani, as the "Shareholders").
Jeffrey D. Krauss, as Trustee of the Trust for the Benefit of Laura Krauss, a
Shareholder, is sometimes referred to herein as the "Krauss Trustee
Shareholder." The Company and Acquisition are hereinafter sometimes referred to
as the "Constituent Corporations" and the Company as the "Surviving Corporation.
WHEREAS, the Company is an insurance plan administrator;
WHEREAS, Parent, Acquisition and the Company desire that Acquisition
merge with and into the Company (the "Merger"), upon the terms and conditions
set forth herein and in accordance with the Business Corporation Law of the
State of New York (the "New York BCL") and the General Corporation Law of the
State of Delaware (the "Delaware GCL"), with the result that the Company shall
continue as the Surviving Corporation and the separate existence of Acquisition
(except as it may be continued by operation of law) shall cease;
WHEREAS, Parent, Acquisition and the Company desire that upon the
Merger, at the Effective Time (as hereinafter defined), the outstanding shares
of the capital stock of the Company be converted into the right to receive fully
paid and nonassessable shares of Common Stock, $.02 par value, of Parent
("Parent Common Stock"), and the outstanding shares of Acquisition be converted
into the right to receive fully paid and nonassessable shares of the Common
Stock, $.01 par value, of the Surviving Corporation, as hereinafter provided;
WHEREAS, Parent, Acquisition and the Company desire that, immediately
after the Effective Time and solely as a result of the Merger, Parent will own
all the issued and outstanding shares of the capital stock of the Surviving
Corporation;
<PAGE>
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger
shall be accounted for as a "pooling-of-interests"; and
WHEREAS, the respective Boards of Directors of the Company, Parent
and Acquisition and the shareholders of the Company have approved the Merger;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, in accordance with this Agreement, the New
York BCL and the Delaware GCL, Acquisition shall be merged with and into the
Company, the separate existence of Acquisition (except as it may be continued by
operation of law) shall cease, and the Company shall continue as the Surviving
Corporation.
SECTION 1.02 Effect Of the Merger. Upon the effectiveness of the
Merger, the Surviving Corporation shall succeed to and assume all the rights and
obligations of the Company and Acquisition in accordance with the New York BCL
and the Delaware GCL and the Merger shall otherwise have the effects set forth
in Section 906 of the New York BCL.
SECTION 1.03 Consummation of the Merger. Simultaneously herewith, the
parties hereto are causing the Merger to be consummated by filing (a) with the
Secretary of State of the State of New York a properly executed Certificate of
Merger in accordance with the New York BCL, and (b) with the Secretary of State
of the State of Delaware a properly executed certificate of merger in accordance
with the Delaware GCL. The effective time of the Merger is referred to herein as
the "Effective Time".
SECTION 1.04 Charter; By-Laws; Directors and Officers. As of the
Effective Time, the Certificate of Incorporation of the Surviving Corporation
shall be the Certificate of Incorporation of the Company unless and until
thereafter amended or restated in
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<PAGE>
accordance with the provisions thereof and as provided by the New York BCL. As
of the Effective Time, the By-Laws of the Surviving Corporation shall be the
By-Laws of the Company as in effect immediately prior to the Effective Time,
unless and until thereafter amended in accordance with the provisions thereof
and as provided by the New York BCL. The initial directors and officers of the
Surviving Corporation shall be the directors and officers set forth below, in
each case until their respective successors are duly elected and qualified.
Directors:
Lynn J. Mangum
Robert J. McMullan
Officers:
Lynn J. Mangum - Chairman
Anthony A. Pascotti - President
Robert J. McMullan - Executive Vice President and
Treasurer
J. Randall Grespin - Executive Vice President
Thomas G. Veal - Executive Vice President
Joseph J. Trapani - Senior Vice President
Mark J. Rybarczyk - Senior Vice President
Dennis R. Sheehan - Senior Vice President
Kevin J. Dell - Vice President, General Counsel and
Secretary
Annamaria Porcaro - Assistant Secretary
Patricia A. Heins - Assistant Secretary
SECTION 1.05 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and do, in the name and on
behalf of such Constituent Corporation, all such other acts and things
necessary, desirable or proper to vest, perfect or confirm its right, title or
interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of such
-3-
<PAGE>
Constituent Corporation and otherwise to carry out the purposes of this
Agreement.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities of the Company. (a) Net Merger
Price. By virtue of the Merger and without any action on the part of the holders
of the common stock, without par value, of the Company ("Company Common Stock"),
at the Effective Time all outstanding shares of the Company Common Stock
(subject to Section 2.03(b) hereof) shall be converted into the right to receive
61,315.4961 fully paid and nonassessable shares of Parent Common Stock on the
following basis:
The aggregate consideration being paid in connection with the Merger
is being paid in the form of Parent Common Stock valued, as set forth below, at
Two Million Sixty Two Thousand Five Hundred Dollars ($2,062,500.00) (the "Net
Merger Price"). The Net Merger Price is divided by $33.6375, which is the
average of the daily closing price per share of Parent Common Stock (the
"Average Price"), as reported on the Nasdaq National Market for the 30 trading
day period immediately preceding the day which is three business days prior to
the Effective Time, in order to determine the number of shares of Parent Common
Stock into which the outstanding shares of Company Common Stock are being
converted in the Merger (the "Aggregate Parent Common Stock Consideration").
(b) Exchange Value. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any such shares
held in the treasury of the Company, which are being canceled as provided in
paragraph (c) below) are being converted into the right to receive 613.1550
shares of Parent Common Stock, which represents the quotient obtained by
dividing the number of outstanding shares of Company Common Stock by the
Aggregate Parent Common Stock Consideration.
(c) Treasury Stock. Each share of capital stock that is held in the
treasury of the Company is being canceled and retired and no capital stock of
Parent, cash or other consideration shall be paid or delivered in exchange
therefor.
SECTION 2.02 Acquisition Common Stock. At the Effective Time, each
share of Common Stock, $.01 par value, of Acquisition issued and outstanding
immediately prior to the Effective Time is being converted into a right to
receive one (1) share of the common stock of the Surviving Corporation, which
shall constitute all of the issued and outstanding shares of the Surviving
Corporation after the Effective Time.
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SECTION 2.03 Exchange of Certificates. (a) Simultaneously herewith,
each Shareholder is delivering to Parent the certificate or certificates
representing its shares of Company Common Stock (each, a "Certificate") in form
sufficient for transfer and cancellation pursuant hereto. Each Shareholder
surrendering such Certificate shall be entitled to receive in exchange therefor,
without any further payment of consideration by such Shareholder, (i) a
certificate evidencing that number of whole shares of Parent Common Stock which
such holder has the right to receive in respect of the shares of Company Common
Stock formerly evidenced by such Certificate (after taking into account all
shares of Company Common Stock then held of record by such holder) and (ii) a
check representing the amount of cash in lieu of fractional shares of Parent
Common Stock, if any, and unpaid dividends or other distributions, if any, to
which such holder is entitled pursuant to the provisions of this Section 2.03,
after giving effect to any applicable withholding tax, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash in lieu of fractional shares and unpaid dividends and distributions, if
any, payable to the Shareholders.
(b) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a shareholder of Parent. Each holder of shares of Company
Common Stock who would otherwise have been entitled to receive in the Merger a
fraction of a share of Parent Common Stock (after taking into account all
certificates surrendered by such holder) shall be entitled to receive, in lieu
thereof, a check in an amount (without interest) equal to such fractional part
of a share of Parent Common Stock multiplied by the Average Price.
(c) Promptly after the Effective Time, the Surviving Corporation
shall issue to Parent a certificate representing One Hundred (100) shares of the
common stock of the Surviving Corporation, and Parent shall cause the
certificate representing the shares of the capital stock of Acquisition to be
canceled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND KRAUSS AND TRAPANI
Each of the Company and each of Krauss and Trapani, jointly and
severally, hereby represents and warrants to Parent and Acquisition, knowing and
intending that each of Parent and Acquisition is relying hereon in entering into
the transactions contemplated hereby, as follows:
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SECTION 3.01 Authority Relative to Agreement. The Company has all
requisite power and authority to enter into and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by the Board of Directors and shareholders of the Company, and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the transactions contemplated hereby.
SECTION 3.02 Shareholders' Title to Stock. The shares of Company
Common Stock identified on the signature page(s) hereof opposite the respective
names of the holders thereof have been duly and validly issued to the respective
holders. The shares of Company Common Stock owned by them represent,
collectively, all of the issued and outstanding shares of capital stock (or
other equity interests) in the Company. Except with respect to such agreements
set forth on Schedule 3.02 hereto (the "Shareholders' Agreements"), each of
which is terminated as of the Effective Time, neither the Company nor the
Shareholders are party to any shareholders' agreement, buy-sell agreement or
similar agreement or arrangement.
SECTION 3.03 Organization, Standing and Qualification. The Company is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of New York and has the corporate power and lawful authority
to own and hold its properties and conduct its business as now owned, held and
conducted in its state of incorporation and the states (or other jurisdictions)
in which it has qualified to do business. The Company is qualified to do
business and is in good standing in all states (or other jurisdictions) in which
such qualification is required by reason of the nature or extent of business
conducted by the Company therein, except where the failure to so qualify would
not have a material adverse effect on the business, results of operations or
financial condition of the Company, and such states (and jurisdictions) are
specified in Schedule 3.03 attached hereto
SECTION 3.04 Stock of the Company. (a) The authorized capital stock
of the Company consists in its entirety of Two Hundred (200) shares of Company
Common Stock, of which One Hundred (100) shares of Company Common Stock are
validly issued and outstanding, fully paid and nonassessable. The Company does
not have any outstanding subscription, warrants, convertible securities,
obligations, options or rights entitling others to acquire shares of capital
stock of the Company, or any outstanding securities, options, warrants, rights
or other instruments convertible into shares of capital stock of the Company.
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(b) Except with respect to the shares of Company Common Stock
identified on the signature page(s) hereof, none of the Shareholders or any
other person or entity has any outstanding claim against the Company or any
right whatsoever against the Company with respect to any shares of capital stock
of the Company, including, without limitation, any option, warrant or other
right to acquire from the Company shares of the capital stock of the Company or
any securities, options or other instruments convertible into or exchangeable
for shares of capital stock of the Company.
SECTION 3.05 Subsidiaries and Other Investments. Other than as listed
on Schedule 3.05 hereto, there is no corporation, partnership, joint venture, or
other entity in which the Company has, directly or indirectly, made any
investment or to which the Company has made an advance of cash. The Company is
not under any obligation to acquire any securities from any person or entity,
and the Company is not under any obligation to make any investment, loan, cash
contribution or other advance to any person or entity, including, but not
limited to, International Benefits Administrators, L.L.C. or any member thereof.
SECTION 3.06 Certificate of Incorporation and By-Laws. True and
complete copies of the Company's Certificate of Incorporation and By-Laws
(together with any amendments thereto) are attached hereto as Schedule 3.06. The
Company has provided to Parent true and complete copies of the Certificate of
Incorporation and By-Laws of the Company and the Certificate of Incorporation
and By-Laws or other organizational agreements and documents of each Subsidiary,
together with all amendments thereto.
SECTION 3.07 Execution and Performance of Agreement; Validity and
Binding Nature. The execution and delivery of this Agreement, and the
performance by the Company, Krauss, Trapani and the Shareholders of the terms of
this Agreement and the transactions contemplated hereby, will not result in a
breach of any of the terms of, or constitute a violation of or default under,
the Certificate of Incorporation or By-Laws of the Company or any statute or
contract, indenture or other instrument by which the Company, Krauss, Trapani,
or the Shareholders or any of their respective properties are bound, and except
as provided in Section 3.27 and disclosed in Schedule 3.27 hereof, no consent,
approval, authorization or order of any court or governmental authority is
required in connection with the execution and delivery of the Agreement by the
Company, Krauss, Trapani and the Shareholders and the performance by the
Company, Krauss, Trapani and the Shareholders of the terms of this Agreement and
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Company, Krauss, Trapani and the Shareholders. This Agreement
is, and the documents and agreements executed and delivered by the Company,
Krauss, Trapani and the Shareholders
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pursuant to the terms hereof, when duly executed and delivered by all parties
whose execution and delivery thereof is required, will be legal, valid, and
binding obligations of the Company, Krauss, Trapani and the Shareholders,
enforceable against the Company, Krauss, Trapani and the Shareholders in
accordance with their respective terms, except to the extent that enforceability
may be limited by bankruptcy, receivership, moratorium, conservatorship,
reorganization or other laws of general application affecting the rights of
creditors generally or by general principles of equity.
SECTION 3.08 Financial Statements. Parent has caused Coopers &
Lybrand L.L.C. to audit the combined balance sheet of the Company and its
affiliated entities, Dascit/White & Winston, Inc. and Krauss & Trapani Co.,
Ltd., as of April 30, 1997 (the "April 1997 Combined Balance Sheet"), and notes
thereto. The Company has delivered to Parent (i) the unaudited balance sheet of
the Company as of April 30, 1997 (the "April 1997 Balance Sheet") used for
purposes of preparing the April 1997 Combined Balance Sheet and included
therein, and the related unaudited statements of income, stockholders' equity
and cash flows for the period then ended, and notes thereto, and (ii) the
unaudited balance sheet of the Company as of December 31, 1996 (the "December
1996 Balance Sheet"), and the related unaudited statements of income,
stockholders' equity and cash flows for the fiscal year then ended, and notes
thereto, herein referred to collectively as the "Financial Statements". All
prepaid expenses included in the Financial Statements as assets represent
payments theretofore made by the Company, the benefit and advantage of which may
be obtained and enjoyed by the Surviving Corporation. The books and records of
the Company have been kept, and will be kept to the Effective Time, in
reasonable detail and in accordance with the same accounting principles
heretofore used and consistently applied.
SECTION 3.09 Intellectual Property Rights. Schedule 3.09 attached
hereto contains a complete and correct list and accurate description of all
trademarks, trade names, service marks, logos and other identifying symbols,
names or marks, copyrights, inventions, processes, designs, formulas, trade
secrets, patents, patent applications and other intellectual and/or proprietary
rights or interests (collectively, "Intellectual Property Rights") (a) owned by
the Company free and clear of all licenses, liens, charges or encumbrances,
except as specified in such Schedule, or (b) licensed to the Company under valid
and enforceable agreements. The Company owns, or possesses adequate rights to
use, all Intellectual Property Rights necessary for the conduct of the business
of the Company, and the protection of patents is not material to the conduct of
the business of the Company. There are no infringements by any third parties
upon any Intellectual Property Rights or any conflict with or infringement by
the Company of the rights of others with respect to same.
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SECTION 3.10 Contracts and Contract Parties. Schedule 3.10 contains a
complete list of (a) each joint venture, co-marketing, co-brokerage or similar
contract or arrangement, whether written or oral, to which the Company is a
party, (b) each contract or arrangement, whether written or oral, with an
insurance company, general insurance agency, distributor or broker to which the
Company is a party, and under which the Company is authorized or obligated to
sell or broker insurance or related products or services, (c) each contract or
arrangement, whether written or oral, under which the Company receives
commissions or other income in connection with the conduct of its business, (d)
each lease or capital lease of equipment or other personal property, whether
written or oral, to which the Company is a party and (e) each consulting or
similar agreement, whether written or oral, to which the Company is a party, all
of the foregoing including the names and addresses of each party thereto other
than the Company (collectively, the "Contract Parties"), in each case under
which the Company's revenues or expenses exceeded $10,000.00 for the twelve
months ended June 30, 1997 or under which the Company reasonably anticipates
that its revenues or expenses will exceed $10,000.00 in the twelve months ending
June 30, 1998. True and complete copies of those contracts or arrangements
described in this Section 3.10 which are in writing have been made available to
Parent, and accurate descriptions of those contracts or arrangements described
in this Section 3.10 which are oral have been made available to Parent. Except
as described in Schedule 3.10, none of the contracts or arrangements listed in
Schedule 3.10 require the Company to purchase any product or service exclusively
from a Contract Party, require the Company to deal exclusively with a Contract
Party with respect to any customer or class of customers of the Company, or
otherwise limit the Company from selling or purchasing any product or service to
or from any person or entity. No Contract Party listed in Schedule 3.10 has
expressed to the Company, Krauss or Trapani its intention to cancel or otherwise
terminate its relationship with the Company, and, to the knowledge of the
Company, Krauss and Trapani, all of such contracts and arrangements will
continue in full force and effect after the Effective Time and a continuing
relationship with each such Contract Party is not in jeopardy.
SECTION 3.11 Major Suppliers. Except as disclosed in Schedule 3.11,
and other than insurance companies or insurance brokers, there are no suppliers
or consultants from whom the Company has purchased goods and/or services
(collectively, the "Major Suppliers"), the loss of which would cause a material
adverse effect on the business, results of operations or financial condition of
the Company or the Surviving Corporation. No Major Supplier has expressed to the
Company, Krauss or Trapani its
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intention to cancel or otherwise terminate its relationship with the Company or
the Surviving Corporation.
SECTION 3.12 Employment, Deferred Compensation or Similar Agreements;
Collective Bargaining Agreements; Employee Benefit Plans. (a) Except as
disclosed in Schedule 3.12(a), the Company is not a party to any agreement or
employment contract or deferred compensation or similar employment or incentive
compensation arrangement with any of its respective employees or former
employees. There are no collective bargaining agreements or any agreements with
any labor union covering any employees of the Company. The business of the
Company is not affected by any present strike or other labor disturbance
involving the employees of the Company nor, to the best knowledge of the Company
or any Management Shareholder, is any union attempting to represent, as
collective bargaining agent, any person employed by the Company.
(b) Except as disclosed in Schedule 3.12(b), the Company does not
sponsor or maintain and is not otherwise a party to or liable under any plan,
program, fund or arrangement (whether or not qualified for Federal income tax
purposes), whether benefiting a single individual or multiple individuals, and
whether funded or not, that is an "employee pension benefit plan," or an
"employee welfare benefit plan," as such terms are defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any other
benefit arrangement for its employees, their dependents and beneficiaries.
(c) Except as disclosed in Schedule 3.12(b) hereto, the Company has
not and does not contribute to any multi-employer plan (as defined in Section
3(37) of ERISA), incurred any liability under Section 4201 of ERISA for any
complete or partial withdrawal from any multi-employer plan and has not assumed
any such liability by any prior owner of any of its assets or properties.
(d) Each employee pension benefit plan maintained by the Company and
listed in Schedule 3.12(b) complies in all material respects with the
requirements of ERISA. No "reportable event" within the meaning of Section 403
of ERISA has occurred with respect to any such plan and the Company has not
engaged in any "prohibited transaction" within the meaning of Section 406(a) or
(b) of ERISA or of Section 4975(c) of the Code, with respect to any such plan;
and no such plan has been terminated in accordance with the procedures set forth
in Section 4041 or 4042 of ERISA.
(e) No liability has been incurred by the Company or any Subsidiary
for any tax imposed by Section 4975 of the Code with respect to any plan
described in Schedule 3.12(b). The Company has, and shall have, for all periods
ending on or prior to the Effective Time, administered each employee pension
benefit plan and
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each employee welfare benefit plan described in Schedule 3.12(b) in all material
respects in compliance with the reporting, disclosure and all other requirements
applicable thereto under ERISA, the Code or any other applicable law.
SECTION 3.13 Inventory. Except as disclosed in Schedule 3.13 or in
the April 1997 Balance Sheet, the Company does not own any inventory, and the
ownership and maintenance of inventory is not significant to the conduct of the
business of the Company.
SECTION 3.14 Real Estate. (a) The Company owns no real property. The
Company is not a party to any agreement involving the purchase or sale of real
or personal property except as disclosed in this Agreement or a Schedule hereto.
(b) Schedule 3.14 (b) contains a true and correct list and
description of all leases, subleases or other agreements under which the Company
is lessee or subtenant or lessor or sublessor of real estate. The Company has
provided to Parent true and complete copies of all such leases, subleases and
agreements, all of which leases, subleases and agreements are valid, binding and
enforceable. The Company has no oral leases of real estate.
(c) All leased real property (and improvements thereon) described in
Schedule 3.14(b) is in good operating condition and repair and conforms in all
material respects with all applicable building, zoning, planning and other
regulations, ordinances or laws, and the Company has the right to use all real
estate necessary to the conduct of its business as currently conducted.
SECTION 3.15 Title to and Condition of Personal Property. The Company
has merchantable title to all personal property reflected in the April 1997
Balance Sheet or acquired subsequent to the date of the April 1997 Balance
Sheet, free and clear of all liens or encumbrances, except as disclosed in
Schedule 3.15 hereto. No representation or warranty as to the condition of any
such personal property is made in this Agreement. The Company owns or has the
right to use all such properties necessary to the conduct of its business as
currently conducted.
SECTION 3.16 Accounts and Notes Receivable. Except as disclosed in
Schedule 3.16, the accounts and notes receivable of the Company reflected in the
April 1997 Balance Sheet or acquired by the Company subsequent to the date of
the April 1997 Balance Sheet (a) are true, bona fide accounts or notes
receivable of the Company created in the ordinary course of business; (b) have
been collected or are fully collectible in amounts not less than the aggregate
amount thereof, net of
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reserves established therefor, on the books of the Company and reflected in the
April 1997 Balance Sheet; (c) are not subject to any offsets, credits or
counterclaims; and (d) have not at any time been placed for collection with any
attorney, collection agency or similar individual or firm.
SECTION 3.17 Marketable Securities and Other Investments. Schedule
3.17 lists all of the marketable securities and other investments shown on the
April 1997 Balance Sheet (the "Company Investments"), all of which are owned by
the Company free and clear of any liens, encumbrances or claims, except as shown
in Schedule 3.17. The value of each of the Company Investments shown on the
April 1997 Balance Sheet reflect the fair market value thereof on the date of
the April 1997 Balance Sheet, as applicable, and the Financial Statements are in
conformity with the requirements of Financial Accounting Standards Board
Statement No. 115. All of the Company Investments are readily marketable except
as described in Schedule 3.17, and, since the date of the April 1997 Balance
Sheet, as applicable, there has been no material decline in the aggregate market
value of the Company Investments.
SECTION 3.18 Taxes. The Company has properly completed and filed all
federal, state, county, municipal and other tax returns, reports and
declarations which are required to be filed by it and has paid all taxes,
penalties and interest which have become due pursuant thereto or which became
due pursuant to asserted deficiencies or assessments. The Company has reported
its income for tax purposes on the cash method of accounting and will be
required pursuant to the Code to change to the accrual method of accounting at
the Effective Time. By reason of such change in the method of accounting, the
Surviving Corporation may be required to make certain adjustments to its taxable
income and may be required to pay additional taxes in respect of income which
the Company would have been required to report had it used the accrual method of
accounting prior to the Effective Time, it being understood and agreed hereunder
that such additional taxes, if any, shall be the exclusive liability of the
Surviving Corporation. Except as set forth in Schedule 3.18 hereto, the Company
has not received any notice of deficiency or assessment of additional taxes, all
such deficiencies or assessments set forth in Schedule 3.18 are being contested
in good faith and through appropriate proceedings, and no tax audits are in
process. The last year for which the federal or state income taxes or other
taxes of the Company have been examined is set forth accurately and completely
on Schedule 3.18 hereto. The Company has not granted any waiver of any statute
of limitation with respect to, or any extension of a period for the assessment
of, any federal, state, county, municipal or other tax. The Company filed an
election under Section 1362(a) of the Code to be
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taxed as an S Corporation on the date indicated on Schedule 3.18, and said
election is in effect on and as of the date hereof.
SECTION 3.19 Litigation. Except as disclosed in Schedule 3.19, there
is no litigation, investigation or proceeding pending or, to the knowledge of
the Company, Krauss or Trapani, threatened, involving the Company or any of its
properties. There are no outstanding orders, writs, injunctions or decrees of
any court, governmental agency or arbitration tribunal materially affecting or
materially limiting the conduct of the business of the Company.
SECTION 3.20 Other Material Contracts and Commitments. Except as
disclosed in Schedule 3.20 or another Schedule hereto, the Company is not a
party to and none of its properties are bound by any of the following types of
contracts or commitments, written or oral: (a) mortgages, indentures, security
agreements and other agreements and instruments relating to the borrowing of
money in excess of $10,000.00 in the aggregate or extension of credit in excess
of $10,000.00 in the aggregate or imposition of an encumbrance on any of the
assets of the Company; (b) any contract with any officer, director or with any
employee of the Company (other than agreements relating to current wage or
salary payments terminable by the Company on notice of thirty (30) days or
less); (c) any contract or promissory note or other instrument with any
Affiliate (as hereinafter defined) of the Company; (d) any guarantee of the
obligations of any person or entity or obligation to provide funds or assume the
debt of any person or entity; (e) any option or right to acquire any assets of
the Company outside of the ordinary course of business; or (f) profit-sharing,
stock option, pension, or retirement agreements, shareholder or similar
agreements or arrangements, trusts, or funds for the benefit of employees
(collectively, the "Other Contracts"). The Company has delivered to Parent
complete and correct copies of all of the Other Contracts as are in writing,
together with all amendments thereto, and accurate descriptions of all of the
other Contracts which are oral. The Company is not in default with respect to
any of the Other Contracts, and to the knowledge of the Company, Krauss and
Trapani, no other party to any of the Other Contracts is in default with respect
thereto. Except as specifically set forth on Schedule 3.20, each of the Other
Contracts will continue in full force and effect after the Effective Time
without any right on the part of any party thereto, other than the Surviving
Corporation, to terminate it as a result of the occurrence of the Merger. For
purposes of this Agreement, an "Affiliate" of the Company means (a) any
corporation, partnership, trust or other entity in control of, controlled by or
under common control with the Company; and (b) any officer, director, trustee,
general partner or employee of any corporation, partnership, trust or other
entity in control of, controlled by or under common control with the Company.
For
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purposes of this Agreement, the term "control" (including the terms
"controlling," "controlled by" and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person, whether through the ownership of voting
securities, by contract, or otherwise. Schedule 3.20 discloses all Affiliates of
the Company which are business entities currently in existence.
SECTION 3.21 Labor Relations. Except as disclosed in Schedule 3.21,
the Company, in the conduct of its affairs, has complied in all material
respects with all applicable laws (including, without limitation, labor and tax
laws), and regulations relating to the hiring and employment of employees and
independent contractors, including, without limitation, those related to
discrimination, wages, hours, collective bargaining, employee pension and
welfare benefit plans, and the payment of (and withholding for) income, Social
Security and other employment related taxes, and the Company is not liable for
any penalties or damages for failure to comply with any of the foregoing. There
are no unfair labor practice claims or charges pending or threatened involving
the Company.
SECTION 3.22 Insurance. Schedule 3.22 hereto contains a list and
description (including the name of the insurer, coverage and expiration date) of
all insurance policies maintained by the Company. Schedule 3.22 further lists
all claims presently pending or threatened which are covered by such policies.
The Company has not received notice of cancellation or non-renewal of any of
such policies.
SECTION 3.23 Conduct of Business and Absence of Changes. Except as
disclosed in Schedule 3.23, since April 30, 1997, the Company has conducted its
business in the regular and ordinary course and has not (a) undergone any
material adverse change in its condition (financial or otherwise), assets,
liabilities, business, or operations, (b) declared, set aside, made or paid any
cash or stock dividend or distribution or purchased, issued or sold any shares
of its capital stock, (c) incurred any indebtedness for borrowed money other
than as disclosed in Schedule 3.20 or issued or sold any debt securities, (d)
instituted any increase in the compensation or bonuses payable or to become
payable to any officers or employees, or any changes in personnel policies or
employees benefits, or (e) made any payment to any Shareholder except for
payments described in a Schedule hereto and regular salary and ordinary and
necessary business expense reimbursements.
SECTION 3.24 Compliance with Laws; Governmental Authorizations. The
Company is in compliance, in all material respects, with all statutes, laws,
ordinances, rules, regulations,
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judgments, orders, decrees, governmental licenses or permits and other
governmental licenses, permits, authorizations or approvals applicable to it or
any of its properties. All governmental licenses, permits, authorizations or
approvals necessary for the conduct of its business have been duly and lawfully
obtained and are in full force and effect, except where the failure to obtain
and/or maintain the same would not have a material adverse effect on the
business, results of operations or financial condition of the Company, and none
of the Company, Krauss or Trapani have knowledge of any proceedings pending or
threatened which may result in the revocation, cancellation or suspension, or
any materially adverse modification, of any thereof.
SECTION 3.25 Officers, Directors and Depositories. Schedule 3.25
hereto contains the names of all the officers and directors of the Company, the
names of all depositories of the funds of the Company and the names of the
officers and other persons empowered to sign instruments withdrawing funds from
said depositories.
SECTION 3.26 Environmental Matters. (a) The business and operations
of the Company comply in all material respects with all federal, state and local
laws, rules, regulations and directives pertaining to the environment. No
governmental agency has asserted any claim or given notice of any possible claim
or, to the knowledge of the Company, Krauss or Trapani, threatened to assert any
claim against the Company in respect of its business, any assets owned or leased
by it, real properties owned or leased by it, or the condition, use or operation
thereof, arising out of any federal, state or local law, rule, regulation or
directive pertaining to the environment.
(b) To the best knowledge of the Company and Krauss and Trapani,
there are nowhere on any real property leased by, used by or otherwise under the
control of the Company any deposits, dumps, or tanks of toxic or other
poisonous, dangerous or noxious waste, fluids, solvents, chemicals or effluents,
all of which chemicals, fuels and fluids are properly and safely stored,
identified, labeled and maintained in accordance with applicable industrial
standards and all governmental or other laws or regulations relating thereto.
The Company does not discharge from any real property leased, used or otherwise
under its control, whether by effluent, emission or other means, any noxious,
toxic, hazardous or deleterious matter or gases. All discharges of waste
material and other substances from the operating facilities of the Company are
in full compliance with applicable law and covered by valid permits and
licenses, where required.
SECTION 3.27 Third Party and Governmental Consents. Except as
disclosed in Schedule 3.27 hereto, and except for (i)
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consents of or filings with governmental agencies and (ii) consents of insurance
carriers or other parties under contracts terminable at will or on notice of 60
days or less, no consent, waiver, authorization, approval, order, license,
certificate or permit of or from, or registration, declaration or filing with,
any court or other tribunal or any other person, firm or entity, nor under any
contract, indenture, mortgage, lease, license or other agreement or instrument
to which the Company, Krauss or any Shareholder is a party or by which the
Company, Krauss or any Shareholder, or any of their respective assets or
properties, is subject or bound, is required by or with respect to the Company,
Krauss or any Shareholder in connection with the execution, delivery or
performance of this Agreement or of any other agreement, document or instrument
to be executed and delivered by the Company, Krauss or any Shareholder pursuant
hereto or in connection herewith or the consummation of the transactions
contemplated hereby. The Company, Krauss, Trapani or a Shareholder, as
applicable, has obtained all consents and waivers listed in Schedule 3.27 on or
prior to the date hereof, including, without limitation, the consent of American
Mayflower Life Insurance Company and the consent of First Colony Life Insurance
Company.
SECTION 3.28 Licenses and Permits. The Company has obtained all
consents, approvals, waivers, licenses and permits from governmental authorities
required to have been obtained by it in connection with the ownership of the
assets of the Company and the operation of the business of the Company as
presently and heretofore conducted, including, without limitation, all insurance
producer and similar licenses required to have been obtained by it (herein
collectively referred to as the "Company Licenses"), except where the failure to
obtain the same would not have a material adverse effect on the business,
results of operations or financial condition of the Company. Except as disclosed
in Schedule 3.28 hereto, the Company, Krauss or Trapani is not aware of any
failure by any employee and agent of the Company to obtain all approvals,
licenses and permits from governmental authorities required in connection with
the operation of the business of the Company and the services provided by such
employee or agent to the Company, including, without limitation, insurance
producer licenses and similar licenses (herein collectively referred to as the
"Employee and Other Licenses"). The Company Licenses and the Employee and Other
Licenses are listed on Schedule 3.28 hereto and, except as otherwise set forth
in Schedule 3.28 hereto, no other licenses or permits are required to conduct or
operate the business of the Company as presently conducted, except where the
failure to obtain the same would not have a material adverse effect on the
business, results of operations or financial condition of the Company. None of
the Company Licenses or the Employee and Other Licenses are threatened to be
revoked or suspended, and there are no disciplinary proceedings pending or
threatened by, any issuer of
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any such license or any other governmental authority against the holder thereof.
SECTION 3.29 Software. The Company does not own or license any
computer software or related programs other than off-the-shelf software licensed
to the Company and used in the ordinary course of the Company's business.
SECTION 3.30 Loans to or from Shareholders or Employees. The Company
does not have outstanding any loans, advances or other indebtedness incurred by
Krauss, Trapani or any Shareholder or any employee, former employee or former
shareholder of the Company or any member of their respective families, and there
are no loans or advances made to the Company by or indebtedness incurred by the
Company to Krauss, Trapani or any Shareholder or any employee, former employee
or former shareholder of the Company, or any member of their respective
families.
SECTION 3.31 Absence of Undisclosed Liabilities. Except as and to the
extent disclosed or accrued on the Financial Statements or incurred in the
ordinary course of business since the date of the April 1997 Balance Sheet,
there exist no liabilities or obligations of any nature whatsoever (whether
absolute, contingent or otherwise) known to the Company, Krauss or Trapani in
respect of the business or assets of the Company of the type customarily
reflected in financial statements prepared in accordance with generally accepted
accounting principles. None of the Company, Krauss or Trapani knows or has any
reasonable grounds to know after due inquiry of any basis for assertion against
the Company of any claim or liability of any nature in any amount not fully
disclosed in the Financial Statements or otherwise pursuant to the terms hereof.
SECTION 3.32 Shareholders' and Similar Agreements. Except as set
forth in Schedule 3.02, neither any Shareholder, nor any other person or entity,
nor the Company, Krauss or Trapani are parties to any shareholders' agreement,
buy-sell agreement, stock rights agreement or any similar agreement or
arrangement related to the purchase and sale of any shares of Company Common
Stock. As of the Effective Time, each of the agreements listed in Schedule 3.02
is terminated and will be of no further effect, and, as of the Effective Time,
the Company has no obligation to any Shareholder or 74y other person or entity
for the purchase of any shares of Company Common Stock or for the payment of any
consideration in respect of the purchase, sale or other disposition of shares of
Company Common Stock.
SECTION 3.33 Approval of Merger. The Merger has been duly and validly
authorized and approved by the holders of 100% of the outstanding shares of
Company Common Stock.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder hereby represents and warrants to Parent and
Acquisition, as to itself, severally and not jointly, as follows, knowing and
intending that each of Parent and Acquisition is relying hereon in entering into
the transactions contemplated hereby:
SECTION 4.01 Authority and Capacity Relative to Agreement. Such
Shareholder has all requisite power, authority and legal capacity to enter into
and perform each of its obligations hereunder.
SECTION 4.02 Execution and Performance of Agreement; Validity and
Binding Nature. The execution and delivery of this Agreement, and the
performance by such Shareholder of the terms of this Agreement and the
transactions contemplated hereby, will not result in a material breach of any of
the terms of, or constitute a violation or default under, any statute or
contract, indenture or other instrument by which such Shareholder or any of its
respective properties are bound, and no consent, approval, authorization or
order of any court or governmental authority is required in connection with the
execution and delivery of this Agreement by such Shareholder and the performance
by such Shareholder of the terms of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
Shareholder and, together with the other documents and agreements to be executed
by all parties whose execution and delivery thereof is required, constitutes the
legal, valid and binding obligations of such Shareholder, enforceable against
such Shareholder in accordance with their respective terms, except to the extent
that enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by general principles of equity.
SECTION 4.03 Stock of the Company. The number of shares of Company
Common Stock beneficially owned by such Shareholder is as identified on the
signature page(s) hereof opposite the respective Shareholder's name. The shares
of Company Common Stock beneficially owned by such Shareholder are owned free
and clear of all liens, claims, options, encumbrances or restrictions
whatsoever. Such Shareholder has the full legal right and power and all
authorizations and approvals required by law or otherwise to sell, transfer and
deliver such shares hereunder and
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to make the representations, warranties and agreements set forth in this
Agreement. Except with respect to the shares of Company Common Stock identified
on the signature page(s) hereof opposite such Shareholder's name, such
Shareholder has no outstanding claim against the Company or any right whatsoever
with respect to any shares of the capital stock of the Company, including
without limitation any option, warrant or other right to acquire shares of the
capital stock of the Company or any securities, options or other instruments
convertible or exchangeable into shares of capital stock of the Company. Except
as set forth in that certain Shareholders' Agreement of Company disclosed on
Schedule 3.32, no Shareholder has granted any option or other right to acquire
from such other Shareholder any shares of Company Common Stock.
SECTION 4.04 Additional Representations and Covenants of
Shareholders. Each Shareholder hereby acknowledges, represents and warrants to
Parent, as to itself, severally and not jointly and agrees as follows, knowing
and intending that Parent is relying hereon in entering into the transaction
contemplated hereby:
(a) Such Shareholder understands that the shares of Parent Common
Stock which are the subject of this Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended (the "Securities Act")
by virtue of Section 4(2) thereof, based, in part, upon the representations,
warranties and agreements of each Shareholder contained in this Agreement.
(b) Neither the Securities and Exchange Commission (the "SEC") nor
any state securities commission has approved the Parent Common Stock or passed
upon or endorsed the merits of an investment therein or confirmed the accuracy
or adequacy of any information provided by Parent to the Shareholders or the
accuracy or adequacy of any of the representations, warranties and agreements of
Parent contained herein.
(c) Such Shareholder is acquiring Parent Common Stock solely for its
own account for investment and not with any present view to resale or
distribution thereof, in whole or in part. No Shareholder has any agreement or
arrangement, formal or informal, written or oral, with any person to sell or
transfer or otherwise dispose of all or any part of the Parent Common Stock, and
none has any present plans to enter into any such agreement or arrangement.
(d) No Shareholder became aware of the offer and sale of Parent
Common Stock through or as a result of any form of general solicitation or
general advertising including, without limitation, any article, notice,
advertisement or other communication published in any newspaper, magazine or
other media in connection with the offer and sale of Parent Common Stock
contemplated hereby and no Shareholder is purchasing Parent Common
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Stock through or as a result of any seminar or meeting to which any Shareholder
was invited.
(e) Such Shareholder, if listed in Schedule 4.04(e), meets the
requirements of at least one of the categories of an "accredited investor", as
defined in Rule 501(a) under the Securities Act.
(f) Such Shareholder, or such Shareholder together with its Purchaser
Representative (hereinafter defined), has such knowledge and experience in
financial, tax, and business matters in general, and investments in securities
in particular, so as to enable such Shareholder to evaluate the merits and risks
of an investment in Parent Common Stock and to make an informed investment
decision with respect thereto.
(g) Such Shareholder, or such Shareholder together with its Purchaser
Representative, is familiar with the business, historical financial performance
and prospects of the Company, including the risks associated therewith. All
information, including, without limitation, financial information and the
Financial Statements, provided by the Company or such Shareholder for insertion
in the Merger Information (hereafter defined) does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances in which they were made, not misleading, it being
understood and acknowledged that such information has not been independently
verified by Parent or Acquisition.
(h) Such Shareholder recognizes that it must bear the substantial
economic risks of the investment in Parent Common Stock indefinitely, because
none of the Parent Common Stock may be sold, transferred, hypothecated or
otherwise disposed of unless such Parent Common Stock is registered under the
Securities Act and applicable state securities laws or an exemption from such
registration is available. Legends shall be placed on the certificates
representing Parent Common Stock issuable stating that the shares represented
thereby have not been registered under the Securities Act or applicable state
securities laws, and appropriate notations thereof will be made in Parent's
stock books.
(i) Such Shareholder has adequate means of providing for its current
financial needs and foreseeable contingencies and has no need for liquidity of
its investment in Parent Common Stock for an indefinite period of time. Such
Shareholder's overall commitment to investments which are not readily marketable
is not excessive in view of its net worth and financial circumstances and the
purchase of the Parent Common Stock will not cause such commitment to become
excessive.
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(j) Such Shareholder is not relying on Parent or any of its employees
or agents with respect to the legal, tax, economic and related considerations of
an investment in Parent Common Stock, other than as expressly contained in the
representations and warranties of Parent contained in Article V hereof. There
has been delivered to such Shareholder copies of this Agreement, Parent's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996, Parent's 1996
Annual Report to Stockholders, Parent's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1996, December 31, 1996 and March 31, 1997,
Parent's Proxy Statement for its Annual Meeting held on November 14, 1996,
Parents Press Releases dated July 17, 1997 and August 5, 1997, the Financial
Statements and a summary description of the Company's business (collectively,
the "Merger Information"). Such Shareholder, or such Shareholder together with
its Purchaser Representative, has read and fully understands the Merger
Information.
(k) Such Shareholder, or such Shareholder together with its Purchaser
Representative, (i) has had the opportunity to obtain all information requested
by him for the purposes of verifying the Merger Information or for any other
purpose related hereto and (ii) has had the opportunity to meet with
representatives of Parent and the Company and to have them answer any questions
and provide such additional information regarding the terms and conditions of
the transactions contemplated hereby, the information with respect to Parent
included in the Merger Information and the business and prospects of Parent
deemed relevant by such Shareholder, or such Shareholder together with its
Purchaser Representative, all of which questions have been answered and all of
which requested information has been provided to the full satisfaction of such
Shareholder. Such Shareholder is aware that an investment in Parent Common Stock
is speculative and involves significant risks, including, among other things,
the risk of the loss of such Shareholder's entire investment in Parent Common
Stock.
(l) In evaluating the suitability of an investment in Parent, and in
deciding to enter into this Agreement, no Shareholder, nor any Shareholder
together with its Purchaser Representative, has relied upon any representation
or other information (whether oral or written) other than as set forth in the
representations and warranties of Parent contained in Article V of this
Agreement and the Merger Information. No oral or written representations have
been made, or oral or written information furnished, to any Shareholder in
connection with the offer and sale of Parent Common Stock that are in any way
inconsistent with the representations and warranties of Parent contained herein
or any of the information contained in the Merger Information.
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(m) Except as described in Schedule 4.04(m) hereto, no Shareholder
has any beneficial interest, directly or indirectly, in any person, firm,
corporation, partnership or other entity which is or within the past two years
has been a supplier of any goods or services to the Company, including, without
limitation, any Major Supplier, or from which the Company has received fees,
including, without limitation, any Contract Party, other than as the beneficial
owner of 1% or less of the voting securities of a publicly held corporation. The
nature and amount of any such beneficial interest is disclosed in Schedule
4.04(m).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company and each Shareholder as
follows:
SECTION 5.01 Organization and Qualification. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own or
lease and operate its properties and assets and to carry on its business as it
is now being conducted. Parent is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the business, results of operations or
financial condition of Parent and its subsidiaries, taken as a whole.
SECTION 5.02 Acquisition. Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as it is now being
conducted. Acquisition is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on business, results of operations or financial
condition of Parent and its subsidiaries, taken as a whole. All the outstanding
shares of capital stock of Acquisition are validly issued, fully paid and
nonassessable and are owned by Parent.
SECTION 5.03 Capitalization. The authorized capital stock of Parent
consists of 80,000,000 shares of Parent Common Stock, and, as of June 30, 1997,
25,235,288 shares of Parent Common Stock were issued and outstanding, all of
which were validly issued
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and are fully paid and nonassessable. Except as contemplated hereby and except
for rights or options outstanding under Parent's employee stock purchase and
stock options plans, and rights outstanding under the Rights Agreement dated May
7, 1997 between Parent and Bank of New York, as rights agent, no subscription,
warrant, option, convertible security, stock appreciation or other right
(contingent or other) to purchase or acquire any shares of any class of capital
stock of Parent is authorized or outstanding and there is not any agreement of
Parent to issue any shares, warrants, options or other such rights or to
distribute to holders of any class of its capital stock any evidences of
indebtedness or assets. Parent does not have any obligation (contingent or
other) to purchase, redeem or otherwise acquire any shares of its capital stock
or any interest therein or to pay any dividend or make any other distribution in
respect thereof. At the Effective Time, Parent will have sufficient authorized
and unissued shares of Parent Common Stock available for issuance in accordance
with Article II hereof. When issued to the Shareholders hereunder, such shares
of Parent Common Stock will have been duly authorized by Parent and, upon
receipt of consideration therefor in accordance with the terms hereof, such
shares will be validly issued, fully paid and nonassessable shares of Parent
Common Stock.
SECTION 5.04 Authority Relative to Agreement. Parent has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Parent and the consummation by Parent of the transactions contemplated hereby
(including issuance of Parent Common Stock to the Shareholders pursuant to the
terms hereof) have been duly authorized by the Board of Directors of Parent, and
no other corporate proceedings on the part of Parent are necessary to authorize
this Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and constitutes the legal, valid and
binding obligation of Parent, enforceable against Parent in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by general
principles of equity.
SECTION 5.05 Non-Contravention. The execution and delivery of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby will not (a) conflict with any provision of the Certificate
of Incorporation or By-Laws of Parent or (b) result (with or without the giving
of notice or the lapse of time or both) in any violation of or default or loss
of a benefit under, or permit the acceleration of any obligation under, any
mortgage, indenture, lease, agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to
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Parent or any of its subsidiaries or any of their respective properties, other
than any such violation, default, loss or acceleration that would not have a
material adverse effect on the business, results of operations or financial
condition of Parent and its subsidiaries, taken as a whole.
SECTION 5.06 Parent Public Information. Parent has provided to each
Shareholder a copy of that portion of the Merger Information consisting of the
public reports and press releases of Parent referred to in Section 4.04(j) the
"Parent Public Information"). The Parent Public Information does not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 5.07 Financial Statements. The consolidated financial
statements of Parent included in the Parent Public Information have been
prepared in accordance with GAAP consistently applied and consistent with prior
periods, subject, in the case of unaudited interim consolidated financial
statements, to year-end adjustments (which consist of normal recurring accruals)
and the absence of certain footnote disclosures. The consolidated balance sheets
of Parent included in the Parent Public Information fairly present in all
material respects the financial position of Parent and its subsidiaries as of
their respective dates, and the related consolidated statements of operations,
shareholders' equity and cash flows included in the Parent Public Information
fairly present in all material respects the results of operations of Parent and
its subsidiaries for the respective periods then ended, subject, in the case of
unaudited interim financial statements, to year-end adjustments (which consist
of normal recurring accruals) and the absence of certain footnote disclosures.
SECTION 5.08 Absence of Certain Changes or Events. Except as
contemplated hereby or disclosed in Parent's press releases dated July 17, 1997
and August 5, 1997, and except for the issuance of Parent Common Stock pursuant
to employee benefit plans of Parent described in Section 5.03 above, since March
31, 1997, Parent has not (a) issued any Parent Common Stock or securities or
obligations convertible into or exchangeable for Parent Common Stock, (b)
incurred any material liabilities (absolute or contingent), except in the
ordinary course of business or (c) suffered any material adverse effect on the
business, results of operations or financial condition of Parent and its
subsidiaries, taken as a whole.
SECTION 5.09 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign governmental
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or regulatory authority is required to be made or obtained by Parent in
connection with the execution and delivery of this Agreement by Parent or the
consummation by Parent of the transactions contemplated hereby, except for (a)
filings pursuant to the Securities Act and the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and the rules and regulations promulgated by the
SEC thereunder, if applicable, (b) filings with state securities agencies under
state securities or blue sky laws, if applicable, (c) the filing of a listing
application with the Nasdaq National Market with respect to shares of Parent
Common Stock issuable in the Merger, (d) the filing of a Certificate of Merger
with the Secretary of State of the State of New York in accordance with the New
York BCL, (e) the filing of a Certificate of Merger with the Secretary of State
of the State of Delaware in accordance with the Delaware GCL, (f) filings of
notices required to be filed with state insurance departments, (g) any licenses,
permits, franchises or other governmental authorizations pertaining to the
business of the Company and its subsidiaries that are required as a result of
the consummation of the transactions contemplated hereby and (h) such consents,
approvals, orders or authorizations which if not obtained, or registrations,
declarations or filings which if not made, would not have a material adverse
effect on the business, results of operations or financial condition of Parent
and its subsidiaries, taken as a whole.
SECTION 5.10 Compliance with Law. Neither Parent nor any of its
subsidiaries is in default under any order of any court, governmental authority
or arbitration board or tribunal. Neither Parent nor any such subsidiary has
received notice of any alleged violation of any applicable laws, ordinances and
governmental rules and regulations to which Parent or any such subsidiary is
subject, including, without limitation, federal securities and banking laws.
Neither Parent nor any subsidiary has failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business, except where the failure to
obtain such licenses, permits, franchises or other governmental authorizations
would not have a material adverse effect on business, results of operations or
financial condition of Parent and its subsidiaries, taken as a whole.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Each of Parent and Acquisition, jointly and severally, represents and
warrants to the Company and each Shareholder, knowing and intending that the
Company and each Shareholder is relying thereon in entering into the
transactions contemplated hereby, as follows:
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SECTION 6.01 Organization and Qualification. Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own or lease and operate its properties and assets and to carry on its business
as it is now being conducted. Acquisition is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect with respect to Acquisition.
SECTION 6.02 Capitalization. The authorized capital stock of
Acquisition consists of 3,000 shares of common stock, $.01 par value. As of the
date hereof, 100 shares of such common stock are validly issued and outstanding,
fully paid and nonassessable and are owned of record and beneficially by Parent,
and no shares of such common stock are held in the treasury of Acquisition.
Acquisition has no commitments to issue or sell any shares of such common stock
or any securities or obligations convertible into or exchangeable for, or giving
any person any right to subscribe for or acquire from Acquisition, any shares of
such common stock, and no securities or obligations evidencing any such rights
are outstanding.
SECTION 6.03 Authority Relative to Agreement. Acquisition has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Acquisition and by Parent as its sole shareholder, and no other corporate
proceedings on the part of Acquisition are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Acquisition and constitutes the legal, valid and binding
obligation of Acquisition, enforceable against Acquisition in accordance with
its terms except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by principles
of equity.
SECTION 6.04 Non-Contravention. The execution and delivery of this
Agreement by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby will not (a) conflict with any provision of the Certificate
of Incorporation or By-Laws of Acquisition or (b) result (with the giving of
notice or the lapse of time or both) in any violation of or default or loss of a
benefit under, or permit the acceleration of any obligation
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under, any mortgage, indenture, lease, agreement, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Acquisition or
its properties.
SECTION 6.05 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign governmental or regulatory authority is required to be
made or obtained by Acquisition in connection with the execution and delivery of
this Agreement by Acquisition or the consummation by Acquisition of the
transactions contemplated hereby, except for (a) the filing of Certificate of
Merger with the Secretary of State of the State of New York in accordance with
the New York BCL, (b) the filing of a Certificate of Merger with the Secretary
of State of the State of Delaware in accordance with the Delaware GCL, (c) any
licenses, permits, franchises or other governmental authorizations pertaining to
the business of Acquisition that are required as a result of the consummation of
the transactions contemplated hereby and (d) the filing of notices required to
be filed with state insurance departments.
SECTION 6.06 Other Matters. Acquisition has been formed for the sole
purpose of effecting the Merger and, except as contemplated by this Agreement,
Acquisition has not conducted any business activities and does not have any
material liabilities or obligations.
ARTICLE VII
COVENANTS AND OTHER AGREEMENTS
SECTION 7.01 Non-Competition Agreements. Simultaneously with the
execution and delivery hereof, Krauss and Trapani are each entering into a
non-competition and confidentiality agreement, effective as of the Effective
Time, for the benefit of Parent and the Surviving Corporation, in form and
substance satisfactory to the parties thereto.
SECTION 7.02 Employment Agreement. Simultaneously with the execution
and delivery hereof, Trapani is entering into three-year employment contract
with Parent, effective as of the Effective Time in form and substance
satisfactory to the parties thereto.
SECTION 7.03 Certain Life Insurance Policies. Schedule 7.03 sets
forth certain life insurance policies maintained in force by the Company in
respect of employees of the Company. As soon as practicable, the Surviving
Corporation will transfer and assign each such insurance policy to the insured
employee, to the
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extent transferable and assignable, provided that such employee shall undertake
and assume in writing all obligations of the Surviving Corporation thereunder.
Any such life insurance policy which is not transferable and assignable will be
terminated.
SECTION 7.04 Indemnification. (a) The Shareholders shall be severally
liable to, and shall severally indemnify, protect, defend and hold harmless
Parent and its successors and the Surviving Corporation and its successors
against any and all claims, damages, liabilities and expenses (including
reasonable attorneys' fees) sustained by Parent or the Surviving Corporation,
resulting from or in connection with the breach of any representation, warranty,
covenant or other agreement made by the Company, Krauss, Trapani or any
Shareholder in or pursuant to this Agreement or any other agreement or
instrument executed and delivered by or on behalf of the Company, Krauss,
Trapani or any Shareholder pursuant hereto or in connection herewith (such
breaches or failures being hereinafter referred to individually as an
"Indemnifiable Breach" and collectively as "Indemnifiable Breaches"); provided,
however, that (i) neither the Krauss Trustee Shareholder, individually, nor
Trapani, individually, shall be required to pay Parent and/or the Surviving
Corporation, as the case may be, pursuant to this Section 7.04(a), an amount in
excess of fifty percent (50%) of any amount required to be paid to Parent and/or
the Surviving Corporation in respect of any Indemnifiable Breach, and (ii)
neither the Krauss Trustee Shareholder, individually, nor Trapani, individually,
shall be required to pay Parent and/or the Surviving Corporation, as the case
may be, pursuant to this Section 7.04, an aggregate amount in excess of the
dollar value equivalent of Parent Common Stock valued at the Average Price
received by them upon consummation of the Merger pursuant to the terms hereof.
The indemnification obligations of the Shareholders under this Section 7.04
shall apply to claims, damages, liabilities and expenses sustained by Parent
and/or the Surviving Corporation in respect of Indemnifiable Breaches if and
when the aggregate amount of such claims, damages, liabilities and expenses
exceeds $25,000.00, or $30,000.00 in the aggregate in respect of indemnifiable
claims, damages, liabilities and expenses for Indemnifiable Breaches and
indemnifiable claims, damages, liabilities and expenses payable by shareholders
of Group Plan Administrators, Inc. and/or Krauss & Trapani Co., Ltd. under the
separate Agreements and Plans of Merger executed simultaneously herewith among
Parent, the certain acquisition subsidiaries of Parent, said corporations and
said shareholders of said corporations (the "Affiliate Merger Agreements"). In
the event the aggregate amount of the claims, damages, liabilities and expenses
sustained by Parent and/or the Surviving Corporation in respect of Indemnifiable
Breaches and/or Indemnifiable Breaches together with indemnifiable claims,
damages, liabilities and expenses in respect of the Affiliate Merger Agreements
exceeds said amount, the
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indemnification obligations of the Shareholders under this Section 7.04 shall
apply to all claims, damages, liabilities and expenses actually sustained by
Parent and/or the Surviving Corporation in respect of Indemnifiable Breaches.
(b) The Shareholders shall each be permitted to satisfy any
obligation under Section 7.04(a) or Section 7.04(b) in cash or by delivering to
Parent shares of Parent Common Stock in an amount equal to his obligation
thereunder based on a per share value equal to the Average Price.
(c) Parent and Acquisition shall be jointly and severally liable to,
and shall jointly and severally indemnify, protect, defend and hold harmless
each Shareholder and its respective successors against any and all claims,
damages, liabilities and expenses (including reasonable attorneys' fees)
sustained by any Shareholder, resulting from or in connection with the breach of
any representation, warranty, covenant or other agreement made by Parent or
Acquisition in or pursuant to this Agreement or any other agreement or
instrument executed and delivered by or on behalf of Parent and/or Acquisition
pursuant hereto or in connection herewith.
(d) Notwithstanding anything herein to the contrary, any party hereto
shall be entitled to seek specific enforcement of this Agreement. In the event
Parent and/or the Surviving Corporation becomes entitled to any sums under the
terms hereof, Parent and/or the Surviving Corporation shall have the right but
not the obligation to set off such liabilities of the Krauss Trustee Shareholder
and/or Trapani against any existing or future liabilities of Parent or the
Surviving Corporation to the Krauss Trustee Shareholder and/or Trapani other
than against amounts owed by the Company to Krauss and/or Trapani as
compensation for employment.
(e) The terms of this Section 7.04 are intended to benefit the
parties hereto, and any and all claims for indemnification under this Section
7.04 must be made during the period commencing at the Effective Time and ending
on the earlier to occur of (i) one (1) year after the Effective Time or (ii)
publication of the independent audit report on the consolidated financial
statements of Parent for the fiscal year ending June 30, 1998.
SECTION 7.05 Confidentiality. Except as otherwise provided in the
certain Confidentiality Agreement dated December 4, 1996 between the Company and
Parent with regard to information about the Company and Parent (the
"Confidentiality Agreement"), Parent and Acquisition, on the one hand, and the
Company and each Shareholder, on the other, shall hold, and shall use their
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<PAGE>
respective best efforts to cause their respective officers, directors,
employees, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other parties furnished to such party in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (a) previously known on a nonconfidential basis by such
party; (b) in the public domain through no fault of such party; or (c) later
lawfully acquired by such party from sources other than the other parties;
provided that each party may disclose such information to its Affiliates and its
Affiliates' officers, directors, employees, consultants, advisors and agents,
lenders and other investors in connection with the transactions contemplated by
this Agreement so long as such persons are informed by such party of the
confidential nature of such information and are directed by such party to treat
such information confidentially.
SECTION 7.06 Transfer Restrictions After the Effective Time. Each
Shareholder hereby agrees that, from and after the Effective Time:
(a) Lock-Up. Such Shareholder shall not sell or otherwise reduce its
risk relative to any shares of Parent Common Stock received by it in the Merger
(within the meaning of Financial Reporting Policy, Section 201.01), except as
permitted by Staff Accounting Bulletin No. 76 issued by the SEC, until Parent
has published financial results covering a fiscal quarter that includes results
(including combined sales and net income) for a period of at least 30 days of
post-Merger operations.
(b) Securities Act Compliance. Such Shareholder shall not offer,
sell, or otherwise dispose of the shares of Parent Common Stock received by such
Shareholder in connection with the Merger other than (i) pursuant to an
effective registration statement under the Securities Act, or (ii) otherwise
pursuant to an exemption from the registration requirements of the Securities
Act.
SECTION 7.07 Registration Rights Agreements. Simultaneously with the
execution hereof, Parent and each Shareholder are executing and delivering a
registration rights agreement in the form of Exhibit A hereto (the "Registration
Rights Agreement"), which agreement shall be effective as of the Effective Time.
SECTION 7.08 Termination of Shareholders' Agreements. Simultaneously
with the execution and delivery hereof, the Company and each Shareholder which
is a party to a shareholders' or similar
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<PAGE>
agreement disclosed in Schedule 3.02 is entering into a written agreement
terminating such agreement, as of the Effective Time, without further obligation
of the Company or the Surviving Corporation thereunder.
SECTION 7.09 Shareholder Sub-S Tax Liability. Simultaneously
herewith, the Company is remitting to each Shareholder that amount reasonably
estimated by the Company to represent such Shareholder's tax obligation for the
undistributed profits of the Company from January 1, 1997 through the Effective
Time, calculated using the anticipated marginal tax rate of 43.9%. The Company
has provided to Parent a written schedule showing the calculation thereof. Such
amount paid to each Shareholder simultaneously herewith shall be adjusted upward
or downward, as the case may be, as hereinafter set forth in this Section 7.09.
In the event that the actual undistributed profits of the Company from January
1, 1997 through the Effective Date (the "Actual Undistributed Profits") shall
exceed the amount of undistributed profits estimated for the calculation of
amounts paid to the Shareholders simultaneously herewith (the "Estimated
Undistributed Profits"), an amount equal to 43.9% of the amount by which the
Actual Undistributed Profits exceed the Estimated Undistributed Profits shall be
paid by Parent or the Surviving Corporation to the Shareholders in proportion to
their respective equity interests in the Company immediately prior to the
Effective Time. In the event that the Actual Undistributed Profits shall be less
than the Estimated Undistributed Profits, the Shareholders shall remit to Parent
an amount equal to 43.9% of the amount by which the Actual Undistributed Profits
are less than the Estimated Undistributed Profits. Parent or the Surviving
Corporation shall notify the Shareholders in writing of its good faith
determination of the Actual Undistributed Profits and any amount to be paid to
the Shareholders or remitted by the Shareholders under this Section 7.09, which
determination shall be binding on the parties hereto. The obligations of the
parties under this Section 7.09 shall survive the Effective Time.
SECTION 7.10 OMITTED.
SECTION 7.11 Closing Deliveries. The Company and the Shareholders are
simultaneously herewith delivering to Parent and Acquisition, the following:
(i) A copy of resolutions duly adopted by the Board of
Directors of the Company and the Shareholders, certified by the
Secretary or Assistant Secretary of the Company, approving the
execution, delivery and performance of this Agreement and the
transactions contemplated hereby;
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<PAGE>
(ii) the opinion of counsel to the Company and the
Shareholders in form and substance satisfactory to Parent and its
counsel; and
(iii) a good standing certificate issued by the Secretary of
State of New York as to the good standing of the Company in such
jurisdiction.
(b) Parent and Acquisition are simultaneously herewith delivering to
the Company and the Shareholders, the following:
(i) A copy of resolutions duly adopted by the Board of
Directors of Parent and by the Board of Directors of Acquisition,
certified by the Secretary or Assistant Secretary of Parent and
Acquisition, respectively, approving the execution, delivery and
performance of this Agreement and the transactions contemplated
hereby;
(ii) the opinion of the Vice President and General Counsel of
Parent in form and substance satisfactory to the Company and its
counsel; and
(iii) good standing certificates issued by the Secretary of
State of Delaware as to the good standing of Parent and Acquisition
in such jurisdictions.
SECTION 7.12 No Recission. The parties hereto covenant and agree that
none of them will seek recission of the Merger in the event that the
pooling-of-interests method of accounting is unavailable for the Merger.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Survival of Certain Representations and Warranties. The
representations and warranties of the Company and the Shareholders in this
Agreement and in any instrument delivered pursuant hereto shall survive the
Effective Time until the earlier to occur of (i) one (1) year after the
Effective Time or (ii) publication of the independent audit report on the
consolidated financial statements of Parent for the fiscal year ending June 30,
1998, provided that this Section 10.01 shall not limit any other covenant or
agreement of the parties that by its terms contemplates performances beyond such
period.
SECTION 8.02 Fees and Expenses. (a) The Company shall pay the
reasonable attorney's and accountant's fees of the Company, Krauss, Trapani and
the Shareholders actually incurred by them in
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<PAGE>
connection with the negotiation, preparation and execution of this Agreement up
to a maximum aggregate amount of $60,000.00 for this Agreement and the Affiliate
Merger Agreements. Except as provided in the foregoing sentence, none of the
Company, Krauss, Trapani or the Shareholders, on the one hand, and Parent and
Acquisition, on the other hand, shall have any obligation to pay any of the fees
and expenses of the other incident to the negotiation, preparation and execution
of this Agreement, including, without limitations, the fees and expenses of
counsel, accountants, advisors, investment bankers and other experts.
(b) The Shareholders, on the one hand, and Parent and Acquisition, on
the other hand, shall indemnify the other and hold it or them, as the case may
be, harmless from and against any claims for advisor's fees, finders' fees or
brokerage commissions, in relation to or in connection with the transactions
contemplated by this Agreement as a result of any agreement or understanding
between the Company or any of the Shareholders, on the one hand, or Parent and
Acquisition, on the other hand, and any third party.
SECTION 8.03 Publicity. The Company, Krauss, Trapani, the
Shareholders and Parent agree that they will not issue any press release or make
any other public announcement concerning this Agreement or the transactions
contemplated hereby without the prior consent of the other party, except that
the Company or Parent may make such public disclosure that it believes in good
faith to be required by law.
SECTION 8.04 Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 8.05 Notices. All notices that are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or national
overnight courier service, transmitted by telecopy or mailed by registered or
certified mail, postage prepaid, as follows:
If to Parent and/or Acquisition, to:
The BISYS Group, Inc.
Overlook at Great Notch
150 Clove Road
Little Falls, New Jersey 07424
Attention: Chairman and Chief Executive Officer
-33-
<PAGE>
with a copy to:
The BISYS Group, Inc.
Overlook at Great Notch
150 Clove Road
Little Falls, New Jersey 07424
Attention: General Counsel
If to the Company and/or the Shareholders, to:
Group Plan Administrators, Inc.
99 Madison Avenue
New York, NY 10016
Attention: Chairman
with a copy to:
Todtman, Young, Nachamie,
Hendler & Spizz, P.C.
425 Park Avenue
New York, New York 10022
Attention: Alex Spizz, Esq.
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 8.06 Waivers. The Company, Krauss and Trapani, on the one
hand, and Parent and Acquisition, on the other hand, may, by written notice to
the other, (a) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement; (b) waive any inaccuracies in
the representations or warranties of the other contained in this Agreement or in
any document delivered pursuant to this Agreement; or (c) waive compliance with
any of the covenants and agreements of the other contained in this Agreement.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
SECTION 8.07 Entire Agreement. This Agreement, its Schedules and the
agreements and documents executed at the Effective Time in connection herewith
and the Confidentiality
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<PAGE>
Agreement constitute the entire agreement among the parties hereto with respect
to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof. No representation, warranty, promise, inducement or
statement of intention has been made by any party that is not embodied in this
Agreement or such other documents, and none of the parties shall be bound by, or
be liable for, any alleged representation, warranty, promise, inducement or
statement of intention not embodied herein or therein.
SECTION 8.08 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflict of laws.
SECTION 8.09 Binding Effect, Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
permitted successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective permitted successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
SECTION 8.10 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
SECTION 8.11 Amendments. This Agreement may be modified, amended or
supplemented at any time by action of the respective Boards of Directors of the
Company, Parent and Acquisition, and by Krauss, Trapani and the Shareholders.
Without limiting the generality of the foregoing, this Agreement may only be
amended, varied or supplemented by an instrument in writing, signed by the
parties hereto.
SECTION 8.12 Applicable Disclosures. For purposes of this Agreement,
any disclosure made in any provision hereof, in any Schedule annexed hereto or
in any Agreement and Plan of Merger bearing even date herewith providing for the
merger of a subsidiary
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<PAGE>
of Parent into any Affiliate of the Company shall be deemed to be disclosed
under a Section of this Agreement.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed and delivered this Agreement and Plan of Merger as of the day and
year first above written.
THE BISYS GROUP, INC.
By:/s/ Lynn J. Mangum
----------------------------
Lynn J. Mangum
Chairman and
Chief Executive Officer
BI-GPA, INC.
By:/s/ Lynn J. Mangum
----------------------------
Lynn J. Mangum
Chairman
GROUP PLAN ADMINISTRATORS,
INC.
By:/s/ Jeffrey D. Krauss
----------------------------
Jeffrey D. Krauss
Chairman
/s/ Jeffrey D. Krauss
----------------------------
Jeffrey D. Krauss
Number of
Shares of Company
Common Stock Owned: SHAREHOLDERS:
50 /s/ Joseph J. DiTrapani
-------------------------
Joseph J. DiTrapani
860 Cranford Avenue
North Woodmere, NY 11581
50 /s/ Jeffrey D. Krauss
-------------------------
Jeffrey D. Krauss, as
Trustee of the Trust
for the Benefit of
Laura Krauss
2649 Rebecca Street
Bellmore, NY 11710
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<PAGE>
INDEX TO DEFINED TERMS
Term Reference
---- ---------
"Acquisition" Preamble
"Actual Undistributed Profits" 7.09
"Affiliate" 3.20
"Affiliate Merger Agreements" 7.04(a)
"Aggregate Parent Common Stock
Consideration" 2.01(a)
"Agreement" Preamble
"April 1997 Balance Sheet" 3.08
"April 1997 Combined Balance Sheet 3.08
"Average Price" 2.01(a)
"Balance Sheet" 3.08(a)
"Certificate" 2.03(a)
"Code" Recitals
"Combined Balance Sheet" 3.08
"Company" Preamble
"Company Common Stock" 2.01(a)
"Company Investments" 3.17
"Company Licenses" 3.28
"Confidentiality Agreement" 3.05
"Constituent Corporations" Preamble
"Contract Parties" 3.10
"Control" 3.20
"December 1996 Balance Sheet" 3.08
"Delaware GCL" Recitals
"Effective Time" 1.03
"Employee and Other Licenses" 3.28
"ERISA" 3.12(b)
"Estimated Undistributed Profits" 7.09
"Exchange Act" 5.09
"Financial Statements" 3.08(a)
"Indemnifiable Breaches" 7.04(a)
"Intellectual Property Rights" 3.09
"Krauss" Preamble
"Krauss Trustee Shareholder" Preamble
"Major Suppliers" 3.11
"Merger" Recitals
"Merger Information" 4.04(j)
"Net Merger Price" 2.01(a)
"New York BCL" Recitals
"Other Contracts" 3.20
"Parent" Preamble
"Parent Common Stock" Recitals
"Parent Public Information" 5.06
"Registration Rights Agreement" 7.07
"SEC" 4.04(b)
<PAGE>
"Securities Act" 4.04(a)
"Shareholders" Preamble
"Shareholders' Agreements" 3.02
"Surviving Corporation" Preamble
"Trapani" Preamble
<PAGE>
Exhibit 99.5
================================================================================
AGREEMENT AND PLAN OF MERGER
Among
THE BISYS GROUP, INC.,
BI-KT, INC.,
KRAUSS & TRAPANI CO., LTD.,
THE SHAREHOLDERS OF KRAUSS & TRAPANI CO., LTD.,
JEFFREY D. KRAUSS AND JOSEPH J. DITRAPANI
Dated as of August 29, 1997
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER....................................................2
SECTION 1.01 The Merger....................................................2
SECTION 1.02 Effect Of the Merger..........................................2
SECTION 1.03 Consummation of the Merger....................................2
SECTION 1.04 Charter; By-Laws; Directors and Officers......................3
SECTION 1.05 Further Assurances............................................3
ARTICLE II CONVERSION OF SECURITIES......................................4
SECTION 2.01 Conversion of Securities of the Company.......................4
SECTION 2.02 Acquisition Common Stock......................................4
SECTION 2.03 Exchange of Certificates......................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND KRAUSS AND TRAPANI............................6
SECTION 3.01 Authority Relative to Agreement...............................6
SECTION 3.02 Shareholders' Title to Stock..................................6
SECTION 3.03 Organization, Standing and Qualification......................6
SECTION 3.04 Stock of the Company..........................................6
SECTION 3.05 Subsidiaries and Other Investments............................7
SECTION 3.06 Certification of Incorporation and By-Laws....................7
SECTION 3.07 Execution and Performance of Agreement;
Validity and Binding Nature...................................7
SECTION 3.08 Financial Statements..........................................8
SECTION 3.09 Intellectual Property Rights..................................8
SECTION 3.10 Contracts and Contract Parties................................9
SECTION 3.11 Major Suppliers..............................................10
SECTION 3.12 Employment, Deferred Compensation or
Similar Agreements; Collective Bargaining
Agreements; Employee Benefit Plans...........................10
SECTION 3.13 Inventory....................................................11
SECTION 3.14 Real Estate..................................................11
SECTION 3.15 Title to and Condition of Personal
Property.....................................................11
SECTION 3.16 Accounts and Notes Receivable................................12
SECTION 3.17 Marketable Securities and Other Investments..................12
SECTION 3.18 Taxes........................................................12
SECTION 3.19 Litigation...................................................13
SECTION 3.20 Other Material Contracts and Commitments.....................13
SECTION 3.21 Labor Relations..............................................14
SECTION 3.22 Insurance....................................................14
i
<PAGE>
TABLE OF CONTENTS
(continued)
Page
SECTION 3.23 Conduct of Business and Absence of
Changes......................................................14
SECTION 3.24 Compliance with Laws; Governmental
Authorizations...............................................15
SECTION 3.25 Officers, Directors and Depositories.........................15
SECTION 3.26 Environmental Matters........................................15
SECTION 3.27 Third Party and Governmental
Consents.....................................................16
SECTION 3.28 Licenses and Permits.........................................16
SECTION 3.29 Software.....................................................17
SECTION 3.30 Loans to or from Shareholders or Employees...................17
SECTION 3.31 Absence of Undisclosed Liabilities...........................17
SECTION 3.32 Shareholders' and Similar Agreements.........................17
SECTION 3.33 Approval of Merger...........................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS.................................................18
SECTION 4.01 Authority and Capacity Relative to
Agreement....................................................18
SECTION 4.02 Execution and Performance of Agreement;
Validity and Binding Nature..................................18
SECTION 4.03 Stock of the Company.........................................18
SECTION 4.04 Additional Representations and Covenants
of Shareholders..............................................19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT.....................22
SECTION 5.01 Organization and Qualification...............................22
SECTION 5.02 Acquisition..................................................23
SECTION 5.03 Capitalization...............................................23
SECTION 5.04 Authority Relative to Agreement..............................24
SECTION 5.05 Non-Contravention............................................24
SECTION 5.06 Parent Public Information....................................24
SECTION 5.07 Financial Statements.........................................24
SECTION 5.08 Absence of Certain Changes or Events.........................25
SECTION 5.09 Governmental Consents........................................25
SECTION 5.10 Compliance with Law..........................................26
ii
<PAGE>
TABLE OF CONTENTS
(continued)
Page
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND
ACQUISITION..................................................26
SECTION 6.01 Organization and Qualification...............................26
SECTION 6.02 Capitalization...............................................26
SECTION 6.03 Authority Relative to Agreement..............................27
SECTION 6.04 Non-Contravention............................................27
SECTION 6.05 Governmental Consents........................................27
SECTION 6.06 Other Matters................................................28
ARTICLE VII COVENANTS AND OTHER AGREEMENTS...............................28
SECTION 7.01 Non-Competition Agreements...................................28
SECTION 7.02 Employment Agreement.........................................28
SECTION 7.03 Certain Life Insurance Policies..............................28
SECTION 7.04 Indemnification..............................................28
SECTION 7.05 Confidentiality..............................................30
SECTION 7.06 Transfer Restrictions After the
Effective Time...............................................31
SECTION 7.07 Registration Rights Agreements...............................31
SECTION 7.08 Termination of Shareholders' Agreements and
Employment Agreements .......................................31
SECTION 7.09 Shareholder Sub-S Tax Liability..............................31
SECTION 7.10 OMITTED......................................................32
SECTION 7.11 Closing Deliveries...........................................32
SECTION 7.12 No Recission.................................................33
ARTICLE VIII MISCELLANEOUS................................................33
SECTION 8.01 Survival of Certain Representations and
Warranties...................................................33
SECTION 8.02 Fees and Expenses............................................33
SECTION 8.03 Publicity....................................................34
SECTION 8.04 Execution in Counterparts....................................34
SECTION 8.05 Notices......................................................34
SECTION 8.06 Waivers......................................................35
SECTION 8.07 Entire Agreement.............................................35
SECTION 8.08 Applicable Law...............................................35
SECTION 8.09 Binding Effect, Benefits.....................................35
SECTION 8.10 Assignability................................................36
SECTION 8.11 Amendments...................................................36
SECTION 8.12 Applicable Disclosures.......................................36
iii
<PAGE>
INDEX TO SCHEDULES AND EXHIBITS
Schedule Description
-------- -----------
3.02 Shareholder's Agreements
3.03 Qualifications
3.05 Subsidiaries/Other Investments
3.06 Certificate of Incorporation and
By-Laws of the Company
3.09 Intellectual Property Rights
3.10 Contracts and Contract Parties
3.11 Major Suppliers
3.12(a) Employment Contracts and
Other Compensation Agreements
3.12(b) Employee Benefit Plans
3.13 Inventory
3.14(b) Real Estate Leased
3.15 Liens and Encumbrances on
Personal Property
3.16 Accounts and Notes Receivable
3.17 Company Investments
3.18 Tax Matters
3.19 Litigation
3.20 Other Contracts
3.21 Compliance with Employment
Related Laws
3.22 Insurance
3.23 Changes in Conduct of Business
3.25 Officers, Directors and Depositories
3.27 Consents and Waivers
3.28 Licenses and Permits
4.04(e) Accredited Investors
4.04(n) Shareholder Interests
7.03 Certain Life Insurance Policies
iv
<PAGE>
Exhibit Ref. Description
- ------- ---- -----------
A 7.13 Form of Registration Rights
Agreement
v
<PAGE>
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August
29, 1997, among The BISYS Group, Inc., a Delaware corporation, with an address
at 150 Clove Road, Little Falls, New Jersey 07424 ("Parent"), BI-KT, Inc., a
Delaware corporation and a wholly-owned subsidiary of Parent, with an address at
150 Clove Road, Little Falls, New Jersey 07424 ("Acquisition"), Krauss & Trapani
Co., Ltd., a New York corporation, with an address at 99 Madison Avenue, New
York, New York 10016 (the "Company"), Jeffrey D. Krauss, with an address at 2649
Rebecca Street, Bellmore, New York 11710 ("Krauss"), Joseph J. DiTrapani (a/k/a
Joseph J. Trapani), with an address at 860 Cranford Avenue, North Woodmere, New
York 11581 ("Trapani"), and the shareholders of the Company, whose names and
addresses are set forth on the signature pages hereto (all of said persons and
Trapani being sometimes referred to herein individually as a "Shareholder", and
collectively, together with Trapani, as the "Shareholders"). Lea Krauss, Michael
Krauss and Laura Krauss, each a Shareholder, are sometimes collectively referred
to herein as the "Krauss Shareholders", and Trapani, Scott DiTrapani, Matthew
DiTrapani and Trapani as custodian for Todd DiTrapani under the Uniform
Transfers to Minors Act, each a Shareholder, are sometimes referred to herein as
the "Trapani Shareholders". The Company and Acquisition are hereinafter
sometimes referred to as the "Constituent Corporations" and the Company as the
"Surviving Corporation.
WHEREAS, the Company is a general insurance agency;
WHEREAS, Parent, Acquisition and the Company desire that Acquisition
merge with and into the Company (the "Merger"), upon the terms and conditions
set forth herein and in accordance with the Business Corporation Law of the
State of New York (the "New York BCL") and the General Corporation Law of the
State of Delaware (the "Delaware GCL"), with the result that the Company shall
continue as the Surviving Corporation and the separate existence of Acquisition
(except as it may be continued by operation of law) shall cease;
WHEREAS, Parent, Acquisition and the Company desire that upon the
Merger, at the Effective Time (as hereinafter defined), the outstanding shares
of the capital stock of the Company be converted into the right to receive fully
paid and nonassessable shares of Common Stock, $.02 par value, of Parent
("Parent Common Stock"), and the outstanding shares of Acquisition be converted
into the right to receive fully paid and nonassessable shares of the Common
Stock, $.01 par value, of the Surviving Corporation, as hereinafter provided;
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<PAGE>
WHEREAS, Parent, Acquisition and the Company desire that, immediately
after the Effective Time and solely as a result of the Merger, Parent will own
all the issued and outstanding shares of the capital stock of the Surviving
Corporation;
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger
shall be accounted for as a "pooling-of-interests"; and
WHEREAS, the respective Boards of Directors of the Company, Parent
and Acquisition and the shareholders of the Company have approved the Merger;
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, in accordance with this Agreement, the New
York BCL and the Delaware GCL, Acquisition shall be merged with and into the
Company, the separate existence of Acquisition (except as it may be continued by
operation of law) shall cease, and the Company shall continue as the Surviving
Corporation.
SECTION 1.02 Effect Of the Merger. Upon the effectiveness of the
Merger, the Surviving Corporation shall succeed to and assume all the rights and
obligations of the Company and Acquisition in accordance with the New York BCL
and the Delaware GCL and the Merger shall otherwise have the effects set forth
in Section 906 of the New York BCL.
SECTION 1.03 Consummation of the Merger. Simultaneously herewith, the
parties hereto are causing the Merger to be consummated by filing (a) with the
Secretary of State of the State of New York a properly executed Certificate of
Merger in accordance with the New York BCL, and (b) with the Secretary of State
of the State of Delaware a properly executed certificate of merger in accordance
with the Delaware GCL. The effective time of the Merger is referred to herein as
the "Effective Time".
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<PAGE>
SECTION 1.04 Charter; By-Laws; Directors and Officers. As of the
Effective Time, the Certificate of Incorporation of the Surviving Corporation
shall be the Certificate of Incorporation of the Company unless and until
thereafter amended or restated in accordance with the provisions thereof and as
provided by the New York BCL. As of the Effective Time, the By-Laws of the
Surviving Corporation shall be the By-Laws of the Company as in effect
immediately prior to the Effective Time, unless and until thereafter amended in
accordance with the provisions thereof and as provided by the New York BCL. The
initial directors and officers of the Surviving Corporation shall be the
directors and officers set forth below, in each case until their respective
successors are duly elected and qualified.
Directors:
Lynn J. Mangum
Robert J. McMullan
Officers:
Lynn J. Mangum - Chairman
Anthony A. Pascotti - President
Robert J. McMullan - Executive Vice President and
Treasurer
J. Randall Grespin - Executive Vice President
Thomas G. Veal - Executive Vice President
Joseph J. Trapani - Senior Vice President
Mark J. Rybarczyk - Senior Vice President
Dennis R. Sheehan - Senior Vice President
Kevin J. Dell - Vice President, General Counsel and
Secretary
Annamaria Porcaro - Assistant Secretary
Patricia A. Heins - Assistant Secretary
SECTION 1.05 Further Assurances. If at any time after the Effective
Time the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments or assurances or any other acts or things are
necessary, desirable or proper (i) to vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation, its right, title or interest in, to or
under any of the rights, privileges, powers, franchises, properties or assets of
either of the Constituent Corporations, or (ii) otherwise to carry out the
purposes of this Agreement, the Surviving Corporation and its proper officers
and directors or their designees shall be authorized to execute and deliver, in
the name and on behalf of either of the Constituent Corporations, all such
deeds, bills of sale, assignments and assurances and do, in the name and on
behalf
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of such Constituent Corporation, all such other acts and things necessary,
desirable or proper to vest, perfect or confirm its right, title or interest in,
to or under any of the rights, privileges, powers, franchises, properties or
assets of such Constituent Corporation and otherwise to carry out the purposes
of this Agreement.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities of the Company. (a) Net Merger
Price. By virtue of the Merger and without any action on the part of the holders
of the common stock, without par value, of the Company ("Company Common Stock"),
at the Effective Time all outstanding shares of the Company Common Stock
(subject to Section 2.03(b) hereof) shall be converted into the right to receive
14,864.3627 fully paid and nonassessable shares of Parent Common Stock on the
following basis:
The aggregate consideration being paid in connection with the Merger
is being paid in the form of Parent Common Stock valued, as set forth below, at
Five Hundred Thousand Dollars ($500,000.00). The Net Merger Price is divided by
$33.6375, which is the average of the daily closing price per share of Parent
Common Stock (the "Average Price"), as reported on the Nasdaq National Market
for the 30 trading day period immediately preceding the day which is three
business days prior to the Effective Time, in order to determine the number of
shares of Parent Common Stock into which the outstanding shares of Company
Common Stock are being converted in the Merger (the "Aggregate Parent Common
Stock Consideration").
(b) Exchange Value. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any such shares
held in the treasury of the Company, which are being canceled as provided in
paragraph (c) below) are being converted into the right to receive 148.6436
shares of Parent Common Stock, which represents the quotient obtained by
dividing the number of outstanding shares of Company Common Stock by the
Aggregate Parent Common Stock Consideration.
(c) Treasury Stock. Each share of capital stock that is held in the
treasury of the Company is being canceled and retired and no capital stock of
Parent, cash or other consideration shall be paid or delivered in exchange
therefor.
SECTION 2.02 Acquisition Common Stock. At the Effective Time, each
share of Common Stock, $.01 par value, of Acquisition issued and outstanding
immediately prior to the
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Effective Time is being converted into a right to receive one (1) share of the
common stock of the Surviving Corporation, which shall constitute all of the
issued and outstanding shares of the Surviving Corporation after the Effective
Time.
SECTION 2.03 Exchange of Certificates. (a) Simultaneously herewith,
each Shareholder is delivering to Parent the certificate or certificates
representing its shares of Company Common Stock (each, a "Certificate") in form
sufficient for transfer and cancellation pursuant hereto. Each Shareholder
surrendering such Certificate shall be entitled to receive in exchange therefor,
without any further payment of consideration by such Shareholder, (i) a
certificate evidencing that number of whole shares of Parent Common Stock which
such holder has the right to receive in respect of the shares of Company Common
Stock formerly evidenced by such Certificate (after taking into account all
shares of Company Common Stock then held of record by such holder) and (ii) a
check representing the amount of cash in lieu of fractional shares of Parent
Common Stock, if any, and unpaid dividends or other distributions, if any, to
which such holder is entitled pursuant to the provisions of this Section 2.03,
after giving effect to any applicable withholding tax, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash in lieu of fractional shares and unpaid dividends and distributions, if
any, payable to the Shareholders.
(b) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a shareholder of Parent. Each holder of shares of Company
Common Stock who would otherwise have been entitled to receive in the Merger a
fraction of a share of Parent Common Stock (after taking into account all
certificates surrendered by such holder) shall be entitled to receive, in lieu
thereof, a check in an amount (without interest) equal to such fractional part
of a share of Parent Common Stock multiplied by the Average Price.
(c) Promptly after the Effective Time, the Surviving Corporation
shall issue to Parent a certificate representing One Hundred (100) shares of the
common stock of the Surviving Corporation, and Parent shall cause the
certificate representing the shares of the capital stock of Acquisition to be
canceled.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND KRAUSS AND TRAPANI
Each of the Company and each of Krauss and Trapani, jointly and
severally, hereby represents and warrants to Parent and Acquisition, knowing and
intending that each of Parent and Acquisition is relying hereon in entering into
the transactions contemplated hereby, as follows:
SECTION 3.01 Authority Relative to Agreement. The Company has all
requisite power and authority to enter into and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by the Board of Directors and shareholders of the Company, and
no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the transactions contemplated hereby.
SECTION 3.02 Shareholders' Title to Stock. The shares of Company
Common Stock identified on the signature page(s) hereof opposite the respective
names of the holders thereof have been duly and validly issued to the respective
holders. The shares of Company Common Stock owned by them represent,
collectively, all of the issued and outstanding shares of capital stock (or
other equity interests) in the Company. Except with respect to such agreements
set forth on Schedule 3.02 hereto (the "Shareholders' Agreements"), each of
which is terminated as of the Effective Time, neither the Company nor the
Shareholders are party to any shareholders' agreement, buy-sell agreement or
similar agreement or arrangement.
SECTION 3.03 Organization, Standing and Qualification. The Company is
a corporation, duly organized, validly existing and in good standing under the
laws of the State of New York and has the corporate power and lawful authority
to own and hold its properties and conduct its business as now owned, held and
conducted in its state of incorporation and the states (or other jurisdictions)
in which it has qualified to do business. The Company is qualified to do
business and is in good standing in all states (or other jurisdictions) in which
such qualification is required by reason of the nature or extent of business
conducted by the Company therein, except where the failure to so qualify would
not have a material adverse effect on the business, results of operations or
financial condition of the Company, and such states (and jurisdictions) are
specified in Schedule 3.03 attached hereto
SECTION 3.04 Stock of the Company. (a) The authorized capital stock
of the Company consists in its entirety of
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Two Hundred (200) shares of Company Common Stock, of which One Hundred (100)
shares of Company Common Stock are validly issued and outstanding, fully paid
and nonassessable. The Company does not have any outstanding subscription,
warrants, convertible securities, obligations, options or rights entitling
others to acquire shares of capital stock of the Company, or any outstanding
securities, options, warrants, rights or other instruments convertible into
shares of capital stock of the Company.
(b) Except with respect to the shares of Company Common Stock
identified on the signature page(s) hereof, none of the Shareholders or any
other person or entity has any outstanding claim against the Company or any
right whatsoever against the Company with respect to any shares of capital stock
of the Company, including, without limitation, any option, warrant or other
right to acquire from the Company shares of the capital stock of the Company or
any securities, options or other instruments convertible into or exchangeable
for shares of capital stock of the Company.
SECTION 3.05 Subsidiaries and Other Investments. Other than as listed
on Schedule 3.05 hereto, there is no corporation, partnership, joint venture, or
other entity in which the Company has, directly or indirectly, made any
investment or to which the Company has made an advance of cash. The Company is
not under any obligation to acquire any securities from any person or entity,
and Agreement, the Company is not under any obligation to make any investment,
loan, cash contribution or other advance to any person or entity, including, but
not limited to, International Benefits Administrators, L.L.C. or any member
thereof.
SECTION 3.06 Certificate of Incorporation and By-Laws. True and
complete copies of the Company's Certificate of Incorporation and By-Laws
(together with any amendments thereto) are attached hereto as Schedule 3.06. The
Company has provided to Parent true and complete copies of the Certificate of
Incorporation and By-Laws of the Company and the Certificate of Incorporation
and By-Laws or other organizational agreements and documents of each Subsidiary,
together with all amendments thereto.
SECTION 3.07 Execution and Performance of Agreement; Validity and
Binding Nature. The execution and delivery of this Agreement, and the
performance by the Company, Krauss, Trapani and the Shareholders of the terms of
this Agreement and the transactions contemplated hereby, will not result in a
breach of any of the terms of, or constitute a violation of or default under,
the Certificate of Incorporation or By-Laws of the Company or any statute or
contract, indenture or other instrument by which the Company, Krauss, Trapani,
or the Shareholders or any of their respective properties are bound, and except
as provided in Section 3.27 and disclosed in Schedule 3.27 hereof, no consent,
approval,
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authorization or order of any court or governmental authority is required in
connection with the execution and delivery of the Agreement by the Company,
Krauss, Trapani and the Shareholders and the performance by the Company, Krauss,
Trapani and the Shareholders of the terms of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company, Krauss, Trapani and the Shareholders. This Agreement is, and the
documents and agreements executed and delivered by the Company, Krauss, Trapani
and the Shareholders pursuant to the terms hereof, when duly executed and
delivered by all parties whose execution and delivery thereof is required, will
be legal, valid, and binding obligations of the Company, Krauss, Trapani and the
Shareholders, enforceable against the Company, Krauss, Trapani and the
Shareholders in accordance with their respective terms, except to the extent
that enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by general principles of equity.
SECTION 3.08 Financial Statements. Parent has caused Coopers &
Lybrand L.L.C. to audit the combined balance sheet of the Company and its
affiliated entities, Dascit/White & Winston, Inc. and Group Plan Administrators,
Inc., as of April 30, 1997 (the "April 1997 Combined Balance Sheet"), and notes
thereto. The Company has delivered to Parent (i) the unaudited balance sheet of
the Company as of April 30, 1997 (the "April 1997 Balance Sheet") used for
purposes of preparing the April 1997 Combined Balance Sheet and included
therein, and the related unaudited statements of income, stockholders' equity
and cash flows for the period then ended, and notes thereto, and (ii) the
unaudited balance sheet of the Company as of December 31, 1996 (the "December
1996 Balance Sheet"), and the related unaudited statements of income,
stockholders' equity and cash flows for the fiscal year then ended, and notes
thereto, herein referred to collectively as the "Financial Statements". All
prepaid expenses included in the Financial Statements as assets represent
payments theretofore made by the Company, the benefit and advantage of which may
be obtained and enjoyed by the Surviving Corporation. The books and records of
the Company have been kept, and will be kept to the Effective Time, in
reasonable detail and in accordance with the same accounting principles
heretofore used and consistently applied.
SECTION 3.09 Intellectual Property Rights. Schedule 3.09 attached
hereto contains a complete and correct list and accurate description of all
trademarks, trade names, service marks, logos and other identifying symbols,
names or marks, copyrights, inventions, processes, designs, formulas, trade
secrets, patents, patent applications and other intellectual and/or proprietary
rights or interests (collectively, "Intellectual Property Rights") (a) owned by
the Company free and clear of all licenses, liens,
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charges or encumbrances, except as specified in such Schedule, or (b) licensed
to the Company under valid and enforceable agreements. The Company owns, or
possesses adequate rights to use, all Intellectual Property Rights necessary for
the conduct of the business of the Company, and the protection of patents is not
material to the conduct of the business of the Company. There are no
infringements by any third parties upon any Intellectual Property Rights or any
conflict with or infringement by the Company of the rights of others with
respect to same.
SECTION 3.10 Contracts and Contract Parties. Schedule 3.10 contains a
complete list of (a) each joint venture, co-marketing, co-brokerage or similar
contract or arrangement, whether written or oral, to which the Company is a
party, (b) each contract or arrangement, whether written or oral, with an
insurance company, general insurance agency, distributor or broker to which the
Company is a party, and under which the Company is authorized or obligated to
sell or broker insurance or related products or services, (c) each contract or
arrangement, whether written or oral, under which the Company receives
commissions or other income in connection with the conduct of its business, (d)
each lease or capital lease of equipment or other personal property, whether
written or oral, to which the Company is a party and (e) each consulting or
similar agreement, whether written or oral, to which the Company is a party, all
of the foregoing including the names and addresses of each party thereto other
than the Company (collectively, the "Contract Parties"), in each case under
which the Company's revenues or expenses exceeded $10,000.00 for the twelve
months ended June 30, 1997 or under which the Company reasonably anticipates
that its revenues or expenses will exceed $10,000.00 in the twelve months ending
June 30, 1998. True and complete copies of those contracts or arrangements
described in this Section 3.10 which are in writing have been made available to
Parent, and accurate descriptions of those contracts or arrangements described
in this Section 3.10 which are oral have been made available to Parent. Except
as described in Schedule 3.10, none of the contracts or arrangements listed in
Schedule 3.10 require the Company to purchase any product or service exclusively
from a Contract Party, require the Company to deal exclusively with a Contract
Party with respect to any customer or class of customers of the Company, or
otherwise limit the Company from selling or purchasing any product or service to
or from any person or entity. No Contract Party listed in Schedule 3.10 has
expressed to the Company, Krauss or Trapani its intention to cancel or otherwise
terminate its relationship with the Company, and, to the knowledge of the
Company, Krauss and Trapani, all of such contracts and arrangements will
continue in full force and effect after the Effective Time and a continuing
relationship with each such Contract Party is not in jeopardy.
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SECTION 3.11 Major Suppliers. Except as disclosed in Schedule 3.11,
and other than insurance companies or insurance brokers, there are no suppliers
or consultants from whom the Company has purchased goods and/or services
(collectively, the "Major Suppliers"), the loss of which would cause a material
adverse effect on the business, results of operations or financial condition of
the Company or the Surviving Corporation. No Major Supplier has expressed to the
Company, Krauss or Trapani its intention to cancel or otherwise terminate its
relationship with the Company or the Surviving Corporation.
SECTION 3.12 Employment, Deferred Compensation or Similar Agreements;
Collective Bargaining Agreements; Employee Benefit Plans. (a) Except as
disclosed in Schedule 3.12(a), the Company is not a party to any agreement or
employment contract or deferred compensation or similar employment or incentive
compensation arrangement with any of its respective employees or former
employees. There are no collective bargaining agreements or any agreements with
any labor union covering any employees of the Company. The business of the
Company is not affected by any present strike or other labor disturbance
involving the employees of the Company nor, to the best knowledge of the Company
or any Management Shareholder, is any union attempting to represent, as
collective bargaining agent, any person employed by the Company.
(b) Except as disclosed in Schedule 3.12(b), the Company does not
sponsor or maintain and is not otherwise a party to or liable under any plan,
program, fund or arrangement (whether or not qualified for Federal income tax
purposes), whether benefiting a single individual or multiple individuals, and
whether funded or not, that is an "employee pension benefit plan," or an
"employee welfare benefit plan," as such terms are defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or any other
benefit arrangement for its employees, their dependents and beneficiaries.
(c) Except as disclosed in Schedule 3.12(b) hereto, the Company has
not and does not contribute to any multi-employer plan (as defined in Section
3(37) of ERISA), incurred any liability under Section 4201 of ERISA for any
complete or partial withdrawal from any multi-employer plan and has not assumed
any such liability by any prior owner of any of its assets or properties.
(d) Each employee pension benefit plan maintained by the Company and
listed in Schedule 3.12(b) complies in all material respects with the
requirements of ERISA. No "reportable event" within the meaning of Section 403
of ERISA has occurred with respect to any such plan and the Company has not
engaged in any "prohibited transaction" within the meaning of Section 406(a) or
(b) of ERISA or of Section 4975(c) of the Code, with respect to any
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such plan; and no such plan has been terminated in accordance with the
procedures set forth in Section 4041 or 4042 of ERISA.
(e) No liability has been incurred by the Company or any Subsidiary
for any tax imposed by Section 4975 of the Code with respect to any plan
described in Schedule 3.12(b). The Company has, and shall have, for all periods
ending on or prior to the Effective Time, administered each employee pension
benefit plan and each employee welfare benefit plan described in Schedule
3.12(b) in all material respects in compliance with the reporting, disclosure
and all other requirements applicable thereto under ERISA, the Code or any other
applicable law.
SECTION 3.13 Inventory. Except as disclosed in Schedule 3.13 or in
the April 1997 Balance Sheet, the Company does not own any inventory, and the
ownership and maintenance of inventory is not significant to the conduct of the
business of the Company.
SECTION 3.14 Real Estate. (a) The Company owns no real property. The
Company is not a party to any agreement involving the purchase or sale of real
or personal property except as disclosed in this Agreement or a Schedule hereto.
(b) Schedule 3.14 (b) contains a true and correct list and
description of all leases, subleases or other agreements under which the Company
is lessee or subtenant or lessor or sublessor of real estate. The Company has
provided to Parent true and complete copies of all such leases, subleases and
agreements, all of which leases, subleases and agreements are valid, binding and
enforceable. The Company has no oral leases of real estate.
(c) All leased real property (and improvements thereon) described in
Schedule 3.14(b) is in good operating condition and repair and conforms in all
material respects with all applicable building, zoning, planning and other
regulations, ordinances or laws, and the Company has the right to use all real
estate necessary to the conduct of its business as currently conducted.
SECTION 3.15 Title to and Condition of Personal Property. The Company
has merchantable title to all personal property reflected in the April 1997
Balance Sheet or acquired subsequent to the date of the April 1997 Balance
Sheet, free and clear of all liens or encumbrances, except as disclosed in
Schedule 3.15 hereto. No representation or warranty as to the condition of any
such personal property is made in this Agreement. The Company owns or has the
right to use all such properties necessary to the conduct of its business as
currently conducted.
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SECTION 3.16 Accounts and Notes Receivable. Except as disclosed in
Schedule 3.16, the accounts and notes receivable of the Company reflected in the
April 1997 Balance Sheet or acquired by the Company subsequent to the date of
the April 1997 Balance Sheet (a) are true, bona fide accounts or notes
receivable of the Company created in the ordinary course of business; (b) have
been collected or are fully collectible in amounts not less than the aggregate
amount thereof, net of reserves established therefor, on the books of the
Company and reflected in the April 1997 Balance Sheet; (c) are not subject to
any offsets, credits or counterclaims; and (d) have not at any time been placed
for collection with any attorney, collection agency or similar individual or
firm.
SECTION 3.17 Marketable Securities and Other Investments. Schedule
3.17 lists all of the marketable securities and other investments shown on the
April 1997 Balance Sheet (the "Company Investments"), all of which are owned by
the Company free and clear of any liens, encumbrances or claims, except as shown
in Schedule 3.17. The value of each of the Company Investments shown on the
April 1997 Balance Sheet reflect the fair market value thereof on the date of
the April 1997 Balance Sheet, as applicable, and the Financial Statements are in
conformity with the requirements of Financial Accounting Standards Board
Statement No. 115. All of the Company Investments are readily marketable except
as described in Schedule 3.17, and, since the date of the April 1997 Balance
Sheet, as applicable, there has been no material decline in the aggregate market
value of the Company Investments.
SECTION 3.18 Taxes. The Company has properly completed and filed all
federal, state, county, municipal and other tax returns, reports and
declarations which are required to be filed by it and has paid all taxes,
penalties and interest which have become due pursuant thereto or which became
due pursuant to asserted deficiencies or assessments. The Company has reported
its income for tax purposes on the cash method of accounting and will be
required pursuant to the Code to change to the accrual method of accounting at
the Effective Time. By reason of such change in the method of accounting, the
Surviving Corporation may be required to make certain adjustments to its taxable
income and may be required to pay additional taxes in respect of income which
the Company would have been required to report had it used the accrual method of
accounting prior to the Effective Time, it being understood and agreed hereunder
that such additional taxes, if any, shall be the exclusive liability of the
Surviving Corporation. Except as set forth in Schedule 3.18 hereto, the Company
has not received any notice of deficiency or assessment of additional taxes, all
such deficiencies or assessments set forth in Schedule 3.18 are being contested
in good faith and through appropriate proceedings, and no
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tax audits are in process. The last year for which the federal or state income
taxes or other taxes of the Company have been examined is set forth accurately
and completely on Schedule 3.18 hereto. The Company has not granted any waiver
of any statute of limitation with respect to, or any extension of a period for
the assessment of, any federal, state, county, municipal or other tax. The
Company filed an election under Section 1362(a) of the Code to be taxed as an S
Corporation on the date indicated on Schedule 3.18, and said election is in
effect on and as of the date hereof.
SECTION 3.19 Litigation. Except as disclosed in Schedule 3.19, there
is no litigation, investigation or proceeding pending or, to the knowledge of
the Company, Krauss or Trapani, threatened, involving the Company or any of its
properties. There are no outstanding orders, writs, injunctions or decrees of
any court, governmental agency or arbitration tribunal materially affecting or
materially limiting the conduct of the business of the Company.
SECTION 3.20 Other Material Contracts and Commitments. Except as
disclosed in Schedule 3.20 or another Schedule hereto, the Company is not a
party to and none of its properties are bound by any of the following types of
contracts or commitments, written or oral: (a) mortgages, indentures, security
agreements and other agreements and instruments relating to the borrowing of
money in excess of $10,000.00 in the aggregate or extension of credit in excess
of $10,000.00 in the aggregate or imposition of an encumbrance on any of the
assets of the Company; (b) any contract with any officer, director or with any
employee of the Company (other than agreements relating to current wage or
salary payments terminable by the Company on notice of thirty (30) days or
less); (c) any contract or promissory note or other instrument with any
Affiliate (as hereinafter defined) of the Company; (d) any guarantee of the
obligations of any person or entity or obligation to provide funds or assume the
debt of any person or entity; (e) any option or right to acquire any assets of
the Company outside of the ordinary course of business; or (f) profit-sharing,
stock option, pension, or retirement agreements, shareholder or similar
agreements or arrangements, trusts, or funds for the benefit of employees
(collectively, the "Other Contracts"). The Company has delivered to Parent
complete and correct copies of all of the Other Contracts as are in writing,
together with all amendments thereto, and accurate descriptions of all of the
other Contracts which are oral. The Company is not in default with respect to
any of the Other Contracts, and to the knowledge of the Company, Krauss and
Trapani, no other party to any of the Other Contracts is in default with respect
thereto. Except as specifically set forth on Schedule 3.20, each of the Other
Contracts will continue in full force and effect after the Effective Time
without any right on the part of any party thereto, other than the Surviving
Corporation, to
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terminate it as a result of the occurrence of the Merger. For purposes of this
Agreement, an "Affiliate" of the Company means (a) any corporation, partnership,
trust or other entity in control of, controlled by or under common control with
the Company; and (b) any officer, director, trustee, general partner or employee
of any corporation, partnership, trust or other entity in control of, controlled
by or under common control with the Company. For purposes of this Agreement, the
term "control" (including the terms "controlling," "controlled by" and "under
common control with") means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract, or otherwise.
Schedule 3.20 discloses all Affiliates of the Company which are business
entities currently in existence.
SECTION 3.21 Labor Relations. Except as disclosed in Schedule 3.21,
the Company, in the conduct of its affairs, has complied in all material
respects with all applicable laws (including, without limitation, labor and tax
laws), and regulations relating to the hiring and employment of employees and
independent contractors, including, without limitation, those related to
discrimination, wages, hours, collective bargaining, employee pension and
welfare benefit plans, and the payment of (and withholding for) income, Social
Security and other employment related taxes, and the Company is not liable for
any penalties or damages for failure to comply with any of the foregoing. There
are no unfair labor practice claims or charges pending or threatened involving
the Company.
SECTION 3.22 Insurance. Schedule 3.22 hereto contains a list and
description (including the name of the insurer, coverage and expiration date) of
all insurance policies maintained by the Company. Schedule 3.22 further lists
all claims presently pending or threatened which are covered by such policies.
The Company has not received notice of cancellation or non-renewal of any of
such policies.
SECTION 3.23 Conduct of Business and Absence of Changes. Except as
disclosed in Schedule 3.23, since April 30, 1997, the Company has conducted its
business in the regular and ordinary course and has not (a) undergone any
material adverse change in its condition (financial or otherwise), assets,
liabilities, business, or operations, (b) declared, set aside, made or paid any
cash or stock dividend or distribution or purchased, issued or sold any shares
of its capital stock, (c) incurred any indebtedness for borrowed money other
than as disclosed in Schedule 3.20 or issued or sold any debt securities, (d)
instituted any increase in the compensation or bonuses payable or to become
payable to any officers or employees, or any changes in personnel policies or
employees benefits, or (e) made any payment to any
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Shareholder except for payments described in a Schedule hereto and regular
salary and ordinary and necessary business expense reimbursements.
SECTION 3.24 Compliance with Laws; Governmental Authorizations. The
Company is in compliance, in all material respects, with all statutes, laws,
ordinances, rules, regulations, judgments, orders, decrees, governmental
licenses or permits and other governmental licenses, permits, authorizations or
approvals applicable to it or any of its properties. All governmental licenses,
permits, authorizations or approvals necessary for the conduct of its business
have been duly and lawfully obtained and are in full force and effect, except
where the failure to obtain and/or maintain the same would not have a material
adverse effect on the business, results of operations or financial condition of
the Company, and none of the Company, Krauss or Trapani have knowledge of any
proceedings pending or threatened which may result in the revocation,
cancellation or suspension, or any materially adverse modification, of any
thereof.
SECTION 3.25 Officers, Directors and Depositories. Schedule 3.25
hereto contains the names of all the officers and directors of the Company, the
names of all depositories of the funds of the Company and the names of the
officers and other persons empowered to sign instruments withdrawing funds from
said depositories.
SECTION 3.26 Environmental Matters. (a) The business and operations
of the Company comply in all material respects with all federal, state and local
laws, rules, regulations and directives pertaining to the environment. No
governmental agency has asserted any claim or given notice of any possible claim
or, to the knowledge of the Company, Krauss or Trapani, threatened to assert any
claim against the Company in respect of its business, any assets owned or leased
by it, real properties owned or leased by it, or the condition, use or operation
thereof, arising out of any federal, state or local law, rule, regulation or
directive pertaining to the environment.
(b) To the best knowledge of the Company and Krauss and Trapani,
there are nowhere on any real property leased by, used by or otherwise under the
control of the Company any deposits, dumps, or tanks of toxic or other
poisonous, dangerous or noxious waste, fluids, solvents, chemicals or effluents,
all of which chemicals, fuels and fluids are properly and safely stored,
identified, labeled and maintained in accordance with applicable industrial
standards and all governmental or other laws or regulations relating thereto.
The Company does not discharge from any real property leased, used or otherwise
under its control, whether by effluent, emission or other means, any noxious,
toxic, hazardous or
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deleterious matter or gases. All discharges of waste material and other
substances from the operating facilities of the Company are in full compliance
with applicable law and covered by valid permits and licenses, where required.
SECTION 3.27 Third Party and Governmental Consents. Except as
disclosed in Schedule 3.27 hereto, and except for (i) consents of or filings
with governmental agencies and (ii) consents of insurance carriers or other
parties under contracts terminable at will or on notice of 60 days or less, no
consent, waiver, authorization, approval, order, license, certificate or permit
of or from, or registration, declaration or filing with, any court or other
tribunal or any other person, firm or entity, nor under any contract, indenture,
mortgage, lease, license or other agreement or instrument to which the Company,
Krauss or any Shareholder is a party or by which the Company, Krauss or any
Shareholder, or any of their respective assets or properties, is subject or
bound, is required by or with respect to the Company, Krauss or any Shareholder
in connection with the execution, delivery or performance of this Agreement or
of any other agreement, document or instrument to be executed and delivered by
the Company, Krauss or any Shareholder pursuant hereto or in connection herewith
or the consummation of the transactions contemplated hereby. The Company,
Krauss, Trapani or a Shareholder, as applicable, has obtained all consents and
waivers listed in Schedule 3.27 on or prior to the date hereof, including,
without limitation, the consent of American Mayflower Life Insurance Company and
the consent of First Colony Life Insurance Company.
SECTION 3.28 Licenses and Permits. The Company has obtained all
consents, approvals, waivers, licenses and permits from governmental authorities
required to have been obtained by it in connection with the ownership of the
assets of the Company and the operation of the business of the Company as
presently and heretofore conducted, including, without limitation, all insurance
producer and similar licenses required to have been obtained by it (herein
collectively referred to as the "Company Licenses"), except where the failure to
obtain the same would not have a material adverse effect on the business,
results of operations or financial condition of the Company. Except as disclosed
in Schedule 3.28 hereto, the Company, Krauss or Trapani is not aware of any
failure by any employee and agent of the Company to obtain all approvals,
licenses and permits from governmental authorities required in connection with
the operation of the business of the Company and the services provided by such
employee or agent to the Company, including, without limitation, insurance
producer licenses and similar licenses (herein collectively referred to as the
"Employee and Other Licenses"). The Company Licenses and the Employee and Other
Licenses are listed on Schedule 3.28 hereto and, except as otherwise set forth
in Schedule 3.28 hereto, no other licenses or
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permits are required to conduct or operate the business of the Company as
presently conducted, except where the failure to obtain the same would not have
a material adverse effect on the business, results of operations or financial
condition of the Company. None of the Company Licenses or the Employee and Other
Licenses are threatened to be revoked or suspended, and there are no
disciplinary proceedings pending or threatened by, any issuer of any such
license or any other governmental authority against the holder thereof.
SECTION 3.29 Software. The Company does not own or license any
computer software or related programs other than off-the-shelf software licensed
to the Company and used in the ordinary course of the Company's business.
SECTION 3.30 Loans to or from Shareholders or Employees. The Company
does not have outstanding any loans, advances or other indebtedness incurred by
Krauss, Trapani or any Shareholder or any employee, former employee or former
shareholder of the Company or any member of their respective families, and there
are no loans or advances made to the Company by or indebtedness incurred by the
Company to Krauss, Trapani or any Shareholder or any employee, former employee
or former shareholder of the Company, or any member of their respective
families.
SECTION 3.31 Absence of Undisclosed Liabilities. Except as and to the
extent disclosed or accrued on the Financial Statements or incurred in the
ordinary course of business since the date of the April 1997 Balance Sheet,
there exist no liabilities or obligations of any nature whatsoever (whether
absolute, contingent or otherwise) known to the Company, Krauss or Trapani in
respect of the business or assets of the Company of the type customarily
reflected in financial statements prepared in accordance with generally accepted
accounting principles. None of the Company, Krauss or Trapani knows or has any
reasonable grounds to know after due inquiry of any basis for assertion against
the Company of any claim or liability of any nature in any amount not fully
disclosed in the Financial Statements or otherwise pursuant to the terms hereof.
SECTION 3.32 Shareholders' and Similar Agreements. Except as set
forth in Schedule 3.02, neither any Shareholder, nor any other person or entity,
nor the Company, Krauss or Trapani are parties to any shareholders' agreement,
buy-sell agreement, stock rights agreement or any similar agreement or
arrangement related to the purchase and sale of any shares of Company Common
Stock. As of the Effective Time, each of the agreements listed in Schedule 3.02
is terminated and will be of no further effect, and, as of the Effective Time,
the Company has no obligation to any Shareholder or 74y other person or entity
for the purchase of any shares of
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Company Common Stock or for the payment of any consideration in respect of the
purchase, sale or other disposition of shares of Company Common Stock.
SECTION 3.33 Approval of Merger. The Merger has been duly and validly
authorized and approved by the holders of 100% of the outstanding shares of
Company Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder hereby represents and warrants to Parent and
Acquisition, as to itself, severally and not jointly, as follows, knowing and
intending that each of Parent and Acquisition is relying hereon in entering into
the transactions contemplated hereby:
SECTION 4.01 Authority and Capacity Relative to Agreement. Such
Shareholder has all requisite power, authority and legal capacity to enter into
and perform each of its obligations hereunder.
SECTION 4.02 Execution and Performance of Agreement; Validity and
Binding Nature. The execution and delivery of this Agreement, and the
performance by such Shareholder of the terms of this Agreement and the
transactions contemplated hereby, will not result in a material breach of any of
the terms of, or constitute a violation or default under, any statute or
contract, indenture or other instrument by which such Shareholder or any of its
respective properties are bound, and no consent, approval, authorization or
order of any court or governmental authority is required in connection with the
execution and delivery of this Agreement by such Shareholder and the performance
by such Shareholder of the terms of this Agreement and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by each
Shareholder and, together with the other documents and agreements to be executed
by all parties whose execution and delivery thereof is required, constitutes the
legal, valid and binding obligations of such Shareholder, enforceable against
such Shareholder in accordance with their respective terms, except to the extent
that enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by general principles of equity.
SECTION 4.03 Stock of the Company. The number of shares of Company
Common Stock beneficially owned by such
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Shareholder is as identified on the signature page(s) hereof opposite the
respective Shareholder's name. The shares of Company Common Stock beneficially
owned by such Shareholder are owned free and clear of all liens, claims,
options, encumbrances or restrictions whatsoever. Such Shareholder has the full
legal right and power and all authorizations and approvals required by law or
otherwise to sell, transfer and deliver such shares hereunder and to make the
representations, warranties and agreements set forth in this Agreement. Except
with respect to the shares of Company Common Stock identified on the signature
page(s) hereof opposite such Shareholder's name, such Shareholder has no
outstanding claim against the Company or any right whatsoever with respect to
any shares of the capital stock of the Company, including without limitation any
option, warrant or other right to acquire shares of the capital stock of the
Company or any securities, options or other instruments convertible or
exchangeable into shares of capital stock of the Company. Except as set forth in
that certain Shareholders' Agreement of Company disclosed on Schedule 3.32, no
Shareholder has granted any option or other right to acquire from such other
Shareholder any shares of Company Common Stock.
SECTION 4.04 Additional Representations and Covenants of
Shareholders. Each Shareholder hereby acknowledges, represents and warrants to
Parent, as to itself, severally and not jointly and agrees as follows, knowing
and intending that Parent is relying hereon in entering into the transaction
contemplated hereby:
(a) Such Shareholder understands that the shares of Parent Common
Stock which are the subject of this Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended (the "Securities Act")
by virtue of Section 4(2) thereof, based, in part, upon the representations,
warranties and agreements of each Shareholder contained in this Agreement.
(b) Neither the Securities and Exchange Commission (the "SEC") nor
any state securities commission has approved the Parent Common Stock or passed
upon or endorsed the merits of an investment therein or confirmed the accuracy
or adequacy of any information provided by Parent to the Shareholders or the
accuracy or adequacy of any of the representations, warranties and agreements of
Parent contained herein.
(c) Such Shareholder is acquiring Parent Common Stock solely for its
own account for investment and not with any present view to resale or
distribution thereof, in whole or in part. No Shareholder has any agreement or
arrangement, formal or informal, written or oral, with any person to sell or
transfer or otherwise dispose of all or any part of the Parent Common Stock, and
none has any present plans to enter into any such agreement or arrangement.
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(d) No Shareholder became aware of the offer and sale of Parent
Common Stock through or as a result of any form of general solicitation or
general advertising including, without limitation, any article, notice,
advertisement or other communication published in any newspaper, magazine or
other media in connection with the offer and sale of Parent Common Stock
contemplated hereby and no Shareholder is purchasing Parent Common Stock through
or as a result of any seminar or meeting to which any Shareholder was invited.
(e) Such Shareholder, if listed in Schedule 4.04(e), meets the
requirements of at least one of the categories of an "accredited investor", as
defined in Rule 501(a) under the Securities Act.
(f) Such Shareholder, or such Shareholder together with its Purchaser
Representative (hereinafter defined), has such knowledge and experience in
financial, tax, and business matters in general, and investments in securities
in particular, so as to enable such Shareholder to evaluate the merits and risks
of an investment in Parent Common Stock and to make an informed investment
decision with respect thereto.
(g) Such Shareholder, or such Shareholder together with its Purchaser
Representative, is familiar with the business, historical financial performance
and prospects of the Company, including the risks associated therewith. All
information, including, without limitation, financial information and the
Financial Statements, provided by the Company or such Shareholder for insertion
in the Merger Information (hereafter defined) does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances in which they were made, not misleading, it being
understood and acknowledged that such information has not been independently
verified by Parent or Acquisition.
(h) Such Shareholder recognizes that it must bear the substantial
economic risks of the investment in Parent Common Stock indefinitely, because
none of the Parent Common Stock may be sold, transferred, hypothecated or
otherwise disposed of unless such Parent Common Stock is registered under the
Securities Act and applicable state securities laws or an exemption from such
registration is available. Legends shall be placed on the certificates
representing Parent Common Stock issuable stating that the shares represented
thereby have not been registered under the Securities Act or applicable state
securities laws, and appropriate notations thereof will be made in Parent's
stock books.
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(i) Such Shareholder has adequate means of providing for its current
financial needs and foreseeable contingencies and has no need for liquidity of
its investment in Parent Common Stock for an indefinite period of time. Such
Shareholder's overall commitment to investments which are not readily marketable
is not excessive in view of its net worth and financial circumstances and the
purchase of the Parent Common Stock will not cause such commitment to become
excessive.
(j) Such Shareholder is not relying on Parent or any of its employees
or agents with respect to the legal, tax, economic and related considerations of
an investment in Parent Common Stock, other than as expressly contained in the
representations and warranties of Parent contained in Article V hereof. There
has been delivered to such Shareholder copies of this Agreement, Parent's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996, Parent's 1996
Annual Report to Stockholders, Parent's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1996, December 31, 1996 and March 31, 1997,
Parent's Proxy Statement for its Annual Meeting held on November 14, 1996,
Parents Press Releases dated July 17, 1997 and August 5, 1997, the Financial
Statements and a summary description of the Company's business (collectively,
the "Merger Information"). Such Shareholder, or such Shareholder together with
its Purchaser Representative, has read and fully understands the Merger
Information.
(k) Such Shareholder, or such Shareholder together with its Purchaser
Representative, (i) has had the opportunity to obtain all information requested
by him for the purposes of verifying the Merger Information or for any other
purpose related hereto and (ii) has had the opportunity to meet with
representatives of Parent and the Company and to have them answer any questions
and provide such additional information regarding the terms and conditions of
the transactions contemplated hereby, the information with respect to Parent
included in the Merger Information and the business and prospects of Parent
deemed relevant by such Shareholder, or such Shareholder together with its
Purchaser Representative, all of which questions have been answered and all of
which requested information has been provided to the full satisfaction of such
Shareholder. Such Shareholder is aware that an investment in Parent Common Stock
is speculative and involves significant risks, including, among other things,
the risk of the loss of such Shareholder's entire investment in Parent Common
Stock.
(l) In evaluating the suitability of an investment in Parent, and in
deciding to enter into this Agreement, no Shareholder, nor any Shareholder
together with its Purchaser Representative, has relied upon any representation
or other information (whether oral or written) other than as set forth in the
representations and warranties of Parent contained in Article V
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of this Agreement and the Merger Information. No oral or written representations
have been made, or oral or written information furnished, to any Shareholder in
connection with the offer and sale of Parent Common Stock that are in any way
inconsistent with the representations and warranties of Parent contained herein
or any of the information contained in the Merger Information.
(m) Each of Krauss and Trapani are the purchaser representatives,
guardians and custodians under the Uniform Transfers to Minors Act for their
respective children who are minors and Shareholders and the purchaser
representatives for their other respective children who are Shareholders (i.e.,
Krauss, on behalf of Michael and Lea Krauss, and Trapani, on behalf of Scott,
Matthew and Todd Trapani), in connection with evaluating the merits and risks of
the transactions contemplated by this Agreement (individually, the "Purchaser
Representative"). There is no existing relationship between Parent or any of its
Affiliates and either Purchaser Representative or any of his Affiliates other
than as disclosed in this Agreement or a Schedule hereto. Neither Purchaser
Representative is an Affiliate, director, officer or employee of Parent, or
beneficial owner of ten percent (10%) or more of Parent Common Stock. Each
Purchaser Representative has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of the
transactions contemplated by this Agreement.
(n) Except as described in Schedule 4.04(n) hereto, no Shareholder
has any beneficial interest, directly or indirectly, in any person, firm,
corporation, partnership or other entity which is or within the past two years
has been a supplier of any goods or services to the Company, including, without
limitation, any Major Supplier, or from which the Company has received fees,
including, without limitation, any Contract Party, other than as the beneficial
owner of 1% or less of the voting securities of a publicly held corporation. The
nature and amount of any such beneficial interest is disclosed in Schedule
4.04(n).
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company and each Shareholder as
follows:
SECTION 5.01 Organization and Qualification. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own or
lease and operate its properties and assets and to carry on its business as it
is now being conducted. Parent is duly qualified as a foreign corporation
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to do business, and is in good standing, in each jurisdiction in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not have a material adverse effect on the business, results of operations
or financial condition of Parent and its subsidiaries, taken as a whole.
SECTION 5.02 Acquisition. Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own or lease and
operate its properties and to carry on its business as it is now being
conducted. Acquisition is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on business, results of operations or financial
condition of Parent and its subsidiaries, taken as a whole. All the outstanding
shares of capital stock of Acquisition are validly issued, fully paid and
nonassessable and are owned by Parent.
SECTION 5.03 Capitalization. The authorized capital stock of Parent
consists of 80,000,000 shares of Parent Common Stock, and, as of June 30, 1997,
25,235,288 shares of Parent Common Stock were issued and outstanding, all of
which were validly issued and are fully paid and nonassessable. Except as
contemplated hereby and except for rights or options outstanding under Parent's
employee stock purchase and stock options plans, and rights outstanding under
the Rights Agreement dated May 7, 1997 between Parent and Bank of New York, as
rights agent, no subscription, warrant, option, convertible security, stock
appreciation or other right (contingent or other) to purchase or acquire any
shares of any class of capital stock of Parent is authorized or outstanding and
there is not any agreement of Parent to issue any shares, warrants, options or
other such rights or to distribute to holders of any class of its capital stock
any evidences of indebtedness or assets. Parent does not have any obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. At the Effective Time, Parent will have
sufficient authorized and unissued shares of Parent Common Stock available for
issuance in accordance with Article II hereof. When issued to the Shareholders
hereunder, such shares of Parent Common Stock will have been duly authorized by
Parent and, upon receipt of consideration therefor in accordance with the terms
hereof, such shares will be validly issued, fully paid and nonassessable shares
of Parent Common Stock.
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SECTION 5.04 Authority Relative to Agreement. Parent has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Parent and the consummation by Parent of the transactions contemplated hereby
(including issuance of Parent Common Stock to the Shareholders pursuant to the
terms hereof) have been duly authorized by the Board of Directors of Parent, and
no other corporate proceedings on the part of Parent are necessary to authorize
this Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and constitutes the legal, valid and
binding obligation of Parent, enforceable against Parent in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by general
principles of equity.
SECTION 5.05 Non-Contravention. The execution and delivery of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby will not (a) conflict with any provision of the Certificate
of Incorporation or By-Laws of Parent or (b) result (with or without the giving
of notice or the lapse of time or both) in any violation of or default or loss
of a benefit under, or permit the acceleration of any obligation under, any
mortgage, indenture, lease, agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent or any of its subsidiaries or any of
their respective properties, other than any such violation, default, loss or
acceleration that would not have a material adverse effect on the business,
results of operations or financial condition of Parent and its subsidiaries,
taken as a whole.
SECTION 5.06 Parent Public Information. Parent has provided to each
Shareholder a copy of that portion of the Merger Information consisting of the
public reports and press releases of Parent referred to in Section 4.04(j) the
"Parent Public Information"). The Parent Public Information does not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 5.07 Financial Statements. The consolidated financial
statements of Parent included in the Parent Public Information have been
prepared in accordance with GAAP consistently applied and consistent with prior
periods, subject, in the case of unaudited interim consolidated financial
statements, to year-end adjustments (which consist of normal recurring accruals)
and the absence of certain footnote disclosures. The consolidated balance
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sheets of Parent included in the Parent Public Information fairly present in all
material respects the financial position of Parent and its subsidiaries as of
their respective dates, and the related consolidated statements of operations,
shareholders' equity and cash flows included in the Parent Public Information
fairly present in all material respects the results of operations of Parent and
its subsidiaries for the respective periods then ended, subject, in the case of
unaudited interim financial statements, to year-end adjustments (which consist
of normal recurring accruals) and the absence of certain footnote disclosures.
SECTION 5.08 Absence of Certain Changes or Events. Except as
contemplated hereby or disclosed in Parent's press releases dated July 17, 1997
and August 5, 1997, and except for the issuance of Parent Common Stock pursuant
to employee benefit plans of Parent described in Section 5.03 above, since March
31, 1997, Parent has not (a) issued any Parent Common Stock or securities or
obligations convertible into or exchangeable for Parent Common Stock, (b)
incurred any material liabilities (absolute or contingent), except in the
ordinary course of business or (c) suffered any material adverse effect on the
business, results of operations or financial condition of Parent and its
subsidiaries, taken as a whole.
SECTION 5.09 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign governmental or regulatory authority is required to be
made or obtained by Parent in connection with the execution and delivery of this
Agreement by Parent or the consummation by Parent of the transactions
contemplated hereby, except for (a) filings pursuant to the Securities Act and
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations promulgated by the SEC thereunder, if applicable, (b)
filings with state securities agencies under state securities or blue sky laws,
if applicable, (c) the filing of a listing application with the Nasdaq National
Market with respect to shares of Parent Common Stock issuable in the Merger, (d)
the filing of a Certificate of Merger with the Secretary of State of the State
of New York in accordance with the New York BCL, (e) the filing of a Certificate
of Merger with the Secretary of State of the State of Delaware in accordance
with the Delaware GCL, (f) filings of notices required to be filed with state
insurance departments, (g) any licenses, permits, franchises or other
governmental authorizations pertaining to the business of the Company and its
subsidiaries that are required as a result of the consummation of the
transactions contemplated hereby and (h) such consents, approvals, orders or
authorizations which if not obtained, or registrations, declarations or filings
which if not made, would not have a material adverse effect on the business,
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results of operations or financial condition of Parent and its subsidiaries,
taken as a whole.
SECTION 5.10 Compliance with Law. Neither Parent nor any of its
subsidiaries is in default under any order of any court, governmental authority
or arbitration board or tribunal. Neither Parent nor any such subsidiary has
received notice of any alleged violation of any applicable laws, ordinances and
governmental rules and regulations to which Parent or any such subsidiary is
subject, including, without limitation, federal securities and banking laws.
Neither Parent nor any subsidiary has failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business, except where the failure to
obtain such licenses, permits, franchises or other governmental authorizations
would not have a material adverse effect on business, results of operations or
financial condition of Parent and its subsidiaries, taken as a whole.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Each of Parent and Acquisition, jointly and severally, represents and
warrants to the Company and each Shareholder, knowing and intending that the
Company and each Shareholder is relying thereon in entering into the
transactions contemplated hereby, as follows:
SECTION 6.01 Organization and Qualification. Acquisition is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own or lease and operate its properties and assets and to carry on its business
as it is now being conducted. Acquisition is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction in
which the character of its properties owned or leased or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified would not have a Material Adverse Effect with respect to Acquisition.
SECTION 6.02 Capitalization. The authorized capital stock of
Acquisition consists of 3,000 shares of common stock, $.01 par value. As of the
date hereof, 100 shares of such common stock are validly issued and outstanding,
fully paid and nonassessable and are owned of record and beneficially by Parent,
and no shares of such common stock are held in the treasury of Acquisition.
Acquisition has no commitments to issue or sell any shares of such common stock
or any securities or obligations convertible into or exchangeable for, or giving
any person any right to subscribe for
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or acquire from Acquisition, any shares of such common stock, and no securities
or obligations evidencing any such rights are outstanding.
SECTION 6.03 Authority Relative to Agreement. Acquisition has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Acquisition and by Parent as its sole shareholder, and no other corporate
proceedings on the part of Acquisition are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Acquisition and constitutes the legal, valid and binding
obligation of Acquisition, enforceable against Acquisition in accordance with
its terms except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by principles
of equity.
SECTION 6.04 Non-Contravention. The execution and delivery of this
Agreement by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby will not (a) conflict with any provision of the Certificate
of Incorporation or By-Laws of Acquisition or (b) result (with the giving of
notice or the lapse of time or both) in any violation of or default or loss of a
benefit under, or permit the acceleration of any obligation under, any mortgage,
indenture, lease, agreement, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquisition or its properties.
SECTION 6.05 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign governmental or regulatory authority is required to be
made or obtained by Acquisition in connection with the execution and delivery of
this Agreement by Acquisition or the consummation by Acquisition of the
transactions contemplated hereby, except for (a) the filing of Certificate of
Merger with the Secretary of State of the State of New York in accordance with
the New York BCL, (b) the filing of a Certificate of Merger with the Secretary
of State of the State of Delaware in accordance with the Delaware GCL, (c) any
licenses, permits, franchises or other governmental authorizations pertaining to
the business of Acquisition that are required as a result of the consummation of
the transactions contemplated hereby and (d) the filing of notices required to
be filed with state insurance departments.
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SECTION 6.06 Other Matters. Acquisition has been formed for the sole
purpose of effecting the Merger and, except as contemplated by this Agreement,
Acquisition has not conducted any business activities and does not have any
material liabilities or obligations.
ARTICLE VII
COVENANTS AND OTHER AGREEMENTS
SECTION 7.01 Non-Competition Agreements. Simultaneously with the
execution and delivery hereof, Krauss and Trapani are each entering into a
non-competition and confidentiality agreement, effective as of the Effective
Time, for the benefit of Parent and the Surviving Corporation, in form and
substance satisfactory to the parties thereto.
SECTION 7.02 Employment Agreement. Simultaneously with the execution
and delivery hereof, Trapani is entering into three-year employment contract
with Parent, effective as of the Effective Time in form and substance
satisfactory to the parties thereto.
SECTION 7.03 Certain Life Insurance Policies. Schedule 7.03 sets
forth certain life insurance policies maintained in force by the Company in
respect of employees of the Company. As soon as practicable, the Surviving
Corporation will transfer and assign each such insurance policy to the insured
employee, to the extent transferable and assignable, provided that such employee
shall undertake and assume in writing all obligations of the Surviving
Corporation thereunder. Any such life insurance policy which is not transferable
and assignable will be terminated.
SECTION 7.04 Indemnification. (a) The Shareholders shall be severally
liable to, and shall severally indemnify, protect, defend and hold harmless
Parent and its successors and the Surviving Corporation and its successors
against any and all claims, damages, liabilities and expenses (including
reasonable attorneys' fees) sustained by Parent or the Surviving Corporation,
resulting from or in connection with the breach of any representation, warranty,
covenant or other agreement made by the Company, Krauss, Trapani or any
Shareholder in or pursuant to this Agreement or any other agreement or
instrument executed and delivered by or on behalf of the Company, Krauss,
Trapani or any Shareholder pursuant hereto or in connection herewith (such
breaches or failures being hereinafter referred to individually as an
"Indemnifiable Breach" and collectively as "Indemnifiable Breaches"); provided,
however, that (i) neither the Krauss Shareholders, as a group, nor the Trapani
Shareholders, as a
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group, shall be required to pay Parent and/or the Surviving Corporation, as the
case may be, pursuant to this Section 7.04(a), an amount in excess of fifty
percent (50%) of any amount required to be paid to Parent and/or the Surviving
Corporation in respect of any Indemnifiable Breach, and (ii) neither the Krauss
Shareholders, as a group, nor the Trapani Shareholders, as a group, shall be
required to pay Parent and/or the Surviving Corporation, as the case may be,
pursuant to this Section 7.04, an aggregate amount in excess of the dollar value
equivalent of Parent Common Stock valued at the Average Price received by them
upon consummation of the Merger pursuant to the terms hereof. The
indemnification obligations of the Shareholders under this Section 7.04 shall
apply to claims, damages, liabilities and expenses sustained by Parent and/or
the Surviving Corporation in respect of Indemnifiable Breaches if and when the
aggregate amount of such claims, damages, liabilities and expenses exceeds
$25,000.00, or $30,000.00 in the aggregate in respect of indemnifiable claims,
damages, liabilities and expenses for Indemnifiable Breaches and indemnifiable
claims, damages, liabilities and expenses payable by shareholders of
Dascit/White & Winston, Inc. and/or Group Plan Administrators, Inc. under the
separate Agreements and Plans of Merger executed simultaneously herewith among
Parent, the certain acquisition subsidiaries of Parent, said corporations and
said shareholders of said corporations (the "Affiliate Merger Agreements"). In
the event the aggregate amount of the claims, damages, liabilities and expenses
sustained by Parent and/or the Surviving Corporation in respect of Indemnifiable
Breaches and/or Indemnifiable Breaches together with indemnifiable claims,
damages, liabilities and expenses in respect of the Affiliate Merger Agreements
exceeds said amount, the indemnification obligations of the Shareholders under
this Section 7.04 shall apply to all claims, damages, liabilities and expenses
actually sustained by Parent and/or the Surviving Corporation in respect of
Indemnifiable Breaches.
(b) The Shareholders shall each be permitted to satisfy any
obligation under Section 7.04(a) in cash or by delivering to Parent shares of
Parent Common Stock in an amount equal to his obligation thereunder based on a
per share value equal to the Average Price.
(c) Parent and Acquisition shall be jointly and severally liable to,
and shall jointly and severally indemnify, protect, defend and hold harmless
each Shareholder and its respective successors against any and all claims,
damages, liabilities and expenses (including reasonable attorneys' fees)
sustained by any Shareholder, resulting from or in connection with the breach of
any representation, warranty, covenant or other agreement made by Parent or
Acquisition in or pursuant to this Agreement or any other agreement or
instrument executed and
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<PAGE>
delivered by or on behalf of Parent and/or Acquisition pursuant hereto or in
connection herewith.
(d) Notwithstanding anything herein to the contrary, any party hereto
shall be entitled to seek specific enforcement of this Agreement. In the event
Parent and/or the Surviving Corporation becomes entitled to any sums under the
terms hereof, Parent and/or the Surviving Corporation shall have the right but
not the obligation to set off such liabilities of the Shareholders against any
existing or future liabilities of Parent or the Surviving Corporation to the
Shareholder other than against amounts owed by the Company to Krauss and/or
Trapani as compensation for employment.
(e) The terms of this Section 7.04 are intended to benefit the
parties hereto, and any and all claims for indemnification under this Section
7.04 must be made during the period commencing at the Effective Time and ending
on the earlier to occur of (i) one (1) year after the Effective Time or (ii)
publication of the independent audit report on the consolidated financial
statements of Parent for the fiscal year ending June 30, 1998.
SECTION 7.05 Confidentiality. Except as otherwise provided in the
certain Confidentiality Agreement dated December 4, 1996 between the Company and
Parent with regard to information about the Company and Parent (the
"Confidentiality Agreement"), Parent and Acquisition, on the one hand, and the
Company and each Shareholder, on the other, shall hold, and shall use their
respective best efforts to cause their respective officers, directors,
employees, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other parties furnished to such party in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (a) previously known on a nonconfidential basis by such
party; (b) in the public domain through no fault of such party; or (c) later
lawfully acquired by such party from sources other than the other parties;
provided that each party may disclose such information to its Affiliates and its
Affiliates' officers, directors, employees, consultants, advisors and agents,
lenders and other investors in connection with the transactions contemplated by
this Agreement so long as such persons are informed by such party of the
confidential nature of such information and are directed by such party to treat
such information confidentially.
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<PAGE>
SECTION 7.06 Transfer Restrictions After the Effective Time. Each
Shareholder hereby agrees that, from and after the Effective Time:
(a) Lock-Up. Such Shareholder shall not sell or otherwise reduce its
risk relative to any shares of Parent Common Stock received by it in the Merger
(within the meaning of Financial Reporting Policy, Section 201.01), except as
permitted by Staff Accounting Bulletin No. 76 issued by the SEC, until Parent
has published financial results covering a fiscal quarter that includes results
(including combined sales and net income) for a period of at least 30 days of
post-Merger operations.
(b) Securities Act Compliance. Such Shareholder shall not offer,
sell, or otherwise dispose of the shares of Parent Common Stock received by such
Shareholder in connection with the Merger other than (i) pursuant to an
effective registration statement under the Securities Act, or (ii) otherwise
pursuant to an exemption from the registration requirements of the Securities
Act.
SECTION 7.07 Registration Rights Agreements. Simultaneously with the
execution hereof, Parent and each Shareholder are executing and delivering a
registration rights agreement in the form of Exhibit A hereto (the "Registration
Rights Agreement"), which agreement shall be effective as of the Effective Time.
SECTION 7.08 Termination of Shareholders' and Employment Agreements.
Simultaneously with the execution and delivery hereof, the Company and each
Shareholder which is a party to a shareholders' or similar agreement disclosed
in Schedule 3.02 is entering into a written agreement terminating such
agreement, as of the Effective Time, without further obligation of the Company
or the Surviving Corporation thereunder, and the Company is entering into a
termination agreement with each of Krauss and Trapani terminating their
respective employment agreements with the Company.
SECTION 7.09 Shareholder Sub-S Tax Liability. Simultaneously
herewith, the Company is remitting to each Shareholder that amount reasonably
estimated by the Company to represent such Shareholder's tax obligation for the
undistributed profits of the Company from January 1, 1997 through the Effective
Time, calculated using the anticipated marginal tax rate of 43.9%. The Company
has provided to Parent a written schedule showing the calculation thereof. Such
amount paid to each Shareholder simultaneously herewith shall be adjusted upward
or downward, as the case may be, as hereinafter set forth in this Section 7.09.
In the event that the actual undistributed profits of the Company from
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<PAGE>
January 1, 1997 through the Effective Date (the "Actual Undistributed Profits")
shall exceed the amount of undistributed profits estimated for the calculation
of amounts paid to the Shareholders simultaneously herewith (the "Estimated
Undistributed Profits"), an amount equal to 43.9% of the amount by which the
Actual Undistributed Profits exceed the Estimated Undistributed Profits shall be
paid by Parent or the Surviving Corporation to the Shareholders in proportion to
their respective equity interests in the Company immediately prior to the
Effective Time. In the event that the Actual Undistributed Profits shall be less
than the Estimated Undistributed Profits, the Shareholders shall remit to Parent
an amount equal to 43.9% of the amount by which the Actual Undistributed Profits
are less than the Estimated Undistributed Profits. Parent or the Surviving
Corporation shall notify the Shareholders in writing of its good faith
determination of the Actual Undistributed Profits and any amount to be paid to
the Shareholders or remitted by the Shareholders under this Section 7.09, which
determination shall be binding on the parties hereto. The obligations of the
parties under this Section 7.09 shall survive the Effective Time.
SECTION 7.10 OMITTED.
SECTION 7.11 Closing Deliveries. The Company and the Shareholders are
simultaneously herewith delivering to Parent and Acquisition, the following:
(i) A copy of resolutions duly adopted by the Board of
Directors of the Company and the Shareholders, certified by the
Secretary or Assistant Secretary of the Company, approving the
execution, delivery and performance of this Agreement and the
transactions contemplated hereby;
(ii) the opinion of counsel to the Company and the
Shareholders in form and substance satisfactory to Parent and its
counsel; and
(iii) a good standing certificate issued by the Secretary of
State of New York as to the good standing of the Company in such
jurisdiction.
(b) Parent and Acquisition are simultaneously herewith delivering to
the Company and the Shareholders, the following:
(i) A copy of resolutions duly adopted by the Board of
Directors of Parent and by the Board of Directors of Acquisition,
certified by the Secretary or Assistant Secretary of Parent and
Acquisition, respectively, approving the execution, delivery and
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performance of this Agreement and the transactions contemplated
hereby;
(ii) the opinion of the Vice President and General Counsel of
Parent in form and substance satisfactory to the Company and its
counsel; and
(iii) good standing certificates issued by the Secretary of
State of Delaware as to the good standing of Parent and Acquisition
in such jurisdictions.
SECTION 7.12 No Recission. The parties hereto covenant and agree that
none of them will seek recission of the Merger in the event that the
pooling-of-interests method of accounting is unavailable for the Merger.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 Survival of Certain Representations and Warranties. The
representations and warranties of the Company and the Shareholders in this
Agreement and in any instrument delivered pursuant hereto shall survive the
Effective Time until the earlier to occur of (i) one (1) year after the
Effective Time or (ii) publication of the independent audit report on the
consolidated financial statements of Parent for the fiscal year ending June 30,
1998, provided that this Section 10.01 shall not limit any other covenant or
agreement of the parties that by its terms contemplates performances beyond such
period.
SECTION 8.02 Fees and Expenses. (a) The Company shall pay the
reasonable attorney's and accountant's fees of the Company, Krauss, Trapani and
the Shareholders actually incurred by them in connection with the negotiation,
preparation and execution of this Agreement up to a maximum aggregate amount of
$60,000.00 for this Agreement and the Affiliate Merger Agreements. Except as
provided in the foregoing sentence, none of the Company, Krauss, Trapani or the
Shareholders, on the one hand, and Parent and Acquisition, on the other hand,
shall have any obligation to pay any of the fees and expenses of the other
incident to the negotiation, preparation and execution of this Agreement,
including, without limitations, the fees and expenses of counsel, accountants,
advisors, investment bankers and other experts.
(b) The Shareholders, on the one hand, and Parent and Acquisition, on
the other hand, shall indemnify the other and hold it or them, as the case may
be, harmless from and against any claims for advisor's fees, finders' fees or
brokerage commissions, in relation to or in connection with the transactions
contemplated
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<PAGE>
by this Agreement as a result of any agreement or understanding between the
Company or any of the Shareholders, on the one hand, or Parent and Acquisition,
on the other hand, and any third party.
SECTION 8.03 Publicity. The Company, Krauss, Trapani, the
Shareholders and Parent agree that they will not issue any press release or make
any other public announcement concerning this Agreement or the transactions
contemplated hereby without the prior consent of the other party, except that
the Company or Parent may make such public disclosure that it believes in good
faith to be required by law.
SECTION 8.04 Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 8.05 Notices. All notices that are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or national
overnight courier service, transmitted by telecopy or mailed by registered or
certified mail, postage prepaid, as follows:
If to Parent and/or Acquisition, to:
The BISYS Group, Inc.
Overlook at Great Notch
150 Clove Road
Little Falls, New Jersey 07424
Attention: Chairman and Chief Executive Officer
with a copy to:
The BISYS Group, Inc.
Overlook at Great Notch
150 Clove Road
Little Falls, New Jersey 07424
Attention: General Counsel
If to the Company and/or the Shareholders, to:
Krauss & Trapani Co., Ltd.
99 Madison Avenue
New York, NY 10016
Attention: Chairman
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<PAGE>
with a copy to:
Todtman, Young, Nachamie,
Hendler & Spizz, P.C.
425 Park Avenue
New York, New York 10022
Attention: Alex Spizz, Esq.
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
SECTION 8.06 Waivers. The Company, Krauss and Trapani, on the one
hand, and Parent and Acquisition, on the other hand, may, by written notice to
the other, (a) extend the time for the performance of any of the obligations or
other actions of the other under this Agreement; (b) waive any inaccuracies in
the representations or warranties of the other contained in this Agreement or in
any document delivered pursuant to this Agreement; or (c) waive compliance with
any of the covenants and agreements of the other contained in this Agreement.
Except as provided in the preceding sentence, no action taken pursuant to this
Agreement, including, without limitation, any investigation by or on behalf of
any party, shall be deemed to constitute a waiver by the party taking such
action of compliance with any representations, warranties, covenants or
agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach.
SECTION 8.07 Entire Agreement. This Agreement, its Schedules and the
agreements and documents executed at the Effective Time in connection herewith
and the Confidentiality Agreement constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof. No representation, warranty, promise,
inducement or statement of intention has been made by any party that is not
embodied in this Agreement or such other documents, and none of the parties
shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement of intention not embodied herein or therein.
SECTION 8.08 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflict of laws.
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<PAGE>
SECTION 8.09 Binding Effect, Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
permitted successors and assigns. Notwithstanding anything contained in this
Agreement to the contrary, nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective permitted successors and assigns, any rights, remedies, obligations
or liabilities under or by reason of this Agreement.
SECTION 8.10 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
SECTION 8.11 Amendments. This Agreement may be modified, amended or
supplemented at any time by action of the respective Boards of Directors of the
Company, Parent and Acquisition, and by Krauss, Trapani and the Shareholders.
Without limiting the generality of the foregoing, this Agreement may only be
amended, varied or supplemented by an instrument in writing, signed by the
parties hereto.
SECTION 8.12 Applicable Disclosures. For purposes of this Agreement,
any disclosure made in any provision hereof, in any Schedule annexed hereto or
in any Agreement and Plan of Merger bearing even date herewith providing for the
merger of a subsidiary of Parent into any Affiliate of the Company shall be
deemed to be disclosed under a Section of this Agreement.
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties
have executed and delivered this Agreement and Plan of Merger as of the day and
year first above written.
THE BISYS GROUP, INC.
By:/s/ Lynn J. Mangum
------------------------
Lynn J. Mangum
Chairman and
Chief Executive Officer
BI-KT, Inc.
By:/s/ Lynn J. Mangum
------------------------
Lynn J. Mangum
Chairman
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<PAGE>
KRAUSS & TRAPANI CO., LTD.
By:/s/ Jeffrey D. Krauss
------------------------
Jeffrey D. Krauss
Chairman
/s/ Jeffrey D. Krauss
------------------------
Jeffrey D. Krauss
Number of
Shares of Company
Common Stock Owned: SHAREHOLDERS:
20 /s/ Joseph J. DiTrapani
---------------------------
Joseph J. DiTrapani
860 Cranford Avenue
North Woodmere, NY 11581
10 /s/ Scott DiTrapani
---------------------------
Scott DiTrapani
860 Cranford Avenue
North Woodmere, NY 11581
10 /s/ Matthew DiTrapani
---------------------------
Matthew DiTrapani
860 Cranford Avenue
North Woodmere, NY 11581
10 /s/ Joseph J. DiTrapani
---------------------------
Joseph J. DiTrapani, as
Custodian for Todd
Di Trapani under the
Uniform Transfers to
Minors Act
860 Cranford Avenue
North Woodmere, NY 11581
15 /s/ Lea Krauss
---------------------------
Lea Krauss
2649 Rebecca Street
Bellmore, NY 11710
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<PAGE>
15 /s/ Michael Krauss
---------------------------
Michael Krauss
2649 Rebecca Street
Bellemore, NY 11710
20 /s/ Laura Krauss
---------------------------
Laura Krauss
2649 Rebecca Street
Bellmore, NY 11710
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<PAGE>
INDEX TO DEFINED TERMS
Term Reference
---- ---------
"Acquisition" Preamble
"Actual Undistributed Profits" 7.09
"Affiliate" 3.20
"Affiliate Merger Agreements" 7.04(a)
"Aggregate Parent Common Stock
Consideration" 2.01(a)
"Agreement" Preamble
"April 1997 Balance Sheet" 3.08
"April 1997 Combined Balance Sheet 3.08
"Average Price" 2.01(a)
"Balance Sheet" 3.08(a)
"Certificate" 2.03(a)
"Code" Recitals
"Combined Balance Sheet" 3.08
"Company" Preamble
"Company Common Stock" 2.01(a)
"Company Investments" 3.17
"Company Licenses" 3.28
"Confidentiality Agreement" 3.05
"Constituent Corporations" Preamble
"Contract Parties" 3.10
"Control" 3.20
"December 1996 Balance Sheet" 3.08
"Delaware GCL" Recitals
"Effective Time" 1.03
"Employee and Other Licenses" 3.28
"ERISA" 3.12(b)
"Estimated Undistributed Profits" 7.09
"Exchange Act" 5.09
"FILCO" 2.01(a)
"FILCO Agreement" 2.01(a)
"FILCO Obligation" 2.01(a)
"Financial Statements" 3.08(a)
"Indemnifiable Breaches" 7.04(a)
"Intellectual Property Rights" 3.09
"Krauss" Preamble
"Krauss Shareholders" Preamble
"Major Suppliers" 3.11
"Merger" Recitals
"Merger Information" 4.04(j)
"Net Merger Price" 2.01(a)
"New York BCL" Recitals
"Other Contracts" 3.20
"Parent" Preamble
"Parent Common Stock" Recitals
"Parent Public Information" 5.06
<PAGE>
"Purchaser Representative" 4.04(m)
"Registration Rights Agreement" 7.07
"SEC" 4.04(b)
"Securities Act" 4.04(a)
"Shareholders" Preamble
"Shareholders' Agreements" 3.02
"Surviving Corporation" Preamble
"Trapani" Preamble
"Trapani Shareholders" Preamble
<PAGE>
Exhibit 99.6
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Among
THE BISYS GROUP, INC.,
BI-BSI ACQUISITION CORP.,
BENEFIT SERVICES, INC. ("BSI"), AND
THE SHAREHOLDERS OF BSI
(BERNARD H. BARRIE, EDWARD S. HUTMAN AND MELISSA H. BARNICKEL)
Dated as of September 16, 1997
<PAGE>
TABLE OF CONTENTS Page
ARTICLE I THE MERGER
SECTION 1.01 The Merger 2
SECTION 1.02 Effect Of the Merger 2
SECTION 1.03 Consummation of the Merger 2
SECTION 1.04 Charter; By-Laws; Directors and Officers 2
SECTION 1.05 Further Assurances 3
ARTICLE II CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities of the Company 3
SECTION 2.02 Acquisition Common Stock. 4
SECTION 2.03 Exchange of Certificates 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDERS
SECTION 3.01 Authority Relative to Agreement 5
SECTION 3.02 Shareholders' Title to Stock 6
SECTION 3.03 Organization, Standing and Qualification 6
SECTION 3.04 Stock of the Company 6
SECTION 3.05 Subsidiaries and Other Investments 6
SECTION 3.06 Certification of Incorporation and By-Laws 7
SECTION 3.07 Execution and Performance of Agreement; 7
Validity and Binding Nature
SECTION 3.08 Financial Statements 7
SECTION 3.09 Intellectual Property Rights 8
SECTION 3.10 Contracts and Contract Parties 8
SECTION 3.11 Major Suppliers 9
SECTION 3.12 Employment, Deferred Compensation or 9
Similar Agreements; Collective Bargaining
Agreements; Employee Benefit Plans
SECTION 3.13 Inventory 10
SECTION 3.14 Real Estate 10
SECTION 3.15 Title to and Condition of Personal Property 10
SECTION 3.16 Accounts and Notes Receivable 10
SECTION 3.17 Marketable Securities and Other Investments 10
SECTION 3.18 Taxes 11
SECTION 3.19 Litigation 11
SECTION 3.20 Other Material Contracts and Commitments 11
SECTION 3.21 Labor Relations 12
SECTION 3.22 Insurance 12
<PAGE>
SECTION 3.23 Conduct of Business and Absence of Changes 12
SECTION 3.24 Compliance with Laws; Governmental Authorizations 12
SECTION 3.25 Officers, Directors and Depositories 13
SECTION 3.26 Environmental Matters 13
SECTION 3.27 Third Party and Governmental Consents 13
SECTION 3.28 Licenses and Permits 13
SECTION 3.29 Software. 14
SECTION 3.30 Loans to or from Shareholders or Employees. 15
SECTION 3.31 Absence of Undisclosed Liabilities 15
SECTION 3.32 Shareholders' and Similar Agreements 15
SECTION 3.33 Representations and Warranties True; No 15
Misleading Statements
SECTION 3.34 Approval of Merger 16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
SHAREHOLDERS
SECTION 4.01 Authority and Capacity Relative to Agreement. 16
SECTION 4.02 Execution and Performance of Agreement; 16
Validity and Binding Nature
SECTION 4.03 Stock of the Company 16
SECTION 4.04 Additional Representations and Covenants 17
of Shareholders
SECTION 4.05 Representations and Warranties True; No Misleading
Statements 19
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT
SECTION 5.01 Organization and Qualification 19
SECTION 5.02 Acquisition 19
SECTION 5.03 Capitalization 20
SECTION 5.04 Authority Relative to Agreement 20
SECTION 5.05 Non-Contravention 20
SECTION 5.06 Parent Public Information 21
SECTION 5.07 Financial Statements 21
SECTION 5.08 Absence of Certain Changes or Events 21
SECTION 5.09 Governmental Consents 21
SECTION 5.10 Compliance with Law 22
ARTICLE VI REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION
SECTION 6.01 Organization and Qualification 22
SECTION 6.02 Capitalization 22
SECTION 6.03 Authority Relative to Agreement 22
<PAGE>
SECTION 6.04 Non-Contravention 23
SECTION 6.05 Governmental Consents 23
SECTION 6.06 Other Matters 23
ARTICLE VII COVENANTS
SECTION 7.01 Conduct of the Company's Business 23
SECTION 7.02 Access to Information 25
SECTION 7.03 Further Assurances 25
SECTION 7.04 Inquiries and Negotiations 25
SECTION 7.05 Related Party Notes and Pledge Agreements 26
SECTION 7.06 Continuation of Certain Employees 26
SECTION 7.07 Notification of Certain Matters 26
SECTION 7.08 Indemnification 27
SECTION 7.09 Confidentiality 28
SECTION 7.10 Covenants of Shareholders 28
SECTION 7.11 Transfer Restrictions After the Effective Time 29
SECTION 7.12 Registration Rights Agreements 29
SECTION 7.13 Termination of Shareholders' Agreements 29
ARTICLE VIII CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to Each Party's Obligation 29
to Effect the Merger
SECTION 8.02 Conditions to the Obligation of the 30
Company to Effect the Merger
SECTION 8.03 Conditions to the Obligation of Parent and 30
Acquisition to Effect the Merger
ARTICLE IX TERMINATION AND ABANDONMENT
SECTION 9.01 Termination and Abandonment 31
SECTION 9.02 Effect of Termination 32
ARTICLE X MISCELLANEOUS
SECTION 10.01 Survival of Certain Representations and 32
Warranties
SECTION 10.02 Fees and Expenses 32
SECTION 10.03 Publicity 32
SECTION 10.04 Execution in Counterparts 33
SECTION 10.05 Notices 33
SECTION 10.06 Waivers 34
SECTION 10.07 Entire Agreement 34
SECTION 10.08 Applicable Law 34
SECTION 10.09 Binding Effect, Benefits 34
SECTION 10.10 Assignability 34
SECTION 10.11 Amendments 34
<PAGE>
INDEX TO SCHEDULES AND EXHIBITS
Schedule Description
- -------- -----------
3.02 Shareholders Agreements
3.03 Qualifications
3.05 Subsidiaries/Other Investments
3.06 Certificate of Incorporation and By-Laws of the Company
3.09 Intellectual Property Rights
3.10 Contracts and Contract Parties
3.11 Major Suppliers
3.12(a) Employment Contracts and Other Compensation Agreements
3.12(b) Employee Benefit Plans
3.12(c) Multi-Employer Plans
3.13 Inventory
3.14(a) Real Estate Owned
3.14(b) Real Estate Leased
3.15 Liens and Encumbrances on Personal Property
3.16 Accounts and Notes Receivable
3.17 Company Investments
3.18 Tax Matters
3.19 Litigation
3.20 Other Contracts
3.21 Compliance with Employment Related Laws
3.22 Insurance
3.25 Officers, Directors and Depositories
3.27 Consents and Waivers
3.28 Licenses and Permits
3.29(a) Software
3.29(c) Interests of Third Parties in Owned Source Codes
3.30 Related Party Loans
4.04(e) Accredited Investors
4.04(m) Shareholder Interests
7.06(a) Company Employees
7.07(a) Company Employees
Exhibit Ref. Description
- ------- ---- -----------
A 4.04(e) Form of Accredited Investor Certificate
B 7.13 Form of Registration Rights Agreement
C 8.02(d) Form of Opinion of Kevin J. Dell, Esq. to the Company
D 8.03(e) Form of Opinion of Summerfield, Willen, Silverberg &
Limsky, P.A. to Parent and Acquisition
<PAGE>
INDEX TO DEFINED TERMS
Term Reference
---- ---------
"ACM" Recitals
"Accredited Investor Certification" 4.04(e)
"Acquisition" Preamble
"Affiliate" 3.20
"Aggregate Parent Common Stock
Consideration" 2.01(a)
"Agreement" Preamble
"Average Price" 2.01(a)
"Balance Sheet" 3.08(a)
"Business Day" 1.03
"Certificate" 2.03(a)
"Code" Recitals
"Company" Preamble
"Company Common Stock" 2.01(a)
"Company Employees" 7.06(a)
"Company Investments" 3.17
"Company Licenses" 3.28
"Confidentiality Agreement" 7.09
"Constituent Corporations" Preamble
"Contract Parties" 3.10
"Delaware GCL" Recitals
"Drop Dead Date" 9.01(b)
"Effective Time" 1.03
"Employee and Other Licenses" 3.28
"ERISA" 3.12(b)
"Excess Company Merger Expenses" 2.01(a)
"Exchange Act" 5.09
"Exchange Shares" 2.01(b)
"Exchange Value" 2.01(b)
"Financial Statements" 3.08(a)
"GAAP" 3.31
"Indemnifiable Breaches" 7.08(a)
"Indemnification Termination Date" 7.08(d)
"Intellectual Property Rights" 3.09
"Major Suppliers" 3.11
"Material Adverse Effect" 3.03
<PAGE>
"Merger" Recitals
"Merger Information" 4.04(j)
"Net Merger Price" 2.01(a)
"Non-Competition Agreements" 7.05
"Owned Source Codes" 3.29(c)
"Parent" Preamble
"Parent Common Stock" Recitals
"Parent Public Information" 5.06
"Purchaser Representative" 4.04(m)
"Registration Rights Agreement" 7.13
"Related Party Loans" 3.30
"Related Party Notes" 3.30
"SEC" 4.04(b)
"Securities Act" 4.04(a)
"Shareholders" Preamble
"Shareholders' Agreements" 3.02
"Software" 3.29(a)
"Software Contracts" 3.29(b)
"Surviving Corporation" Preamble
<PAGE>
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September 16,
1997, among THE BISYS GROUP, INC., a Delaware corporation, with an address at
150 Clove Road, Little Falls, New Jersey 07424 ("Parent"), BI-BSI ACQUISITION
CORP., a Delaware corporation and a wholly-owned subsidiary of Parent, with an
address at 150 Clove Road, Little Falls, New Jersey 07424 ("Acquisition"),
Benefit Services, Inc., a Maryland corporation, with an address at 132 Business
Center Drive, P.O. Box 1017, Reisterstown, MD 21136 (the "Company"), and the
shareholders of the Company, whose names and addresses are set forth on the
signature pages hereto (all of said persons, are referred to herein individually
as a "Shareholder", and collectively as the "Shareholders"). The Company and
Acquisition are hereinafter sometimes referred to as the "Constituent
Corporations" and the Company as the "Surviving Corporation."
WHEREAS, the Company is a general insurance agency specializing in
marketing long term care products to independent and career producers on a
national basis;
WHEREAS, Parent, Acquisition and the Company desire that Acquisition merge
with and into the Company (the "Merger"), upon the terms and conditions set
forth herein and in accordance with the Corporations and Associations Article of
the Annotated Code of Maryland (the "ACM") and the General Corporation Law of
the State of Delaware (the "Delaware GCL"), with the result that the Company
shall continue as the Surviving Corporation and the separate existence of
Acquisition (except as it may be continued by operation of law) shall cease;
WHEREAS, Parent, Acquisition and the Company desire that upon the Merger,
at the Effective Time (as hereinafter defined), the outstanding shares of the
capital stock of the Company be converted into the right to receive fully paid
and nonassessable shares of Common Stock, $.02 par value, of Parent ("Parent
Common Stock"), and the outstanding shares of Acquisition be converted into the
right to receive fully paid and nonassessable shares of the Common Stock, $.01
par value, of the Surviving Corporation, as hereinafter provided;
WHEREAS, Parent, Acquisition and the Company desire that, immediately
after the Effective Time and solely as a result of the Merger, Parent will own
all the issued and outstanding shares of the capital stock of the Surviving
Corporation;
WHEREAS, for federal income tax purposes, it is intended that the Merger
qualify as a reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling-of-interests"; and
WHEREAS, the respective Boards of Directors of the Company, Parent and
Acquisition and the shareholders of the Company have approved the Merger;
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NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereto hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, in accordance with this Agreement, the
Delaware GCL and the ACM, Acquisition shall be merged with and into the Company,
the separate existence of Acquisition (except as it may be continued by
operation of law) shall cease, and the Company shall continue as the Surviving
Corporation.
SECTION 1.02 Effect Of the Merger. Upon the effectiveness of the Merger,
the Surviving Corporation shall succeed to and assume all the rights and
obligations of the Company and Acquisition in accordance with the Delaware GCL
and the ACM, and the Merger shall otherwise have the effects set forth in
Section 259 of the Delaware GCL and Section 3-114 of the ACM.
SECTION 1.03 Consummation of the Merger. As soon as practicable after the
satisfaction or waiver of the conditions to the obligations of the parties to
effect the Merger set forth herein, provided that this Agreement has not been
terminated previously, the parties hereto will cause the Merger to be
consummated by filing (a) with the State of Maryland Department of Assessments
and Taxation properly executed Articles of Merger in accordance with the ACM,
and (b) with the Secretary of State of the State of Delaware a properly executed
Certificate of Merger in accordance with the Delaware GCL. The Merger shall be
effective upon filing of such certificate and articles or on such later date as
may be specified therein, but in no event shall such certificate or articles be
delivered for filing more than two (2) Business Days (hereinafter defined) after
satisfaction of all of the conditions set forth in Article VIII hereof (the time
of such effectiveness being the "Effective Time"). For purposes of this
Agreement, the term "Business Day" shall mean a day of the year on which
national banks are open for business and are not required or authorized to
close.
SECTION 1.04 Charter; By-Laws; Directors and Officers. As of the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be the
Certificate of Incorporation of the Company as in effect immediately prior to
the Effective Time unless and until thereafter amended or restated in accordance
with the provisions thereof and as provided by the ACM. As of the Effective
Time, the By-Laws of the Surviving Corporation shall be the By-Laws of the
Company as in effect immediately prior to the Effective Time, unless and until
thereafter amended in accordance with the provisions thereof and as provided by
the ACM. The initial directors and officers of the Surviving Corporation shall
be the directors and officers set forth below, in each case until their
respective successors are duly elected and qualified.
Directors:
Lynn J. Mangum
Robert J. McMullan
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Corporate Officers:
Lynn J. Mangum - Chairman
Anthony A. Pascotti - President
Robert J. McMullan - Executive Vice President and Treasurer
Bernard H. Barrie - Executive Vice President
J. Randall Grespin - Executive Vice President
Melissa H. Barnickel - Senior Vice President
Edward S. Hutman - Senior Vice President
Mark J. Rybarczyk - Senior Vice President
Dennis R. Sheehan - Senior Vice President
Kevin J. Dell - Vice President, General Counsel and Secretary
Patrician A. Heins - Assistant Secretary
Annamaria Porcaro - Assistant Secretary
SECTION 1.05 Further Assurances. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (i) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (ii) otherwise to carry out the purposes of
this Agreement, the Surviving Corporation and its proper officers and directors
or their designees shall be authorized to execute and deliver, in the name and
on behalf of either of the Constituent Corporations, all such deeds, bills of
sale, assignments and assurances and do, in the name and on behalf of such
Constituent Corporation, all such other acts and things necessary, desirable or
proper to vest, perfect or confirm its right, title or interest in, to or under
any of the rights, privileges, powers, franchises, properties or assets of such
Constituent Corporation and otherwise to carry out the purposes of this
Agreement.
ARTICLE II
CONVERSION OF SECURITIES
SECTION 2.01 Conversion of Securities of the Company. (a) Net Merger
Price. By virtue of the Merger and without any action on the part of the holders
of the common stock, without par value, of the Company ("Company Common Stock"),
at the Effective Time all outstanding shares of the Company Common Stock
(subject to Section 2.03(c) hereof) shall be converted into the right to receive
fully paid and nonassessable shares of Parent Common Stock on the following
basis:
The aggregate consideration to be paid in connection with the Merger shall
be paid in the form of Parent Common Stock valued, as set forth below, at
$2,400,000 less the amount (the "Excess Company Merger Expenses") in excess of
$25,000 paid or payable by the Company to the Company's financial advisors,
brokers, consultants, appraisers, attorneys and accountants in connection with
and/ or as a result of the Merger and the transactions related thereto (the "Net
Merger Price"). The Net Merger Price shall be divided by the average of the
closing price per share of Parent Common Stock (the "Average Price") as reported
on the Nasdaq National Market, for the 30 trading day period
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immediately preceding the day which is two business days prior to the Effective
Time in order to determine the number of shares of Parent Common Stock into
which the outstanding shares of Company Common Stock shall be converted in the
Merger (the "Aggregate Parent Common Stock Consideration").
(b) Exchange Value. Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any such shares
held in the treasury of the Company, which shall be canceled as provided in
paragraph (c) below) (all such shares collectively referred to herein as the
"Exchange Shares") shall be converted into the right to receive the number of
shares of Parent Common Stock (the "Exchange Value"), determined by dividing the
Aggregate Parent Common Stock Consideration by the aggregate number of Exchange
Shares. If, prior to the Effective Time, Parent should split or combine the
outstanding shares of Parent Common Stock, or pay a stock dividend or other
stock distribution in Parent Common Stock, then the determination of the
Exchange Value shall be appropriately adjusted to reflect such split,
combination, dividend or other distribution.
(c) Treasury Stock. Each share of capital stock that is held in the
treasury of the Company shall be canceled and retired and no capital stock of
Parent, cash or other consideration shall be paid or delivered in exchange
therefor.
SECTION 2.02 Acquisition Common Stock. At the Effective Time, each share
of Common Stock, $.01 par value, of Acquisition issued and outstanding
immediately prior to the Effective Time shall be converted into a right to
receive one (1) share of the common stock of the Surviving Corporation, which
shall constitute all of the issued and outstanding shares of the Surviving
Corporation after the Effective Time.
SECTION 2.03 Exchange of Certificates. (a) Promptly after the Effective
Time, each Shareholder shall deliver to Parent the certificate or certificates
representing its shares of Company Common Stock (each, a "Certificate") in form
sufficient for transfer and cancellation pursuant hereto. Upon surrender of a
Certificate for cancellation to Parent in form sufficient for transfer and
cancellation pursuant hereto and delivery to Parent of such other documents as
may reasonably be required by Parent to effect the transfer, each Shareholder
surrendering such Certificate shall be entitled to receive in exchange therefor
(i) a certificate evidencing that number of whole shares of Parent Common Stock
which such holder has the right to receive in respect of the shares of Company
Common Stock formerly evidenced by such Certificate (after taking into account
all shares of Company Common Stock then held of record by such holder) and (ii)
a check representing the amount of cash in lieu of fractional shares of Parent
Common Stock, if any, and unpaid dividends or other distributions, if any, to
which such holder is entitled pursuant to the provisions of this Section 2.03,
after giving effect to any applicable withholding tax, and the Certificate so
surrendered shall forthwith be canceled. No interest will be paid or accrued on
the cash in lieu of fractional shares and unpaid dividends and distributions, if
any, payable to the Shareholders.
(b) No dividends or other distributions declared after the Effective Time
with respect to Parent Common Stock shall be paid with respect to any shares of
Company Common Stock represented by a Certificate until such Certificate is
surrendered for exchange as provided herein. After surrender of any
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such Certificate, there shall be paid to the holder of the certificate
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
declared with respect to such whole shares of Parent Common Stock and not paid,
less the amount of any applicable withholding taxes thereon, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to the date of such surrender and
with a payment date subsequent to the date of such surrender payable with
respect to such whole shares of Parent Common Stock, less the amount of any
applicable withholding taxes thereon.
(c) No certificates or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner thereof to vote
or to any rights of a shareholder of Parent. Each holder of shares of Company
Common Stock who would otherwise have been entitled to receive in the Merger a
fraction of a share of Parent Common Stock (after taking into account all
certificates surrendered by such holder) shall be entitled to receive, in lieu
thereof, a check in an amount (without interest) equal to such fractional part
of a share of Parent Common Stock multiplied by the Average Price.
(d) From and after the date of this Agreement, the stock transfer books of
the Company shall be closed, and there shall be no further registrations of
transfers of shares of Company Common Stock on the records of the Company.
(e) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of 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 of a bond in such reasonable amount as the
Surviving Corporation may direct, Parent shall issue in exchange for such
Certificate the shares of Parent Common Stock and cash in lieu of fractional
shares, if any, and unpaid dividends and distributions, if any, on shares of
Parent Common Stock deliverable in respect thereof as provided herein.
(f) Promptly after the Effective Time, the Surviving Corporation shall
issue to Parent a certificate representing One Hundred (100) shares of the
common stock of the Surviving Corporation, and Parent shall cause the
certificate representing the shares of the capital stock of Acquisition to be
canceled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS
Each of the Company and each of the Shareholders, jointly and severally,
hereby represents and warrants to Parent and Acquisition, knowing and intending
that each of Parent and Acquisition is relying hereon in entering into the
transactions contemplated hereby, as follows:
SECTION 3.01 Authority Relative to Agreement. The Company has all
requisite power and authority to enter into and to perform its obligations
hereunder. The execution and delivery of this
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Agreement by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by the Board of Directors and
shareholders of the Company, and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement and the transactions
contemplated hereby.
SECTION 3.02 Shareholders' Title to Stock. The shares of Company Common
Stock identified on the signature page(s) hereof opposite the respective names
of the holders thereof have been duly and validly issued to the respective
holders. The shares of Company Common Stock owned by them represent,
collectively, all of the issued and outstanding shares of capital stock (or
other equity interests) in the Company. Except with respect to such agreements
set forth on Schedule 3.02 hereto (the "Shareholders' Agreements"), neither the
Company nor the Shareholders are party to any shareholders' agreement, buy-sell
agreement or similar agreement or arrangement.
SECTION 3.03 Organization, Standing and Qualification. The Company is a
corporation, duly organized, validly existing and in good standing under the
laws of the State of Maryland and has the corporate power and lawful authority
to own and hold its properties and conduct its business as now owned, held and
conducted in its state of incorporation and the states (or other jurisdictions)
in which it has qualified to do business. The Company is qualified to do
business and is in good standing in all states (or other jurisdictions) in which
such qualification is required by reason of the nature or extent of business
conducted by the Company therein, except where the failure to be so qualified
would not have a Material Adverse Effect (as hereinafter defined) on the
Company, and such states (and jurisdictions) are specified in Schedule 3.03
attached hereto. As used herein, "Material Adverse Effect" shall mean, with
respect to any party, a material adverse effect on the assets, financial
condition, operating results or business of such party and its subsidiaries,
taken as a whole.
SECTION 3.04 Stock of the Company. (a) The authorized capital stock of the
Company consists in its entirety of Three Hundred (300) shares of Company Common
Stock, of which One Hundred and seventeen and 646/1000 (117.646) shares of
Company Common Stock are validly issued and outstanding, fully paid and
nonassessable. The Company does not have any outstanding subscription, warrants,
convertible securities, obligations, options or rights entitling others to
acquire shares of capital stock of the Company, or any outstanding securities,
options, warrants, rights or other instruments convertible into shares of
capital stock of the Company.
(b) Except with respect to the shares of Company Common Stock identified
on the signature page(s) hereof, none of the Shareholders or any other person or
entity has any outstanding claim against the Company or any right whatsoever
against the Company with respect to any shares of capital stock of the Company,
including, without limitation, any option, warrant or other right to acquire
from the Company shares of the capital stock of the Company or any securities,
options or other instruments convertible into or exchangeable for shares of
capital stock of the Company.
SECTION 3.05 Subsidiaries and Other Investments. There is no corporation,
partnership, joint venture, or other entity in which the Company has, directly
or indirectly, any investment or to which the Company has made an advance of
cash other than as listed on Schedule 3.05 hereto. The Company is not under any
obligation to acquire any securities from any person or entity, the Company
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is not under any obligation to make any investment, loan, cash contribution or
other advance to any person or entity.
SECTION 3.06 Certificate of Incorporation and By-Laws. True and complete
copies of the Company's Certificate of Incorporation and By-Laws (together with
any amendments thereto) are attached hereto as Schedule 3.06. The Company has
provided to Parent true and complete copies of the Certificate of Incorporation
and By-Laws of the Company and the Certificate of Incorporation and By-Laws or
other organizational agreements and documents of each Subsidiary, if any,
together with all amendments thereto.
SECTION 3.07 Execution and Performance of Agreement; Validity and Binding
Nature. The execution and delivery of this Agreement, and the performance by the
Company and the Shareholders of the terms of this Agreement and the transactions
contemplated hereby, will not result in a breach of any of the terms of, or
constitute a violation of or default under, the Certificate of Incorporation or
By-Laws of the Company or any statute or contract, indenture or other instrument
by which the Company, the Shareholders or any of their respective properties are
bound, and except as disclosed in Schedule 3.27 hereof, no consent, approval,
authorization or order of any court or governmental authority is required in
connection with the execution and delivery of the Agreement by the Company and
the Shareholders and the performance by the Company and the Shareholders of the
terms of this Agreement and the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and by the Shareholders.
This Agreement is, and the documents and agreements executed and delivered by
the Company and the Shareholders pursuant to the terms hereof, when duly
executed and delivered by all parties whose execution and delivery thereof is
required, will be legal, valid, and binding obligations of the Company and the
Shareholders, enforceable against the Company and the Shareholders in accordance
with their respective terms, except to the extent that enforceability may be
limited by bankruptcy, receivership, moratorium, conservatorship, reorganization
or other laws of general application affecting the rights of creditors generally
or by general principles of equity.
SECTION 3.08 Financial Statements. (a) The Company has delivered to Parent
(i) the unaudited balance sheet of the Company as of June 30, 1997 (the "Balance
Sheet"), and the related unaudited statements of income, stockholders' equity
and cash flows for the six months then ended, and (ii) the unaudited balance
sheet of the Company as of December 31, 1996, and the related unaudited
statements of income, stockholders' equity and cash flows for the fiscal year
then ended, (hereinafter referred to collectively as the "Financial
Statements"). Each of the Financial Statements (a) is true and correct and has
been prepared on a cash basis from the books and records of the Company, and (b)
presents fairly on a cash basis the financial position of the Company as of the
respective dates and the results of the operations and cash flow of the Company
for such respective periods in all respects. All prepaid expenses included
therein as assets represent payments theretofore made by the Company, the
benefit and advantage of which may be obtained and enjoyed by the Surviving
Corporation. The books and records of the Company have been kept, and will be
kept to the Effective Time, in reasonable detail and in accordance with the same
accounting principles heretofore used and consistently applied and will fairly
and accurately reflect to the Effective Time all of the transactions of the
Company on a cash basis, and are and will be complete and correct in all
material respects.
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SECTION 3.09 Intellectual Property Rights. Schedule 3.09 attached hereto
contains a complete and correct list and accurate description of all trademarks,
trade names, service marks, logos and other identifying symbols, names or marks,
copyrights, inventions, processes, designs, formulas, trade secrets, patents,
patent applications and other intellectual and/or proprietary rights or
interests (collectively, "Intellectual Property Rights") (a) owned by the
Company free and clear of all licenses, liens, charges or encumbrances, except
as specified in such Schedule, or (b) licensed to the Company under valid and
enforceable agreements, exclusive of the Software (hereinafter defined)
identified in Schedule 3.29(a) hereof. The Company owns, or possesses adequate
rights to use, all Intellectual Property Rights necessary for the conduct of the
business of the Company, and the protection of patents is not material to the
conduct of the business of the Company. There are no infringements by any third
parties upon any Intellectual Property Rights or any conflict with or
infringement by the Company of the rights of others with respect to same.
SECTION 3.10 Contracts and Contract Parties. Schedule 3.10 contains a
complete list of (a) each independent insurance agent, so-call premier insurance
groups of insurance agencies, career agents, national account, or other persons
or entities, as evidenced by the attached comprehensive production report for
the period commencing January 1, 1997 and ending September 12, 1997 to which the
Company provides insurance brokerage, distribution or general agency services
pursuant to a contract, selling agreement, service agreement or other
arrangement, whether written or oral, with such persons or entities (b) each
joint venture, co-marketing, co-brokerage or similar contract or arrangement,
whether written or oral, to which the Company is a party, (c) each contract or
arrangement, whether written or oral, with an insurance company, general
insurance agency, distributor or broker to which the Company is a party, and
under which the Company is authorized or obligated to sell or broker insurance
or related products or services, (d) each contract or arrangement, whether
written or oral, under which the Company receives commissions or other income in
connection with the conduct of its business, (e) each lease or capital lease of
equipment or other personal property, whether written or oral, to which the
Company is a party and (f) each consulting or similar agreement, whether written
or oral, to which the Company is a party, all of the foregoing including the
names and addresses of each party thereto other than the Company (collectively,
the "Contract Parties"). True and complete copies of those contracts or
arrangements which are in writing have been heretofore made available to Parent,
and complete descriptions of those contracts or arrangements which are oral have
been heretofore made available to Parent. Except as described in Schedule 3.10,
none of the contracts or arrangements listed in Schedule 3.10 require the
Company to purchase any product or service exclusively from a Contract Party,
require the Company to deal exclusively with a Contract Party with respect to
any customer or class of customers of the Company, or otherwise limit the
Company from selling or purchasing any product or service to or from any person
or entity. No Contract Party listed in Schedule 3.10 has expressed to the
Company or any of the Shareholders its intention to cancel or otherwise
terminate its relationship with the Company, and, to the best knowledge of the
Company and each Shareholder, all of such contracts and arrangements will
continue in full force and effect after the Effective Time and a continuing
relationship with each such Contract Party is not in jeopardy.
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SECTION 3.11 Major Suppliers. Schedule 3.11 contains the names and
business addresses of all of the suppliers or consultants from whom the Company
purchased, during the twelve (12) month period ending June 30, 1997, goods
and/or services, the aggregate cost of which exceeded Five Thousand Dollars
($5,000) or which suppliers or consultants are in any event material to the
continued operation of the business of the Company or any Subsidiary in the
ordinary course (collectively, the "Major Suppliers"). Except as disclosed in
Schedule 3.11, the Company has no other suppliers or consultants which are
material to the business of the Company as presently conducted. No Major
Supplier listed in Schedule 3.11 has expressed to the Company or any Management
Shareholder its intention to cancel or otherwise terminate its relationship with
the Company, and, to the best knowledge of the Company and each Management
Shareholder, a continuing relationship with each such supplier or consultant is
not in jeopardy.
SECTION 3.12 Employment, Deferred Compensation or Similar Agreements;
Collective Bargaining Agreements; Employee Benefit Plans. (a) Except as
disclosed in Schedule 3.12(a), the Company is not a party to any agreement or
employment contract or deferred compensation or similar employment or incentive
compensation arrangement with any of its respective employees or former
employees. There are no collective bargaining agreements or any agreements with
any labor union covering any employees of the Company. The business of the
Company is not affected by any present strike or other labor disturbance
involving the employees of the Company nor, to the best knowledge of the Company
or any Shareholder, is any union attempting to represent, as collective
bargaining agent, any person employed by the Company.
(b) Except as disclosed in Schedule 3.12(b), the Company does not sponsor
or maintain and is not otherwise a party to or liable under any plan, program,
fund or arrangement (whether or not qualified for Federal income tax purposes),
whether benefiting a single individual or multiple individuals, and whether
funded or not, that is an "employee pension benefit plan," or an "employee
welfare benefit plan," as such terms are defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or any other benefit
arrangement for its employees, their dependents and beneficiaries.
(c) Except as disclosed in Schedule 3.12(c) hereto, the Company has not
and does not contribute to any multi-employer plan (as defined in Section 3(37)
of ERISA), incurred any liability under Section 4201 of ERISA for any complete
or partial withdrawal from any multi-employer plan and has not assumed any such
liability by any prior owner of any of its assets or properties.
(d) Each employee pension benefit plan maintained by the Company and
listed in Schedule 3.12(b) complies in all material respects with the
requirements of ERISA. No "reportable event" within the meaning of Section 403
of ERISA has occurred with respect to any such plan and the Company has not
engaged in any "prohibited transaction" within the meaning of Section 406(a) or
(b) of ERISA or of Section 4975(c) of the Code, with respect to any such plan;
and no such plan has been terminated in accordance with the procedures set forth
in Section 4041 or 4042 of ERISA.
(e) No liability has been incurred by the Company or any Subsidiary for
any tax imposed by Section 4975 of the Code with respect to any plan described
in Schedule 3.12(b). The Company has, and shall have, for all periods ending on
or prior to the Effective Time, administered each employee
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pension benefit plan and each employee welfare benefit plan described in
Schedule 3.12(b) in all material respects in compliance with the reporting,
disclosure and all other requirements applicable thereto under ERISA, the Code
or any other applicable law.
SECTION 3.13 Inventory. Except as disclosed in Schedule 3.13 or in the
Financial Statements, the Company does not own any inventory, and the ownership
and maintenance of inventory is not significant to the conduct of the business
of the Company.
SECTION 3.14 Real Estate. (a) The Company owns no real property. The
Company is not a party to any agreement involving the purchase or sale of real
or personal property except as disclosed in this Agreement.
(b) Schedule 3.14 (b) contains a true and correct list and description of
all leases, subleases or other agreements under which the Company is lessee or
subtenant or lessor or sublessor of real estate. The Company has provided to
Parent true and complete copies of all such leases, subleases and agreements,
all of which leases, subleases and agreements are valid, binding and
enforceable. The Company has no oral leases of real estate.
(c) All leased real property (and improvements thereon) described in
Schedule 3.14(b) is in good operating condition and repair and conforms in all
material respects with all applicable building, zoning, planning and other
regulations, ordinances or laws, and the Company has the right to use all real
estate necessary to the conduct of its business as currently conducted.
SECTION 3.15 Title to and Condition of Personal Property. The Company
has merchantable title to all personal property reflected in the Balance Sheet
or acquired subsequent to the date of the Balance Sheet, free and clear of all
liens or encumbrances, except as specifically disclosed in Schedule 3.15 hereto.
All of the personal property owned by the Company is in good operating condition
and repair. The Company owns or has the right to use all such properties
necessary to the conduct of its business as currently conducted.
SECTION 3.16 Accounts and Notes Receivable. Except as disclosed in
Schedule 3.16, the accounts and notes receivable of the Company reflected in the
Balance Sheet or acquired by the Company subsequent to the date of the Balance
Sheet (a) are true, bona fide accounts or notes receivable of the Company
created in the ordinary course of business; (b) have been collected or are fully
collectible in amounts not less than the aggregate amount thereof, net of
reserves established therefor, on the books of the Company and reflected in the
Balance Sheet; (c) are not subject to any offsets, credits or counterclaims; and
(d) have not at any time been placed for collection with any attorney,
collection agency or similar individual or firm.
SECTION 3.17 Marketable Securities and Other Investments. Schedule
3.17 lists all of the marketable securities and other investments shown on the
Balance Sheet (the "Company Investments"), all of which are owned by the Company
free and clear of any liens, encumbrances or claims, except as shown in Schedule
3.17. The value of each of the Company Investments shown on the Balance Sheet
reflect the fair market value thereof on the date of the Balance Sheet,
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as applicable, and the Financial Statements are in conformity with the
requirements of Financial Accounting Standards Board Statement No. 115. All of
the Company Investments are readily marketable except as described in Schedule
3.17, and, since the date of the Balance Sheet, as applicable, there has been no
material decline in the aggregate market value of the Company Investments.
SECTION 3.18 Taxes. The Company has properly completed and filed all
federal, state, county, municipal and other tax returns, reports and
declarations which are required to be filed by it and has paid all taxes,
penalties and interest which have become due pursuant thereto or which became
due pursuant to asserted deficiencies or assessments. Except as set forth in
Schedule 3.18 hereto, the Company has not received any notice of deficiency or
assessment of additional taxes, all such deficiencies or assessments set forth
in Schedule 3.18 are being contested in good faith and through appropriate
proceedings, and no tax audits are in process. The last year for which the
federal or state income taxes or other taxes of the Company have been examined
is set forth accurately and completely on Schedule 3.18 hereto. The Company has
not granted any waiver of any statute of limitation with respect to, or any
extension of a period for the assessment of, any federal, state, county,
municipal or other tax. The Company has not filed an election under Section
1362(a) of the Code to be taxed as an S Corporation .
SECTION 3.19 Litigation. Except as disclosed in Schedule 3.19, there is no
litigation, investigation or proceeding pending or, to the best knowledge of the
Company and the shareholders threatened, involving the Company or any of its
properties. There are no outstanding orders, writs, injunctions or decrees of
any court, governmental agency or arbitration tribunal materially affecting or
materially limiting the conduct of the business of the Company.
SECTION 3.20 Other Material Contracts and Commitments. Schedule 3.20 lists
all contracts or commitments to which the Company is a party, which contracts
are material to the business of the Company and are not disclosed in another
Schedule hereto. Except as disclosed in Schedule 3.20 or another Schedule
hereto, the Company is not a party to and none of its properties are bound by
any of the following types of contracts or commitments, written or oral: (a)
mortgages, indentures, security agreements and other agreements and instruments
relating to the borrowing of money or extension of credit or imposition of an
encumbrance on any of the assets of the Company; (b) other contracts and
commitments which in any case involve payments or receipts of more than $5,000;
(c) any contract with any officer, director or with any employee of the Company
(other than agreements relating to current wage or salary payments terminable by
the Company on notice of thirty (30) days or less); (d) any contract or
promissory note or other instrument with any Affiliate (as hereinafter defined)
of the Company; (e) any guarantee of the obligations of any person or entity or
obligation to provide funds or assume the debt of any person or entity; (f) any
option or right to acquire any assets of the Company outside of the ordinary
course of business; or (g) profit-sharing, stock option, pension, or retirement
agreements, shareholder or similar agreements or arrangements, trusts, or funds
for the benefit of employees. The Company has delivered to Parent complete and
correct copies of all written contracts and commitments, together with all
amendments thereto, and accurate descriptions of all oral contracts and
commitments described in Schedule 3.20 or any other Schedule hereto. The Company
is not in default with respect to any such contract or commitment, and
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no other party to any such contract or commitment is in default with respect
thereto. Except as specifically set forth on Schedule 3.20, each such contract
will continue in full force and effect after the Effective Time without any
right on the part of any party thereto, other than the Company, to terminate
such contract or commitment as a result of the occurrence of the Merger. For
purposes of this Agreement, "Affiliate" of the Company or a Subsidiary means (a)
any corporation, partnership, trust or other entity in control of, controlled by
or under common control with the Company or such Subsidiary; and (b) any
officer, director, trustee, general partner or employee of any corporation,
partnership, trust or other entity in control of, controlled by or under common
control with the Company or a Subsidiary. Schedule 3.20 discloses all Affiliates
of the Company which are business entities currently in existence.
SECTION 3.21 Labor Relations. Except as disclosed in Schedule 3.21, the
Company, in the conduct of its affairs, has complied in all material respects
with all applicable laws (including, without limitation, labor and tax laws),
and regulations relating to the hiring and employment of employees and
independent contractors, including, without limitation, those related to
discrimination, wages, hours, collective bargaining, employee pension and
welfare benefit plans, and the payment of (and withholding for) income, Social
Security and other employment related taxes, and the Company is not liable for
any penalties or damages for failure to comply with any of the foregoing. There
are no unfair labor practice claims or charges pending or threatened involving
the Company.
SECTION 3.22 Insurance. Schedule 3.22 hereto contains a list and
description (including the name of the insurer, dollar amount of coverage and
expiration date) of all insurance policies maintained by the Company. Schedule
3.22 further lists all claims presently pending or threatened which are covered
by such policies. The Company has not received notice of cancellation or
non-renewal of any of such policies.
SECTION 3.23 Conduct of Business and Absence of Changes. Since June 30,
1997, the Company has conducted its business in the regular and ordinary course
and has not (a) undergone any adverse change in its condition (financial or
otherwise), assets, liabilities, business, or operations, (b) declared, set
aside, made or paid any cash or stock dividend or distribution or purchased,
issued or sold any shares of its capital stock, (c) incurred any indebtedness
for borrowed money or issued or sold any debt securities, (d) instituted any
increase in the compensation or bonuses payable or to become payable to any
officers or employees, or any changes in personnel policies or employees
benefits, or (e) made any payment to any Shareholder except for payments
described in a Schedule hereto and regular salary and ordinary and necessary
business expense reimbursements.
SECTION 3.24 Compliance with Laws; Governmental Authorizations. The
Company is in compliance, in all material respects, with all statutes, laws,
ordinances, rules, regulations, judgments, orders, decrees, governmental
licenses or permits and other governmental licenses, permits, authorizations or
approvals applicable to it or any of its properties, and all governmental
licenses, permits, authorizations or approvals necessary in any material respect
for the conduct of its business have been duly and lawfully obtained and are in
full force and effect, and there are no proceedings pending or threatened which
may result in the revocation, cancellation or suspension, or any materially
adverse modification, of any thereof.
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SECTION 3.25 Officers, Directors and Depositories. Schedule 3.25 hereto
contains the names of all the officers and directors of the Company, the names
of all depositories of the funds of the Company and the names of the officers
and other persons empowered to sign instruments withdrawing funds from said
depositories.
SECTION 3.26 Environmental Matters. (a) The business and operations of the
Company comply with all federal, state and local laws, rules, regulations and
directives pertaining to the environment. No governmental agency has asserted
any claim or given notice of any possible claim or threatened to assert any
claim against the Company in respect of its business, any assets owned or leased
by it, real properties owned or leased by it, or the condition, use or operation
thereof, arising out of any federal, state or local law, rule, regulation or
directive pertaining to the environment.
(b) To the best knowledge of the Company and the shareholders, there are
nowhere on any real property leased by, used by or otherwise under the control
of the Company any deposits, dumps, or tanks of toxic or other poisonous,
dangerous or noxious waste, fluids, solvents, chemicals or effluents, any and
all of which chemicals, fuels and fluids are properly and safely stored,
identified, labeled and maintained in accordance with applicable industrial
standards and all governmental or other laws or regulations relating thereto.
The Company does not discharge from any real property leased, used or otherwise
under its control, whether by effluent, emission or other means, any noxious,
toxic, hazardous or deleterious matter or gases. All discharges of waste
material and other substances from the operating facilities of the Company are
in full compliance with applicable law and covered by valid permits and
licenses, where required.
SECTION 3.27 Third Party and Governmental Consents. Except as disclosed in
Schedule 3.27 hereto, no consent, waiver, authorization, approval, order,
license, certificate or permit of or from, or registration, declaration or
filing with, any governmental authority or any court or other tribunal or any
other person, firm or entity, nor under any contract, indenture, mortgage,
lease, license or other agreement or instrument to which the Company or any
Shareholder is a party or by which the Company or any Shareholder, or any of
their respective assets or properties, is subject or bound, is required by or
with respect to the Company or any Shareholder in connection with the execution,
delivery or performance of this Agreement or of any other agreement, document or
instrument to be executed and delivered by the Company or any Shareholder
pursuant hereto or in connection herewith or the consummation of the
transactions contemplated hereby. The Company or a Shareholder, as applicable,
has obtained all consents and waivers listed in Schedule 3.27 on or prior to the
date hereof.
SECTION 3.28 Licenses and Permits. The Company has obtained all consents,
approvals, waivers, licenses and permits from governmental authorities required
in connection with the ownership of the assets of the Company and the operation
of the business of the Company as presently and heretofore conducted, including,
without limitation, all required insurance producer and similar licenses (herein
collectively referred to as the "Company Licenses"). Except as disclosed in
Schedule 3.28 hereto, each employee and agent of the Company has obtained all
approvals, licenses and permits from governmental authorities required in
connection with the operation of the business of the Company and the services
provided by such employee or agent to the Company, including, without
limitation,
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insurance producer licenses and similar licenses (herein collectively referred
to as the "Employee and Other Licenses"). The Company Licenses and the Employee
and Other Licenses are listed on Schedule 3.28 hereto and, except as otherwise
set forth in Schedule 3.28 hereto, no other licenses or permits are required to
conduct or operate the business of the Company or any Subsidiary as presently
conducted. None of the Company Licenses or the Employee and Other Licenses are
threatened to be revoked or suspended, and there are no disciplinary proceedings
pending or threatened by, any issuer of any such license or any other
governmental authority against the holder thereof.
SECTION 3.29 Software. (a) Schedule 3.29(a) hereto contains a true,
complete and accurate list and description of (i) all computer software and
related programs owned by the Company and (ii) all computer software and related
programs licensed by the Company for use in connection with the business of the
Company, other than off-the-shelf software licensed to the Company which is not
material to the operation of the business of the Company or the services
provided by the Company (collectively, the "Software"). The Company either owns
or has a valid license to use and sublicense all of the Software, and upon
consummation of the Merger the Surviving Corporation shall have the right to use
and authorize others to use all of the Software, free from any claim, security
interest or other lien or encumbrance whatsoever, except as set forth on
Schedule 3.29(a). The Company is the exclusive licensee of the Software
indicated on Schedule 3.29(a) as being exclusively licensed by the Company. The
Software constitutes the only computer software or programs necessary for the
operation of the business of the Company as presently conducted.
(b) The Company has provided to Parent true and complete copies of all
licenses, leases, contracts and other written instruments relating to any
Software and/or source codes thereof which are not owned by the Company
(collectively, the "Software Contracts"), all of which are legally valid and
binding and enforceable in accordance with their respective terms. Neither the
Company, nor, to the knowledge of the Company or any Shareholder, any other
party thereto, is in violation of any material term or provision of any Software
Contract. The use of the owned Software by the Company does not, and upon
consummation of the Merger the use of such owned Software by the Surviving
Corporation will not, in any manner infringe upon any rights of any third
parties. To the knowledge of the Company and each of the Shareholders, the use
of any source codes related to Software which is not owned by the Company, and
the exercise of the rights of the Company in and to such source codes, as
provided in any of the Software Contracts, does not, and upon consummation of
the Merger the use of any such source codes and exercise of such rights by the
Surviving Corporation pursuant to the terms of the Software Contracts will not,
in any manner infringe upon the rights of any third parties.
(c) All source codes relating to the Software which is owned by the
Company (the "Owned Source Codes") are in the possession of the Company and
constitute trade secret information of the Company, and, except as set forth in
Schedule 3.29(c), no third party has any copy of any of the Owned Source Codes
or any right, title, interest or license, conditional or otherwise, with respect
to any of the Owned Source Codes under any circumstances whatsoever. Upon
consummation of the Merger, the Surviving Corporation shall own and have
possession of, and shall have the right to use, all of the Owned Source Codes,
free from any claim, security interest or other lien or encumbrance whatsoever.
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(d) The Company owns and has possession of, and the Surviving Corporation
will own and have possession of immediately after the Effective Time, complete
and adequate documentation, including without limitation, documentation of
source codes, object codes and engineering change notices, reflecting the
current versions of all Software so as to enable the Surviving Corporation to
conduct fully after the Effective Time the business conducted by the Company
prior to the Effective Time in the same manner as theretofore conducted.
SECTION 3.30 Loans to or from Shareholders or Employees. Except as set
forth in Schedule 3.30, the Company does not have outstanding any loans,
advances or other indebtedness incurred by any Shareholder or any employee,
former employee or former shareholder of the Company or any member of their
respective families, and there are no loans or advances made to the Company by
or indebtedness incurred by the Company to any Shareholder or any employee,
former employee or former shareholder of the Company, or any member of their
respective families ("Related Party Loans"). True and complete copies of all
promissory notes or other agreements or documents evidencing the Related Party
Loans, if any, ("Related Party Notes") have been heretofore delivered to Parent.
SECTION 3.31 Absence of Undisclosed Liabilities. Except as and to the
extent disclosed or accrued on the Financial Statements or incurred in the
ordinary course of business since the date of the Balance Sheet, there exist no
liabilities or obligations of any nature whatsoever (whether absolute,
contingent or otherwise, matured or unmatured, or known or unknown) in respect
of the business or assets of the Company of the type customarily reflected in
financial statements prepared in accordance with generally accepted accounting
principles ("GAAP"). None of the Shareholders knows or has any reasonable
grounds to know after due inquiry of any basis for assertion against the Company
of any claim or liability of any nature in any amount not fully disclosed in
such Financial Statements or otherwise pursuant to the terms hereof.
SECTION 3.32 Shareholders' and Similar Agreements. Except as set forth in
Schedule 3.02, neither any Shareholder, nor any other person or entity, nor the
Company are parties to any shareholders' agreement, buy-sell agreement, stock
rights agreement or any similar agreement or arrangement related to the purchase
and sale of any shares of Company Common Stock. As of the Effective Time, the
Company will have no obligation to any Shareholder or any other person or entity
for the purchase of any shares of Company Common Stock or for the payment of any
consideration in respect of the purchase, sale or other disposition of shares of
Company Common Stock.
SECTION 3.33 Representations and Warranties True; No Misleading
Statements. All of the representations and warranties set forth in this Article
III shall be true and correct as of the Effective Time as if made at that time.
The representations and warranties made herein in connection with the
transactions contemplated hereby and the operation of the business of the
Company and in any Schedule, list or other document specifically referred to
herein and delivered by the Company or any Shareholder pursuant hereto do not
contain any untrue statements of a material fact or omit to state a material
fact necessary in order to make the statements herein or therein, in light of
the circumstances under which they were made, not misleading.
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SECTION 3.34 Approval of Merger. The Merger has been approved by the
holders of 100% of the outstanding shares of Company Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each Shareholder hereby represents and warrants to Parent and Acquisition,
as to itself, severally and not jointly, as follows, knowing and intending that
each of Parent and Acquisition is relying hereon in entering into the
transactions contemplated hereby:
SECTION 4.01 Authority and Capacity Relative to Agreement. Such
Shareholder has all requisite power, authority and legal capacity to enter into
and perform each of its obligations hereunder.
SECTION 4.02 Execution and Performance of Agreement; Validity and Binding
Nature. The execution and delivery of this Agreement, and the performance by
such Shareholder of the terms of this Agreement and the transactions
contemplated hereby, will not result in a material breach of any of the terms
of, or constitute a violation or default under, any statute or contract,
indenture or other instrument by which such Shareholder or any of its respective
properties are bound, and no consent, approval, authorization or order of any
court or governmental authority is required in connection with the execution and
delivery of this Agreement by such Shareholder and the performance by such
Shareholder of the terms of this Agreement and the transactions contemplated
hereby. This Agreement has been duly executed and delivered by such Shareholder
and, together with the other documents and agreements to be executed by all
parties whose execution and delivery thereof is required, constitutes the legal,
valid and binding obligations of such Shareholder, enforceable against such
Shareholder in accordance with their respective terms, except to the extent that
enforceability may be limited by bankruptcy, receivership, moratorium,
conservatorship, reorganization or other laws of general application affecting
the rights of creditors generally or by general principles of equity.
SECTION 4.03 Stock of the Company. The number of shares of Company Common
Stock beneficially owned by such Shareholder is as identified on the signature
page(s) hereof opposite the respective Shareholder's name. The shares of Company
Common Stock beneficially owned by such Shareholder are owned free and clear of
all liens, claims, options, encumbrances or restrictions whatsoever. Such
Shareholder has the full legal right and power and all authorizations and
approvals required by law or otherwise to sell, transfer and deliver such shares
hereunder and to make the representations, warranties and agreements set forth
in this Agreement. Except with respect to the shares of Company Common Stock
identified on the signature page(s) hereof opposite the respective Shareholder's
name, such Shareholder has no outstanding claim against the Company or any right
whatsoever with respect to any shares of the capital stock of the Company,
including without limitation any option, warrant or other right to acquire
shares of the capital stock of the Company or any securities, options or other
instruments convertible or exchangeable into shares of capital stock of the
Company. Except as set forth in that certain Stockholders' Agreement effective
January 2, 19965 by and among Edward Hutman, Melissa Barnickel and the Company,
disclosed on Schedule 3.02, such
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Shareholder has not granted any option or other right to acquire from such
Shareholder any shares of Company Common Stock.
SECTION 4.04 Additional Representations and Covenants of Shareholders. (a)
Such Shareholder understands that the shares of Parent Common Stock which are
the subject of this Agreement are intended to be exempt from registration under
the Securities Act of 1933, as amended (the "Securities Act") by virtue of
Section 4(2) thereof, based, in part, upon the representations, warranties and
agreements of such Shareholder contained in this Agreement.
(b) Neither the Securities and Exchange Commission (the "SEC") nor any
state securities commission has approved the Parent Common Stock or passed upon
or endorsed the merits of an investment therein or confirmed the accuracy or
adequacy of any information provided by Parent to the Shareholders or the
accuracy or adequacy of any of the representations, warranties and agreements of
Parent contained herein.
(c) Except as contemplated pursuant to Section 7.12 hereof, such
Shareholder is acquiring Parent Common Stock solely for its own account for
investment and not with any present view to resale or distribution thereof, in
whole or in part. Such Shareholder has no agreement or arrangement, formal or
informal, written or oral, with any person to sell or transfer or otherwise
dispose of all or any part of the Parent Common Stock other than as set forth on
Schedule 3.02, and has no present plans to enter into any such agreement or
arrangement.
(d) Such Shareholder did not become aware of the offer and sale of Parent
Common Stock through or as a result of any form of general solicitation or
general advertising including, without limitation, any article, notice,
advertisement or other communication published in any newspaper, magazine or
other media in connection with the offer and sale of Parent Common Stock
contemplated hereby and is not purchasing Parent Common Stock through or as a
result of any seminar or meeting to which any Shareholder was invited.
(e) Such Shareholder, if listed in Schedule 4.04(e), meets the
requirements of at least one of the categories of an "accredited investor", and
as defined in Rule 501(a) of Regulation D promulgated under the Securities Act
and as set forth in the form of Accredited Investor Certification attached
hereto as Exhibit A. In connection with the closing of the transactions
contemplated by this Agreement, such Shareholder shall certify to Parent, in the
form of the certification set forth in Exhibit A, as to which category (or
categories) of accredited investor is applicable to such Shareholder.
(f) Such Shareholder has such knowledge and experience in financial, tax,
and business matters in general, and investments in securities in particular, so
as to enable such Shareholder to evaluate the merits and risks of an investment
in Parent Common Stock and to make an informed investment decision with respect
thereto.
(g) Such Shareholder is familiar with the business, historical financial
performance and prospects of the Company, including the risks associated
therewith. All information, including, without limitation, financial information
and the Financial Statements, provided by the Company or such Shareholder for
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insertion in the Merger Information (as hereinafter defined) does not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein , in the light of the circumstances in which they were made, not
misleading, it being understood and acknowledged that such information has not
been independently verified by Parent or Acquisition.
(h) Such Shareholder recognizes that he or she must bear the substantial
economic risks of the investment in Parent Common Stock indefinitely, because
none of the Parent Common Stock may be sold, transferred, hypothecated or
otherwise disposed of unless such Parent Common Stock is registered under the
Securities Act and applicable state securities laws or an exemption from such
registration is available. Legends shall be placed on the certificates
representing Parent Common Stock issuable stating that the shares represented
thereby have not been registered under the Securities Act or applicable state
securities laws, and appropriate notations thereof will be made in Parent's
stock books.
(i) Such Shareholder has adequate means of providing for his or her
current financial needs and foreseeable contingencies and has no need for
liquidity of his or her investment in Parent Common Stock for an indefinite
period of time. Such Shareholder's overall commitment to investments which are
not readily marketable is not excessive in view of his or her net worth and
financial circumstances and the purchase of the Parent Common Stock will not
cause such commitment to become excessive.
(j) Such Shareholder is not relying on Parent or any of its employees or
agents with respect to the legal, tax, economic and related considerations of an
investment in Parent Common Stock, other than as expressly contained in the
representations and warranties of Parent contained in Article V hereof. There
has been delivered to such Shareholder copies of this Agreement, Parent's Annual
Report on Form 10-K for the fiscal year ended June 30, 1996, Parent's 1996
Annual Report to Stockholders, Parent's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1996, December 31, 1996 and March 31, 1997,
Parent's press releases dated July 17, 1997, August 5, 1997, September 2, 1997
and September 4, 1997, Parent's Proxy Statement for its Annual Meeting held on
November 14, 1996, the Financial Statements and a summary description of the
Company's business (collectively, the "Merger Information"). Such Shareholder
has read and fully understands the Merger Information.
(k) Such Shareholder (i) has had the opportunity to obtain all information
requested by him or her for the purposes of verifying the Merger Information or
for any other purpose related hereto and (ii) has had the opportunity to meet
with representatives of Parent and the Company and to have them answer any
questions and provide such additional information regarding the terms and
conditions of the transactions contemplated hereby, the information with respect
to Parent included in the Merger Information and the business and prospects of
Parent deemed relevant by such Shareholder, all of which questions have been
answered and all of which requested information has been provided to the full
satisfaction of such Shareholder. Such Shareholder is aware that an investment
in Parent Common Stock is speculative and involves significant risks, including,
among other things, the risk of the loss of such Shareholder's entire investment
in Parent Common Stock.
(l) In evaluating the suitability of an investment in Parent, and in
deciding to enter into this Agreement, such Shareholder has not relied upon any
representation or other information (whether
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oral or written) other than as set forth in the representations and warranties
of Parent contained in Article V of this Agreement and the Merger Information.
No oral or written representations have been made, or oral or written
information furnished, to such Shareholder in connection with the offer and sale
of Parent Common Stock that are in any way inconsistent with the representations
and warranties of Parent contained herein or any of the information contained in
the Merger Information.
(m) Except as described in Schedule 4.04(m) hereto, such Shareholder has
no beneficial interest, directly or indirectly, in any person, firm,
corporation, partnership or other entity which is or within the past two years
has been a supplier of any goods or services to the Company, including, without
limitation, any Major Supplier, or from which the Company has received fees,
including, without limitation, any Contract Party, other than as the beneficial
owner of 1% or less of the voting securities of a publicly held corporation. The
nature and amount of any such beneficial interest is disclosed in Schedule
4.04(m).
(n) No spousal consent of such Shareholder is required in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
SECTION 4.05 Representations and Warranties True; No Misleading
Statements. All of the representations and warranties set forth in this Article
IV shall be true and correct as of the Effective Time as if made at that time.
The representations and warranties made in this Article IV in connection with
the transactions contemplated hereby and the operation of the Company's business
and in any Schedule, list or other document specifically referred to in this
Article IV and delivered by such Shareholder pursuant hereto do not contain any
untrue statements of a material fact or omit to state a material fact necessary
in order to make the statements herein or therein, in light of the circumstances
under which they were made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company and each Shareholder as
follows:
SECTION 5.01 Organization and Qualification. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to own or lease and
operate its properties and assets and to carry on its business as it is now
being conducted. Parent is duly qualified as a foreign corporation to do
business, and is in good standing, in each jurisdiction in which the character
of its properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect on Parent.
SECTION 5.02 Acquisition. Acquisition is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own or lease and operate
its properties and to carry on its business as it is now being conducted.
Acquisition is duly qualified as a foreign corporation to do business, and is in
good standing, in each jurisdiction in which the character of its properties
owned or leased or the nature of
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its activities makes such qualification necessary, except where the failure to
be so qualified would not have a Material Adverse Effect on Parent. All the
outstanding shares of capital stock of Acquisition are validly issued, fully
paid and nonassessable and are owned by Parent.
SECTION 5.03 Capitalization. The authorized capital stock of Parent
consists of 80,000,000 shares of Parent Common Stock, and, as of June 30, 1997,
25,235,288 shares of Parent Common Stock were issued and outstanding, all of
which were validly issued and are fully paid and nonassessable. Except as
contemplated hereby and except for rights or options outstanding under Parent's
employee stock purchase and stock options plans, and rights outstanding under
the Rights Agreement dated May 7, 1997 between Parent and Bank of New York, as
rights agent, no subscription, warrant, option, convertible security, stock
appreciation or other right (contingent or other) to purchase or acquire any
shares of any class of capital stock of Parent is authorized or outstanding and
there is not any agreement of Parent to issue any shares, warrants, options or
other such rights or to distribute to holders of any class of its capital stock
any evidences of indebtedness or assets. Parent does not have any obligation
(contingent or other) to purchase, redeem or otherwise acquire any shares of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. At the Effective Time, Parent will have
sufficient authorized and unissued shares of Parent Common Stock available for
issuance in accordance with Article II hereof. When issued to the Shareholders
hereunder, such shares of Parent Common Stock will have been duly authorized by
Parent and, upon receipt of consideration therefor in accordance with the terms
hereof, such shares will be validly issued, fully paid and nonassessable shares
of Parent Common Stock.
SECTION 5.04 Authority Relative to Agreement. Parent has all requisite
corporate power and authority to enter into this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement by Parent
and the consummation by Parent of the transactions contemplated hereby
(including issuance of Parent Common Stock to the Shareholders pursuant to the
terms hereof) have been duly authorized by the Board of Directors of Parent, and
no other corporate proceedings on the part of Parent are necessary to authorize
this Agreement and the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Parent and constitutes the legal, valid and
binding obligation of Parent, enforceable against Parent in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by general
principles of equity.
SECTION 5.05 Non-Contravention. The execution and delivery of this
Agreement by Parent and the consummation by Parent of the transactions
contemplated hereby will not (a) conflict with any provision of the Certificate
of Incorporation or By-Laws of Parent or (b) result (with or without the giving
of notice or the lapse of time or both) in any violation of or default or loss
of a benefit under, or permit the acceleration of any obligation under, any
mortgage, indenture, lease, agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Parent or any of its subsidiaries or any of
their respective properties, other than any such violation, default, loss or
acceleration that would not have a Material Adverse Effect with respect to
Parent.
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SECTION 5.06 Parent Public Information. Parent has provided to each
Shareholder a copy of that portion of the Merger Information consisting of the
public reports of Parent referred to in Section 4.04(j) (the "Parent Public
Information"). The Parent Public Information does not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 5.07 Financial Statements. The consolidated financial statements
of Parent included in the Parent Public Information have been prepared in
accordance with GAAP consistently applied and consistent with prior periods,
subject, in the case of unaudited interim consolidated financial statements, to
year-end adjustments (which consist of normal recurring accruals) and the
absence of certain footnote disclosures. The consolidated balance sheets of
Parent included in the Parent Public Information fairly present in all material
respects the financial position of Parent and its subsidiaries as of their
respective dates, and the related consolidated statements of operations,
shareholders' equity and cash flows included in the Parent Public Information
fairly present in all material respects the results of operations of Parent and
its subsidiaries for the respective periods then ended, subject, in the case of
unaudited interim financial statements, to year-end adjustments (which consist
of normal recurring accruals) and the absence of certain footnote disclosures.
SECTION 5.08 Absence of Certain Changes or Events. Except as contemplated
hereby and except for the issuance of Parent Common Stock pursuant to employee
benefit plans of Parent described in Section 5.03 above and the issuance of an
aggregate of 723,341 shares of Parent Common Stock in connection with the merger
of Charter Systems, Inc. referred to in Parent's press release of August 5,
1997, and the merger of Dascit/White & Winston, Inc. and related companies,
since March 31, 1997, Parent has not (a) issued any Parent Common Stock or
securities or obligations convertible into or exchangeable for Parent Common
Stock, (b) incurred any material liabilities (absolute or contingent), except in
the ordinary course of business or (c) suffered any Material Adverse Effect.
SECTION 5.09 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign governmental or regulatory authority is required to be
made or obtained by Parent in connection with the execution and delivery of this
Agreement by Parent or the consummation by Parent of the transactions
contemplated hereby, except for (a) filings pursuant to the Securities Act and
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
rules and regulations promulgated by the SEC thereunder, if applicable, (b)
filings with state securities agencies under state securities or blue sky laws,
if applicable, (c) the filing of a listing application with the Nasdaq National
Market with respect to shares of Parent Common Stock issuable in the Merger, (d)
the filing of Articles of Merger with the State of Maryland Department of
Assessments and Taxation in accordance with the ACM, (e) the filing of a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the Delaware GCL, (f) filings of notices required to be filed
with state insurance departments, commissions or agencies, (g) any licenses,
permits, franchises or other governmental authorizations pertaining to the
business of the Company and its subsidiaries that are required as a result of
the consummation of the transactions contemplated hereby; and (h) such consents,
approvals, orders or authorizations which if not obtained,
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or registrations, declarations or filings which if not made, would not have a
Material Adverse Effect with respect to Parent.
SECTION 5.10 Compliance with Law. Neither Parent nor any of its
subsidiaries is in default under any order of any court, governmental authority
or arbitration board or tribunal. Neither Parent nor any such subsidiary has
received notice of any alleged violation of any applicable laws, ordinances and
governmental rules and regulations to which Parent or any such subsidiary is
subject, including, without limitation, federal securities and banking laws.
Neither Parent nor any subsidiary has failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business, except where the failure to
obtain such licenses, permits, franchises or other governmental authorizations
would not have a Material Adverse Effect on Parent.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
Each of Parent and Acquisition, jointly and severally, represents and
warrants to the Company and each Shareholder, knowing and intending that the
Company and each Shareholder is relying thereon in entering into the
transactions contemplated hereby, as follows:
SECTION 6.01 Organization and Qualification. Acquisition is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own or
lease and operate its properties and assets and to carry on its business as it
is now being conducted. Acquisition is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction in which the
character of its properties owned or leased or the nature of its activities
makes such qualification necessary, except where the failure to be so qualified
would not have a Material Adverse Effect with respect to Acquisition.
SECTION 6.02 Capitalization. The authorized capital stock of Acquisition
consists of 3,000 shares of common stock, $.01 par value. As of the date hereof,
100 shares of such common stock are validly issued and outstanding, fully paid
and nonassessable and are owned of record and beneficially by Parent, and no
shares of such common stock are held in the treasury of Acquisition. Acquisition
has no commitments to issue or sell any shares of such common stock or any
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire from Acquisition, any shares of
such common stock, and no securities or obligations evidencing any such rights
are outstanding.
SECTION 6.03 Authority Relative to Agreement. Acquisition has all
requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution and delivery of this Agreement
by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Acquisition and by Parent as its sole shareholder, and no other corporate
proceedings on the part of Acquisition are necessary to authorize this Agreement
and the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Acquisition and constitutes the legal, valid and binding
obligation
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of Acquisition, enforceable against Acquisition in accordance with its terms
except to the extent that enforceability may be limited by bankruptcy,
receivership, moratorium, conservatorship, reorganization or other laws of
general application affecting the rights of creditors generally or by principles
of equity.
SECTION 6.04 Non-Contravention. The execution and delivery of this
Agreement by Acquisition and the consummation by Acquisition of the transactions
contemplated hereby will not (a) conflict with any provision of the Certificate
of Incorporation or By-Laws of Acquisition or (b) result (with the giving of
notice or the lapse of time or both) in any violation of or default or loss of a
benefit under, or permit the acceleration of any obligation under, any mortgage,
indenture, lease, agreement, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquisition or its properties, other
than any such violation, default, loss or acceleration that would not have a
Material Adverse Effect with respect to Acquisition.
SECTION 6.05 Governmental Consents. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Federal,
state, local or foreign governmental or regulatory authority is required to be
made or obtained by Acquisition in connection with the execution and delivery of
this Agreement by Acquisition or the consummation by Acquisition of the
transactions contemplated hereby, except for (a) the filing of Articles of
Merger with the State of Maryland Department of Assessments and Taxation in
accordance with the ACM, (b) the filing of a Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with the Delaware GCL,
(c) any licenses, permits, franchises or other governmental authorizations
pertaining to the business of Acquisition that are required as a result of the
consummation of the transactions contemplated hereby and (d) such consents,
approvals, orders or authorizations which if not obtained, or registrations,
declarations or filings which if not made, would not have a Material Adverse
Effect with respect to Acquisition.
SECTION 6.06 Other Matters. Acquisition has been formed for the sole
purpose of effecting the Merger and, except as contemplated by this Agreement,
Acquisition has not conducted any business activities and does not have any
material liabilities or obligations.
ARTICLE VII
COVENANTS
SECTION 7.01 Conduct of the Company's Business. Each of the Company and
the Shareholders covenants and agrees that, prior to the Effective Time, unless
Parent shall otherwise consent in writing or as otherwise expressly contemplated
by this Agreement:
(a) the business of the Company shall be conducted only in, and the
Company shall not take any action except in, the normal and ordinary course of
business and consistent with past practice;
(b) the Company and the Shareholders shall use their best efforts to
preserve the goodwill of the business of the Company; and
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(c) the Company shall not, directly or indirectly, do any of the
following:
(i) sell, pledge, dispose of or encumber any of its assets except
immaterial assets in the ordinary course of business; (ii) amend or
propose to amend its Certificate of Incorporation or By-Laws or
other organization agreements or documents; (iii) split, combine or
reclassify any outstanding shares of its capital stock or other
equity interests, or declare, set aside or pay any dividend or
distribution payable in cash, stock, property or otherwise with
respect to such shares; (iv) redeem, purchase, acquire or offer to
acquire any shares of its capital stock of any class or other equity
interests; or (v) enter into any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this
paragraph (c);
(d) the Company shall not (i) issue, sell, pledge or dispose of, or agree
to issue, sell, pledge or dispose of, any additional shares of, or securities
convertible or exchangeable for, or any options, warrants or rights of any kind
to acquire, any shares of its capital stock of any class or other equity
interests, property or assets; (ii) acquire (by merger, consolidation or
acquisition of stock or assets) any corporation, partnership or other business
organization or division thereof (except an existing wholly-owned subsidiary);
(iii) incur any indebtedness for borrowed money or issue any debt securities;
(iv) enter into or modify any contract, lease, agreement or commitment, except
in the ordinary course of business and consistent with past practice; (v)
terminate, modify, assign, waive, release or relinquish any contract rights or
amend any rights or claims not in the ordinary course of business or (vi) settle
or compromise any claim, action, suit or proceeding pending or threatened
against the Company, or, if the Company may be liable or obligated to provide
indemnification, against the directors or officers of the Company, before any
court, governmental agency or arbitrator; provided that nothing herein shall
require any action that might impair or otherwise affect the obligation of any
insurance carrier under any insurance policy maintained by the Company;
(e) the Company shall not grant any increase in the salary or other
compensation of any employee or grant any bonus to any employee, except pursuant
to the terms of employment agreements in effect on the date hereof and listed on
Schedule 3.12 hereto, or enter into any new employment agreement or make any
loan to or enter into any material transaction of any other nature with any
employee of the Company;
(f) the Company shall not take any action to institute any new severance
or termination pay practices with respect to any directors, officers or
employees of the Company or to increase the benefits payable under its severance
or termination pay practices;
(g) the Company shall not adopt or amend, in any respect, except as
contemplated hereby or as may be required by applicable law or regulation, any
collective bargaining, bonus, profit sharing, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment or
other employee benefit plan, agreement, trust, fund, plan or arrangement for the
benefit or welfare of any of its respective directors, officers or employees;
and
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(h) the Company shall use its best efforts, to the extent not prohibited
by the foregoing provisions of this Section 7.01, to maintain the relationships
of the Company with its customers, co-brokers, co-marketers, partners and joint
venturers, including, without limitation, all Contract Parties, and if and as
requested by Parent or Acquisition, (i) the Company shall use its best efforts
to make reasonable arrangements for representatives of Parent or Acquisition to
meet with the customers, suppliers, co-brokers, co-marketers, partners and joint
venturers of the Company, as designated by Parent, in order to ensure that the
relationships of the Company with such customers, suppliers, co-brokers,
co-marketers, partners and joint venturers will remain in force under
substantially the same terms following the Effective Time as are in effect on
the date hereof, and (ii) the Company shall schedule, and the management of the
Company shall participate in, meetings of representatives of Parent or
Acquisition with employees of the Company.
SECTION 7.02 Access to Information. (a) The Company shall, and shall cause
its officers, directors, employees, representatives and agents to, afford,
through the Effective Time, the officers, employees, representatives and agents
of Parent reasonable and complete access during regular business hours to its
premises and to its officers, employees, agents, properties, books, records and
workpapers, and shall furnish Parent all financial, operating and other
information and data as Parent, through its officers, accountants, attorneys and
other employees or agents, may reasonably request.
(b) Parent shall, and shall cause its officers, employees, representatives
and agents to, afford, through the Effective Time, the officers, employees,
representatives and agents of the Company reasonable access during regular
business hours to its officers, employees, agents and properties, and shall
furnish the Company all financial, operating and other information and data as
the Company, through its officers, employees or agents, may reasonably request.
(c) No investigation pursuant to this Section 7.02 shall affect, add to or
subtract from any representations or warranties of the parties hereto or the
conditions to the obligations of the parties hereto to effect the Merger.
SECTION 7.03 Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including, without limitation, using all reasonable efforts to obtain all
necessary waivers, consents and approvals and to effect all necessary
registrations and filings; provided that the foregoing shall not require Parent
to agree to make, or to permit the Company to make, any divestiture of a
significant asset in order to obtain any waiver, consent or approval.
SECTION 7.04 Inquiries and Negotiations. Neither the Company nor any of
its Affiliates, shareholders, directors, officers, employees, representatives or
agents, shall from August 11, 1997 through the Effective Time, directly or
indirectly, (a) solicit or initiate any discussions, submissions of proposals or
offers or negotiations with, or (b) participate in any negotiations or
discussions with, or provide any information or data of any nature whatsoever
to, or otherwise cooperate in any other way with, or assist or participate in,
facilitate or encourage any effort or attempt by, any person, other than
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Parent and its affiliates, representatives and agents, concerning any merger,
consolidation, sale of substantial assets, sale of shares of capital stock or
other securities or equity interests, recapitalization, debt restructuring or
similar transaction involving the Company. The Company shall immediately notify
Parent if any proposal, offer, inquiry or other contact is received by, any
information is requested from, or any discussions or negotiations are sought to
be initiated or continued with, the Company in respect of any such transaction,
and shall, in any such notice to Parent, indicate the identity of the offeror
and the terms and conditions of any proposals or offers or the nature of any
inquiries or contacts, and thereafter shall keep Parent informed of the status
and terms of any such proposals or offers. The Company shall not release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which the Company is a party.
SECTION 7.05 Related Party Notes and Pledge Agreements. Simultaneously
with the execution hereof, the Company shall deliver to counsel to the Company,
with instructions to said counsel to deliver same immediately prior to the
Effective Time, all of the original executed Related Party Notes, identified in
Schedule 3.30, if any, with any and all liens, pledges and encumbrances with
respect thereto, other than liens, pledges and encumbrances in favor of the
Company, having been discharged or released prior to the Effective Time.,
SECTION 7.06 Continuation of Certain Employees. (a) As of the Effective
Time, Parent shall cause the Surviving Corporation to continue the employment of
all employees of the Company listed on Schedule 7.06(a) hereto (the "Company
Employees") at their current rates of compensation as reflected in such Schedule
. For the purposes of employee benefit plans of Parent, the time of service of
such Company employees shall include their time of service with the Company.
Notwithstanding the foregoing, nothing herein shall be construed or deemed to
constitute an employment contract by the Company or the Surviving Corporation or
confer upon any of the Company Employees any right to continue in the employ of
Parent or the Surviving Corporation or limit in any respect the right of Parent
or the Surviving Corporation to terminate such employment at any time.
(b) Simultaneously with the execution hereof, Mr. Barrie shall each
execute and deliver to counsel to the Company, with instructions to said counsel
to deliver the same immediately prior to the Effective Time, and Parent shall
execute and deliver to counsel to Parent, with instructions to said counsel to
deliver the same immediately prior to the Effective time, a written two-year
employment agreement and non-competition agreement on terms mutually acceptable
to the parties thereto, which agreements shall be effective as of the Effective
Time.
(c) Not later than immediately prior to the Effective Time, the Company
shall terminate any and all insurance policies on the life of an employee or any
other person the premiums of which are paid or payable by the Company, or, to
the extent transferable, shall have transferred such policies to such
employee(s) or other persons, who shall assume all of the obligations of the
Company thereunder.
SECTION 7.07 Notification of Certain Matters. The Company and the
Shareholders shall give prompt notice to Parent and Acquisition, and Parent and
Acquisition shall give prompt notice to the Company and the Shareholders, of (a)
the occurrence, or failure to occur, of any event that such party believes would
be likely to cause any of its representations or warranties contained in this
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Agreement to be untrue or inaccurate in any material respect at any time from
the date hereof to the Effective Time and (b) any material failure of the
Company, Parent or Acquisition, as the case may be, or any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder; provided, however,
that failure to give such notice shall not constitute a waiver of any defense
that may be validly asserted.
SECTION 7.08 Indemnification. (a) Each of the Shareholders shall be
jointly and severally liable to, and shall jointly and severally indemnify,
protect, defend and hold harmless Parent and its successors and the Surviving
Corporation and its successors against any and all claims, damages, liabilities
and expenses (including reasonable attorneys' fees) sustained by Parent or the
Surviving Corporation, resulting from or in connection with the breach of any
representation, warranty, covenant or other agreement made by the Company or any
Shareholder in or pursuant to this Agreement or any other agreement or
instrument executed and delivered by or on behalf of the Company or any
Shareholder pursuant hereto or in connection herewith (such breaches or failures
being hereinafter referred to individually as an "Indemnifiable Breach" and
collectively as "Indemnifiable Breaches"); provided, however, that no
Shareholder shall be required to pay Parent and/or the Surviving Corporation, as
the case may be, pursuant to this Section 7.08(a), an aggregate amount in excess
of the dollar value equivalent of Parent Common Stock valued at the Average
Price received by such Shareholder upon consummation of the Merger pursuant to
the terms hereof. The Shareholders shall each be permitted to satisfy any
obligations under this Section 7.08(a) in cash or by delivery to Parent shares
of Parent Common Stock in an amount equal to its obligations hereunder based on
a per share value equal to the Average Price.
(b) Parent and Acquisition shall be jointly and severally liable to, and
shall jointly and severally indemnify, protect, defend and hold harmless each
Shareholder and its respective successors against any and all claims, damages,
liabilities and expenses (including reasonable attorneys' fees) sustained by any
Shareholder, resulting from or in connection with the breach of any
representation, warranty, covenant or other agreement made by Parent or
Acquisition in or pursuant to this Agreement or any other agreement or
instrument executed and delivered by or on behalf of Parent and/or Acquisition
pursuant hereto or in connection herewith.
(c) The remedies set forth in this Section 7.08 are in addition to any to
which any party might otherwise be entitled under any other provision of this
Agreement or otherwise under law. In the event Parent and/or the Surviving
Corporation becomes entitled to any sums under the terms hereof, Parent and/or
the Surviving Corporation shall have the right but not the obligation to set off
such liabilities of the Shareholders against any existing or future liabilities
of Parent or the Surviving Corporation to the Shareholders or any of them
individually other than against amounts owed by the Company to any such
Shareholders as compensation for employment. The terms of this Section 7.08 are
intended to benefit the parties hereto and any and all claims for
indemnification must be made during the period commencing at the Effective Time
and ending on the earlier to occur of (i) one (1) year after the Effective Time
or (ii) publication of the independent audit report on the consolidated
financial statements of Parent for the fiscal year ending June 30, 1998 (the
"Indemnification Termination Date").
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SECTION 7.09 Confidentiality. Except as otherwise provided in the certain
Confidentiality Agreement dated _____________________, 1997 between the Company
and Parent with regard to information about the Company and Parent (the
"Confidentiality Agreement"), Parent and Acquisition, on the one hand, and the
Company and each Shareholder, on the other, shall hold, and shall use their
respective best efforts to cause their respective officers, directors,
employees, consultants, advisors and agents to hold, in confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all confidential documents and information concerning the
other parties furnished to such party in connection with the transactions
contemplated by this Agreement, except to the extent that such information can
be shown to have been (a) previously known on a nonconfidential basis by such
party; (b) in the public domain through no fault of such party; or (c) later
lawfully acquired by such party from sources other than the other parties;
provided that each party may disclose such information to its Affiliates and its
Affiliates' officers, directors, employees, consultants, advisors and agents,
lenders and other investors in connection with the transactions contemplated by
this Agreement so long as such persons are informed by such party of the
confidential nature of such information and are directed by such party to treat
such information confidentially. If the transactions contemplated by this
Agreement are abandoned, such confidentiality shall be maintained and each party
shall, and shall use its best efforts to cause its respective officers,
directors, employees, consultants, advisors and agents to, destroy or deliver to
the other party(ies), upon request, all documents and other materials, and all
copies thereof, obtained by such party or on its behalf from the other
party(ies) in connection with this Agreement that are subject to such
confidentiality. The terms of this Section 7.09 shall survive indefinitely.
SECTION 7.10 Covenants of Shareholders. (a) Each Shareholder hereby agrees
not to:
(i) sell, transfer, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other arrangement
or understanding with respect to the sale, transfer, pledge,
encumbrance, assignment or other disposition of, any shares of
Company Common Stock owned by such Shareholder, other than as
provided herein;
(ii) grant any proxies other than for the purpose of voting in
favor of the transactions contemplated hereby or enter into a voting
agreement or other arrangement with respect to any shares of Company
Common Stock owned by such Shareholder; or
(iii) deposit any shares of Company Common Stock owned by such
Shareholder into a voting trust.
(b) Each Shareholder hereby agrees not to take any action that would make
any representation or warranty herein of such Shareholder or the Company untrue
or incorrect in any material respect or that would have the effect of preventing
or disabling such Shareholder or the Company from performing its obligations
under this Agreement.
(c) Each Shareholder hereby waives any and all dissenter's rights with
respect to Company Common Stock granted pursuant to Section 3-201. et. seq. of
the ACM.
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(d) Each Shareholder hereby agrees to surrender the Certificates owned by
such Shareholder in exchange for certificates representing shares of Parent
Common Stock and cash, if applicable, within two (2) Business Days after the
Effective Time.
(e) Simultaneously with the execution hereof, each Shareholder who is an
"accredited investor" shall execute and deliver to counsel to the Company, with
instructions to said counsel to deliver same immediately prior to the Effective
Time, an Accredited Investor Certification in the form of Exhibit A hereto which
shall be deemed effective as of the Effective Time.
SECTION 7.11 Transfer Restrictions After the Effective Time. Each
Shareholder hereby agrees that, from and after the Effective Time:
(a) Lock-Up. Such Shareholder shall not sell or otherwise reduce its risk
relative to any shares of Parent Common Stock received by it in the Merger
(within the meaning of Financial Reporting Policy, Section 201.01), except as
permitted by Staff Accounting Bulletin No. 76 issued by the SEC, until Parent
has published financial results covering a fiscal quarter that includes results
(including combined sales and net income) for a period of at least 30 days of
post-Merger operations.
(b) Securities Act Compliance. Such Shareholder shall not offer, sell, or
otherwise dispose of the shares of Parent Common Stock received by such
Shareholder in connection with the Merger other than (i) pursuant to an
effective registration statement under the Securities Act, or (ii) otherwise
pursuant to an exemption from the registration requirements of the Securities
Act.
SECTION 7.12 Registration Rights Agreements. Simultaneously with the
execution hereof, Parent and each Shareholder shall execute and deliver to
counsel to Parent in the case of Parent, and counsel to the Company in the case
of each Shareholder, with instructions to said counsel to deliver the same
immediately prior to the Effective Time, a registration rights agreement in the
form of Exhibit B hereto (the "Registration Rights Agreement"), which agreement
shall be effective as of the Effective Time.
SECTION 7.13 Termination of Shareholders' Agreements. Simultaneously with
the execution and delivery hereof, the Company and each Shareholder who is a
party to a shareholders' or similar agreement disclosed in Schedule 3.32 shall
enter into a written agreement, in form and substance satisfactory to counsel to
Parent, terminating such agreements, as of the Effective Time without further
obligation of the Company or the Surviving Corporation thereunder.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 Conditions to Each Party's Obligation to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the condition that no
preliminary or permanent injunction or other order, decree or ruling issued by
any court of competent jurisdiction nor any statute, rule, regulation or order
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entered, promulgated or enacted by any governmental, regulatory or
administrative agency or authority shall be in effect that would prevent the
consummation of the Merger as contemplated hereby.
SECTION 8.02 Conditions to the Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following additional
conditions:
(a) Parent and Acquisition shall have performed and complied in all
material respects with all obligations and agreements required to be performed
and complied with by them under this Agreement at or prior to the Effective
Time;
(b) the representations and warranties of Parent and Acquisition contained
in this Agreement shall be true and correct in all material respects at and as
of the Effective Time as if made at and as of such date, except as otherwise
contemplated or permitted by this Agreement;
(c) unless there shall be a simultaneous execution and closing of this
transaction such that the Effective Time is simultaneous with the execution
hereof, the Company shall have received a certificate from the Chief Executive
Officer or Chief Financial Officer of Parent, dated as of the Effective Time, to
the effect that the conditions set forth in paragraphs (a) and (b) above have
been satisfied; and
(d) the Company shall have received the opinion of Kevin J. Dell, Esq.,
Vice President and General Counsel of Parent and Acquisition, substantially in
the form of Exhibit C attached hereto.
SECTION 8.03 Conditions to the Obligation of Parent and Acquisition to
Effect the Merger. The obligation of Parent and Acquisition to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following additional conditions:
(a) the Company and each of the Shareholders shall have performed and
complied in all material respects with all obligations and agreements required
to be performed and complied with by it under this Agreement at or prior to the
Effective Time;
(b) the representations and warranties of the Company and of the
Shareholders contained in this Agreement shall be true and correct in all
material respects at and as of the Effective Time as if made at and as of such
date, except as otherwise contemplated or permitted by this Agreement;
(c) unless there shall be a simultaneous execution and closing of this
transaction such that the Effective Time is simultaneous with the execution
hereof, Parent shall have received a certificate from the Chairman of the
Company, dated as of the Effective Time, to the effect that the conditions set
forth in paragraphs (a) and (b) above have been satisfied;
(d) Parent shall have determined in its sole opinion that the business
combination to be effected by the Merger is to be accounted for as a
pooling-of-interests by Parent for purposes of its consolidated financial
statements under GAAP and applicable SEC rules and regulations;
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(e) Parent and Acquisition shall have received the opinion of Summerfield,
Willen, Silverberg & Limsky, P.A., counsel to the Company, substantially in the
form of Exhibit D attached hereto;
(f) Parent shall have received satisfactory evidence of the approval of
the Merger by the holders of 100% percent of the outstanding shares of Company
Common Stock and each such holder shall have executed and delivered this
Agreement;
(g) Parent shall have received reasonable assurance in its sole opinion
that all relationships with Contract Parties and Major Suppliers shall remain in
force and effect after the Effective Time upon substantially the same terms in
effect prior to the Effective Time;
(h) any and all existing employment contracts and deferred compensation
arrangements, if any, between the Company and any employee of the Company shall
have been terminated, and Parent, the Surviving Corporation and Mr. Barrie shall
have executed and delivered an employment agreement with respect to employment
with the Surviving Corporation or its successor and the Parent for the two-year
period commencing with the Effective Time;
(i) each Shareholder who is an accredited investor shall have executed and
delivered an Accredited Investor Certification in the form of Exhibit A attached
hereto; and
(j) Parent shall have determined, in its sole discretion, that the
business of the Company shall have been operated, from June 30, 1997 through the
Effective Time, in the normal and ordinary course including, without limitation,
that no dividends shall have been declared and/or issued by the Company and no
stock options or bonuses granted, declared or issued for the officers or
employees of the Company and that the Company and the Shareholders shall have
used their reasonable good faith efforts to preserve the goodwill of the
business of the Company and to maintain and keep the assets intact and that no
additional liabilities have been incurred, other than in the normal course of
business.
ARTICLE IX
TERMINATION AND ABANDONMENT
SECTION 9.01 Termination and Abandonment. This Agreement may be terminated
and the Merger may be abandoned prior to the Effective Time:
(a) by mutual action of the Boards of Directors of Parent and the Company;
(b) by the Company, if all of the conditions set forth in Section 8.03
shall have been complied with and performed and one or more of the conditions
set forth in Sections 8.01 or 8.02 shall not have been complied with or
performed in any material respect and such noncompliance or nonperformance shall
not have been cured or eliminated (or by its nature cannot be cured or
eliminated) by Parent and Acquisition on or before December 31, 1997 (the "Drop
Dead Date"); or
(c) by Parent or Acquisition, if all of the conditions set forth in
Section 8.02 shall have been complied with and performed and one or more of the
conditions set forth in Sections 8.01 and 8.03
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shall not have been complied with or performed in any material respect and such
noncompliance or nonperformance shall not have been cured or eliminated (or by
its nature cannot be cured or eliminated) by the Company on or before the Drop
Dead Date.
SECTION 9.02 Effect of Termination. Except as provided in Section 10.02
hereof with respect to expenses and certain indemnities and confidentiality
provisions, in the event of the termination of this Agreement and the
abandonment of the Merger pursuant to Section 9.01, this Agreement shall
thereafter become void and have no effect, and no party hereto shall have any
liability to any other party hereto or its shareholders or directors or officers
in respect thereof, except that nothing herein shall relieve any party from
liability for any willful breach hereof.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 Survival of Certain Representations and Warranties. The
representations and warranties of the Company and the Shareholders in this
Agreement and in any instrument delivered pursuant hereto shall survive the
Effective Time until the earlier to occur of (i) one (1) year after the
Effective Time or (ii) publication of the independent audit report on the
consolidated financial statements of Parent for the fiscal year ending June 30,
1998, provided that this Section 10.01 shall not limit any other covenant or
agreement of the parties that by its terms contemplates performances beyond such
period.
SECTION 10.02 Fees and Expenses. (a) Whether or not the transactions
contemplated by this Agreement are consummated, neither the Company and the
Shareholders, on the one hand, and Parent and Acquisition, on the other hand,
shall have any obligation to pay any of the fees and expenses of the other
incident to the negotiation, preparation and execution of this Agreement,
including, without limitations, the fees and expenses of counsel, accountants,
advisors, investment bankers and other experts, provided that if this Agreement
shall have been terminated as a result of the willful and material
misrepresentations by a party or the willful and material breach by a party of
any of its covenants and agreements contained herein, such party shall pay the
costs and expenses incurred by the other parties in connection with this
Agreement. The Shareholders shall pay any and all transaction fees and expenses
with regard to any investment counsel representation.
(b) The Company, on the one hand, and Parent and Acquisition, on the other
hand, shall indemnify the other and hold it harmless from and against any claims
for advisor's fees, finders' fees or brokerage commissions, in relation to or in
connection with such transactions as a result of any agreement or understanding
between such indemnifying party and any third party.
SECTION 10.03 Publicity. The Company and the Shareholders and Parent agree
that they will not issue any press release or make any other public announcement
concerning this Agreement or the transactions contemplated hereby without the
prior consent of the other party, except that the Company or Parent may make
such public disclosure that it believes in good faith to be required by law.
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SECTION 10.04 Execution in Counterparts. For the convenience of the
parties, this Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
SECTION 10.05 Notices. All notices that are required or may be given
pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if given in writing and delivered by hand or national
overnight courier service, transmitted by telecopy or mailed by registered or
certified mail, postage prepaid, as follows:
If to Parent and/or Acquisition, to:
The BISYS Group, Inc.
Overlook at Great Notch
150 Clove Road
Little Falls, New Jersey 07424
Attention: Chairman and Chief Executive Officer
with a copy to:
The BISYS Group, Inc.
Overlook at Great Notch
150 Clove Road
Little Falls, New Jersey 07424
Attention: General Counsel
If to the Company and/or the Shareholders, to:
Benefit Services, Inc.
132 Business Center Drive
P.O. Box 1017
Reisterstown, MD 21136
Attention: President
with a copy to:
Summerfield, Willen, Silverberg & Limsky, P.A.
10019 Reisterstown Road, Suite 301
Owings Mill, MD 21117-3910
Attention: Mark T. Willen, Esq.
or such other address or addresses as any party hereto shall have designated by
notice in writing to the other parties hereto.
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SECTION 10.06 Waivers. The Company, on the one hand, and Parent and
Acquisition, on the other hand, may, by written notice to the other, (a) extend
the time for the performance of any of the obligations or other actions of the
other under this Agreement; (b) waive any inaccuracies in the representations or
warranties of the other contained in this Agreement or in any document delivered
pursuant to this Agreement; (c) waive compliance with any of the conditions of
the other contained in this Agreement; or (d) waive performance of any of the
obligations of the other under this Agreement. Except as provided in the
preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of any party, shall be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
SECTION 10.07 Entire Agreement. This Agreement, its Schedules and the
agreements and documents executed at the Effective Time in connection herewith
and the Confidentiality Agreement constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral and written, among the parties hereto with
respect to the subject matter hereof. No representation, warranty, promise,
inducement or statement of intention has been made by any party that is not
embodied in this Agreement or such other documents, and none of the parties
shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement of intention not embodied herein or therein.
SECTION 10.08 Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflict of laws.
SECTION 10.09 Binding Effect, Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective permitted
successors and assigns. Notwithstanding anything contained in this Agreement to
the contrary, nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective permitted
successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement; provided, however, that the provisions of
Section 7.09 hereof shall accrue to the benefit of, and shall be enforceable by,
each of the current and former directors and officers of the Company.
SECTION 10.10 Assignability. Neither this Agreement nor any of the
parties' rights hereunder shall be assignable by any party hereto without the
prior written consent of the other parties hereto.
SECTION 10.11 Amendments. This Agreement may be modified, amended or
supplemented at any time by action of the respective Boards of Directors of the
Company, Parent and Acquisition, and the Shareholders. Without limiting the
generality of the foregoing, this Agreement may only be amended, varied or
supplemented by an instrument in writing, signed by the parties hereto.
[signatures follow on next page]
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<PAGE>
IN WITNESS WHEREOF, intending to be legally bound hereby, the parties have
executed and delivered this Agreement and Plan of Merger as of the day and year
first above written.
THE BISYS GROUP, INC.
By: /s/ Lynn J. Mangum
----------------------------
Lynn J. Mangum
Chairman and
Chief Executive Officer
BI-BSI ACQUISITION CORP.
By: /s/ Lynn J. Mangum
----------------------------
Lynn J. Mangum
Chairman
BENEFIT SERVICES. INC.
By: /s/ Bermard H. Barrie
----------------------------
Bernard H. Barrie
President
Number of
Shares of Company
Common Stock Owned: SHAREHOLDERS:
/s/ Bernard H. Barrie
-------------------------
100 Bernard H. Barrie
/s/ Edward S. Hutman
-------------------------
11.764 Edward S. Hutman
/s/ Melissa H. Barnickel
-------------------------
5.882 Melissa H. Barnickel
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