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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
ELITE INFORMATION GROUP, INC.
(Name of Subject Company)
ELITE INFORMATION GROUP, INC.
(Title of Person Filing Statement)
COMMON STOCK, $.01 PAR VALUE PER SHARE
(Name of Class of Securities)
28659M
(CUSIP Number of Class of Securities)
Christopher K. Poole
Chairman and Chief Executive Officer
Elite Information Group, Inc.
5100 West Goldleaf Circle
Los Angeles, California 90056
(323) 642-5200
(Name, Address and Telephone Number of Person Authorized to Receive Notice and
Communications on Behalf of the Person Filing Statement)
Copies to:
PATRICK S. BRYANT
ROBINSON, BRADSHAW & HINSON, P.A.
1900 Independence Center
101 North Tryon Street
Charlotte, North Carolina 28246
(704) 377-2536
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Elite Information Group, Inc., a
Delaware corporation (the "Company"), and the address of the principal executive
offices of the Company is 5100 West Goldleaf Circle, Los Angeles, California
90056. The title of the class of equity securities to which this Statement
relates is the common stock, $.01 par value per share (the "Shares") of the
Company.
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer by EIG Acquisition Corp., a
Delaware corporation (the "Purchaser"), which is an indirect wholly-owned
subsidiary of Solution 6 Holdings Limited, a New South Wales, Australia
corporation (the "Parent"), disclosed in a Tender Offer Statement on Schedule
14D-1 dated December 21, 1999 (the "Schedule 14D-1"), to purchase all of the
outstanding Shares at a price of $11.00 per Share, net to seller in cash (the
"Offer Price"), upon the terms and conditions set forth in the Offer to Purchase
dated December 21, 1999 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer" and are contained within the
Schedule 14D-1). Capitalized terms used herein and not otherwise defined herein
have the meanings assigned thereto in the Offer.
The Offer is conditioned upon, among other things, there having been
validly tendered and not withdrawn prior to the expiration of the Offer that
number of shares that represents at least a majority of the Shares outstanding
on a fully diluted basis (the "Minimum Condition"). See "Introduction; The
Offer; Terms of the Offer" of the Offer to Purchase.
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of December 14, 1999, by and among Parent, the Purchaser, and the Company
(the "Merger Agreement"). The Merger Agreement provides that, following
completion of the Offer and subject to the terms and conditions of the Merger
Agreement, the Purchaser will be merged with and into the Company (the
"Merger"), with the Company being the surviving corporation (the "Surviving
Corporation"). At the time the Merger is effective, each Share then outstanding
(other than Shares held by the Purchaser, Parent, the Company or any of their
respective affiliates and other than Shares held by shareholders who have
exercised the right (to the extent such right is available by law) to demand and
to receive the fair value of such Shares (the "Dissenting Shares") under Section
262 of the Delaware General Corporation Law (the "Delaware Corporation Law"))
will be cancelled and converted into the right to receive from the Surviving
Corporation $11.00 in cash (the "Merger Consideration"). A copy of the Merger
Agreement is filed herewith as Exhibit 1 and incorporated herein by reference.
According to the Schedule 14D-1, the address of the principal executive
offices of Purchaser and Parent is Town Hall House, Level 21, 456 Kent Street,
Sydney, New South Wales, Australia 2000.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) (i) Certain contracts, agreements, arrangements and understandings
between the Company and certain of its executive officers, directors and
affiliates are described in Annex I to this Statement, which description is
incorporated herein by reference.
(ii) A description of the Merger Agreement is contained in Section 12
of the Offer to Purchase, a copy of which is enclosed with this Schedule
14D-9 and which description is incorporated herein by reference. The Offer
to Purchase is being mailed to the Company's stockholders together with
this Statement. Such description is qualified in its entirety by reference
to the Merger Agreement, a copy of which is filed as Exhibit 1 to this
Statement and is incorporated herein by reference.
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ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board of Directors has
unanimously approved the Merger Agreement and the transactions contemplated
thereby and recommends that the shareholders of the Company accept the Offer and
tender all of their Shares pursuant to the Offer.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION.
In March 1999, the Company engaged the Prudential Volpe Technology Group of
Prudential Securities Incorporated, formerly known as Volpe Brown Whelan &
Company, LLC ("Prudential Volpe") to provide financial advisory services in
connection with a variety of strategic initiatives, including, but not limited
to, possible business combinations. In the spring and summer of 1999, the
Company had informal contacts and introductory meetings with various parties,
but did not entertain serious discussions regarding an acquisition of the
Company.
In early August 1999, Mr. Chris Tyler, Chief Executive Officer of Parent,
left a phone message for Mr. Barry Emerson, Chief Financial Officer of the
Company, regarding Parent's interest in a possible business combination with the
Company. On September 5, 1999, Mr. Tyler and Mr. Christopher K. Poole, Chairman
and Chief Executive Officer of the Company, had an initial meeting in Santa
Monica, California in which they exchanged general information and Mr. Tyler
expressed Parent's general interest in a possible merger with the Company. At
about that same time, the Company also had preliminary discussions with a
prospective financial buyer (the "First Financial Bidder"), which signed a
confidentiality agreement and received certain financial information regarding
the Company.
On September 8, 1999, Mr. Tyler sent a message to Mr. Poole at the Company
proposing a possible merger transaction in which Parent and the Company would
exchange stock at "current market rates." On September 16, 1999, the Company
held a Board meeting at which Mr. Poole provided an update on discussions with
Parent and the First Financial Bidder. The Board authorized Mr. Poole to proceed
with discussions and provide further updates as discussions progressed.
Following this Board meeting, additional financial information was provided to
the First Financial Bidder.
On September 18, 1999, Mr. Tyler sent a message to Mr. Poole at the Company
indicating Parent's desire to proceed with a possible merger transaction and to
discuss maximizing stockholder value.
On October 1, 1999, Mr. Poole met with Mr. Tyler at the Company's offices
in Los Angeles to further discuss Parent's interest in an acquisition of the
Company. Later that day, Mr. Poole met in the Company's offices with a
representative of a second prospective financial buyer (the "Second Financial
Bidder").
On October 8, 1999, a conference call was held between Parent, Company and
their respective advisors to discuss a possible transaction. Parent suggested an
"at-market" bid of slightly more than $5.00 per share. The Company rejected this
suggestion as inadequate, and negotiations between Parent and the Company
stalled.
On October 15, 1999, Mr. Tyler sent a message to Prudential Volpe revising
Parent's indication of interest to $7.50 per share. On October 19, 1999, Mr.
Poole sent the Board of Directors an update about the status of Parent's
expression of interest in the range of $7.00 to $8.00 and further informed the
Board that the First Financial Buyer had also expressed interest in the same
range.
On October 27, 1999, the Company's Board of Directors held its regular
quarterly meeting and also considered the status of discussions with potential
buyers. The Board concluded that the indications of interest received to date
were not high enough and that contacts with other potential buyers might yield
higher values. The Board then directed Prudential Volpe to attempt to elicit
higher price per share indications of interest from currently interested parties
and to contact other potentially interested parties. Following this meeting,
Prudential Volpe contacted a total of nine additional possible buyers.
On November 1, 1999, Prudential Volpe sent a message to Mr. Tyler stating
that the Company was uncomfortable with Parent's proposed valuation and was
unlikely to proceed unless Parent could propose a price that approached
multiples paid in Parent's recent acquisition transactions.
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On November 1, 1999, representatives of Prudential Volpe also had a
conversation with the First and Second Financial Bidders and instructed them
that the Company was unlikely to proceed with the transaction unless these
parties were able to significantly raise their indications of interest.
On November 2, 1999, the Company received a written expression of interest
from the Second Financial Bidder, raising its price per share to a range of
$8.50 to $9.50.
On November 2, 1999, Mr. Tyler sent a message to Prudential Volpe with an
indication of interest at $10.80 and sent the Company a revised letter proposing
a merger transaction at $10.80 a share, consisting of 50% stock and 50% cash
consideration.
On November 4, 1999, Prudential Volpe sent Parent a confidentiality
agreement for execution.
On November 9, 1999, the Company received a revised expression of interest
from the Second Financial Bidder proposing a price range of approximately $9.00
to $10.00 per share.
On or about November 9, 1999, Prudential Volpe invited Parent and both
Financial Bidders to set up due diligence visits. Parent proposed scheduling
meetings immediately. Both Financial Bidders proposed scheduling meetings for
late November. The Company and Parent entered into a confidentiality agreement
on November 11, 1999.
On November 15, 1999, the Company furnished certain due diligence documents
to Parent. On November 17 through 19, 1999, Parent conducted due diligence in
Los Angeles. The Company and Parent continued to negotiate price based on due
diligence proceedings. On November 21, 1999, Mr. Tyler sent a message to
Prudential Volpe indicating his interest in proceeding with an all-cash
transaction at $10.80 per share and proposing other key terms.
On November 22, 1999, the Company, together with Prudential Volpe, and
Parent, together with its financial advisor and legal counsel, met in Los
Angeles to discuss a possible merger transaction. The parties were unable to
agree on certain material points. However, prior to leaving the meeting, Parent
presented the Company a draft of the Merger Agreement and the Stockholders
Agreement. Over the next several days, Parent and the Company and their
representatives exchanged numerous messages and had numerous discussions
concerning price and other terms. On November 28, 1999, Mr. Tyler notified
Prudential Volpe of Parent's proposal of an all-cash transaction at $11.00 per
share.
On November 29, 1999, the Company's Board of Directors held a telephonic
meeting at which Parent's proposal was discussed. The Board discussed the
specifics of Parent's proposal, and directed Prudential Volpe to reject certain
aspects of Parent's proposal and to propose modifications to others. Mr. Poole
and a representative of Prudential Volpe also updated the Board on the status of
discussions with the Financial Bidders, and directed its financial advisors to
give guidance to the Financial Bidders regarding the type of bid necessary to
stay competitive with Parent's proposal.
On November 30, 1999, Mr. Poole, Mr. Emerson and other representatives of
the Company met with a potential strategic buyer in the Company's offices in Los
Angeles, at which time the potential strategic buyer executed a confidentiality
agreement. On December 1, 1999, representatives of the First Financial Bidder
conducted due diligence visits and met with Messrs. Poole and Emerson and
representatives of Prudential Volpe. Prudential Volpe informed the First
Financial Bidder that discussions between the Company and another bidder had
progressed to an advanced stage and urged the First Financial Bidder to respond
quickly with a firm proposal if it was interested in acquiring the Company.
Later on December 1, 1999, the Company shipped due diligence materials to the
strategic buyer it had met on November 30, 1999 and to the First Financial
Bidder.
On December 2, 1999, the First Financial Bidder sent the Company a letter
stating an indication of interest, subject to due diligence and other
conditions, of $11.00 per share. On December 3, 1999, a representative of
Prudential Volpe left a message with a representative of the First Financial
Bidder acknowledging the December 2, 1999 letter and advising that the Company
needed to see a formal proposal quickly in order to determine how to proceed
with the First Financial Bidder.
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From December 2 through 8, 1999, the Company and Prudential Volpe (together
and alone) had numerous conversations with Parent and its financial advisors
(together and alone) concerning unresolved issues related to the possible
transaction. During this period, several written demands, conditions, proposals
and alternatives were exchanged. On December 3, 1999, counsel for Parent
disseminated a revised draft of the Merger Agreement and the Stockholders
Agreement.
On December 6, 1999, the Board held a telephonic meeting, at which time Mr.
Poole and a representative of Prudential Volpe updated the Board on the status
of discussions with all parties. Mr. Poole informed the Board that he had
received a letter from Mr. Tyler stating that Parent was prepared to withdraw
its proposal unless the Company agreed to enter into exclusive negotiations with
Parent within 24 hours. The Board of Directors weighed the relative merits and
likelihood of completion of the transactions proposed by Parent and the other
interested buyers, including the Financial Bidders, and authorized the grant of
a week-long exclusivity period to Parent.
On December 6, 1999, Company and Parent signed a letter providing that the
parties would negotiate exclusively until midnight December 14, 1999, Los
Angeles, California time in order to reach a definitive agreement. From December
7 to December 14, 1999, Parent continued conducting due diligence. On December 9
and 10, 1999, a representative from the Company met with representatives of the
Parent in Sydney, Australia, while other representatives of the Company and
their legal counsel met with a representative of the Parent and its legal
counsel in Los Angeles to continue to negotiate the terms of a possible
transaction. On December 10, 1999, the representative of the Company who was in
Sydney, Australia flew back to Los Angeles and joined the meetings being held in
Los Angeles.
On December 9, 1999, the Second Financial Bidder sent Mr. Poole a letter
expressing frustration at the Company's having entered into an exclusivity
period with another bidder and stating that, subject to conducting its due
diligence, it was interested in presenting an offer in a price range of
$12.00-$13.00 per share.
On December 12, 1999, the Company's Board of Directors held a telephonic
meeting to discuss the status of negotiations with Parent and the receipt of the
Second Financial Bidder's December 9, 1999 letter. The Board reviewed with
counsel and representatives of Prudential Volpe the terms of this letter and
weighed the relative risks of delaying negotiations with Parent, which had
already threatened to withdraw its offer if the Company further delayed
negotiations, to pursue the Second Financial Bidder's indication of interest,
which included a due diligence contingency, at $12.00 to $13.00 per share. The
Board considered the relative likelihood of completion of Parent's and the
Second Financial Bidder's proposed transactions, noting that Parent's proposal
did not include a due diligence contingency, and the potential effect on any
proposal from the Second Bidder if the Company entered into a definitive
agreement with Parent. The Board also considered, and concluded, that Parent's
proposed termination fee of $3.0 million (or approximately $0.34 per fully
diluted share, including "in the money" options), coupled with the provision in
the Merger Agreement allowing the Company to (i) respond to acquisition
proposals offering greater consideration than $11.00 per share and (ii)
terminate the Merger Agreement in favor of such a proposal if required by the
fiduciary duties of the Board of Directors, should not preclude any bidder from
making a superior proposal for the Board's consideration. The Board was also
advised that negotiations with Parent had progressed to the level where only a
few open negotiating points remained. The Board gave direction to counsel and
Prudential Volpe regarding the open negotiating points and authorized management
to proceed with negotiations with Parent in an effort to reach a definitive
agreement.
On December 13, 1999, Second Financial Bidder sent a second letter to
members of the Company's Board of Directors indicating that, subject to due
diligence review, it was prepared to offer a price of $12.00 per share. The
letter indicated that if the Company did not respond by December 14, 1999, the
Second Financial Bidder would consider other alternatives for addressing its
interest in the Company.
On December 13 and 14, 1999, the Company, its legal counsel and Prudential
Volpe and Parent and its financial and legal advisors met together (and
individually) with each other throughout these days and nights to finalize the
terms of the Merger Agreement and Stockholders Agreement.
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On December 14, 1999, the Company's Board of Directors held a telephonic
meeting at which they reviewed the status of all interested parties and
proposals received to date. The Board considered whether to proceed with
Parent's proposal in light of the Second Financial Bidder's renewed statement of
interest, subject to due diligence, in presenting an offer at a higher price
than Parent. After discussion, the Board concluded, for the same reasons
discussed at the December 12, 1999 meeting, that the preliminary nature of the
Second Financial Bidder's stated interest did not warrant risking the loss of
reaching a definitive agreement with Parent at $11.00 per share and that
entering a definitive agreement with Parent on the terms proposed would not
preclude the Second Financial Bidder from making a proposal superior to Parent's
if it was indeed serious about its stated indication of interest in an
acquisition at $12.00 per share.
The Board then reviewed in detail, with counsel, the proposed terms of the
Merger Agreement and Stockholders Agreement with Parent. The Board also received
a financial presentation regarding Parent's proposal from Prudential Volpe. The
Board adjourned the meeting to review materials presented by Prudential Volpe
and reconvened later that afternoon. Prudential Volpe presented these materials
and at the conclusion, gave the Board its oral opinion described below (which
was subsequently confirmed in writing later that day). The Board then approved
the execution of the Merger Agreement and Stockholders Agreement and the
proposed transactions with Parent. The Board also approved an amendment to the
Company's Rights Agreement to exempt Purchaser, Parent and the transactions
contemplated by the Merger Agreement and the Stockholders Agreement from the
application of the Rights Agreement. On December 14, 1999, upon being advised
that the Company's Board of Directors had approved the Merger, the Offer and the
other transactions contemplated by the Merger Agreement, Parent's Board of
Directors approved the Merger Agreement and the Stockholders Agreement. Late in
the evening of December 14, 1999, Parent, Purchaser and the Company executed the
Merger Agreement and the Stockholders Agreement, and on the morning of December
15, 1999 the parties issued a press release announcing the transaction.
On December 15, 1999, following the public announcement of the Offer and
the Merger, a representative of the Second Financial Bidder called to
congratulate Mr. Poole and indicated that the Second Financial Bidder had no
interest in pursuing an offer to the Company.
In making the determinations and recommendations set forth in Item 4(a)
above, the Board considered a number of factors, including, without limitation,
the following:
(i) The terms and conditions of the Offer and the Merger Agreement;
(ii) Various presentations by management at Board of Director meetings
held on and before December 14, 1999 regarding the financial condition,
results of operations, business and prospects of the Company, including the
prospects of the Company if it were to remain independent;
(iii) The results of contacts by Prudential Volpe on behalf of the
Company with certain potential acquirors;
(iv) The trading price of the Shares, and the fact that the $11.00 per
Share Offer price represents a premium of approximately 44% over the
average closing sales prices for the Shares on the NASDAQ National Market
for the last 30 days prior to the public announcement of the execution of
the Merger Agreement;
(v) The presentation of Prudential Volpe at the December 14, 1999
Board of Directors' meeting and its oral opinion (which was subsequently
confirmed in writing) to the effect that, as of the date of such opinion,
the $11.00 in cash to be received by holders of the Shares in the Offer and
the Merger was fair to the Company's stockholders. A copy of the opinion of
Prudential Volpe, which sets forth the assumptions made, matters considered
and limitations on the review undertaken by Prudential Volpe, is attached
hereto and filed as Exhibit 5, and incorporated herein by reference.
STOCKHOLDERS ARE URGED TO READ THE OPINION OF PRUDENTIAL VOLPE CAREFULLY IN
ITS ENTIRETY;
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(vi) That the Merger Agreement permits the Company to furnish
information to (pursuant to a customary confidentiality agreement not
materially more favorable to the recipient than the one between the Company
and Parent), and enter into discussions and negotiations with, any third
party in response to an unsolicited inquiry, offer or proposal regarding an
acquisition received after the date of the Merger Agreement if, and only to
the extent that: (a) the Board of Directors determines that such inquiry,
offer or proposal is reasonably likely to result in a proposal that (based
on the advice of Prudential Volpe or another nationally recognized
financial advisor) has a reasonable likelihood of being consummated and, if
consummated, would be superior to the Company's stockholders from a
financial point of view, (b) the Board of Directors, after consulting with
outside legal counsel, determines in good faith that failure to respond to
the inquiry, offer or proposal would result in a breach of the directors'
fiduciary duties under applicable law and (c) the Company provides Parent
advance written notice that it is furnishing information to, or entering
discussions or negotiations with, such third party.
(vii) The termination provisions of the Merger Agreement, which were a
condition to Parent's proposal, providing that Parent would be entitled to
a fee of $3.0 million upon the termination of the Merger Agreement under
certain circumstances; and
(viii) The representation of Parent and the Purchaser that Parent has
commitments to obtain sufficient funds to permit Purchaser to consummate
the Offer and the Merger.
The Board of Directors did not assign relative weights to the factors
or determine that any factor was of particular importance. Rather, the
Board of Directors viewed its position and recommendations as being based
on the totality of the information presented to and considered by it.
A copy of the press release of the Company and Parent announcing the
execution of the Merger Agreement is attached hereto as Exhibit 3 and is
incorporated herein by reference thereto. A copy of a letter to stockholders of
the Company, which accompanies this Schedule 14D-9, is attached hereto as
Exhibit 4 and is incorporated herein by reference.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
Prudential Volpe has been retained by the Company to act as the Company's
exclusive financial advisor with respect to the Offer and the Merger. Pursuant
to an engagement letter with Prudential Volpe, the Company has agreed to pay
Prudential Volpe for its services a transaction fee equal to approximately
$1,685,000. The Company has also agreed to reimburse Prudential Volpe for its
out-of-pocket expenses, including the fees and expenses of its counsel, and to
indemnify Prudential Volpe and certain related parties against certain
liabilities, including liabilities under the federal securities laws. In the
ordinary course of business, Prudential Volpe and its affiliates may actively
trade the debt and equity securities of the Company and the Parent for their own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) Except as described below, there have been no transactions in Shares
which were effected during the past 60 days by the Company, or, to the best
knowledge of the Company, any executive officer, director, affiliate or
subsidiary of the Company. Each of the directors of the Company, Barry D.
Emerson, Chief Financial Officer of the Company, and PAR Investment Partners,
L.P., have in their respective individual capacities as holders of Shares and
options to purchase Shares, entered into a Stockholders Agreement (the
"Stockholders Agreement") dated as of December 14, 1999 with the Parent, the
Purchaser and the Company. Pursuant to the Stockholders Agreement, each
stockholder party thereto has agreed to, at the election of the Purchaser,
either tender any and all Shares owned by such stockholder in the Offer or,
alternatively, to sell all such Shares to Purchaser immediately following the
expiration of the Offer at the Offer Price. In addition,
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each stockholder has granted Purchaser an irrevocable option to purchase all
Shares owned by such stockholder and buy Shares represented by options held by
such stockholder at any time during a thirty (30) day period following the
occurrence of certain triggering events. The exercise price of Purchaser's
option is, in the case of Shares, the Offer Price, or, in the case of options,
the difference between the Offer Price and the exercise price of such options.
Each stockholder also has agreed to vote all Shares he owns, and has
granted certain members of Parent's management an irrevocable proxy to vote any
and all of such Shares, at any meeting of the Company's stockholders, in favor
of approval of the Merger Agreement, the Merger, and any related transactions
and against certain alternative or frustrating transactions.
The stockholders' obligations under the Stockholders Agreement, other than
the option, expire upon termination of the Merger Agreement. The option grant
survives for a period of thirty (30) days following the occurrence of any
triggering event.
(b) To the best knowledge of the Company, (i) all of its executive
officers, directors, affiliates or subsidiaries presently intend to tender
shares to the Purchaser pursuant to the Offer and (ii) none of its executive
officers, directors, affiliates or subsidiaries presently intends to otherwise
sell any Shares which are owned beneficially or held of record by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as referred to in Item 3(b) or Item 4 hereof, the Company is not
engaged in any other negotiation in response to the Offer which relates to or
would result in (i) an extraordinary transaction such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described above or in Item 3(b), there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer which relate or would result in one or more of the matters referred to
in Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The information statement attached hereto as Annex I is being furnished in
connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company other than at a meeting of the Company's shareholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 -- Agreement and Plan of Merger dated December 14, 1999 among
Parent, the Purchaser and the Company.
Exhibit 2 -- Stockholders Agreement dated as of December 14, 1999 among the
Parent, the Purchaser, the Company, Christopher K. Poole,
Barry D. Emerson, Roger Noall, William G. Seymour, Arthur G.
Epker III, Alan Rich and David A. Finley.
Exhibit 3 -- Press Release of the Company and the Parent issued on December
15, 1999 (New York City Time).
Exhibit 4* -- Letter to Stockholders of the Company dated December 21,
1999.
Exhibit 5* -- Opinion of Prudential Volpe dated December 14, 1999.
Exhibit 6 -- Confidentiality Agreement of between the Parent and the
Company, dated November 11, 1999.
Exhibit 7 -- Letter agreement between the Company and the Parent dated
December 6, 1999.
Exhibit 8 -- First Amendment to Rights Agreement dated December 14, 1999.
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* Included in the materials sent to shareholders of the Company.
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
ELITE INFORMATION GROUP, INC.
By: /s/ CHRISTOPHER K. POOLE
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Name: Christopher K. Poole
Title: Chairman and Chief
Executive Officer
Date: December 21, 1999
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ANNEX I
ELITE INFORMATION GROUP, INC.
5100 WEST GOLDLEAF CIRCLE
LOS ANGELES, CALIFORNIA 90056
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about December 21, 1999 as
part of Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of Elite Information Group, Inc. (the "Company"). You are receiving this
Information Statement in connection with the possible election of persons
designated by the Purchaser to a majority of the seats on the Board of Directors
of the Company (the "Board"). You are urged to read this Information Statement
carefully. You are not, however, required to take any action. Capitalized terms
used and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 21, 1999. The Offer is scheduled to expire at 12:00 midnight on January
20, 2000, New York City time, unless extended, at which time, upon the
expiration of the Offer, if all conditions of the Offer have been satisfied or
waived, the Purchaser has agreed with the Company that it will purchase all
Shares validly tendered pursuant to the Offer and not withdrawn. The
consummation of the Offer and the Merger pursuant to the terms of the Merger
Agreement would result in a change of control of the Company.
The information contained in this Information Statement concerning Parent
and the Purchaser has been furnished to the Company by Parent and the Purchaser,
and the Company assumes no responsibility for the accuracy or completeness of
such information.
BOARD OF DIRECTORS
GENERAL
The common stock, $0.01 par value per share (the "Company Common Stock"),
is the only class of voting stock of the Company outstanding. As of December 13,
1999, there were outstanding and entitled to vote 8,409,380 shares of Company
Common Stock, each of which is entitled to one vote. An additional 705,165
shares of Company Common Stock are issuable pursuant to outstanding options,
431,416 of which options currently are, or will be, upon consummation of the
Offer, exercisable at an "in the money" value based on the Offer Price. For
information regarding the ownership of the Company Common Stock by holders of
more than five percent of the outstanding shares and by the management of the
Company, see "Security Ownership of Certain Beneficial Owners and Management."
The Company's Certificate of Incorporation provides that its Board of
Directors shall be divided into three classes, such classes to be as nearly
equal in number as possible, and that each year the holders of its Common Stock
shall elect the members of one of the three classes to serve three-year terms of
office. The number of directors is currently fixed by resolution of the Board of
Directors at six, divided into three classes of two directors each. Currently,
there are six members of the Board of Directors.
RIGHT TO DESIGNATE DIRECTORS
The Company has agreed in the Merger Agreement that, promptly upon the
acceptance for payment of, and payment for, any shares of Company Common Stock
by the Purchaser pursuant to the Offer, the Purchaser shall be entitled to
designate such number of directors, rounded up to the next whole director, on
the Board of Directors of the Company as will give the Purchaser representation
on the Board of Directors
<PAGE> 11
equal to at least that number of directors that equals the product of the total
number of directors on the Board multiplied by the percentage that the aggregate
number of shares of Company Common Stock accepted for payment and paid for by
Purchaser pursuant to the Offer bears to the number of shares of Company Common
Stock then outstanding, except that until the Effective Time of the Merger, the
Board of Directors shall include at least two directors (the "Independent
Directors") who served as directors of the Company on the date of the Merger
Agreement. The Merger Agreement provides that if one of the Independent
Directors ceases to serve as a director for any reason prior to the Effective
Time of the Merger, the Board of Directors shall appoint as his replacement an
individual designated by the remaining Independent Director. The Company has
agreed at such time to take any and all action needed to cause the Purchaser's
designees to be appointed to the Board of Directors.
The Company's obligations to appoint Parent's designees to the Board
pursuant to the Merger Agreement are subject to Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder. The Company has agreed to promptly take all
actions required pursuant to such Section and Rule in order to fulfill its
obligations under the Merger Agreement and to include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under such Section and Rule to fulfill such obligations.
PURCHASER'S DESIGNEES
Pursuant to the terms of the Merger Agreement, it is expected that the
Purchaser's designees will take office as directors of the Company upon the
Purchaser's acceptance for payment of, and payment for, any Shares as represents
at least a majority of the outstanding Shares (on a fully diluted basis) in the
Offer.
The Purchaser has advised the Company that its designees will be the
persons described in the following table and has provided the information below
regarding such individuals. The Purchaser has advised the Company that it shall
designate such persons to the extent which it is entitled in the order listed in
the following table and shall designate such persons under the appropriate class
of director as required by the Company's bylaws. The following table sets forth
for each designee the designee's name, age, present occupation or employment,
material occupations, positions, offices and employments thereof for each of the
past five years, and any current service on the board of directors of any public
company.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME AND AGE DURING THE PAST FIVE YEARS PUBLIC COMPANY DIRECTORSHIPS
- ------------ ----------------------------------- ----------------------------
<S> <C> <C>
Christie S. Tyler Mr. Tyler has been the Chief Solution 6 Holdings Limited,
Age 41 Executive Officer and a director of Hartley Poynton Limited
Purchaser since April 1997. From
1995 to March 1997, Mr. Tyler
served as managing director of
Extra, Telecom New Zealand.
Thomas A. Montgomery Mr. Montgomery has served as the Medical Alliance, Inc.
Age 42 Chief Financial Officer of
Purchaser since October 1999. In
addition, since 1990, Mr.
Montgomery has served as a general
partner of Montgomery, Baggett &
Drews, L.L.P., certified public
accountants.
Brendan Redden Currently and during the past five Solution 6 Holdings Limited,
Age 65 years, Mr. Redden has served as Pracom Limited
Chairman of the following
companies: Purchaser, Pracom
Limited and Mandata Investments Pty
Ltd.
</TABLE>
I-2
<PAGE> 12
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME AND AGE DURING THE PAST FIVE YEARS PUBLIC COMPANY DIRECTORSHIPS
- ------------ ----------------------------------- ----------------------------
<S> <C> <C>
Anthony Cionciolo Currently and during the past five None.
Age 44 years, Mr. Cianciolo has served as
the Corporate Secretary of
Purchaser.
Robert L. Stovold Mr. Stovold has served as a non- Solution 6 Holdings Limited,
Age 57 executive director during the Blackmores Limited, DC
periods indicated for the following International Limited. MS McLoed
public companies: Purchaser (1995- Holdings Ltd., Indo Pacific
present); Blackmores Limited Securities Ltd., and York
(1996-present); Nuance Global Securities Limited.
Traders (1993-present); Port
Doyglas Reef Resorts Ltd (1997-
present); DC International Limited
(1994-present); and Balfours Pty
Limited (1996-present).
Michael F. Clarkin Mr. Clarkin has served as the Solution 6 Holdings Limited
Age 58 managing director of Assured
Systems Australia Pty Ltd since
July 1991.
Caroline C. Waldron Ms. Waldron has served as general None.
Age 35 counsel to the Purchaser since
February, 1999. From 1998 to
February, 1999, Ms. Waldron served
as assistant general counsel to the
New Zealand Dairy Board, from 1995
to 1998 as senior competition
lawyer with Telecom New Zealand,
and from 1993 to 1995 as senior
solicitor with the New Zealand law
firm of Russul McVeagh.
</TABLE>
The Purchaser has advised the Company that each of the persons listed in
the table above has consented to act as a director, and that none of such
persons has during the last five years been convicted in a criminal proceeding
(excluding traffic violations and similar misdemeanors) or was party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was, or is, subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws. The
Purchaser has also advised the Company that none of the persons listed in the
table above is a director of, or holds any position with, the Company, or has
been involved in any transactions with the Company or any of its directors,
executive officers or affiliates which are required to be disclosed pursuant to
the rules and regulations of the Securities and Exchange Commission. In
addition, the Purchaser has also advised the Company that none of the persons
listed in the table above beneficially owns any equity securities, or rights to
acquire any equity securities, of the Company, except that Solution 6 Holding
Limited owns 147,200 shares of Common Stock (1.8% of the shares outstanding on
December 13, 1999) and certain of such persons may, by virtue of their positions
with Solution 6 Holdings Limited, be deemed to beneficially own such shares. The
election of the Purchaser's designees will be accomplished at a meeting or by
written consent of the Board.
I-3
<PAGE> 13
BOARD OF DIRECTORS OF THE COMPANY
The following table sets forth with respect to each current member of the
Board of Directors of the Company (i) his name and age, (ii) his business
experience, including principal occupation, and all positions and offices with
the Company, (iii) his directorships in other publicly held companies, if any,
and (iv) his term of service as a director.
<TABLE>
<CAPTION>
NAME AND AGE PRINCIPAL OCCUPATION AND CERTAIN OTHER DIRECTORSHIPS DIRECTOR SINCE
- ------------ ---------------------------------------------------- --------------
<S> <C> <C>
Arthur G. Epker III Vice President, PAR Capital Management, -- Inc.(1) 1999
Age 37
David A. Finley President, Investment Management Partners II, Inc.(2) 1990
Age 66 Director: Intelligroup, Inc. and Hungarian Telephone &
Cable Corp.
Roger Noall Executive, KeyCorp(3) 1996
Age 64 Director: Alleghany Corp. and The Victory Funds
Christopher K. Poole Chairman of the Board, President and Chief Executive 1999
Age 42 Officer, Elite Information Group, Inc.(4)
Alan Rich Co-Founder and non-employee Chairman, Elite Information 1999
Age 44 Systems, Inc.(5)
William G. Seymour President, PriMax Properties, LLC(6) 1981
Age 57 Director: First Trust Bank
</TABLE>
- ---------------
(1) Mr. Epker has been a Vice President of PAR Capital, an investment management
firm, since July 1992.
(2) Mr. Finley served as Executive Vice President and Chief Financial Officer of
the Company from January 1996 to July 1997 and again served as Executive
Vice President on a temporary basis from mid-September 1997 to mid-November
1997. Prior to joining the Company, Mr. Finley worked as a consultant and
was a private investor and the President, since 1992, of Investment
Management Partners II, Inc., an investment management firm. Since leaving
the Company, Mr. Finley has resumed his work as a consultant, private
investor and President of Investment Management Partners, Inc. From
September 1986 until his retirement in August 1989, Mr. Finley served as
Treasurer of International Business Machines Corporation.
(3) Mr. Noall has been an Executive of KeyCorp since January 1, 1997. Mr. Noall
served as Senior Executive Vice President and Chief Administrative Officer
of KeyCorp from March 1, 1994 to December 31, 1996 and served in the
additional positions of General Counsel and Secretary of KeyCorp from
September 1, 1995 to June 14, 1996. Prior to March 1, 1994, Mr. Noall served
as Vice Chairman of the Board and Chief Administrative Officer of Society
Corporation (banking). Mr. Noall joined KeyCorp on that date upon the merger
of Society Corporation and KeyCorp.
(4) Mr. Poole has served as Chairman of the Board of Directors, President and
Chief Executive Officer of the Company since May 1999. Since May 1995, Mr.
Poole has served as Chief Operating Officer of Elite Information Systems,
Inc., the wholly owned operating subsidiary of the Company ("Elite
Systems"), and since January 1998 as the President of Elite Systems. From
November 1989 to May 1995, Mr. Poole was the Director of Technology and
Executive Director of Latham & Watkins, a law firm based in Los Angeles,
California.
(5) Mr. Rich is the co-founder of Elite Systems and served as President of Elite
Systems from January 1982 until his retirement in December 1997. Since that
time, Mr. Rich has continued to provide services as consultant to Elite
Systems and as a director and non-employee Chairman of Elite Systems.
(6) Mr. Seymour has served as President of PriMax Properties, LLC, a real estate
investment company, since his retirement from the Company in January 1995.
Mr. Seymour, a co-founder of the Company, served as Vice Chairman of the
Board from June 1993 to May, 1999 and from September 1985 to November 1989
and as Secretary of the Company from June 1993 to May 1996. Mr. Seymour also
served as Senior Vice President of the Company from November 1989 to June
1993.
I-4
<PAGE> 14
The classes in which the directors serve are as follows:
<TABLE>
<CAPTION>
CLASS I CLASS II CLASS III
- -------------------- ------------------ -------------------
<S> <C> <C>
Christopher K. Poole David A. Finley Alan Rich
Roger Noall William G. Seymour Arthur G. Epker III
</TABLE>
The term of office of each of the Class I directors expires at the 2000
annual meeting of stockholders; the term of office of each of the Class II
directors expires at the 2001 annual meeting of stockholders; and the term of
office of each of the Class III directors expires at the 2002 annual meeting of
stockholders or in each case until their respective successors shall be duly
elected and qualified to serve. There are no family relationships among the
executive officers or directors of the Company.
The Company, Parent and the Purchaser have agreed pursuant to the Merger
Agreement that, following the election or appointment of Parent's designees and
prior to the Effective Time, any amendment or termination of the Merger
Agreement by the Company (other than termination in the event of issuance of a
final order or injunction prohibiting the Merger) will require the affirmative
vote of a majority of Independent Directors.
It is contemplated that the following directors, to the extent that
additional vacancies will be required to appoint the Purchaser's designees,
shall, in the order listed below, resign from the Board of Directors upon the
Purchaser's acceptance for payment of shares of Company Common Stock pursuant to
the Offer:
Christopher K. Poole
Alan Rich
David A. Finley
William G. Seymour
Roger Noall
Arthur G. Epker III
BOARD MEETINGS -- COMMITTEES OF THE BOARD
The Board of Directors held 13 meetings during the year ended December 31,
1998 and took action on 3 occasions by unanimous written consent. During 1998,
no current director attended less than 75% of the total number of meetings of
the Board of Directors during his term of service or the total number of
meetings of committees of the Board on which he served.
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees of
the Company and administers the Company's 1996 Stock Option Plan and the 1995
Employee Stock Purchase Plan; and an Audit Committee, which reviews the results
and scope of the audit and other services provided by the Company's independent
accountants. Messrs. Noall and Epker currently serve on the Compensation
Committee. Messrs. Finley and Seymour currently serve on the Audit Committee.
During the year ended December 31, 1998, the Compensation Committee met four
times and the Audit Committee met twice. The Board of Directors does not have a
nominating committee.
COMPENSATION OF DIRECTORS
Upon adoption of the 1996 Stock Option Plan on June 25, 1996, each director
who was not also an officer or employee of the Company on that date (i.e., Mr.
Seymour) was granted options to purchase 5,000 shares of Common Stock at the
fair market value of the shares on that date. In addition, under the 1996 Stock
Option Plan, any individual who is not an employee or officer of the Company and
who is first elected to the Board after June 25, 1996 (i.e., Messrs. Epker,
Noall, Rich) shall receive upon the date of such election an option to purchase
5,000 shares of Common Stock at an exercise price per share equal to the fair
market value of a share of Common Stock on such date. The 1996 Stock Option Plan
further provides for awards of options to purchase 5,000 shares of Common Stock
on each January 5 after the adoption of the 1996 Stock Option Plan if the
average daily value of a share of Common Stock for the immediately preceding
month of December is
I-5
<PAGE> 15
ten percent greater than the average daily value of a share for the month of
December of the immediately prior year. In the event that the total exercise
price of such options for 5,000 shares exceeds $100,000, the number of shares
purchasable under such option are to be reduced so that the total exercise price
of the options granted equals $100,000, and in the event that the number of
shares authorized under the 1996 Stock Option Plan are not sufficient to make an
award to outside directors, options for the remaining authorized shares shall be
awarded pro rata to the outside directors then entitled to receive such options.
To date, no options have been awarded pursuant to such formula grant, and the
Company has agreed in the Merger Agreement not to grant any additional options
without Parent's written consent. All such options awarded to non-employee
directors under the 1996 Stock Option Plan become exercisable over a period of
four years, with 20% of the total award being exercisable on the date of grant
and an additional 20% becoming exercisable on each of the next four
anniversaries. Pursuant to the 1996 Stock Option Plan, all options awarded under
the plan, including the options granted to non-employee directors, will vest
upon consummation of the Offer and also if the stockholders approve the Merger
Agreement.
The Company pays its non-employee directors a fee of $2,500 for each
directors' meeting attended and pays an additional $500 fee to each member of
the Audit Committee and Compensation Committee for each committee meeting
attended. Additional committees are established from time to time, and in 1998
members of such committees were paid a total of $8,500 in fees. No fee is paid
for telephonic meetings. Directors are reimbursed for travel and lodging
expenses in connection with meetings of the Board of Directors.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
HOLDERS OF MORE THAN FIVE PERCENT BENEFICIAL OWNERSHIP
The following table sets forth the names and addresses of, and the number
and percentage of shares beneficially owned by, the persons known to the Company
to beneficially own five percent or more of the Company's outstanding Common
Stock as of December 13, 1999:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS(1)
- ------------------- -------------------- -----------
<S> <C> <C>
PAR Investment Partners, L.P. 1,220,300(2) 14.5%
One Financial Center
Suite 1600
Boston, Massachusetts 02111
Dimensional Fund Advisors Inc. 694,400(3) 8.3%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Tudor Investment Corporation 533,400(4) 6.3%
One Liberty Plaza, 51st Floor
New York, New York 10006
William G. Seymour 436,622(5) 5.2%
1115 East Moorehead Street
Charlotte, North Carolina 28204
</TABLE>
- ---------------
(1) Based on the shares of Common Stock outstanding as of December 13, 1999.
(2) Based upon a Schedule 13D/A of PAR Capital Management, Inc. ("PAR Capital"),
PAR Group, L.P. ("PAR Group") and PAR Investment Partners, L.P. ("PIP"),
dated December 17, 1999. Arthur G. Epker III, who is a director of The
Company, is a Vice President of PAR Capital and may be deemed to be a
controlling stockholder of PAR Capital. PAR Capital is a Delaware S
Corporation and the sole general partner of PAR Group. The principal
business of PAR Capital is to act as the general partner of
I-6
<PAGE> 16
PAR Group. PAR Group is a Delaware limited partnership and the sole general
partner of PIP. The principal business of PAR Group is that of a private
investment partnership engaging in the purchase and sale of securities for
its own account. PIP is a Delaware limited partnership and its principal
business is that of a private investment partnership engaging in the
purchase and sale of securities for its own account. In connection with the
Merger Agreement, PIP has entered into a Stockholders Agreement with Parent
whereby it has granted Purchaser certain purchase rights, options and voting
proxies with respect to such shares. See Item 6, "Recent Transactions and
Intent with Respect to Securities" of Schedule 14D-9. Mr. Epker disclaims
beneficial ownership of such shares. In addition, Mr. Epker's wife owns
10,000 shares of the Company's Common Stocks through an Individual
Retirement Account. Mr. Epker also disclaims beneficial ownership of such
shares.
(3) Based upon a Schedule 13G of Dimensional Fund Advisors Inc. dated February
11, 1999 filed by Dimensional Fund Advisors Inc. on behalf of certain
clients for which it is the investment manager.
(4) Based upon Amendment No. 1 to Schedule 13G of Tudor Investment Corporation,
Paul Tudor Jones II, Tudor BVI Futures, Ltd., Tudor Proprietary Trading,
L.L.C., The Raptor Global Fund L.P., The Raptor Global Fund Ltd. and The
Upper Mill Capital Appreciation Fund Ltd. dated February 11, 1999.
(5) Includes options exercisable on December 13, 1999 or within 60 days
thereafter to purchase 4,000 shares.
BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth as of December 13, 1999 the beneficial
ownership of Common Stock by each director, each executive officer named in the
Summary Compensation Table below, and by all directors and executive officers as
a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(2)
----------------------------
NAME OF BENEFICIAL OWNER(1) NUMBER PERCENT
- --------------------------- ------------ --------
<S> <C> <C>
Arthur G. Epker III 1,221,300(3) 14.5%
David A. Finley 82,000 *
Roger Noall 24,000 *
Christopher K. Poole 87,668 1.0%
Alan Rich 18,501 *
William G. Seymour 436,622 5.2%
All directors and executive officers as a group (7 in
number) 21.7%
</TABLE>
- ---------------
* Less than one percent.
(1) In connection with the Merger Agreement, each person named in the table
below has entered into a Stockholders Agreement with Parent whereby they
have granted Purchaser certain purchase rights, options and voting proxies
with respect to all such shares beneficially owned by such persons. See Item
6, "Recent Transactions and Intent with Respect to Securities" of Schedule
14D-9.
(2) Included in the calculation of the number of shares of Common Stock owned
beneficially are the following shares purchasable under options exercisable
on December 13, 1999 or within 60 days thereafter (without regard to the
effect of the consummation of the Offer, in which event additional options
granted under the Company's 1996 Stock Option Plan to purchase 111,666
additional shares would also immediately vest) by the directors and
executive officers indicated and by all the directors and executive officers
as a group: Mr. Epker -- 1,000 shares; Mr. Finley -- 80,000 shares; Mr.
Rich -- 18,501 shares; Mr. Noall -- 4,000 shares; Mr. Poole -- 82,668; Mr.
Seymour -- 4,000 shares; and members of the group (including the
foregoing) -- 190,169 shares.
(3) Mr. Epker is a Vice President of PAR Capital and may be deemed to be a
controlling stockholder of PAR Capital. Accordingly, Mr. Epker may be deemed
to beneficially own shares of Common Stock owned by Par Capital, PAR Group
and PIP. See "Security Ownership of Certain Beneficial Owners and
Management; Holders of More than Five Percent Beneficial Ownership; Footnote
2" above for information regarding PAR Capital, PAR Group and PIP. Mr. Epker
disclaims beneficial ownership of such shares. In addition, Mr. Epker's wife
owns 10,000 shares of the Company's Common Stocks through an Individual
Retirement Account. Mr. Epker also disclaims beneficial ownership of such
shares.
I-7
<PAGE> 17
EXECUTIVE OFFICERS
The Company's executive officers are Christopher K. Poole and Barry D.
Emerson. Mr. Emerson, age 42, joined the Company in May 1999 and has served
since that time as the Company's Vice President, Treasurer and Chief Financial
Officer. Prior to joining the Company, Mr. Emerson served as the Vice President
and Controller for Wyle Electronics in Irvine, CA., from 1993 to 1998.
COMPENSATION OF OFFICERS
Messrs. Poole and Emerson are the only executive officers of the Company.
The following table sets forth a summary, for fiscal years ended December 31,
1998, December 31, 1997 and December 31, 1996, of the compensation of the
employees serving as executive officers on December 31, 1998 (Alan C. Stanford
and Keith B. Hall, who ceased to be employed by the Company in May 1999), and
Mr. Poole, who became an executive officer in January 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ---------------------
--------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) UNDERLYING OPTIONS(#) COMPENSATION($)(1)
- --------------------------- ---- --------- --------- --------------------- ------------------
<S> <C> <C> <C> <C> <C>
Alan C. Stanford 1998 300,000 100,000(2) 0 2,639
Former Chairman and Chief 1997 300,000 100,000(2) 0 4,750
Executive Officer 1996 300,000 100,000(3) 400,000(4) 4,750
Keith B. Hall(5) 1998 200,000 25,000 0 5,000
Former Vice President and 1997 100,000 25,000 20,000 147,022(6)
Chief Financial Officer 1996 -- -- -- --
Christopher K. Poole 1998 270,000 50,000 0 5,000
President and 1997 240,000 77,500 0 4,750
Chief Operating Officer,
Elite 1996 200,228 73,333 20,000 4,750
</TABLE>
- ---------------
(1) Represents matching contributions made by the Company under the Company's
401(k) retirement plan.
(2) A portion of Mr. Stanford's 1997 and 1998 bonus was in lieu of reimbursement
of certain travel expenses incurred by Mr. Stanford.
(3) Mr. Stanford received an initial bonus as an inducement for his acceptance
of employment with the Company and to partially defray the costs of exiting
his existing businesses, of which $100,000 was paid in March 1996.
(4) On January 15, 1999, Mr. Stanford voluntarily forfeited such stock options.
(5) Mr. Hall's employment with the Company commenced July 1, 1997.
(6) Also includes $80,000, adjusted for potential tax liability to $144,772,
paid to Mr. Hall for relocation expenses.
No options were granted during the year ended December 31, 1998 to the
executive officers named in the Summary Compensation Table.
I-8
<PAGE> 18
The following table sets forth certain information with regard to stock
options held at December 31, 1998 by each of the executive officers named in the
Summary Compensation Table. No options were exercised by any of the executive
officers named in the Summary Compensation Table in the year ended December 31,
1998.
FY-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF SECURITIES UNDERLYING
NUMBER OF SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY
UNEXERCISED OPTIONS AT FY-END(#) OPTIONS AT FY-END($)
NAME EXERCISABLE/ UNEXERCISABLE EXERCISABLE/ UNEXERCISABLE
- ---- -------------------------------- ------------------------------
<S> <C> <C>
Alan C. Stanford 266,667/133,333(1) 0/0
Keith B. Hall 6,666/13,334 0/0
Christopher K Poole(2) 25,999/15,001 0/0
</TABLE>
- ---------------
(1) On January 15, 1999, Mr. Stanford voluntarily forfeited all 400,000 stock
options.
(2) On January 19, 1999, Mr. Poole was granted an additional 50,000 stock
options under the Company's 1996 Stock Option Plan at an exercise price per
share equal to the fair market value of a share of Common Stock on the date
of grant ($2.34). The options vest in two equal installments on January 19,
1999 and 2000.
EMPLOYMENT AGREEMENTS
Christopher K. Poole. On June 1, 1999, the Company entered into an
employment agreement with Christopher K. Poole with respect to his service as
the Chief Executive Officer of the Company. The employment agreement has an
initial term of one year and renews automatically for successive one-year terms.
The Company may terminate Mr. Poole's employment under the agreement at any
time. If the Company terminates Mr. Poole's employment other than for "cause"
(as defined in the agreement) or as the result of his permanent disability, the
Company is obligated to pay to him (following receipt of a general release from
Mr. Poole) a lump-sum amount equal to twice his then-current annual salary (less
applicable tax withholding). If such termination occurs as a result of a change
in control of the Company or within two years after a change in control, the
Company is also obligated to pay to Mr. Poole the larger of the proportionate
amount of any incentive bonus that would otherwise be payable to Mr. Poole for
the year in which his employment is terminated (based on the number of days
elapsed in the year) or the amount of his incentive bonus paid for the prior
year. Consummation of the Offer pursuant to the Merger Agreement would
constitute a change in control under the employment agreement.
If the Company terminates Mr. Poole's employment as the result of his
permanent disability, the Company is obligated to pay to him (following receipt
of a general release from Mr. Poole) a lump-sum amount equal to his then-current
annual salary (less applicable tax withholding) plus the proportionate amount of
any incentive bonus that would otherwise be payable to Mr. Poole for the year in
which his employment is terminated (based on the number of days elapsed in the
year). In addition, the Company would be obligated to pay for continued health
insurance coverage for Mr. Poole and his dependents for 18 months following a
termination of his employment for disability.
The agreement provides that if Mr. Poole resigns due to a failure of the
Company to comply with a material term of the agreement that is not cured within
30 days after written notice of the failure is given to the Company, the Company
is obligated to pay to him (following receipt of a general release from Mr.
Poole) a lump-sum amount equal to twice his then-current annual salary (less
applicable tax withholding). In addition, if Mr. Poole resigns following a
change in control of the Company accompanied by a termination of his authority
equivalent to that of the senior executive of the Company, the Company is
obligated to pay to him (following receipt of a general release from Mr. Poole)
a lump-sum amount equal to twice his then-current annual salary (less applicable
tax withholding) plus the larger of the proportionate amount of any incentive
bonus that would otherwise be payable to him for the year in which his
employment is terminated (based on the number of days elapsed in the year) or
the amount of his incentive bonus paid for the prior year. Mr. Poole shall be
considered to be the senior executive of the Company if the Company is acquired
and
I-9
<PAGE> 19
becomes part of another entity if Mr. Poole remains the senior executive of the
division, subsidiary or entity carrying on the business conducted by the Company
prior to the acquisition. In addition, if Mr. Poole resigns for any reason after
the first anniversary of a change in control but before the second anniversary
of a change in control, the Company is obligated to pay to him (following
receipt of a general release from Mr. Poole) a lump-sum amount equal to one and
one-half times his then-current annual salary (less applicable tax withholding).
The agreement provides that Mr. Poole's annual salary will be $300,000,
which may be increased with the approval of the Compensation Committee of the
Company's Board of Directors. In addition, Mr. Poole is to be eligible to
participate in incentive bonuses and other compensation plans approved by the
Board of Directors or the Compensation Committee. Mr. Poole is also eligible to
participate in other benefit plans made available to employees and to receive
perquisites as agreed upon from time to time. Mr. Poole is also entitled to four
weeks paid vacation. If he elects to purchase long-term care or personal
disability insurance coverage, the Company shall pay one half of the premiums,
up to $2,500 per year, and the Company will continue to pay such amount
following termination of Mr. Poole's employment due to permanent disability so
long as he continues COBRA insurance coverage.
The agreement contains a covenant restricting Mr. Poole from engaging in
certain activities in competition with the Company for a period of one year
following the termination of his employment for any reason. The covenant applies
to competitive activities in the United States, Canada and the United Kingdom.
In addition, Mr. Poole has agreed not to disclose confidential and proprietary
information of the Company without the Company's consent and to return copies of
any such information in his possession upon the termination of his employment.
Barry D. Emerson. On May 10, 1999, the Company entered into a severance
agreement with Barry D. Emerson in connection with Mr. Emerson's employment as
the Company's Chief Financial Officer. Pursuant to the agreement, Mr. Emerson is
employed "at will" by the Company and may be terminated at any time for any
reason. If the Company terminates Mr. Emerson's employment other than for
"cause" (as defined in the agreement), the Company is obligated to pay to him
(following receipt of a general release from Mr. Emerson) a lump-sum amount
equal to his then-current annual salary (less applicable tax withholding). In
addition, the Company would be obligated to pay for continued health insurance
coverage for Mr. Emerson for 12 months following a termination of his
employment.
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<PAGE> 20
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total shareholder
return for five fiscal years through the end of the most recently completed
fiscal year, December 31, 1998, assuming the investment on January 31, 1994, of
$100 in Common Stock, along with the cumulative total returns of a broad-based
equity market index -- the Center for Research in Securities Prices (CRSP) Total
Return Index for the Nasdaq Stock Market (U.S. Companies) -- and of a published
industry peer index -- the CRSP Nasdaq Computer & Data Processing Services
Index -- over the same period assuming the investment on January 31, 1994, of
$100 in securities that are the components of these indices.
[PERFORMANCE GRAPH]
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executive officers generally are
made by the Compensation Committee of the Board. Set forth below is a report of
the Board's Compensation Committee addressing the Company's compensation
policies for 1998 for its executive officers.
OBJECTIVES AND POLICIES
Over the past year, the Committee's policy in compensating executive
officers has been to align the interests of the executives with the strategic
goals established by the Board of Directors and to ensure that compensation and
benefits are at levels that enable the Company to retain the executives it needs
through any strategic transaction and transition period. Consistent with these
objectives, it has been the policy of the Committee to make a portion of
executive compensation dependent upon corporate performance, including the
success of the Company in meeting its financial goals, with a portion being
linked to overall corporate results.
The Committee also believes it is essential that the Committee retain the
flexibility to evaluate not only the performance of the individual executive
officer in furthering the Company's strategic goals and the Company's
performance as a whole, but also the overall performance of the individual
executive officer and all circumstances and challenges facing the Company and
the respective executive officer. Consequently, the Committee relies on
subjective evaluation rather than objective formulas in setting and adjusting
the base salary of the Chief Executive Officer and the other executive officers
and in awarding bonuses and other incentive compensation.
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<PAGE> 21
BASE SALARIES; OPTIONS; AND ANNUAL BONUSES
In determining 1998 bonuses, the Committee used its subjective assessment
of the overall performance of the individual executive officer in terms of the
strategic goals established by the Board and the performance of the Company as a
whole. No specific weights were assigned to these factors.
Mr. Stanford was employed pursuant to an employment agreement that
established his minimum level of salary for 1997 at $300,000, subject to
increases upon approval by the Compensation Committee. The Committee did not
increase Mr. Stanford's salary for 1997 or 1998. Mr. Hall was employed pursuant
to an employment agreement that established his level of salary for 1997 at
$200,000. The Committee did not increase Mr. Hall's salary for 1998. The
agreements for Messrs. Stanford and Hall provide that the Committee may increase
compensation for future periods. Also, the Company did not award any options to
Messrs. Stanford or Hall in 1998 and, on January 15, 1999, Mr. Stanford
voluntarily forfeited 400,000 stock options previously granted.
Under the terms of the employment agreements, Messrs. Stanford and Hall
were eligible to receive annual bonuses for 1998 to be determined by the
Compensation Committee, provided that Mr. Hall was to receive a guaranteed bonus
of $25,000 on June 30, 1998 which, in the discretion of the Compensation
Committee, was to be in addition to or in lieu of any other bonus awarded by the
Compensation Committee. Mr. Hall was awarded the $25,000 bonus in satisfaction
of the guaranteed bonus obligations under his employment agreement and in
recognition of his performance as Chief Financial Officer during 1998, but was
awarded no other bonus for 1998.
In determining the bonus to be awarded to Mr. Stanford for 1998, the
Committee evaluated Mr. Stanford's contribution to the Company's overall
financial strength, product development, customer satisfaction, and positioning
the Company to achieve its strategic goals. The Committee also noted that, under
Mr. Stanford's employment agreement, the Company is required to reimburse him
for travel expenses from his residence in Indiana and the Committee included
such reimbursement as part of his bonus rather than pursuant to the Company's
expense reimbursement policy. After considering these factors, the Committee
awarded Mr. Stanford a bonus of $100,000.
TAX POLICY
Section 162(m) of the Internal Revenue Code limits deductions for certain
executive compensation in excess of $1 million. Certain types of compensation,
including compensation pursuant to stock option plans, are deductible only if
performance criteria are specified in detail and are contingent on stockholder
approval of the compensation arrangement. The Committee anticipates that certain
option awards may be made as qualified incentive stock options for which the
Company generally would not be able to claim a deduction for compensation
expense. In addition, compensation expense arising under option awards made from
January 1996 to February 1998 during the terms of service of William G. Seymour
and Robert J. Levenson on the Committee may not qualify for the exemption from
Section 162(m) due to Mr. Seymour's prior service as an officer of the Company
and the level of transactions between Mr. Levenson's employer, First Data Corp.,
and the Company. While the Committee will consider deductibility under Section
162(m) with respect to future compensation arrangements with executive officers,
deductibility will not be the sole factor used in ascertaining appropriate
levels or modes of compensation. Since corporate objectives may not always be
consistent with the requirements for full deductibility, it is conceivable that
the Company may authorize compensation arrangements under which payments may not
be deductible under Section 162(m). The Committee believes that due to the level
of current salary and maximum cash bonus compensation, and
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anticipated levels of future stock option awards, the Company will be able to
claim full deductibility of amounts paid under existing executive compensation
arrangements.
For the Compensation Committee:
Roger Noall
Arthur G. Epker III
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Executive
officers, directors and greater than ten percent shareholders are required by
SEC regulations to furnish the Company with copies of all Section 16(a) forms
they file. To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the year ended December 31, 1998, all Section
16(a) filing requirements applicable to its executive officers, directors and
greater than ten percent beneficial owners were complied with.
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<PAGE> 1
EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SOLUTION 6 HOLDINGS LIMITED,
EIG ACQUISITION CORP.
AND
ELITE INFORMATION GROUP, INC.
DATED AS OF DECEMBER 14, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I Definitions................................................ 1
1.1. Definitions................................................. 1
1.2. Rules of Construction....................................... 1
ARTICLE II The Offer................................................. 1
2.1. The Offer................................................... 1
2.2. Company Actions............................................. 2
2.3. Stockholder Lists........................................... 3
2.4. Composition of the Board of Directors; Section 14(f)........ 3
ARTICLE III The Merger............................................... 4
3.1. The Merger.................................................. 4
3.2. Effective Time.............................................. 4
3.3. Effect of the Merger........................................ 4
3.4. Certificate of Incorporation; Bylaws........................ 4
3.5. Directors and Officers...................................... 5
3.6. Stock Options............................................... 5
3.7. Stockholders' Meeting....................................... 5
ARTICLE IV Conversion of Securities; Exchange of Certificates........ 6
4.1. Merger Consideration; Conversion and Cancellation of
Securities.................................................. 6
4.2. Exchange of Certificates.................................... 6
4.3. Dissenting Shares........................................... 7
4.4. Closing..................................................... 8
4.5. Stock Transfer Books........................................ 8
ARTICLE V Representations and Warranties of the Company.............. 8
5.1. Organization and Qualification; Subsidiaries................ 8
5.2. Certificate of Incorporation and Bylaws..................... 8
5.3. Capitalization.............................................. 8
5.4. Authorization of Agreement.................................. 9
5.5. Approvals................................................... 10
5.6. No Violation................................................ 10
5.7. Reports and Financial Statements............................ 10
5.8. No Undisclosed Liabilities.................................. 11
5.9. No Material Adverse Effect; Conduct......................... 11
5.10. Schedule 14D-9; Offer Documents; Proxy Statement............ 12
5.11. Properties and Assets....................................... 12
5.12. Contracts................................................... 12
5.13. Litigation; Compliance with Laws............................ 12
5.14. Employee Benefit Plans...................................... 13
5.15. Labor Matters............................................... 14
5.16. Taxes....................................................... 14
5.17. Environmental Matters....................................... 15
5.18. Intellectual Property....................................... 16
5.19. Brokers..................................................... 17
5.20. Opinion of Financial Advisor................................ 17
5.21. Year 2000................................................... 18
5.22. Insurance................................................... 18
ARTICLE VI Representations and Warranties of the Parent Companies.... 18
6.1. Organization and Qualification; Subsidiaries................ 18
6.2. Authorization of Agreement.................................. 18
</TABLE>
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<PAGE> 3
<TABLE>
<C> <S> <C>
6.3. Approvals................................................... 18
6.4. No Violation................................................ 19
6.5. Proxy Statement; Schedule 14D-9............................. 19
6.6. Sufficient Funds............................................ 19
6.7. Brokers..................................................... 19
6.8. DGCL 203.................................................... 19
ARTICLE VII Covenants................................................ 20
7.1. Conduct of Business of the Company.......................... 20
7.2. Prohibited Actions by the Company........................... 20
7.3. No Solicitation............................................. 22
7.4. Access to Information....................................... 24
7.5. Confidentiality Agreement................................... 24
7.6. Reasonable Efforts.......................................... 24
7.7. Public Announcements........................................ 24
7.8. Employee Agreements......................................... 24
7.9. State Takeover Statutes..................................... 24
7.10. Rights Plan................................................. 25
7.11. Employee Benefit Plans...................................... 25
7.12. Indemnification of Directors and Officers................... 25
7.13. Event Notices and Other Actions............................. 26
7.14. Third Party Standstill Agreements; Tortious Interference.... 26
7.15. Payment of Certain Fees..................................... 26
ARTICLE VIII Closing Conditions...................................... 27
8.1. Closing Conditions.......................................... 27
ARTICLE IX Termination, Amendment and Waiver......................... 27
9.1. Termination................................................. 27
9.2. Effect of Termination....................................... 28
9.3. Amendment................................................... 28
9.4. Extension; Waiver........................................... 28
9.5. Fees, Expenses and Other Payments........................... 28
ARTICLE X General Provisions......................................... 29
10.1. Nonsurvival of Representations, Warranties and Agreements... 29
10.2. Notices..................................................... 29
10.3. Headings.................................................... 30
10.4. Severability................................................ 30
10.5. Entire Agreement............................................ 30
10.6. Assignment.................................................. 30
10.7. Parties in Interest......................................... 30
10.8. Failure or Indulgence Not Waiver; Remedies Cumulative....... 30
10.9. Governing Law............................................... 30
10.10. Enforcement................................................. 30
10.11. Counterparts................................................ 31
</TABLE>
ii
<PAGE> 4
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger, dated as of December 14, 1999 (this
"Agreement"), is by and among Solution 6 Holdings Limited, a New South Wales,
Australia corporation ("Parent"), EIG Acquisition Corp., a Delaware corporation
and an indirect wholly-owned subsidiary of Parent ("Purchaser"), and Elite
Information Group, Inc., a Delaware corporation (the "Company"). Parent and
Purchaser are sometimes referred to herein as the "Parent Companies."
W I T N E S S E T H
WHEREAS the respective Boards of Directors of the Company, Parent, and
Purchaser have unanimously approved the acquisition of the Company by Parent on
the terms and subject to the conditions set forth in this Agreement.
WHEREAS, in furtherance of such acquisition, Parent proposes to cause
Purchaser to make a tender offer (as it may be amended from time to time as
permitted under this Agreement, the "Offer") to purchase all the issued and
outstanding shares of common stock, par value $0.01 per share, of the Company
("Company Common Stock") at a price per share of Company Common Stock of $11.00,
net to the seller in cash, upon the terms and subject to the conditions set
forth in this Agreement.
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware,
Purchaser will merge with and into the Company and the Company will be the
Surviving Corporation (as defined below).
WHEREAS, concurrently with the execution and delivery of this Agreement,
Parent and Purchaser, on the one hand, and certain stockholders of the Company
are entering into an agreement dated the date hereof (the "Stockholders
Agreement") pursuant to which such stockholders have agreed to take specified
actions in furtherance of the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1. Definitions. Certain capitalized and other terms used in this
Agreement are defined in Annex A hereto and are used herein with the meanings
ascribed to them therein.
1.2. Rules of Construction. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. Unless the context otherwise requires, as used in this Agreement: (a)
a term has the meaning ascribed to it; (b) "or" is not exclusive; (c) whenever
the words "include," "includes" or "including" are used, they shall be deemed to
be followed by the words "without limitation"; and (d) words in the singular
include the plural and words in the plural include the singular.
ARTICLE II
THE OFFER
2.1. The Offer.
(a) Subject to the conditions of this Agreement including those set forth
in Annex B hereto, as promptly as practicable but in no event later than five
Business Days after the date of this Agreement, Purchaser shall, and Parent
shall cause Purchaser to, commence the Offer within the meaning of the
applicable Regulations of the SEC. The obligation of Purchaser to, and of Parent
to cause Purchaser to, commence the Offer or accept for payment, or pay for, any
shares of Company Common Stock tendered pursuant to the Offer shall be
1
<PAGE> 5
subject to the conditions set forth in Annex B (any of which may be waived by
Purchaser in its sole and reasonable judgment provided that, without the consent
of the Company, Purchaser may not waive the Minimum Tender Condition) and to the
other provisions of this Agreement. The initial expiration date of the Offer
shall be the 20th Business Day following the commencement of the Offer
(determined using Rule 14d-1(e)(6) under the Exchange Act).
Purchaser expressly reserves the right to modify the terms of the Offer,
except that, without the consent of the Company, Purchaser shall not (i) reduce
the number of shares of Company Common Stock subject to the Offer, (ii) reduce
the price per share of Company Common Stock to be paid pursuant to the Offer,
(iii) modify or add to the conditions set forth in Annex B in any manner adverse
to the holders of shares of Company Common Stock, (iv) except as provided in the
next sentence, extend the Offer, (v) change the form of consideration payable in
the Offer or (vi) otherwise amend the Offer in any manner adverse to the holders
of shares of Company Common Stock. Notwithstanding the foregoing, Purchaser may,
without the consent of the Company, (i) extend the Offer, if at the scheduled
expiration date of the Offer any of the conditions to Purchaser's obligation to
purchase shares of Company Common Stock are not satisfied, until such time as
such conditions are satisfied or waived; provided, however, that the expiration
date shall not be later than the Termination Date as a result of such extension,
(ii) extend the Offer for a period of not more than 10 Business Days beyond the
expiration date that would otherwise be permitted under clause (i) of this
sentence, if on the date of such extension (x) less than 90% of the Company
Common Stock have been validly tendered and not properly withdrawn pursuant to
the Offer and (y) Purchaser has permanently waived all of the conditions to the
Offer set forth in Annex B (other than conditions that are not legally capable
of being satisfied and conditions that have not been satisfied because of the
willful or intentional action or inaction of the Company), and (iii) extend the
Offer for any period required by any Regulation, interpretation or position of
the SEC or the staff thereof applicable to the Offer. If, on any scheduled
expiration date of the Offer, any of the conditions set forth in Annex B have
not been satisfied or waived and such unsatisfied conditions are still capable
of being satisfied, the Company may require Purchaser to extend the expiration
date of the Offer for a period of not more than 10 Business Days; provided,
however, that Purchaser shall not be required to extend the expiration date
later than the Termination Date. On the terms and subject to the conditions of
the Offer and this Agreement, Purchaser shall, and Parent shall cause Purchaser
to, pay for all shares of Company Common Stock validly tendered and not
withdrawn pursuant to the Offer that Purchaser becomes obligated to purchase
pursuant to the Offer as soon as practicable after the expiration of the Offer.
(b) Notwithstanding anything to the contrary contained in this Agreement,
Parent and Purchaser shall not be required to commence the Offer in any
jurisdiction other than the United States of America.
(c) On the date of the commencement of the Offer, Purchaser shall file with
the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer
("Schedule 14D-1") which will contain an offer to purchase and form of the
related letter of transmittal (the Schedule 14D-1 and the documents included
therein pursuant to which the Offer will be made, together with any supplements
or amendments thereto, collectively, the "Offer Documents"). Parent, Purchaser,
and the Company each agrees promptly to correct any information provided by it
for use in the Offer Documents if and to the extent that it shall have become
false or misleading in any material respect and Parent and Purchaser further
agree to take all steps necessary to cause the Offer Documents as so corrected
to be filed with the SEC and be disseminated to holders of shares of Company
Common Stock, in each case, as and to the extent required by applicable federal
securities Laws.
(d) Subject to the terms and conditions of this Agreement, Parent shall
provide or cause to be provided to Purchaser on a timely basis the funds
necessary to purchase any shares of Company Common Stock that Purchaser becomes
obligated to purchase pursuant to the Offer.
2.2. Company Actions. The Company hereby consents to the Offer and
represents that its Board of Directors (at a meeting duly called and held) has
(a) determined that the Offer and the Merger are fair to the stockholders of the
Company and are in the best interests of the stockholders of the Company, (b)
approved this Agreement, the Offer, the Merger and the other Transaction
Agreements, which approval (assuming the accuracy of the representations and
warranties in Section 6.8) constitutes approval of each of the Transactions
2
<PAGE> 6
for purposes of the applicable provisions of the DGCL, including Section 203 of
the DGCL, and (c) resolved to recommend acceptance of the Offer and approval and
adoption of this Agreement and the Merger by the stockholders of the Company.
The Financial Advisor has delivered to the Board of Directors of the Company its
opinion that the consideration to be received by the holders of shares of
Company Common Stock in the Offer and the Merger is fair to the holders of
shares of Company Common Stock from a financial point of view. The Company
hereby agrees to file a Solicitation/Recommendation Statement on Schedule 14D-9
(together with any amendments or supplements thereto, the "Schedule 14D-9")
containing such recommendation with the SEC (and the information required by
Section 14(f) of the Exchange Act) and to mail such Schedule 14D-9 to the
stockholders of the Company; provided that such recommendation may be withdrawn,
modified or amended by the Company's Board of Directors only to the extent
permitted by Section 7.3(b). The Company shall use its reasonable best efforts
to cause such Schedule 14D-9 to be filed on the same date as Purchaser's
Schedule 14D-1 is filed and mailed together with the Offer Documents. Purchaser
agrees to give the Company and its counsel a reasonable opportunity to review
and comment on the Schedule 14D-1 prior to Purchaser's filing of the Schedule
14D-1 with the SEC. Purchaser agrees to provide the Company and its counsel in
writing with any comments Purchaser or its counsel may receive from the SEC or
its staff with respect to the Schedule 14D-1 promptly after the receipt thereof.
Each of the Company, Parent, and Purchaser agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false or misleading in any material respect, and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and disseminated to the holders of
shares of Company Common Stock, in each case, as and to the extent required by
applicable federal securities Laws. The Company agrees to give Purchaser and its
counsel a reasonable opportunity to review and comment on the Schedule 14D-9
prior to the Company's filing of the Schedule 14D-9 with the SEC. The Company
agrees to provide Purchaser and its counsel in writing with any comments the
Company or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt thereof.
2.3. Stockholder Lists. In connection with the Offer, the Company will
promptly furnish Purchaser with mailing labels, security position listings and
any available listing or computer file containing the names and addresses of the
record holders of shares of Company Common Stock as of a recent date and of
those Persons becoming record holders subsequent to such date (to the extent
available), together with all other information in the Company's possession or
control regarding the beneficial owners of shares of Company Common Stock and
shall furnish Purchaser with such information and assistance (including, to the
extent available, updated lists of stockholders, security position listings and
computer files) as Purchaser or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of shares of
Company Common Stock. Subject to the requirements of applicable law, and except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate this Agreement, Parent and Purchaser shall
hold in confidence the information contained in any such labels, listings and
files, shall use such information only in connection with the Offer and the
Merger and, if this Agreement is terminated, shall, upon request, deliver to the
Company or destroy all copies of such information then in their possession,
followed promptly by written certification of copies destroyed, if any.
2.4. Composition of the Board of Directors; Section 14(f). Promptly upon
the acceptance for payment of, and payment by Purchaser for, any shares of
Company Common Stock pursuant to the Offer, Purchaser shall be entitled to
designate such number of directors on the Board of Directors of the Company as
will give Purchaser, subject to compliance with Section 14(f) of the Exchange
Act, representation on the Board of Directors of the Company equal to at least
that number of directors, rounded up to the next whole number, which is the
product of (a) the total number of directors on the Company's Board of Directors
(giving effect to the directors elected pursuant to this sentence) multiplied by
(b) the percentage that (i) such number of shares of Company Common Stock so
accepted for payment and paid for by Purchaser plus the number of shares of
Company Common Stock otherwise owned by Purchaser or any other Subsidiary of
Parent bears to (ii) the number of such shares outstanding, and the Company
shall, at such time, cause Purchaser's designees to be so elected; provided,
however, that in the event that Purchaser's designees are appointed or elected
to the Board of Directors of the Company, until the Effective Time the Board of
the Directors of the Company shall have at least two directors who are directors
on the date of this Agreement (the "Independent Directors");
3
<PAGE> 7
and provided further that, in such event, if the number of Independent Directors
shall be reduced below two for any reason whatsoever, the remaining Independent
Director shall be entitled to designate a person to fill such vacancy who shall
be deemed to be an Independent Director for purposes of this Agreement or, if no
Independent Director then remains, the other directors promptly shall designate
two persons to fill such vacancies who shall not be officers, employees,
stockholders or Affiliates of Parent or Purchaser, and such persons shall be
deemed to be Independent Directors for purposes of this Agreement. Subject to
applicable Law, the Company shall take all action reasonably requested by Parent
necessary to effect any such election, including mailing to its stockholders the
information statement required under Rule 14f-1 containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and the Company shall make such mailing with the mailing of the
Schedule 14D-9. Purchaser shall supply to the Company in a timely manner, and
shall be solely responsible for, any information with respect to Purchaser's
nominees, officers, directors and affiliates required by such Section 14(f) and
14f-1. Purchaser's designees shall be divided between the classes of directors
as necessary to comply with the requirements of the Company's bylaws. In
connection with the foregoing, the Company shall promptly, at the option of
Purchaser, either increase the size of the Board of Directors of the Company or
obtain the resignation of such number of its current directors as is necessary
to enable Purchaser's designees to be elected or appointed to the Board of
Directors of the Company as provided above. The date on which Purchaser's
designees constitute a majority of the Company's Board of Directors is herein
referred to as the "Control Date." Following the Control Date but prior to the
Effective Time: (i) no amendment or waiver of this Agreement on the Company's
behalf pursuant to Sections 9.03 and 9.04, respectively, and no termination of
this Agreement pursuant to Section 9.01(a) shall be valid; (ii) there shall be
no amendment to the certificate of incorporation or bylaws of the Company; (iii)
there shall be no extension of the time for the performance of any of the
obligations or other acts of Parent or Purchaser (including any extension of the
Closing pursuant to Section 4.4 or the Effective Time of the Merger beyond
filing of the Certificate of Merger); and (iv) no waiver of any provision in
favor of the Company in the Confidentiality Agreement, unless, in each such
case, there are Independent Directors in office and a majority of such
Independent Directors approve such amendment, waiver, termination or action, as
the case may be.
ARTICLE III
THE MERGER
3.1. The Merger. Subject to the terms and conditions set forth herein,
Purchaser shall merge with and into the Company at the Effective Time (the
"Merger"). The terms and conditions of the Merger and the mode of carrying the
same into effect shall be as set forth in this Agreement. As a result of the
Merger, the separate corporate existence of Purchaser shall cease and the
Company shall continue as the Surviving Corporation. At the election of Parent,
subject to Section 10.6, Parent or any Affiliate of Parent may be substituted
for Purchaser as a constituent corporation in the Merger.
3.2. Effective Time. As soon as practicable after the satisfaction or, if
permissible, waiver of the conditions set forth in Article VIII, the parties
hereto shall cause the Merger to be consummated by filing a certificate of
merger (the "Certificate of Merger") with the Secretary of State of the State of
Delaware, in such form as required by, and executed in accordance with the
relevant provisions of, the DGCL.
3.3. Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the DGCL. Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time,
except as otherwise provided herein, all the property, rights, privileges,
powers and franchises of Purchaser and the Company shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Purchaser and the Company
shall become the debts, liabilities and duties of the Surviving Corporation.
3.4. Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of the
Surviving Corporation shall be amended to read in its entirety the same as the
certificate of incorporation of Purchaser in effect immediately
4
<PAGE> 8
prior to the Effective Time, until further amended in accordance with applicable
law; provided that the name of the Surviving Corporation shall continue to be
Elite Information Group, Inc.
(b) The Bylaws of Purchaser as in effect immediately prior to the Effective
Time shall be the bylaws of the Surviving Corporation until thereafter changed
or amended as provided therein or by applicable Law; provided, however, that the
Bylaws of Purchaser shall be amended prior to the Effective Time to the extent
necessary to comply with Purchaser's obligations under the first sentence of
Section 7.12(a).
3.5. Directors and Officers. The directors of Purchaser immediately prior
to the Effective Time and/or any individuals designated by Parent shall be the
directors of the Surviving Corporation, each to hold office in accordance with
the certificate of incorporation and bylaws of the Surviving Corporation, and
the officers of the Company immediately prior to the Effective Time and/or any
individuals designated by Parent shall be the officers of the Surviving
Corporation, in each case until the earlier of their resignation or removal or
until their respective successors are duly elected or appointed and qualify.
3.6. Stock Options.
(a) Except as provided herein, upon consummation of the Merger, all then
outstanding vested and unvested Company Stock Options and all Company Common
Stock subject to a vesting requirement ("Restricted Stock") shall be cancelled
in exchange for a cash payment from the Company to the holder of a Company Stock
Option or Restricted Stock equal to (i) in the case of Company Common Stock
Options, the product of (x) the difference between the Per Share Merger
Consideration and the per share exercise price of the holder's Company Stock
Option multiplied by (y) the number of shares of Company Common Stock subject to
the holder's Company Stock Option and (ii) in the case of Restricted Stock, the
number of shares of the holder's Restricted Stock multiplied by the per share
Merger Consideration. All applicable Taxes shall be withheld from any proceeds
payable under this Section 3.6(a).
(b) Except as provided herein or as otherwise agreed to by the parties, (i)
the Company Option Plans shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement providing for the issuance
or grant by the Company or any of its Subsidiaries of any interest in respect of
the capital stock of the Company or any of its Subsidiaries shall be terminated
as of the Effective Time, and (ii) following the Effective Time no holder of
Company Stock Options or any participant in the Company Option Plans or any
other such plans, programs or arrangements shall have any right thereunder to
acquire any equity securities of the Company, the Surviving Corporation or any
Subsidiary thereof.
(c) Notwithstanding subparagraph (a) above or Section 7.2, upon the
acceptance of, and payment by Purchaser for, any shares of Company Common Stock
pursuant to the Offer, the Company shall redeem any Company Stock Options for
the cash payment provided in subparagraph (a) above (assuming an agreement of
redemption is made with the applicable optionholder).
3.7. Stockholders' Meeting.
(a) If the adoption of this Agreement by the Company's stockholders is
required by Law, the Company shall, at Parent's request, as soon as practicable
following the expiration of the Offer, prepare and file with the SEC the Proxy
Statement in preliminary form, and each of the Company and Parent shall use its
reasonable best efforts to respond as promptly as practicable to any comments of
the SEC or its staff with respect thereto. The Company shall notify Parent
promptly of the receipt of any comments from the SEC or its staff and of any
request by the SEC or its staff for amendments or supplements to the Proxy
Statement or for additional information and shall supply Parent with copies of
all correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement. If at any time prior to receipt of the Company Stockholder Approval
there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Company shall promptly prepare and mail
to its stockholders such an amendment or supplement. The Company shall not mail
any Proxy Statement, or any amendment or supplement thereto, to which Parent
reasonably objects, unless such mailing is required by Law. The Company shall
use its reasonable best efforts to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after filing and clearance
with the SEC.
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(b) If the adoption of this Agreement by the Company's stockholders is
required by Law, the Company shall, at Parent's request, as soon as practicable
following the expiration of the Offer and the purchase of Shares pursuant
thereto, duly call, give notice of, convene and hold a meeting of its
stockholders (the "Company Stockholders' Meeting") for the purpose of seeking
the Company Stockholder Approval. The Company shall, through the Board of
Directors of the Company, give the recommendation referred to in Section 2.2.
Notwithstanding the foregoing, (i) if Purchaser or any other Subsidiary of
Parent shall acquire at least 90% of the outstanding shares of Company Common
Stock, the parties shall, at the request of Parent, take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without a stockholders meeting in
accordance with Section 253 of the DGCL and (ii) the parties shall, at the
request of Parent, take all necessary and appropriate action to effect the
Merger through a written consent in lieu of the Company Stockholders' Meeting to
the extent permitted by, and in accordance with, applicable Law.
(c) Parent will provide the Company with the information concerning Parent
and Purchaser required to be included in the Proxy Statement and will vote, or
cause to be voted, all shares of Company Common Stock owned by it or its
Subsidiaries in favor of the adoption of this Agreement.
ARTICLE IV
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
4.1. Merger Consideration; Conversion and Cancellation of Securities. At
the Effective Time, by virtue of the Merger and without any action on the part
of the Parent Companies, the Company or the holders of any of the following
securities:
(a) Subject to Section 4.3, each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (excluding any
shares of Company Common Stock described in Section 4.1(c)) shall be
converted into the right to receive $11.00 in cash, without interest
thereon (the "Per Share Merger Consideration").
(b) All shares of Company Common Stock converted pursuant to Section
4.1(a) shall cease to be outstanding and shall automatically be canceled
and retired, and each holder of a Certificate previously evidencing such
shares of Company Common Stock shall cease to have any rights as a
stockholder of the Company, except the right to receive the Per Share
Merger Consideration for each such share.
(c) Each share of Company Common Stock that is owned by the Company,
Parent or Purchaser immediately prior to the Effective Time shall be
cancelled and retired and shall cease to exist and no consideration shall
be delivered in exchange therefor. Each share of Company Common Stock owned
by any Subsidiary of the Company or Parent (other than Purchaser)
immediately prior to the Effective Time shall remain outstanding without
change.
(d) Each share of common stock, par value $.01 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time shall
continue to be issued and outstanding as one fully paid and nonassessable
share of common stock, par value $.01 per share, of the Surviving
Corporation.
4.2. Exchange of Certificates.
(a) Exchange Fund. Parent shall deposit, or cause to be deposited, on a
timely basis immediately after the Effective Time with the Paying Agent in the
Exchange Fund, for the payment of the Merger Consideration through the Paying
Agent upon surrender of Certificates in accordance with Section 4.2(c), cash in
an amount sufficient to make the cash payments due under Section 4.1(a). The
Exchange Fund shall not be used for any other purpose except as specified in
this Section 4.2.
(b) Letter of Transmittal. As soon as reasonably practicable after the
Effective Time, Parent will cause the Paying Agent to send a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Paying Agent and shall be in a form and have such other
provisions as Parent may reasonably specify) to each record holder of shares
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of Company Common Stock immediately prior to the Effective Time, along with
other appropriate materials for use in surrendering Certificates to the Paying
Agent.
(c) Exchange Procedures. Promptly after the Effective Time, the Paying
Agent shall distribute to each former holder of shares of Company Common Stock,
upon surrender to the Paying Agent for cancellation of one or more Certificates,
the Merger Consideration. If the Merger Consideration is to be paid to a Person
other than the Person in whose name the surrendered Certificate or Certificates
are registered, it shall be a condition of payment of the Merger Consideration
that the surrendered Certificate or Certificates shall be properly endorsed,
with signatures guaranteed, or otherwise in proper form for transfer and that
the Person requesting such payment shall pay any transfer or other Taxes
required by reason of the payment of the Merger Consideration to a Person other
than the registered holder of the surrendered Certificate or Certificates or
such Person shall establish to the reasonable satisfaction of Parent that such
Tax has been paid or is not applicable. Until surrendered as contemplated by
this Section 4.2(c), each Certificate shall be deemed from and after the
Effective Time to represent only the right to receive upon such surrender the
Per Share Merger Consideration for each share of Company Common Stock evidenced
by such Certificate. In no event shall the holder of any such surrendered
Certificate be entitled to receive interest on any cash to be received in the
Merger. Neither the Paying Agent nor any party hereto shall be liable to a
holder of shares of Company Common Stock for any amount paid to a public
official or Governmental Authority pursuant to any applicable abandoned
property, escheat, or similar Law. If any Certificate has not been surrendered
prior to the date which is five years after the Effective Time (or immediately
prior to such earlier date on which Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Authority), any such cash in respect of such Certificate shall, to
the extent permitted by applicable Law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any Person previously
entitled thereto.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains unclaimed by the former holders of shares of Company Common Stock for
six months after the Effective Time shall be delivered to Parent, upon demand,
and any former holders of shares of Company Common Stock who have not
theretofore complied with this Article IV shall thereafter look only to Parent
for any cash payment to which they are entitled.
(e) Investment of Exchange Fund. The Paying Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(f) Withholding of Tax. Parent or any of its Affiliates shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any former holder of shares of Company Common Stock such amounts as
Parent (or any Affiliate thereof) is required to deduct and withhold with
respect to the making of such payment under the Code, or any provision of state,
local or foreign Tax Law. To the extent that amounts are so withheld by Parent
and paid by Parent to the applicable taxing authority, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
former holder of shares of Company Common Stock in respect of which such
deduction and withholding was made by Parent.
4.3. Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock ("Dissenting Shares") which are issued
and outstanding immediately prior to the Effective Time and that are held by any
Person who is entitled to demand and properly demands appraisal of such
Dissenting Shares pursuant to, and who complies in all respects with, Section
262 of the DGCL ("Section 262") shall not be converted as provided in Section
4.1(a), but rather the holders of Dissenting Shares shall be entitled only to
payment of the fair value of such Dissenting Shares in accordance with Section
262; provided, however, that if any such holder shall fail to perfect or
otherwise shall waive, withdraw or lose the right to appraisal under Section
262, then the right of such holder to be paid the fair value of such holder's
Dissenting Shares shall cease and such Dissenting Shares shall be treated as if
they had been converted as of the Effective Time into the Merger Consideration
as provided in Section 4.1(a). The Company shall serve prompt notice to Parent
of any demands received by the Company for appraisal of any shares of Company
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<PAGE> 11
Common Stock, and Parent shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to, or settle or offer to settle, any such demands, or agree to do any
of the foregoing.
4.4. Closing. The closing (the "Closing") of the Merger shall take place at
the offices of Jackson Walker L.L.P., 901 Main Street, Suite 6000, Dallas, Texas
75202 at 10 a.m. (Dallas time) on a date as soon as practicable following the
date on which the conditions to the Closing (other than those that, by their
terms, are to be satisfied at the Closing) have been satisfied or waived, or at
such other place, time and date as the parties hereto may agree. At the
conclusion of the Closing on the Closing Date, the parties hereto shall cause
the Certificate of Merger to be filed with the Secretary of State of the State
of Delaware.
4.5. Stock Transfer Books. At the Effective Time, the stock transfer books
of the Company shall be closed and there shall be no further registration of
transfers of shares of Company Common Stock thereafter on the records of the
Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company's Disclosure Letter that specifically
relates to such Section, the Company hereby represents and warrants to the
Parent Companies that:
5.1. Organization and Qualification; Subsidiaries. The Company and each
Subsidiary of the Company are legal entities duly organized, validly existing
and in good standing under the Laws of their respective jurisdictions of
incorporation or organization, have all requisite power and authority and
possess all governmental franchises and Permits necessary to enable them to own,
lease and operate their respective properties and assets and to carry on their
business as it is now being conducted and are duly qualified and in good
standing to do business in each jurisdiction in which the nature of the business
conducted by them or the ownership or leasing of their respective properties and
assets makes such qualification necessary, other than such franchises and
Permits and qualifications the lack of which, individually or in the aggregate,
has not had and would not reasonably be expected to have a Material Adverse
Effect on the Company. Section 5.01 of the Company's Disclosure Letter sets
forth, as of the date of this Agreement, a true and complete list of all the
Company's directly or indirectly owned Subsidiaries, together with the
jurisdiction of incorporation of each Subsidiary and the percentage of each
Subsidiary's outstanding capital stock or other equity interests owned of record
or beneficially by the Company or another Subsidiary of the Company. Except for
such Subsidiaries and as disclosed in Section 5.01 of the Company's Disclosure
Letter, neither the Company nor any of its Subsidiaries owns an equity interest
in any partnership or joint venture arrangement or other business entity.
5.2. Certificate of Incorporation and Bylaws. The Company has heretofore
furnished or made available to Parent complete and correct copies of the
certificate of incorporation and the bylaws or the equivalent organizational
documents, in each case as amended or restated to the date hereof, of the
Company. Neither the Company nor any of its Subsidiaries is in violation of any
of the provisions of its certificate of incorporation or bylaws (or equivalent
organizational documents).
5.3. Capitalization.
(a) The authorized capital stock of the Company consists of (i) 20,000,000
shares of Company Common Stock of which, as of December 13, 1999, 8,409,380
shares were issued and outstanding, all of which are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights, and
(ii) 2,000,000 shares of preferred stock, 400,000 of which are designated Series
A Junior Participating Preferred Stock, but none of which are issued and
outstanding. As of the date hereof, there were 705,165 shares of Company Common
Stock reserved for future issuance pursuant to outstanding Company Stock Options
granted pursuant to the Company Option Plans, and the exercise price for each of
such Company Stock Options is set forth in the Company's Disclosure Letter.
(b) Except as set forth in Section 5.3(a), no shares of Company Common
Stock are reserved for issuance, and, except for the Company Stock Options, as
listed in Section 5.3(b) of the Company's Disclosure
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<PAGE> 12
Letter, there are no options, warrants, rights, convertible or exchangeable
securities, "phantom" stock rights, stock appreciation rights, stock-based
performance units, contracts, agreements, commitments or arrangements obligating
the Company (i) to offer, sell, issue or grant any shares of, or any options,
warrants or rights of any kind to acquire any shares of, or any securities that
are convertible into or exchangeable for any shares of, capital stock of the
Company, (ii) to redeem, purchase or acquire, or offer to purchase or acquire,
any outstanding shares of, or any outstanding options, warrants or rights of any
kind to acquire any shares of, or any outstanding securities that are
convertible into or exchangeable for any shares of, capital stock of the Company
or (iii) to grant any Lien on any shares of capital stock of the Company.
(c) Except as set forth in Section 5.3(c) of the Company's Disclosure
Letter, (i) the issued and outstanding shares of capital stock of, or other
equity interests in, each of the Subsidiaries of the Company that are owned by
the Company or any of its Subsidiaries have been duly authorized and are validly
issued, and, with respect to capital stock, are fully paid and nonassessable,
and were not issued in violation of any preemptive or similar rights of any past
or present equity holder of such Subsidiary; (ii) all such issued and
outstanding shares, or other equity interests, that are indicated as owned by
the Company or one of its Subsidiaries in Section 5.3(c) of the Company's
Disclosure Letter are owned (A) beneficially as set forth therein and (B) free
and clear of all Liens except as described therein; (iii) no shares of capital
stock of, or other equity interests in, any Subsidiary of the Company are
reserved for issuance, and there are no options, warrants, rights, convertible
or exchangeable securities, "phantom" stock rights, stock appreciation rights,
stock-based performance units, contracts, agreements, commitments or
arrangements obligating the Company or any of its Subsidiaries (A) to offer,
sell, issue, grant, pledge, dispose of or encumber any shares of capital stock
of, or other equity interests in, or any options, warrants or rights of any kind
to acquire any shares of capital stock of, or other equity interests in, or any
securities that are convertible into or exchangeable for any shares of capital
stock of, or other equity interests in, any of the Subsidiaries of the Company
or (B) to redeem, purchase or acquire, or offer to purchase or acquire, any
outstanding shares of capital stock of, or other equity interests in, or any
outstanding options, warrants or rights of any kind to acquire any shares of
capital stock of, other equity interests in, or any outstanding securities that
are convertible into or exchangeable for, any shares of capital stock of, or
other equity interests in, any of the Subsidiaries of the Company or (C) to
grant any Lien on any outstanding shares of capital stock of, or other equity
interests in, any of the Subsidiaries of the Company.
(d) Except for the Company Option Plans listed in Section 5.3(b) of the
Company's Disclosure Letter, there are no voting trusts, proxies or other
agreements, commitments or understandings of any character to which the Company
or any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound with respect to the voting of any shares of capital stock
of the Company or any of its Subsidiaries or with respect to the future
registration of the offering, sale or delivery of any shares of capital stock of
the Company or any of its Subsidiaries under the Securities Act.
(e) There are not any bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of the
Company may vote ("Voting Company Debt").
5.4. Authorization of Agreement.
(a) The Company has all requisite corporate power and authority to execute
and deliver each Transaction Agreement to which it is a party and each
instrument required hereby to be executed and delivered by it prior to or at the
Closing, to perform its obligations hereunder and thereunder and to consummate
the Transactions. The execution and delivery by the Company of each Transaction
Agreement to which it is a party and each instrument required hereby to be
executed and delivered by it prior to or at the Closing and the performance of
its obligations hereunder and thereunder have been duly and validly authorized
by all requisite corporate action on the part of the Company (other than,
assuming the accuracy of the representations and warranties in Section 6.8, with
respect to the Merger, the adoption of this Agreement by the holders of a
majority of the outstanding shares of Company Common Stock in accordance with
the DGCL). Each Transaction Agreement to which it is a party has been duly
executed and delivered by the Company and (assuming due authorization, execution
and delivery hereof by the other parties hereto)
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constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as the same may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar Laws relating to creditors' rights generally, and
(ii) legal principles of general applicability governing the application and
availability of equitable remedies.
(b) Assuming the accuracy of the representations and warranties contained
in Section 6.8: (i) the only vote of holders of any class or series of capital
stock of the Company necessary to adopt or approve this Agreement and the Merger
is the adoption of this Agreement by the holders of a majority of the
outstanding shares of Company Common Stock (the "Company Stockholder Approval");
and (ii) the affirmative vote of the holders of any capital stock of the
Company, or any of them, is not necessary to consummate the Offer or any other
Transaction, other than the Merger.
5.5. Approvals. Except for the applicable requirements, if any, of (a) the
Exchange Act, (b) state securities Laws or blue sky Laws, (c) the HSR Act, (d)
the filing and recordation of appropriate merger documents as required by the
DGCL and (e) those Laws and Orders noncompliance with which would not reasonably
be expected to have a material adverse effect on the ability of the Company to
perform its obligations under each Transaction Agreement to which it is a party
or to have a Material Adverse Effect on the Company, no filing or registration
with, no waiting period imposed by and no Permit or Order of, any Governmental
Authority is required under any Law or Order applicable to the Company or any of
its Subsidiaries to permit the Company to execute, deliver or perform each
Transaction Agreement to which it is a party or any instrument required hereby
or thereby to be executed and delivered by it prior to or at the Closing.
5.6. No Violation. Except as set forth in Section 5.6 of the Company's
Disclosure Letter, assuming effectuation of all filings and registrations with,
termination or expiration of any applicable waiting periods imposed by and
receipt of all Permits and Orders of, Governmental Authorities indicated as
required in Section 5.5 and adoption of this Agreement by the stockholders of
the Company as required by the DGCL, neither the execution and delivery by the
Company of any Transaction Agreement to which it is a party or any instrument
required hereby or thereby to be executed and delivered by it prior to or at the
Closing nor the performance by the Company of its obligations hereunder or
thereunder will (a) conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a Material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any Person under, or result in the creation
of any Lien upon any of the properties or assets of the Company or any
Subsidiary of the Company under, any provision of (i) any Law or Order
applicable to the Company, (ii) the certificate of incorporation or bylaws of
the Company or (iii) any contract or agreement to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
or any of their respective properties or assets is bound, or (b) with the
passage of time, the giving of notice or the taking of any action by a third
Person, have any of the effects set forth in clause (a) of this Section, except
in any such case for any matters described in this Section that would not
reasonably be expected to have a Material Adverse Effect on the Company. Prior
to the execution of this Agreement, assuming the accuracy of the representations
and warranties contained in Section 6.8, the Board of Directors of the Company
has taken all necessary action to cause this Agreement and the other Transaction
Agreements and the Transactions to be exempt from the provisions of Section 203
of the DGCL No other state takeover statute or similar Law or Regulation applies
to the Company with respect to this Agreement, the other Transaction Agreements,
the Offer, the Merger or any other Transaction. The Company has been advised by
each of its directors and executive officers that each such Person currently
intends to tender all shares of Company Common Stock owned by such Person
pursuant to the Offer.
5.7. Reports and Financial Statements.
(a) The Company has filed all SEC Reports required to be filed by the
Company with the SEC (the "Company SEC Documents"). As of its respective date,
each Company SEC Document complied in all material respects with the
requirements of the Exchange Act or the Securities Act, as the case may be,
applicable to such Company SEC Document, and did 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,
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in light of the circumstances under which they were made, not misleading. Except
to the extent that information contained in any Company SEC Document has been
revised or superseded by a later filed Company SEC Document, none of the Company
SEC Documents contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. No Subsidiaries of the Company are SEC reporting
companies.
(b) The Company and its Subsidiaries have filed all Reports required to be
filed with any Governmental Authorities other than the SEC, including state
securities administrators, except where the failure to file any such Reports of
the Company would not reasonably be expected to have a Material Adverse Effect
on the Company. Such Reports of the Company, including all those filed after the
date of this Agreement and prior to the Effective Time, were or will be prepared
in all material respects in accordance with the requirements of applicable Law.
(c) The Company Consolidated Financial Statements and any consolidated
financial statements of the Company (including any related notes thereto)
contained in any SEC Reports of the Company filed with the SEC (i) have been or
will have been prepared in accordance with applicable accounting requirements
and the published Regulations of the SEC and/or in accordance with GAAP
consistently applied (except (A) to the extent required by changes in GAAP and
(B) with respect to SEC Reports of the Company filed prior to the date of this
Agreement, as may be indicated in the notes thereto) and (ii) fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the respective dates thereof and the consolidated results of their
operations and cash flows for the periods indicated (and include, in the case of
any unaudited interim financial statements, reasonable accruals for normal
year-end adjustments).
5.8. No Undisclosed Liabilities. Except as set forth in Section 5.8 of the
Company's Disclosure Letter, there exist no liabilities or obligations of the
Company and its Subsidiaries, whether accrued, absolute, contingent or
otherwise, which would be required to be reflected, reserved for or disclosed
under GAAP in consolidated financial statements of the Company (including the
notes thereto) as of and for the most recent period ended prior to the date this
representation and warranty is given or required to be true to satisfy any
condition to the Offer or the Merger, other than (a) liabilities or obligations
that are adequately reflected, reserved for or disclosed in the Company's
Consolidated Financial Statements and (b) liabilities or obligations incurred in
the ordinary course of business of the Company since the Balance Sheet Date of
similar nature and amount as the liabilities and obligations of the Company as
of the Balance Sheet Date.
5.9. No Material Adverse Effect; Conduct. Except as disclosed in the
Company SEC Documents filed and publicly available prior to the date of this
Agreement (the "Filed Company SEC Documents") or in Section 5.9 of the Company's
Disclosure Letter, from the date of the most recent audited financial statements
included in the Filed Company SEC Documents, the Company has conducted its
business only in the ordinary course, and during such period there has not been:
(a) any event, change, effect or development that, individually or in
the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect on the Company;
(b) any declaration, setting aside or payment of any dividend on, or
other distribution in respect of (whether in cash, stock or property), any
capital stock of the Company or any repurchase for value by the Company of
any capital stock of the Company;
(c) any split, combination or reclassification of any capital stock of
the Company or of any other equity interests in the Company, or any
issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of capital stock of
the Company or of any other equity interests in the Company;
(d) (i) any granting by the Company or any Subsidiary of the Company
to any director or executive officer of the Company or any Subsidiary of
the Company of any increase in compensation, except in the ordinary course
of business consistent with past practice or as was required under
employment agreements in effect as of the date of the most recent audited
financial statements included in the Filed Company SEC Documents, (ii) any
granting by the Company or any Subsidiary of the Company to any
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such director or executive officer of any increase in severance or
termination pay, except as was required under any employment, severance or
termination agreements in effect as of the date of the most recent audited
financial statements included in the Filed Company SEC Documents, or (iii)
any entry by the Company or any Subsidiary of the Company into any
employment, severance or termination agreement with any such director or
executive officer; or
(e) any change in accounting methods, principles or practices by the
Company or any Subsidiary of the Company materially affecting the
consolidated assets, liabilities or results of operations of the Company.
5.10. Schedule 14D-9; Offer Documents; Proxy Statement. None of the
information supplied or to be supplied by or on behalf of the Company for
inclusion or incorporation by reference in the Offer Documents, the Schedule
14D-9 or the Proxy Statement, including any amendments or supplements thereto,
at the time such document is filed with the SEC, at any time it is amended or
supplemented or at the time it is first published or sent or given to holders of
shares of Company Common Stock, and, in the case of the Proxy Statement, at the
time that it or any amendment or supplement thereto is mailed to the Company's
stockholders, at the time of the Company Stockholders' Meeting or at the
Effective Time, will contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading; provided, that the foregoing shall not apply to
information supplied by or on behalf of Parent or the Purchaser specifically for
inclusion or incorporation by reference in any such document. Schedule 14D-9
will comply as to form in all material respects with the provisions of the
Exchange Act, except that no representation is made by the Company with respect
to statements made or incorporated by reference therein based on information
supplied by Parent or Purchaser for inclusion or incorporation by reference
therein.
5.11. Properties and Assets. Except as set forth in Section 5.11 of the
Company's Disclosure Letter, the Company and its Subsidiaries own or have rights
to use all properties and assets necessary to permit the Company and its
Subsidiaries to continue to conduct their businesses as currently being
conducted except where the failure to own or have the right to use such
properties and assets would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Company. Except as set forth
in Section 5.11 of the Company's Disclosure Letter, each of the Company and its
Subsidiaries has good and indefeasible fee title to, or valid leasehold
interests in, all its material real property, free and clear of all Liens,
except for Permitted Liens. As of the date of this Agreement, the Company had
cash of over $30 million. There are no Liens on the Company's cash, nor are
there any contractual restrictions on the use or distribution of the Company's
cash.
5.12. Contracts. Section 5.12(a) of the Company's Disclosure Letter
contains a true and complete list of all "Company Contracts". All Company
Contracts are in full force and effect, the Company or the Subsidiary of the
Company that is a party to or bound by such Company Contract has performed its
obligations thereunder to date and, to the Knowledge of the Company, each other
party thereto has performed its obligations thereunder to date. Except as set
forth in Section 5.12(b) of the Company's Disclosure Letter, neither the Company
nor any of its Subsidiaries has received any written notice of the intention of
any party to terminate any Company Contract, whether as a termination for
convenience or for default of the Company or any Subsidiary thereunder.
5.13. Litigation; Compliance with Laws. There are no actions, suits,
investigations or proceedings (including any proceedings in arbitration) pending
or, to the Knowledge of the Company, threatened against the Company or any of
its Subsidiaries, at law or in equity, except actions, suits or proceedings that
are set forth in Section 5.13 of the Company's Disclosure Letter. Except as set
forth in Section 5.13 of the Company's Disclosure Letter, the Company and its
Subsidiaries are in compliance with all applicable Laws and Regulations and are
not in default with respect to any Order applicable to the Company or any of its
Subsidiaries, except such events of noncompliance or defaults that, individually
or in the aggregate would not reasonably be expected to have a Material Adverse
Effect on the Company. Since January 1, 1994, to the date hereof, neither the
Company nor any Subsidiary of the Company has received any written notice of any
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administrative or civil or criminal investigation or audit (other than Tax
audits) by any Governmental Authority.
5.14. Employee Benefit Plans.
(a) Each Benefit Plan of the Company and its Subsidiaries is listed in
Section 5.14(a) of the Company's Disclosure Letter, including, with respect to
Terminated Benefit Plans, the date of termination.
(b) Except as set forth in Section 5.14(b) of the Company's Disclosure
Letter, no event has occurred and, to the Knowledge of the Company, there exists
no condition or set of circumstances in connection with which the Company or any
of its Subsidiaries could be subject to any liability under the terms of any
Benefit Plan, or under ERISA, or, with respect to any Benefit Plan, under the
Code or any other applicable Law. Each of the Benefit Plans has been
administered in material compliance with its terms and with the applicable
provisions of ERISA, the Code and any other applicable Law.
(c) Except as set forth in Section 5.14(c) of the Company's Disclosure
Letter, as to any Benefit Plan of the Company intended to be qualified under
Section 401 of the Code, such Benefit Plan has been determined by the IRS to
satisfy in form the requirements of such Section, no event has occurred that,
individually or in the aggregate, could be reasonably expected to result in the
disqualification of such Benefit Plan (disregarding correction methods under the
Employee Plans Compliance Resolution System) and there has been no termination
or partial termination of such Benefit Plan within the meaning of Section
411(d)(3) of the Code.
(d) As to any Terminated Benefit Plan intended to have been qualified under
Section 401 of the Code, such Terminated Benefit Plan received a favorable
determination letter from the IRS with respect to its termination, all
liabilities with respect to each such plan have been satisfied by the purchase
of annuities or otherwise, and each Terminated Benefit Plan has been terminated
in accordance with the requirements of law and the terms of the plan.
(e) There are no investigations, audits, actions, suits or claims pending
(other than routine claims for benefits) or, to the Knowledge of the Company,
threatened against, or with respect to, any Benefit Plan or its assets.
(f) To the Knowledge of the Company, there is no matter pending (other than
routine qualification determination filings) with respect to any Benefit Plan
before the IRS, the Department of Labor or the PBGC.
(g) All contributions required to be made by the Company or the Company's
Subsidiaries to any Benefit Plan pursuant to its terms and provisions have been
timely made.
(h) Neither the Company or any of its subsidiaries maintain any Current
Benefit Plan subject to Title IV of ERISA.
(i) Except as set forth in Section 5.14(i) of the Company's Disclosure
Letter, no employee of the Company or any Subsidiary of the Company or any
fiduciary of a Benefit Plan has a material liability with respect to a Benefit
Plan.
(j) In connection with the consummation of the Transactions, no payments
have been or will be made under any Current Benefit Plan or any other program,
agreement, policy or arrangement which would be nondeductible under Section 280G
of the Code.
(k) Except as set forth in Section 5.14(k) of the Company's Disclosure
Letter, the execution and delivery of this Agreement and the consummation of the
Transactions will not (i) require the Company or any of its Subsidiaries to pay
greater compensation or make a larger contribution to, or pay greater benefits
or accelerate payment or vesting of a benefit under, any Current Benefit Plan or
any other program, agreement, policy or arrangement or (ii) create or give rise
to any additional vested rights or service credits under any Current Benefit
Plan or any other program, agreement, policy or arrangement.
(l) Except as set forth in Section 5.14(l) of the Company's Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to or is
bound by any severance agreement, program or policy. True and
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correct copies of all employment agreements with officers of the Company and its
Subsidiaries, and all vacation, overtime and other compensation policies of the
Company and its Subsidiaries relating to their employees have been made
available to Parent.
(m) No Benefit Plan provides retiree medical or retiree life insurance
benefits to any Person and neither the Company nor any of its Subsidiaries is
contractually or otherwise obligated (whether or not in writing) to provide any
Person with life insurance or medical benefits upon retirement or termination of
employment, other than as required by the provisions of Sections 601 through 608
of ERISA and Section 4980B of the Code.
(n) Neither the Company nor any of its Subsidiaries contributes or has an
obligation to contribute, and neither has within six years prior to the date of
this Agreement contributed or had an obligation to contribute, to a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(o) No compensation payable by the Company or any of its Subsidiaries to
any of their employees under any Current Benefit Plan or other program,
agreement, policy or arrangement is subject to disallowance under Section 162(m)
of the Code.
(p) All liabilities of Benefit Plans required to be included in the
Company's financial statements under financial accounting standards has been so
included in the Financial statements.
(q) The Company or a Subsidiary of the Company has retained the right to
terminate, suspend or amend any Benefit Plan.
5.15. Labor Matters. No collective bargaining agreement to which the
Company or any of its Subsidiaries is a party is currently in effect or is being
negotiated by the Company or any of its Subsidiaries. There is no pending or, to
the Knowledge of the Company, threatened labor dispute, strike or work stoppage
against the Company or any of its Subsidiaries. Neither the Company or any of
its Subsidiaries nor any representative or employee of the Company or any of its
Subsidiaries has committed any unfair labor practices in connection with the
operation of the business of the Company and its Subsidiaries, and there is no
pending or, to the Knowledge of the Company, threatened charge or complaint
against the Company or any of its Subsidiaries by the National Labor Relations
Board or any comparable agency of any state of the United States. The Company
and its Subsidiaries are in compliance with all applicable federal, state, local
or foreign labor Laws.
5.16. Taxes.
(a) Except as disclosed in Section 5.16(a) of the Company's Disclosure
Letter, (i) the Company and each Subsidiary of the Company, and any affiliated
group, within the meaning of Section 1504 of the Code, of which the Company or
any Subsidiary of the Company is or has been a member, has filed or will file in
a timely manner (within any applicable extension periods) all material Tax
Returns required to be filed by the Code or by applicable state, local or
foreign tax Laws, and all such Tax Returns are or will be true, complete and
accurate in all material respects, (ii) all Taxes with respect to taxable
periods covered by such Tax Returns, and all other Taxes for which the Company
or any Subsidiary of the Company is or might otherwise be liable, have been
timely paid in full or will be timely paid in full by the due date thereof and
the most recent audited financial statements contained in the Filed Company SEC
Documents for the Company reflect an adequate reserve for all Taxes accruing or
payable by the Company and its Subsidiaries for all taxable periods and portions
thereof through the date of such financial statements, and (iii) there are no
material liens for Taxes with respect to any of the assets or properties of the
Company or any Subsidiary of the Company.
(b) Except as disclosed in Section 5.16(b) of the Company's Disclosure
Letter, no Tax Return of the Company or of any Subsidiary of the Company is
under examination by the Internal Revenue Service, and no written notice of such
an audit or examination has been received by the Company or any Subsidiary of
the Company.
(c) Each deficiency resulting from any audit or examination relating to
Taxes by any Taxing Authority has been timely paid. No material issues relating
to Taxes were raised by the relevant Taxing Authority in any completed audit or
examination that can reasonably be expected to recur in a later taxable period.
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(d) Neither the Company nor any Subsidiary of the Company is party to or
bound by any tax sharing agreement, tax indemnity obligation or similar
agreement, arrangement or practice with respect to Taxes (including any advance
pricing agreement, closing agreement or other agreement relating to Taxes with
any Taxing Authority).
(e) Except as disclosed in Section 5.16(e) of the Company's Disclosure
Letter or as disclosed in the most recent audited financial statements included
in the Filed Company SEC Documents, neither the Company nor any Subsidiary of
the Company shall be required to include in a taxable period ending after the
Effective Time taxable income attributable to income that accrued in a
Pre-Effective Time Tax period but that was not recognized in any Pre-Effective
Time Tax period as a result of the installment method of accounting, the
completed contract or percentage contract methods of accounting (including the
look-back method under Section 460(b)(2) of the Code), the cash method of
accounting or Section 481 of the Code or any comparable provision of state,
local, or foreign Tax law, or for any other reason.
(f) Except as disclosed in Section 5.16(f) of the Company's Disclosure
Letter, (i) there are no outstanding agreements or waivers extending, or having
the effect of extending, the statutory period of limitation applicable to any
Tax Returns required to be filed with respect to the Company or any Subsidiary
of the Company, (ii) neither the Company nor any Subsidiary of the Company, nor
any affiliated group, within the meaning of Section 1504 of the Code, of which
the Company or any Subsidiary of the Company is or has ever been a member, has
requested any extension of time within which to file any Tax Return, which
return has not yet been filed , and (iii) no power of attorney with respect to
any Taxes has been executed or filed with any Taxing Authority by or on behalf
of the Company or any Subsidiary of the Company.
(g) The Company and its Subsidiaries have complied in all material respects
with all applicable Laws relating to the payment and withholding of Taxes
(including withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402
of the Code or any comparable provision of any state, local or foreign Laws) and
have, within the time and in the manner prescribed by applicable Law, withheld
from and paid over to the proper Taxing Authorities all amounts required to be
so withheld and paid over under applicable Laws.
(h) To the Company's knowledge, no person who holds five percent or more of
the stock of the Company is a "foreign person" as defined in Section 1445 of the
Code.
(i) None of the Company and its Subsidiaries, has been a member of an
affiliated group filing a consolidated Federal income Tax Return other than the
affiliated group of which the Company is the common parent corporation.
5.17. Environmental Matters. The properties, operations and activities of
the Company and its Subsidiaries are in compliance with all material
Environmental Laws. The Company and its Subsidiaries and the properties,
operations and activities of the Company and its Subsidiaries are not subject
to, and have not received written notice of, any existing, pending or, to the
Knowledge of the Company, threatened action, suit, investigation, inquiry or
proceeding by or before any Court or Governmental Authority under any
Environmental Law. All material Permits or applications therefor required to be
obtained or filed by the Company or any of its Subsidiaries under any
Environmental Law in connection with the properties, operations and activities
of the Company and its Subsidiaries have been obtained or filed and are valid
and currently in full force and effect, and, to the Company's Knowledge, there
are no facts or circumstances that would cause such Permits to be revoked,
modified or not renewed under current conditions or in connection with the
transactions contemplated by this Agreement. There has been no material release
of any hazardous substance, pollutant or contaminant into the environment by the
Company or its Subsidiaries or in connection with their properties, operations
or activities. There has been no exposure (attributable to the action of the
Company or its Subsidiaries) of any Person or property to any hazardous
substance, pollutant or contaminant in connection with the properties,
operations and activities of the Company and its Subsidiaries in such quantities
or of such type as would reasonably be expected to give rise to a claim, demand
or suit. Neither the Company nor its Subsidiaries have assumed, whether by
contract, operation of Law or otherwise, any liabilities or obligations arising
under Environmental Laws in connection with their respective formerly owned
properties, businesses, divisions, Subsidiaries, companies or other entities.
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5.18. Intellectual Property. Section 5.18 of the Company's Disclosure
Letter contains a complete list of all Patents and Trademarks which are owned by
the Company or its Subsidiaries. Except as set forth in Sections 5.6 and 5.18 of
the Company's Disclosure Letter:
(a) The rights of the Company in and to each item of Intellectual
Property are owned or licensed by the Company, free and clear of any Liens
(except, in the case of licensed Intellectual Property, as set forth in the
license therefor). All of the Company's rights in and to such Intellectual
Property owned by the Company are freely assignable by it or its
Subsidiaries. As of the date of this Agreement, the Company is under no
obligation to pay any royalty, license fee or other similar consideration
to any third party or to obtain any approval or consent for use of any of
the Intellectual Property (except, in the case of licensed Intellectual
Property, as set forth in the license therefor). None of the Intellectual
Property owned by the Company or its Subsidiaries is subject to any
outstanding judgment, order, decree, or injunction issued by a court of
competent jurisdiction; no complaint, action, suit, proceeding, or hearing,
is pending or, to the Knowledge of the Company, no charge, investigation,
claim or demand, is threatened, which challenges the legality, validity,
enforceability, or ownership of any of the Intellectual Property owned and
currently used by the Company or its Subsidiaries.
(b) No breach or default (or event which with notice or lapse of time
or both would result in an event of default) by the Company exists or has
occurred, but not been cured, under any License-In or other agreement
pursuant to which the Company uses any Intellectual Property, and the
consummation of the transactions contemplated by this Agreement will not
violate or conflict with or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) or result in a
forfeiture under, or constitute a basis for termination of, any such
License-In or other agreement, except for such breaches, defaults,
violations or conflicts which, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the Company.
(c) The Company owns or has the right to use all the Intellectual
Property necessary to provide, produce, sell or license the services and
products currently provided, produced, sold or licensed by the Company and
conduct the Company's business as presently conducted, and the consummation
of the transactions contemplated hereby will not impair any such rights,
including any right of the Company to use or sublicense any Intellectual
Property owned by others. The Intellectual Property covers all rights that
are necessary to operate the business of the Company as it is presently
conducted and to satisfy and perform the contracts, commitments,
arrangements and understandings with customers of the Company. The Company
has no Knowledge of any reason the Company will not be able to continue to
own, use, license or sub-license all Intellectual Property without
infringing any enforceable intellectual property rights of any third party.
(d) Except for Licensed-In Intellectual Property, no Intellectual
Property owned or used by the Company, and no product or service licensed
or sold by the Company, infringes any trademark, trade name, copyright or
patent, or misappropriates any trade secret, right of publicity, right of
privacy or other proprietary right of any Person or would give rise to an
obligation to render an accounting to any Person as a result of
co-authorship or co-invention; provided, however, that as to Licensed-In
Intellectual Property of a third party, such representation is qualified by
"to the Knowledge of the Company." The Company has received no written
notice of any adversely held patent, trademark, copyright, service mark,
trade name or trade secret of any other Person alleging or threatening to
assert that the Company's use of any of the Intellectual Property infringes
upon or is in conflict with any intellectual property or proprietary rights
of any third party. The Company has no Knowledge of any basis for any
charge, claim, suit or action asserting any such infringement or asserting
that the Company does not have the legal right to use any such Intellectual
Property.
(e) All the Company's Patents and registered Trademarks listed in
Section 5.18 of the Company's Disclosure Schedule as having been filed in,
issued by or registered with the United States Patent and Trademark Office
or the corresponding offices of other countries have been so duly filed,
registered or issued, as the case may be, and have been properly maintained
and renewed in accordance with all applicable provisions of law and
administrative regulations in the United States and each such other
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country. The Company has used reasonable efforts to diligently protect its
rights in such Intellectual Property, and, to the Knowledge of the Company,
there have been no acts or omissions by the Company, the result of which
would be to compromise the rights of the Company to apply for or enforce
appropriate legal protection of such Intellectual Property in the United
States or in such countries as the Company has done business within the
past year.
(f) Each of the Company's employees and those independent contractors
retained by the Company who, either alone or in concert with others,
created or creates, developed or develops, invented or invents, discovered
or discovers, derived or derives, programmed or programs or designed or
designs any of the Intellectual Property, has entered into a written
agreement with the Company providing, in substance, that all such
Intellectual Property shall be owned by, or otherwise assigned to, the
Company and that the Company's Proprietary Information shall not be used,
or disclosed to any third party except as authorized by the Company. No
former employees or independent contractors of the Company have any claim
or right to any of the Intellectual Property necessary for the lawful
conduct of the Company's business as now conducted. To the Knowledge of the
Company, no employee of the Company is a party to or otherwise bound by any
agreement with or obligated to any other Person (including, any former
employer) which prevents such employee from performing any material
obligation or commitment of such employee to the Company under any
agreement to which he or she is currently a party.
(g) The Company and each of its Subsidiaries has used its reasonable
best efforts to protect the proprietary and, as appropriate, confidential
nature of all Proprietary Information that it presently owns or uses.
For purposes of this Agreement, "Intellectual Property" means all of the
following which is owned by, licensed by, licensed to, or used by the Company
and its Subsidiaries (including all authorized copies and embodiments thereof
that are fixed in a tangible media or form): (i) all registered and unregistered
trademarks, service marks, logos, trade names, and other indications of origin,
the goodwill associated with the foregoing and registrations in any
jurisdiction, and applications in any jurisdiction to register (the
"Trademarks"); (ii) all issued U.S. and foreign patents and pending patent
applications (including, without limitation, divisionals, continuation,
continuation in part, continuing and renewal applications) (the "Patents");
(iii) all registered and unregistered copyrights and all applications to
register the same (the "Copyrights"), (iv) all protectable items of trade dress
used by the Company and its Subsidiaries, (v) all computer software and
protectable databases owned by the Company or under development by, or
specifically on behalf of, the Company (the "Software"); (vi) all licenses and
agreements pursuant to which the Company has acquired rights in or to the
Trademarks, Patents, Copyrights or Software (excluding software and databases
licensed to the Company under standard (except for immaterial deviations),
nonexclusive software licenses granted to end-user customers by third parties in
the ordinary course of such third parties' business) ("Licenses-In"), (vii) all
licenses and agreements pursuant to which the Company has licensed or
transferred the rights in and to Company Intellectual Property (excluding
software licensed by the Company under standard (except for immaterial
deviations) non-exclusive software licenses granted to end-user customers by the
Company as part of the sale of the Company's products) ("Licenses Out"); and
(viii) all confidential and proprietary trade secrets, know-how, processes,
procedures, drawings, specifications, designs, plans, proposals, or technical
data. ("Proprietary Information").
5.19. Brokers. Except as set forth in Section 5.19 of the Company's
Disclosure Letter, no broker, finder or investment banker (other than the
Financial Advisor) is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
or on behalf of the Company. The estimated fees and expenses incurred and to be
incurred by the Company in connection with the Offer, the Merger and the other
Transactions (including the fees of the Financial Adviser and the fees of the
Company's legal counsel) are set forth in Section 5.19 of the Company's
Disclosure Letter. The Company has furnished to Parent a true and complete copy
of all agreements between the Company and the Financial Advisor relating to the
Merger and the other Transactions.
5.20. Opinion of Financial Advisor. The Company has received the opinion of
the Financial Advisor in customary form, dated the date of this Agreement, to
the effect that, as of such date, the consideration to be
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received in the Offer and the Merger by the Company's stockholders is fair to
the Company's stockholders from a financial point of view.
5.21. Year 2000. The disclosures in the Company's Form 10-Q for the period
ending September 30, 1999 regarding the status of "Year 2000 Issues" are true,
correct and complete in all material respects as if made on the date of this
Agreement.
5.22. Insurance. The Company and its Subsidiaries maintain policies of fire
and casualty, liability and other forms of insurance in such amounts, with such
deductibles and against such risks and losses as are reasonable for the assets
and properties of the Company and its Subsidiaries and as are customary in the
Company's industry. As of the date of this Agreement all such policies are in
full force and effect, all premiums due and payable thereon have been paid, and
no notice of cancellation or termination has been received with respect to any
such policy.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PARENT COMPANIES
The Parent Companies hereby represent and warrant to the Company that:
6.1. Organization and Qualification; Subsidiaries. Parent and Purchaser are
legal entities duly organized, validly existing and in good standing under the
Laws of their respective jurisdictions of incorporation or organization, have
all requisite power and authority to own, lease and operate their respective
properties and assets and to carry on their business as it is now being
conducted and are duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by them or the
ownership or leasing of their respective properties and assets makes such
qualification necessary, other than such qualifications the lack of which,
individually or in the aggregate, has not had and would not reasonably be
expected to have a Material Adverse Effect on Parent.
6.2. Authorization of Agreement. Each of Parent and Purchaser has all
requisite corporate power and authority to execute and deliver, each Transaction
Agreement to which it is a party and each instrument required hereby to be
executed and delivered by it prior to or at the Closing, to perform its
obligations hereunder and thereunder and to consummate the Transactions. The
execution and delivery by Parent and Purchaser of each Transaction Agreement to
which it is a party and each instrument required hereby to be executed and
delivered by Parent or Purchaser prior to or at the Closing and the performance
of their respective obligations hereunder and thereunder have been duly and
validly authorized by all requisite corporate action on the part of Parent and
Purchaser, respectively. Each Transaction Agreement to which it is a party has
been duly executed and delivered by Parent and Purchaser and (assuming due
authorization, execution and delivery hereof by the other party hereto)
constitutes a legal, valid and binding obligation of Parent and Purchaser,
enforceable against Parent and Purchaser in accordance with its terms, except as
the same may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar Laws relating to creditors'
rights generally and (b) legal principles of general applicability governing the
application and availability of equitable remedies.
6.3. Approvals. Except for the applicable requirements, if any, of (a) the
Exchange Act, (b) state securities Laws or blue sky Laws, (c) the HSR Act, (d)
the filing and recordation of appropriate merger documents as required by the
DGCL (and other state Laws where Purchaser or the Company are qualified to do
business) and (e) those Laws and Orders noncompliance with which would not
reasonably be expected to have a material adverse effect on the ability of
Parent or Purchaser to perform its obligations under each Transaction Agreement
to which it is a party, no filing or registration with, no waiting period
imposed by and no Permit or Order of, any Governmental Authority is required
under any Law or Order applicable to Parent or Purchaser to permit Parent or
Purchaser to execute, deliver or perform each Transaction Agreement to which it
is a party or any instrument required hereby or thereby to be executed and
delivered by it prior to or at the Closing.
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6.4. No Violation. Assuming effectuation of all filings and registrations
with, termination or expiration of any applicable waiting periods imposed by and
receipt of all Permits and Orders of, Governmental Authorities indicated as
required in Section 6.3, neither the execution and delivery by Parent or
Purchaser of any Transaction Agreement to which it is a party or any instrument
required hereby or thereby to be executed and delivered by Parent or Purchaser
prior to or at the Closing nor the performance by Parent or Purchaser of their
respective obligations hereunder or thereunder will (a) conflict with, or result
in any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a Material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
Person under, or result in the creation of any Lien upon any of the properties
or assets of Parent or any Subsidiary of Parent under, any provision of (i) any
Law or Order applicable to Parent or Purchaser, (ii) the certificate of
incorporation or bylaws of Parent or Purchaser or (iii) any contract or
agreement to which Parent or any of its Subsidiaries is a party or by which it
or any of its properties or assets is bound, or (b) with the passage of time,
the giving of notice or the taking of any action by a third Person, have any of
the effects set forth in clause (a) of this Section, except in any such case for
any matters described in this Section that would not reasonably be expected to
have a material adverse effect upon the ability of Parent or Purchaser to
perform its obligations under this Agreement or any other Transaction Agreement.
6.5. Proxy Statement; Schedule 14D-9. None of the information supplied or
to be supplied by or on behalf of Parent or Purchaser for inclusion or
incorporation by reference in the Offer Documents, the Schedule 14D-9 or the
Proxy Statement, including any amendments or supplements thereto, incorporation
by reference in the Offer Documents, the Schedule 14D-9 or the Proxy Statement,
including any amendments or supplements thereto, at the time such document is
filed with the SEC, at any time it is amended or supplemented or at the time it
is first published or given to holders of shares of Company Common Stock, and,
in the case of the Proxy Statement, at the time that it or any amendment or
supplement thereto is mailed to the Company's stockholders, at the time of the
Company Stockholders' Meeting or at the Effective Time, will contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading; provided
that the foregoing shall not apply to information supplied by or on behalf of
the Company specifically for inclusion or incorporation by reference in any such
document. The Offer Documents will contain (or will be amended in a timely
manner so as to contain) all information which is required to be included
therein in accordance with the Exchange Act and the rules and regulations
thereunder and any other applicable law, and will comply as to form in all
material respects with the provisions of the Exchange Act and any other
applicable law, except that no representations is made by Parent or Purchaser
with respect to statements made or incorporated by reference therein based on
information supplied by the Company for inclusion or incorporation by reference
therein.
6.6. Sufficient Funds. Parent and Purchaser have access to sufficient funds
to consummate the Offer and the Merger on the terms contemplated by this
Agreement and to pay related fees and expenses, the evidence of which
sufficiency has been provided in Section 6.6 of the Purchaser's Disclosure
Letter.
6.7. Brokers. Except for Warburg Dillon Read, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Transactions based upon arrangements made by
and on behalf of Parent or Purchaser.
6.8. DGCL 203. At no time during the three (3) years prior to the date of
this Agreement has Parent, Purchaser, or any of their respective Affiliates,
been an "interested stockholder" within the meaning of, and as defined in,
Section 203 of the DGCL.
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ARTICLE VII
COVENANTS
7.1. Conduct of Business of the Company. The Company hereby covenants and
agrees that, prior to the Effective Time, unless otherwise expressly
contemplated by this Agreement or consented to in writing by Parent and, after
the Control Date, also by a majority of the Independent Directors, it will and
will cause each of its Subsidiaries to:
(a) operate its business in the usual and ordinary course consistent
with past practices;
(b) use reasonable efforts to preserve intact its business
organization, maintain its material rights and franchises, retain the
services of its respective key employees and maintain its relationships
with its respective customers and suppliers and others having business
dealings with it;
(c) maintain and keep its properties and assets in as good repair and
condition as at present, ordinary wear and tear excepted, and maintain
supplies and inventories in quantities consistent with its customary
business practice; and
(d) use reasonable efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that currently
maintained.
7.2. Prohibited Actions by the Company. Without limiting the generality of
Section 7.1, the Company covenants and agrees that, except as expressly
contemplated by this Agreement or otherwise consented to in writing by Parent
and after the Control Date, also by a majority of the Independent Directors,
which consents shall not be unreasonably withheld or delayed, from the date of
this Agreement until the Effective Time, it will not do, and will not permit any
of its Subsidiaries to do, any of the following:
(a) (i) increase the compensation payable to or to become payable to
any director or employee, except for increases in salary or wages of
employees in the ordinary course of business and consistent with past
practice or as required under any existing employment agreements, and
except that the Company may pay annual bonuses for fiscal year 1999 as
provided in Item 7 of Section 5.14(a) of the Company's Disclosure Letter;
(ii) grant any severance or termination pay (other than pursuant to any
existing employment agreements or the normal severance policy or practice
of the Company or its Subsidiaries as in effect on the date of this
Agreement) to, or enter into or amend in any material respect any
employment or severance agreement with, any employee; (iii) establish,
adopt, enter into or amend in any material respect any collective
bargaining agreement or Benefit Plan of the Company or its Subsidiaries
except as required by applicable Law or (iv) take any action to accelerate
any rights or benefits, or make any material determinations not in the
ordinary course of business consistent with past practice, under any
collective bargaining agreement or Benefit Plan of the Company or its
Subsidiaries;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of (whether in cash, stock or property),
outstanding shares of capital stock, except for dividends by a wholly owned
Subsidiary of the Company to the Company or another wholly owned Subsidiary
of the Company;
(c) redeem, purchase or otherwise acquire, or offer to redeem,
purchase or otherwise acquire, any outstanding shares of capital stock of,
or other equity interests in, or any securities that are convertible into
or exchangeable for any shares of capital stock of, or other equity
interests in, or any outstanding options, warrants or rights of any kind to
acquire any shares of capital stock of, or other equity interests in, the
Company or any of its Subsidiaries (other than (i) any such acquisition by
the Company or any of its wholly owned Subsidiaries directly from any
wholly owned Subsidiary of the Company in exchange for capital
contributions or loans to such Subsidiary or (ii) any purchase, forfeiture
or retirement of shares of Company Common Stock or the Company Stock
Options occurring pursuant to the terms (as in effect on the date of this
Agreement) of any existing Benefit Plan of the Company or any of its
Subsidiaries);
(d) effect any reorganization or recapitalization; or split, combine
or reclassify any of the capital stock of, or other equity interests in,
the Company or any of its Subsidiaries or issue or authorize or
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propose the issuance of any other securities in respect of, in lieu of or
in substitution for, shares of such capital stock or such equity interests;
(e) offer, sell, issue or grant, or authorize the offering, sale,
issuance or grant of, any shares of capital stock of, or other equity
interests in, any securities convertible into or exchangeable for any
shares of capital stock of, or other equity interests in, or any options,
warrants or rights of any kind to acquire any shares of capital stock of,
or other equity interests in, or any Voting Company Debt or other voting
securities of, the Company or any of its Subsidiaries, or any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units, other than issuances of shares of Company Common Stock
upon the exercise of the Company Stock Options outstanding at the date of
this Agreement in accordance with the terms thereof (as in effect on the
date of this Agreement);
(f) change the terms of any Company Stock Option;
(g) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or in any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire any
assets of any other Person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent with
past practice);
(h) sell, lease, exchange or otherwise dispose of, or grant any Lien
with respect to, any of the properties or assets (including technological
assets) of the Company or any of its Subsidiaries, except for (i)
dispositions of excess or obsolete assets, (ii) sales of inventories in the
ordinary course of business and consistent with past practice and (iii) the
licensing of software to customers consistent with past practice;
(i) adopt any amendments to its certificate of incorporation or bylaws
or other organizational documents;
(j) effect any change in any accounting methods, principles or
practices of the Company, except as may be required by a change in GAAP, or
any change in Tax accounting;
(k) (i) incur any indebtedness, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its Subsidiaries, guarantee any debt securities of another Person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings pursuant to existing lines of credit incurred in the ordinary
course of business consistent with past practice or (ii) make any loans,
advances or capital contributions to, or investments in, any other Person,
other than to or in the Company or any direct or indirect wholly owned
Subsidiary of the Company;
(l) enter into any contract which, if such contract is entered into,
would be a Material Contract;
(m) make or agree to make any new capital expenditure or expenditures
other than the capital expenditures contemplated by the Company's annual
operating plan for 1999, copy of which has been furnished to Parent prior
to the execution of this Agreement and except for capital expenditures from
January 1, 2000 through May 1, 2000 not to exceed $732,335 in the
aggregate, and capital expenditures described in Section 7.2(m) of the
Company's Disclosure Letter;
(n) make any nonroutine Tax election or settle or compromise any Tax
liability or refund, except as provided in Section 7.2(n) of the Company's
Disclosure Letter;
(o) (i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company included in the Filed SEC Documents or
incurred in the ordinary course of business consistent with past practice
or (ii) cancel any Material indebtedness (individually or in the aggregate)
or waive any claims or rights of substantial value;
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(p) enter into any new agreements with, or commitments to, insurance
brokers or advisers extending beyond one year or extend any insurance
policy beyond one year (including, for the avoidance of doubt, the
directors' and officers' liability insurance policies referred to in
Section 7.11); or
(q) agree in writing or otherwise to do any of the foregoing.
7.3. No Solicitation.
(a) From the date of this Agreement until the Effective Time or the
termination of this Agreement pursuant to Section 9.1, the Company agrees that
it will not, and will not permit any of its Subsidiaries, or any of its or their
officers, directors, employees, representatives, agents, or Affiliates,
including any investment banker, attorney, or accountant retained by the Company
or any of its Subsidiaries (collectively, "Representatives"), to, directly or
indirectly (i) initiate, solicit or encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries with respect
to or the making of any proposal or offer that constitutes, or may reasonably be
expected to lead to, an Acquisition Proposal, (ii) enter into or maintain or
continue discussions or negotiate with any Person regarding an Acquisition
Proposal or in furtherance of such inquiries with respect to or to obtain an
Acquisition Proposal, or (iii) agree to, approve, recommend or endorse any
Acquisition Proposal, or authorize or permit any of the Representatives of the
Company or any of its Subsidiaries to take any such action, and the Company
shall promptly notify Parent of any such inquiries and proposals hereafter
received by the Company or any of its Subsidiaries or by any such
Representative, relating to any of such matters. Any violation of the
restrictions set forth in this Section 7.3 by any Representative of the Company
or any of its Subsidiaries, whether or not such Person is purporting to act on
behalf of the Company or otherwise, shall be deemed to be a breach of this
Section 7.3 by the Company. Notwithstanding the foregoing, the Board of
Directors of the Company may, at any time prior to the payment of shares of
Company Common Stock pursuant to the Offer, furnish information (pursuant to a
customary confidentiality agreement not materially more favorable to the party
receiving information than the Confidentiality Agreement and consistent with the
Company's disclosure and other obligations under this Agreement, including
Section 7.3(c)) to, or engage in discussions or negotiations with, any Person in
response to an unsolicited (and the existence of discussions or negotiations
with a Person prior to the date of this Agreement shall not create a presumption
that a proposal from a Person was solicited) bona fide Acquisition Proposal of
such Person that the Board of Directors of the Company determines is reasonably
likely to result in a Qualifying Proposal, if, and only to the extent that, (A)
the Board of Directors of the Company, after consultation with outside legal
counsel to the Company, determines in good faith that failure to do so would
result in a breach of the fiduciary duty of the Board of Directors of the
Company to the stockholders of the Company under applicable Law, and (B) prior
to furnishing such information to, or entering into discussions or negotiations
with, such Person the Company provides written notice to Parent to the effect
that it is furnishing information to, or entering into discussions or
negotiations with, such Person and the Company complies with Section 7.3(c). The
Company shall immediately cease and terminate any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any Persons
conducted heretofore by it or its Representatives with respect to any
Acquisition Proposal.
(b) Except as expressly permitted by this Section 7.3, (i) neither the
Board of Directors of the Company nor any committee thereof shall (A) withdraw
or modify, or propose publicly to withdraw or modify, in a manner adverse to
Parent or Purchaser, the approval or recommendation by such Board of the Offer
or the Merger as set forth in Section 2.02, (B) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal, or (C) cause the
Company to enter into any letter of intent, agreement in principle, acquisition
agreement or other agreement (each, an "Acquisition Agreement") related to any
Acquisition Proposal and (ii) the Company shall not enter into any Acquisition
Agreement with respect to any Acquisition Proposal. Notwithstanding the
foregoing, prior to the payment of shares of Company Common Stock pursuant to
the Offer, the Board of Directors of the Company may terminate this Agreement
but only (A) if the Board of Directors of the Company, after consultation with
outside legal counsel to the Company, determines in good faith that failure to
do so would result in a breach of the fiduciary duty of the Board of Directors
to the stockholders of the Company under applicable Law, (B) if the Company and
the Board of Directors of the Company have complied with all the provisions of
this Section 7.3, (C) after the second Business Day
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following Parent's receipt of written notice advising Parent that the Board of
Directors of the Company is prepared to accept a Qualifying Proposal, and after
having received from the Company sufficient and accurate guidance in order to
enable Parent to make a bona fide counter proposal, it being understood and
agreed that nothing contained in this paragraph shall require the Company to
provide to Parent any of the details of such Qualifying Proposal, including the
identity of the Person making such Qualifying Proposal and the specific terms of
such Qualifying Proposal (during which two day period the Company will negotiate
in good faith with Parent or Purchaser concerning any amendments proposed by
Parent or Purchaser) and (D) if concurrently with such termination, the Company
enters into an Acquisition Agreement with respect to such Qualifying Proposal
and pays to Parent the Termination Fee.
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 7.3, the Company shall promptly advise Parent,
orally and in writing, of any request for information or of any Acquisition
Proposal.
(d) "Acquisition Proposal" means an inquiry, offer or proposal that is made
after the date of this Agreement regarding any of the following (other than the
Transactions) involving the Company: (i) any merger, consolidation, share
exchange, recapitalization, liquidation, dissolution, business combination or
other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of a substantial portion of the assets of the
Company and its Subsidiaries, taken as a whole, or of any Material Business or
of any Subsidiary or Subsidiaries responsible for a Material Business in a
single transaction or series of related transactions; (iii) any acquisition of
20% or more of the outstanding shares of capital stock of the Company or the
filing of a registration statement under the Securities Act in connection
therewith or any other acquisition or disposition the consummation of which
would prevent or materially diminish the benefits to Parent of the Merger; or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
"Qualifying Proposal" means any written proposal made by a third party
after the date of this Agreement to acquire, directly or indirectly, including
pursuant to a tender offer, exchange offer, merger, consolidation, share
exchange, business combination, recapitalization, liquidation, dissolution or
other similar transaction all the shares of Company Common Stock then
outstanding or all or substantially all of the assets of the Company and its
Subsidiaries which the Board of Directors of the Company determines in good
faith (x) (based on the advice of the Financial Advisor or another financial
advisor of nationally recognized reputation) that such proposal has a reasonable
likelihood of being consummated and (y) (based on the advice of the Financial
Advisor or another financial advisor of nationally recognized reputation) that
such proposal would, if consummated, be superior to the Company's stockholders
from a financial point of view (taking into account any changes to the financial
terms of this Agreement proposed by Parent or Purchaser in response to such
proposal) when compared to the Offer, the Merger and the other Transactions,
taken as a whole.
"Material Business" means any business (or the assets needed to carry out
such business) that contributed or represented 15% or more of the net sales, the
net income or the assets (including equity securities) of the Company and its
Subsidiaries taken as a whole.
(e) Nothing contained in this Section 7.3 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule 14d-9
or Rule 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Company's stockholders which the Board of Directors of the
Company, after consultation with outside legal counsel to the Company,
determines in good faith is required by applicable Law; provided that neither
the Board of Directors of the Company nor any committee thereof approves or
recommends, or publicly proposes to approve or recommend, an Acquisition
Proposal unless the Company and the Board of Directors of the Company have
complied with all the provisions of this Section 7.3. Notwithstanding anything
to the contrary, if the Purchaser has accepted for payment of, and paid for, any
shares of Company Common Stock pursuant to the Offer, the Company will duly
call, give notice and hold the Stockholders Meeting, if required by the DGCL,
for the purpose of considering and taking action upon this Agreement and the
Merger whether or not the Board of Directors of the Company has determined at
any time after the date hereof it is no longer advisable for the stockholders of
the Company to adopt this Agreement.
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7.4. Access to Information. Between the date of this Agreement and the
Effective Time, the Company shall, and shall cause its Subsidiaries to: (a)
afford to Parent and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives full reasonable
access during normal business hours and at all other reasonable times to the
officers, employees, agents, properties, offices and other facilities of the
Company and its Subsidiaries and to their books and records and (b) furnish
promptly to Parent and its representatives a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities Laws and such other
information concerning the business, properties, contracts, records and
personnel of the Company and its Subsidiaries (including financial, operating
and other data and information) as may be reasonably requested, from time to
time, by or on behalf of Parent.
7.5. Confidentiality Agreement. Subject to Section 7.7, the parties agree
that the provisions of the Confidentiality Agreement shall remain binding and in
full force and effect and that the terms of the Confidentiality Agreement are
incorporated herein by reference; provided, however, that any consents from the
Company necessary under the Confidentiality Agreement for Parent and Purchaser
to consummate the Transactions shall be deemed to have been made. The parties
shall comply with, and shall cause their respective representatives to comply
with, all of their respective obligations under the Confidentiality Agreement
until the Effective Time.
7.6. Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action, and to do, or cause to be done, all
things reasonably necessary, proper or advisable under applicable Laws to
consummate and make effective as soon as reasonably practicable the Transactions
including: (a) cooperating in the preparation and filing of all applications,
requests, consents and other filings required by applicable Governmental
Authorities or Courts, including filings required by the HSR Act, the Offer
Documents, the Schedule 14D-9, the Proxy Statement and any amendments and
supplements to any thereof; (b) taking all action reasonably necessary, proper
or advisable to secure any necessary consents, approvals or waivers from third
parties; (c) contesting any pending legal proceeding, whether judicial or
administrative, relating to the Offer or the Merger, including seeking to have
any stay or temporary restraining order entered by any Court or other
Governmental Authority vacated or reversed; and (d) executing any additional
instruments necessary to consummate the Transactions. In case at any time after
the Effective Time any further action is necessary to carry out the purposes of
this Agreement, the proper officers and directors of each party hereto shall use
all reasonable efforts to take all such necessary action.
7.7. Public Announcements. Parent, Purchaser and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Offer or the Merger or this Agreement and shall
not issue any such press release or make any such public statement prior to such
consultation (and affording the other party or parties an opportunity to comment
thereon), except as may be required by applicable Law or Court process or by
obligations pursuant to any listing agreement with the NASD or any securities
exchange.
7.8. Employee Agreements. Parent acknowledges and agrees that all
employment agreements, severance agreements, deferred compensation agreements,
and supplemental retirement agreements with the employees of the Company and its
Subsidiaries that are listed in Section 7.8 of the Company's Disclosure Letter
will be binding and enforceable obligations of the Surviving Corporation to the
same extent as they were binding and enforceable obligations of the Company and
its Subsidiaries as of the date of this Agreement, except as the parties thereto
may otherwise agree or as required by applicable law.
7.9. State Takeover Statutes. Assuming the accuracy of the representations
and warranties in Section 6.8, the Company has taken all steps necessary (a) to
exempt the Transactions from Section 203 of the DGCL, (b) to ensure that no
other state takeover statute or similar Law or Regulation is or becomes
applicable to any Transaction Agreement and (c) if any state takeover statute or
similar Law or Regulation becomes applicable to any Transaction Agreement, to
ensure that the Offer, the Merger and the other Transactions may be consummated
as promptly as practicable on the terms contemplated by the Transaction
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Agreements and otherwise to minimize the effect of such Law or Regulation on the
Offer, the Merger and the other Transactions.
7.10. Rights Plan. The Board has amended the Rights Agreement so that (i)
none of the execution or delivery of this Agreement or the Stockholders
Agreement or the making of the Offer or the exercise of Purchaser's rights under
the Stockholders Agreement will cause (A) the "Rights" (as defined in the Rights
Agreement) to become exercisable under the Rights Agreement, (B) Parent or
Purchaser or any of their affiliates to be deemed an "Acquiring Person" (as
defined in the Rights Agreement) or (C) the "Stock Acquisition Date" (as defined
in the Rights Agreement) to occur upon any such event, (ii) none of the
acceptance for payment or payment for Shares by Purchaser pursuant to the Offer,
the consummation of the Merger or the exercise of Purchaser's rights under the
Stockholders Agreement will cause (A) the Rights to become exercisable under the
Rights Agreement or (B) Parent or Purchaser or any of their affiliates to be
deemed an Acquiring Person or (C) the Stock Acquisition Date to occur upon any
such event, and (iii) the "Expiration Date" (as defined in the Rights Agreement)
shall occur no later than immediately prior to the purchase of shares pursuant
to the Offer, a copy of which amendment is attached to Section 7.10 of the
Company's Disclosure Letter.
7.11. Employee Benefit Plans. Following the Effective Time, Parent intends
to continue the Benefit Plans until it has evaluated the Benefit Plans, market
conditions and other factors. However, Parent reserves the right to cancel any
and all Benefit Plans at any time, in which event, as to any such cancelled
Benefit Plan, Parent shall grant all employees of the Surviving Corporation and
its Subsidiaries on the date of such cancellation credit for vesting and
eligibility purposes for all service with the Surviving Corporation and any
Subsidiary of the Surviving Corporation prior to the date of such cancellation
under all Benefit Plans of Parent or its Subsidiaries (other than the Surviving
Corporation and its Subsidiaries) in which such employees shall become eligible
to participate as if such service with the Surviving Corporation or any
Subsidiary of the Surviving Corporation and their respective predecessors was
service with Parent or any Subsidiary of Parent (other than the Surviving
Corporation and its Subsidiaries). In the event any severance agreement, program
or policy requires the payment of benefits solely as a result of the
transactions contemplated under agreement, the Company will prior to the Closing
amend such agreement, program or policy to prevent the payment of benefits
solely as a result of the transactions contemplated under this agreement.
7.12. Indemnification of Directors and Officers.
(a) Purchaser agrees that all rights to indemnification or exculpation (to
the extent provided in the certificate of incorporation of the Company) for acts
or omissions occurring prior to the Effective Time in favor of the current or
former directors, officers or employees of the Company and its Subsidiaries as
provided in their respective certificates of incorporation or bylaws shall
survive the Merger and shall continue in full force and effect in accordance
with their terms for a period of six years from the Effective Time. In addition,
until the sixth (6th) anniversary of the Effective Time, Parent shall cause the
Surviving Corporation to maintain in effect with respect to matters occurring
prior to the Effective Time, to the extent available at less than 300% of
current premiums, the policies of directors' and officers' liability insurance
currently maintained by the Company (or policies substantially similar in amount
and coverage) or, in the alternative, may cause similar coverage to be included
in Parent's directors' and officers' liability coverage (if available). The
Company shall not increase, amend or change any rights to indemnification or
exculpation after the date hereof.
(b) If any claims for indemnification as provided in subparagraph (a) above
cannot be satisfied by the Surviving Corporation (through its own means and/or
directors' and officers' liability insurance) and the Surviving Corporation has
distributed assets to Parent or any of Parent's Affiliates or has otherwise
transferred any assets to or for the benefit of Parent or any of Parent's
affiliates (whether by loan, asset sale or otherwise), then Parent shall be
liable for such unsatisfied indemnification claims to the extent of up to the
fair market value of any such distributions or transfers (less, in the case of
any transfer, the fair market value of any consideration received by the Company
in such transfer).
(c) If any claim or claims shall, subsequent to the Effective Time and
within six years thereafter, be made in writing against any present or former
director, officer or employee of the Company based on or arising
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<PAGE> 29
out of the services of such Person prior to the Effective Time in the capacity
of such Person as a director, officer or employee of the Company (and such
director, officer or employee shall have given Parent written notice of such
claim or claims within such six year period), the provisions of subsection (a)
of this Section respecting the rights to indemnity for current or former
directors, officers or employees under the certificate of incorporation and
bylaws of the Company and its Subsidiaries shall continue in effect until the
final disposition of all such claims.
(d) Notwithstanding anything to the contrary in this Section 7.12, neither
Parent nor the Surviving Corporation shall be liable for any settlement effected
without its written consent, which shall not be unreasonably withheld.
7.13. Event Notices and Other Actions.
(a) From and after the date of this Agreement until the Effective Time,
each party hereto shall promptly notify the other parties hereto of (i) the
occurrence or nonoccurrence of any event, the occurrence or nonoccurrence of
which has resulted in, or could reasonably be expected to result in, any
condition to the Offer set forth in Annex B, or any condition to the Merger set
forth in Article VIII, not being satisfied, (ii) the failure of such party to
comply with any covenant or agreement to be complied with by it pursuant to this
Agreement which has resulted in, or could reasonably be expected to result in,
any condition to the Offer set forth in Annex B, or any condition to the Merger
set forth in Article VIII, not being satisfied and (iii) any representation or
warranty made by it contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect. No delivery of any notice pursuant to this
Section 7.13(a) shall cure any breach of any representation or warranty of such
party contained in this Agreement or otherwise limit or affect the remedies
available hereunder to the party or parties receiving such notice.
(b) The Company and Parent shall not, and shall not permit any of their
respective Subsidiaries to, take any action or nonaction that would, or that
could reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that is qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that is not so qualified becoming untrue in any material respect or (iii) except
as otherwise permitted by Section 7.3, any condition to the Offer set forth in
Annex B, or any condition to the Merger set forth in Article VIII, not being
satisfied.
7.14. Third Party Standstill Agreements; Tortious Interference. During the
period from the date of this Agreement through the Effective Time, the Company
shall not terminate, amend, modify or waive any provision of any confidentiality
or standstill or similar agreement to which the Company or any of its
Subsidiaries is a party (other than any involving Parent or customary
confidentiality agreements with customers, suppliers and other third parties in
the ordinary course of business provided that no such terminations, amendments,
modifications or waivers shall, individually or in the aggregate have a Material
Adverse Effect on the Company). Subject to the foregoing, during such period,
the Company agrees to enforce, to the fullest extent permitted under applicable
Law, the provisions of any such agreements, including obtaining injunctions to
prevent any breaches of such agreements and to use all reasonable efforts to
enforce specifically the terms and provisions thereof in any Court of the United
States or any state thereof having jurisdiction. Notwithstanding the foregoing,
nothing in this Section 7.14 is intended to prevent the Company from exercising
its rights under Section 7.3 in accordance with the provisions of Section 7.3.
7.15. Payment of Certain Fees. Upon consummation of the Merger, Parent
shall cause the Surviving Corporation to promptly (but no later than two (2)
Business days following such consummation) pay any fees and expenses owed to the
Financial Advisor.
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ARTICLE VIII
CLOSING CONDITIONS
8.1. Closing Conditions. The obligations of each party to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote of the stockholders of the Company, if required by
applicable Law.
(b) No Court of competent jurisdiction or Governmental Authority shall
have enacted, issued, promulgated, enforced or entered any Law or Order
(whether temporary, preliminary or permanent) which is in effect and which
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(c) The applicable waiting period under the HSR Act shall have expired
or been terminated.
(d) The Purchaser, Parent or their Affiliates shall have accepted for
payment and purchased shares of Company Common Stock pursuant to and
subject to the conditions of the Offer.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. Termination. This Agreement may be terminated and the Offer and the
Merger may be abandoned at any time (notwithstanding approval of the Merger by
the stockholders of the Company) prior to the Effective Time:
(a) by mutual written consent of Parent, Purchaser and the Company;
(b) by Parent, Purchaser or the Company if any Court of competent
jurisdiction or other Governmental Authority shall have issued a final
Order or taken any other final action restraining, enjoining or otherwise
prohibiting the consummation of the Offer or the Merger and such Order or
other action is or shall have become nonappealable;
(c) by Parent or Purchaser if due to an occurrence or circumstance
which would result in a failure to satisfy any of the conditions set forth
in Annex B hereto, Purchaser shall have (i) failed to commence the Offer
within the time required by Regulation 14D under the Exchange Act, (ii)
terminated the Offer without purchasing any shares of Company Common Stock
pursuant to the Offer or (iii) failed to accept for payment shares of
Company Common Stock pursuant to the Offer prior to May 1, 2000 (the
"Termination Date");
(d) by the Company if (i) there shall not have been (x) any breach or
breaches of any representation or warranty or (y) any breach or breaches of
a covenant or agreement on the part of the Company under this Agreement
that, individually or in the aggregate, materially adversely affect (or
materially delay) the consummation of the Offer and Purchaser shall have
(A) failed to commence the Offer within the time required by Regulation 14D
under the Exchange Act, (B) terminated the Offer without purchasing any
shares of Company Common Stock pursuant to the Offer or (C) failed to
accept for payment shares of Company Common Stock pursuant to the Offer
prior to the Termination Date, or (ii) prior to the payment for shares of
Company Common Stock pursuant to the Offer, concurrently with the execution
of an Acquisition Agreement under the circumstances permitted by Section
7.3; provided that such termination under this clause (ii) shall not be
effective unless the Company and the Board of Directors of the Company
shall have complied with all their obligations under Section 7.3 and until
payment of the Termination Fee pursuant to Section 9.5(b);
(e) by Parent or Purchaser prior to the purchase of shares of Company
Common Stock pursuant to the Offer, if (i) Purchaser shall be entitled to
terminate the Offer pursuant to paragraph (b)(i) of Annex B, (ii) there
shall have been any breach of any covenant or agreement on the part of the
Company under this Agreement which materially adversely affects (or
materially delays) the consummation of the
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Offer, which shall not have been cured prior to the earlier of (A) 10 days
following notice of such breach and (B) two Business Days prior to the date
on which the Offer expires, provided, however, that the Company shall have
no right to cure a breach of Section 7.3, (iii) the Board of Directors of
the Company or any committee thereof shall have withdrawn or modified
(including by amendment of Schedule 14D-9) in a manner adverse to Purchaser
its approval or recommendation of the Offer, the Merger or this Agreement
or shall have recommended to the Company's stockholders a Third Party
Acquisition, or (iv) there shall not have been validly tendered and not
withdrawn prior to the expiration of the Offer at least a majority of the
Fully Diluted Shares; or
(f) by the Company prior to the purchase of any shares of Company
Common Stock pursuant to the Offer if (i) there shall have been a breach of
any representation or warranty in this Agreement on the part of Parent or
Purchaser which materially adversely affects (or materially delays) the
consummation of the Offer or the Merger or (ii) there shall have been a
breach of any covenant or agreement in this Agreement on the part of Parent
or Purchaser which materially adversely affects (or materially delays) the
consummation of the Offer or the Merger which shall not have been cured
prior to the earliest of (A) 10 days following notice of such breach and
(B) two Business Days prior to the date on which the Offer expires.
9.2. Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 9.1, this Agreement shall forthwith become
void and have no effect, without any liability on the part of any party hereto
or its Affiliates, directors, officers or stockholders, other than the
provisions of this Section 9.2 and Sections 5.19, 6.7, 7.5 and 9.5 and Article X
and the Confidentiality Agreement. Nothing contained in this Section 9.2 shall
relieve any party from liability for any antecedent breach of this Agreement.
9.3. Amendment. This Agreement may be amended by action taken by the
Company, Parent and Purchaser at any time before or after any adoption of this
Agreement by the stockholders of the Company (whether or not such adoption is
required); provided that after the date of adoption of this Agreement by the
stockholders of the Company, no amendment shall be made that by Law requires
further approval of such stockholders without the approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all the parties.
9.4. Extension; Waiver. At any time prior to the Effective Time, a party
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions of the other parties hereto
contained herein; provided that after the date of adoption of the Merger by the
stockholders of the Company, no extensions or waivers shall be made that by Law
requires further approval by such stockholders without the approval of such
stockholders. Any agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
9.5. Fees, Expenses and Other Payments.
(a) Except as provided in Section 9.5(b) of this Agreement, all fees and
expenses incurred by the parties hereto shall be borne solely and entirely by
the party which has incurred such fees and expenses.
(b) If:
(i) Parent or Purchaser terminates this Agreement pursuant to Section
9.1(e)(i) (other than a termination resulting from an event or circumstance
that causes a Material Adverse Effect with respect to the Company after the
date of this Agreement, which event or circumstance was not caused by the
willful or intentional action or inaction by the Company) or pursuant to
Section 9.1(e) (ii) (other than as a result of a breach of Section 7.3),
and in any such case, any proposal for a Third Party Acquisition shall have
been made on or prior to the date of such termination and in any such case,
within 12 months thereafter the Company enters into an agreement with
respect to the consummation of a Third Party Acquisition or a Third Party
Acquisition is otherwise consummated;
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(ii) Parent or Purchaser terminates this Agreement pursuant to Section
9.1(e)(ii) as a result of a breach of Section 7.3 or pursuant to Section
9.1(e)(iii); or
(iii) the Company terminates this Agreement pursuant to Section
9.1(d)(ii); or
(iv) if Parent or Purchaser terminates, or does not purchase any
shares of Company Common Stock under, the Offer, and prior to such
termination an Acquisition Proposal is publicly announced, and within
twelve (12) months after such termination, the transactions contemplated by
such Acquisition Proposal (as may be modified or amended) are consummated;
then, in each case, the Company shall pay to Parent, within two Business
Days following the execution and delivery of such agreement or such
occurrence, as the case may be, or simultaneously with such termination
pursuant to Section 9.1(d)(ii), a fee, in cash, of $3 million (the
"Termination Fee).
(c) Any payment required to be made pursuant to Section 9.5(b) of this
Agreement shall be made to Parent by wire transfer of immediately available
funds to an account designated by Parent.
ARTICLE X
GENERAL PROVISIONS
10.1. Nonsurvival of Representations, Warranties and Agreements. None of
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 10.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time.
10.2. Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given upon
receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses or sent by electronic transmission to the telecopier number specified
below:
(a) If to either of the Parent Companies:
Solution 6 Holdings Limited
Town Hall House
Level 21, 456 Kent Street
Sydney, New South Wales,
Australia 2000
Attention: Thomas A. Montgomery
Telecopier No.: 011-612-9278-0702
with a copy to:
Jackson Walker L.L.P.
901 Main Street, Suite 6000
Dallas, Texas 75202
Attention: Richard F. Dahlson
Telecopier No.: (214) 953-6187
(b) If to the Company:
Elite Information Group, Inc.
5100 West Gold Leaf Circle
Los Angeles, California 90056
Attention: Christopher K. Poole
Telecopier No.: (323) 292-3975
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with a copy to:
Robinson Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attention: Patrick S. Bryant
Telecopier No.: (704) 378-4000
or to such other address or telecopier number as any party may, from time to
time, designate in a written notice given in a like manner. Notice given by
telecopier shall be deemed received on the day the sender receives telecopier
confirmation that such notice was received at the telecopier number of the
addressee. Notice given by mail as set out above shall be deemed received three
days after the date the same is postmarked.
10.3. Headings. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
10.4. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the Transactions is not affected in any manner materially adverse to any party.
Upon such determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner to the end that transactions
contemplated hereby are fulfilled to the extent possible.
10.5. Entire Agreement. This Agreement (together with the Annexes, the
Company's Disclosure Letter, the Confidentiality Agreement and the other
Transaction Agreements) constitutes the entire agreement of the parties, and
supersedes all prior agreements and undertakings, both written and oral, among
the parties, with respect to the subject matter hereof.
10.6. Assignment. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement shall be assigned, in whole or in part, by
operation of Law or otherwise by any of the parties without the prior written
consent of the other parties, except that Purchaser may assign, in its sole
discretion, any of or all its rights (including the right to purchase Shares in
the Offer), interests and obligations under this Agreement to Parent or to an
Affiliate of Parent, but no such assignment shall relieve Purchaser of any of
its obligations under this Agreement. Any attempted assignment in violation of
this Section 10.06 shall be void. Subject to the preceding sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
10.7. Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and its successors and permitted
assigns, and, except as provided in Article III, Article IV and Section 7.12
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other Person any rights, benefits or remedies or any nature whatsoever
under or by reason of this Agreement.
10.8. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right.
10.9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW.
10.10. Enforcement. The parties agree that irreparable damage would occur
in the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent
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<PAGE> 34
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any Delaware state court or any Federal court located in
the State of Delaware, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any Delaware state
court or any Federal court located in the State of Delaware in the event any
dispute arises out of this Agreement or any transaction contemplated by this
Agreement (and Parent agrees that promptly after the date hereof, Parent will
appoint CT Corporation as agent for service of process in Delaware for such
purpose), (b) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, (c)
agrees that it will not bring any action relating to this Agreement or any
transaction contemplated by this Agreement in any court other than any Delaware
state court or any Federal court sitting in the State of Delaware and (d) waives
any right to trial by jury with respect to any action related to or arising out
of this Agreement or any transaction contemplated by this Agreement. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of Delaware or of the United
States of America located in the State of Delaware, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
10.11. Counterparts. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by their respective officers or
directors thereunto duly authorized.
SOLUTION 6 HOLDINGS LIMITED.
By: /s/ THOMAS A. MONTGOMERY
----------------------------------
Name: Thomas A. Montgomery
------------------------------------
Title: CEO
------------------------------------
ELITE INFORMATION GROUP, INC.
By: /s/ CHRISTOPHER K. POOLE
----------------------------------
Name: Christopher K. Poole
------------------------------------
Title: CEO
------------------------------------
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ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings set
forth below unless the context shall otherwise require:
"Acquisition Agreement" shall have the meaning ascribed to such term in
Section 7.3(b).
"Acquisition Proposal" shall have the meaning ascribed to such term in
Section 7.3(d).
"Affiliate" shall mean, with respect to any Person, any other Person that
controls, is controlled by or is under common control with the former Person.
"Agreement" shall mean the Agreement and Plan of Merger dated as of
December 14, 1999 among Parent, Purchaser and the Company, including any
amendments thereto and each Annex (including this Annex A) and Schedule thereto
(including the Company's Disclosure Letter).
"Balance Sheet Date" shall mean November 30, 1999.
"Benefit Plans" shall mean any employee pension benefit plan (whether or
not insured), as defined in Section 3(2) of ERISA, any employee welfare benefit
plan (whether or not insured) as defined in Section 3(1) of ERISA, any plans
that would be employee pension benefit plans or employee welfare benefit plans
if they were subject to ERISA, such as foreign plans and plans for directors,
any employment contracts, severance or termination pay arrangements, any stock
bonus, stock ownership, stock option, stock purchase, stock appreciation rights,
phantom stock or other stock plan (whether qualified or nonqualified), and any
bonus or incentive compensation plan sponsored, maintained or contributed to by
the Company or any of its Subsidiaries for the benefit of any of the present or
former directors, officers, employees, agents, consultants or other similar
representatives providing services to or for the Company or any of its
Subsidiaries in connection with such services or any such plans which have been
so sponsored, maintained, or contributed to within six years prior to the date
of this Agreement (however, as to employment contracts, and severance or
termination pay arrangements, only as to those that are currently in effect);
provided, however, that such term shall not include (a) routine employment
policies and procedures developed and applied in the ordinary course of business
and consistent with past practice, including wage, vacation, holiday and sick or
other leave policies, and (b) workers compensation insurance.
"Business Day" means any day other than a day on which banks in New York
are authorized or obligated to be closed.
"Certificate" shall mean an outstanding stock certificate which immediately
prior to the Effective Time represented shares of Company Common Stock.
"Certain Stockholders" shall have the meaning ascribed to such term in the
recitals to the Agreement.
"Certificate of Merger" shall have the meaning ascribed to such term in
Section 3.2.
"Closing" shall have the meaning ascribed to such term in Section 4.4.
"Closing Date" shall mean the date of the Closing as determined pursuant to
Section 4.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
Regulations promulgated thereunder.
"Company" shall mean Elite Information Group, Inc., a Delaware corporation.
"Company Common Stock" shall have the meaning ascribed to such term in the
recitals to the Agreement.
"Company Contract" shall mean all contracts, agreements, arrangements and
understandings to which the Company or any of its Subsidiaries is a party which
fall into any of the following categories: (i) leases; (ii) contracts with
customers (including maintenance agreements) as provided in Section 5.12 of the
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Company's Disclosure Letter or which, as of the date hereof, have a receivable
balance of over $50,000 any portion of which is over 120 days past due, which
contracts are listed on Section A-1 of the Company's Disclosure Letter; (iii)
agreements of resale with third party software providers; (iv) dealer
agreements; (v) the Agreement with Data Fusion Technologies, Inc.; (vi) the
License Support and Maintenance Agreement with Pivotal Corporation and the
Services Agreement with Basys Inc.; (vii) agreements with any employees that
cannot be terminated at will without less than a three-month
severance/termination payment; (viii) agreements entered into since January 1,
1998 involving the sale of any stock and/or all or substantially all of the
assets of the or by the Company or any of its current or former subsidiaries;
(ix) loan agreements; (x) noncompetition agreements; (xi) consulting agreements
(excluding temporary employee agreements and consulting agreements with
installation contractors entered into in the ordinary course of business); or
(xii) agreements with financial advisors.
"Company Option Plans" shall mean the option plans listed in Section 5.3(a)
of the Company's Disclosure Letter.
"Company SEC Documents" shall have the meaning ascribed to such term in
Section 5.7(a).
"Company Stock Options" shall mean stock options granted pursuant to the
Company Option Plans.
"Company Stockholder Approval" shall have the meaning ascribed to such term
in Section 5.4(b).
"Company Stockholders' Meeting" shall have the meaning ascribed to such
term in Section 3.7(b).
"Company's Audited Consolidated Financial Statements" shall mean the
consolidated balance sheets of the Company and its Subsidiaries as of December
31, 1998 and December 31, 1997 and the related consolidated statements of income
and cash flows for the fiscal years ended December 31, 1998, 1997 and 1996,
together with the notes thereto, all as audited by Pricewaterhouse Coopers LLP,
under their report with respect thereto dated February 6, 1999 and included in
the Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998 filed with the SEC.
"Company's Consolidated Financial Statements" shall mean the Company's
Audited Consolidated Financial Statements and the Company's Unaudited
Consolidated Financial Statements.
"Company's Disclosure Letter" shall mean a letter dated the date of the
Agreement delivered by the Company to the Parent Companies concurrently with the
execution of the Agreement, which, among other things, shall identify exceptions
to the Company's representations and warranties contained in Article V and
covenants contained in Article VII by specific section and subsection
references.
"Company's Unaudited Consolidated Financial Statements" shall mean the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
September 30, 1999, and the related consolidated statements of income and cash
flows for the nine-month periods ended September 30, 1999 and September 30,
1998.
"Copyrights" shall have the meanings ascribed to such term in Section 5.18.
"Confidentiality Agreement" shall mean that certain confidentiality
agreement between Parent and the Company entered into in 1999.
"Control Date" shall have the meaning ascribed to such term in Section 2.4.
"Court" shall mean any court of the United States, any foreign country or
any domestic or foreign state, and any political subdivision thereof, or any
arbitration tribunal and shall include the European Court of Justice.
"Current Benefit Plans" shall mean Benefit Plans that are sponsored,
maintained, or contributed to by the Company or any of its Subsidiaries as of
the date of this Agreement.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Dissenting Shares" shall have the meaning ascribed to such term in Section
4.3.
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"Effective Time" shall mean the date and time of the completion of the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with Section 3.2 or such later time as Parent and the
Company may agree and specify in such certificate.
"Environmental Law or Laws" shall mean any and all Laws, enforceable
requirements or Orders of any Governmental Authority pertaining to health or the
environment currently in effect and applicable to a specified Person and its
Subsidiaries, including the Clean Air Act, as amended, the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), as
amended, the Federal Water Pollution Control Act, as amended, the Occupational
Safety and Health Act of 1970, as amended, the Resource Conservation and
Recovery Act of 1976 ("RCRA"), as amended, the Hazardous & Solid Waste
Amendments Act of 1984, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
the Oil Pollution Act of 1990, as amended ("OPA"), any state or local Laws
implementing the foregoing federal Laws, and all other environmental
conservation or protection Laws. For purposes of the Agreement, the terms
"hazardous substance" and "release" have the meanings specified in CERCLA;
provided, however, that, to the extent the Laws of the state or locality in
which the property is located establish a meaning for "hazardous substance" or
"release" that is broader than that specified in CERCLA, such broader meaning
shall apply within the jurisdiction of such state or locality, and the term
"hazardous substance" shall include all dehydration and treating wastes, waste
(or spilled) oil, and waste (or spilled) petroleum products, by-products and
derivatives thereof, polychlorinated biphenyls, asbestos, and radioactive
material, even if such are specifically exempt from classification as hazardous
substances or hazardous wastes pursuant to CERCLA or RCRA or the analogous
statutes of any jurisdiction applicable to the specified Person or its
Subsidiaries or any of their respective properties or assets.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the Regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, and the
Regulations promulgated thereunder.
"Exchange Fund" shall mean the fund of cash deposited with the Paying Agent
pursuant to Section 4.2.
"Expenses" shall have the meaning ascribed to such term in the Option
Agreement.
"Filed Company SEC Documents" shall have the meaning ascribed to such term
by Section 5.9.
"Financial Advisor" shall mean Volpe Brown Whelan & Company, LLC, the
financial advisor to the Company with respect to the Transactions.
"Fully Diluted Shares" shall have the meaning ascribed to such term in
Annex B.
"GAAP" shall mean accounting principles generally accepted in the United
States consistently applied by a specified Person.
"Governmental Authority" shall mean any governmental agency or authority
(other than a Court) of the United States, any foreign country, or any domestic
or foreign state, and any political subdivision or agency thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the Regulations promulgated thereunder.
"Independent Directors" shall have the meaning ascribed to such term in
Section 2.4.
"Intellectual Property" shall have the meaning ascribed to such term in
Section 5.18.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean, with respect to either the Company or Parent, the
actual knowledge (after reasonable inquiry) of: (i) in the case of the Company,
Christopher K. Poole, Barry Emerson, Steven Todd and Mark Goldin; and, (ii) in
the case of Parent, any executive officer of Parent.
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"Laws" shall mean all laws, statutes, ordinances and Regulations of the
United States, any foreign country, or any domestic or foreign state, and any
political subdivision or agency thereof, including all decisions of Courts
having the effect of Law in each such jurisdiction.
"Leaseholds" shall mean, with respect to any Person, all the right, title
and interest of such Person as lessee or licensee, in, to and under leases,
licenses, improvements and/or fixtures.
"Licenses-In" shall have the meaning ascribed to such term in Section 5.18.
"Licenses-Out" shall have the meaning ascribed to such term in Section
5.18.
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing), any conditional sale or other title retention agreement, any lease
in the nature thereof or the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction.
"Material" shall mean is or will be material to the business, properties,
assets, condition (financial and other) or results of operations of a specified
Person and its Subsidiaries, if any, taken as a whole.
"Material Adverse Effect" shall mean any change or effect that is material
and adverse to the business, properties, assets, condition (financial and other)
or results of operations of a specified Person and its Subsidiaries, if any,
taken as a whole, including a material adverse effect on the ability of a
specified Person to perform its obligations under each Transaction Agreement to
which it is a party, other than any such effect arising out of or resulting
from, in the case of a determination with respect to the Company and its
Subsidiaries (i) changes in general economic conditions, (ii) general changes or
developments in the industries in which the Company and its Subsidiaries operate
and (iii) facts or events that are primarily and directly attributable to the
announcement of this Agreement and the Transactions.
"Material Business" shall have the meaning ascribed to such term in Section
7.3(d).
"Material Contract" shall mean any Company Contract, except with respect to
contracts with customers, only if such contract is not commercially reasonable
or not consistent with past practices.
"Merger" shall have the meaning ascribed to such term in Section 3.1.
"Merger Consideration" shall mean, as to any Certificate, the amount to be
paid to the holder thereof pursuant to the Merger, which amount shall be equal
to the product of the number of shares of Company Common Stock evidenced by such
Certificate, multiplied by the Per Share Merger Consideration.
"Minimum Tender Condition" shall have the meaning ascribed to such term in
Annex B.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Offer" shall have the meaning ascribed to such term in the recitals to the
Agreement.
"Offer Closing Date" shall mean the date on which the acceptance for
payment and payment by Purchaser for shares of Company Common Stock tendered
pursuant to the Offer occurs.
"Offer Documents" shall have the meaning ascribed to such term in Section
2.1(c).
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Parent" shall mean Solution 6 Holdings Limited, a New South Wales,
Australia corporation.
"Parent Companies" shall have the meaning ascribed to such term in the
first paragraph of the Agreement.
"Patents" shall have the meaning ascribed to such term in Section 5.18.
"Paying Agent" shall mean a bank or trust company designated and appointed
by Parent to act in the capacities required thereof under Section 4.2.
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"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Per Share Merger Consideration" shall have the meaning ascribed to such
term in Section 4.01(a).
"Permits" shall mean any and all permits, licenses, authorizations, orders,
certificates, registrations or other approvals granted by any Governmental
Authority.
"Permitted Lien" shall mean (i) Liens for taxes not yet due and payable or
which are being contested in good faith and by appropriate proceedings, (ii)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which are less than $10,000 in
amount and which are being contested in good faith by appropriate proceedings,
or (iii) easements, rights-of-way, encroachments, restrictions, conditions and
other similar encumbrances incurred or suffered in the ordinary course of
business and which, individually or in the aggregate (A) are not substantial in
character, amount or extent in relation to the applicable real property and (B)
do not materially detract from the use, utility or value of the applicable real
property or otherwise materially impair the Company's present business
operations at such location.
"Person" shall mean an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association or
unincorporated organization, or any other form of business or professional
entity, but shall not include a Governmental Authority.
"Proprietary Information" shall have the meaning ascribed to such term in
Section 5.18.
"Proxy Statement" shall mean a proxy statement conforming to the
requirements of the Exchange Act and relating to the adoption of this Agreement
by the Company's stockholders, if such adoption is required by Law.
"Purchaser" shall mean EIG Acquisition Corp., a Delaware corporation and a
wholly owned Subsidiary of Parent.
"Qualifying Proposal" shall have the meaning ascribed to such term in
Section 7.3(d).
"Regulation" shall mean any rule or regulation of any Governmental
Authority having the effect of Law.
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority (other than the SEC).
"Representatives" shall have the meaning ascribed to such term in Section
7.3(a).
"Restricted Stock" shall have the meaning ascribed to such term in Section
3.6(a).
"Schedule 14D-1" shall have the meaning ascribed to such term in Section
2.1(c).
"Schedule 14D-9" shall have the meaning ascribed to such term in Section
2.2.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall mean all of the following filings since December 1,
1996: (a) all Annual Reports on Form 10-K, (b) all Quarterly Reports on Form
10-Q, (c) all proxy statements relating to meetings of stockholders (whether
annual or special), (d) all Current Reports on Form 8-K and (e) all other
reports, schedules, registration statements or other documents required to be
filed during a specified period by a Person with the SEC pursuant to the
Securities Act or the Exchange Act.
"Section 262" shall have the meaning ascribed to such term in Section 4.3.
"Securities Act" shall mean the Securities Act of 1933 and the Regulations
promulgated thereunder.
"Software" shall have the meaning ascribed to such term in Section 5.18.
"Stockholders Agreement" shall have the meaning ascribed to such term in
the recitals to this Agreement.
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A "Subsidiary" of a specified Person shall mean any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
Subsidiary) owns, directly or indirectly, 50% or more of the stock or other
equity or partnership interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation or other legal entity.
"Surviving Corporation" shall mean the Company as the corporation surviving
the Merger.
"Tax" or "Taxes" shall mean all Federal, state, county, local, municipal,
foreign and other taxes, assessments, duties or similar charges of any kind
whatsoever, including all corporate franchise, income, sales, use, ad valorem,
receipts, value added, profits, license, withholding, payroll, employment,
excise, premium, property, customs, net worth, capital gains, transfer, stamp,
documentary, social security, environmental, alternative minimum, occupation,
recapture and other taxes, and including all interest, penalties and additions
imposed with respect to such amounts, and all amounts payable pursuant to any
agreement or arrangement with respect to Taxes.
"Taxing Authority" shall mean any domestic, foreign, federal, national,
state, county or municipal or other local government, any subdivision, agency,
commission or authority thereof, or any quasi-governmental body exercising tax
regulatory authority.
"Tax Return" or "Tax Returns" shall mean all returns, declarations of
estimated tax payments, reports, estimates, information returns and statements,
including any related or supporting information with respect to any of the
foregoing, filed or to be filed with any Taxing Authority in connection with the
determination, assessment, collection or administration of any Taxes.
"Terminated Benefit Plans" shall mean Benefit Plans that were sponsored,
maintained, or contributed to by the Company or any of its Subsidiaries within
six years prior to the date of the Agreement but which have been terminated
prior to the date of the Agreement.
"Termination Date" shall have the meaning ascribed to such term in Section
9.1(c).
"Termination Fee" shall have the meaning ascribed to such term in Section
9.5(b).
"Third Party Acquisition" shall mean (a) the acquisition of the Company by
merger, consolidation, share exchange, recapitalization, liquidation,
dissolution, business combination or other similar transaction by any Person
(which includes for these purposes a "person" as defined in Section 13(d)(3) of
the Exchange Act) other than Parent, Purchaser or any Affiliate thereof (a
"Third Party"); (b) the acquisition by a Third Party of more than 50% of the
assets of the Company and its Subsidiaries, taken as a whole; (c) the
acquisition by a Third Party of 50% or more of the outstanding Company Common
Stock or 50% or more of the aggregate ordinary voting power represented by the
issued and outstanding capital stock of the Company; (d) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; or (e) the purchase by the Company or any of its
Subsidiaries of more than 30% of the outstanding shares of Company Common Stock.
"Trademarks" shall have the meaning ascribed to such term in Section 5.18.
"Transaction Agreements" shall mean, collectively, the Agreement and the
Stockholders Agreement.
"Transactions" shall mean, collectively, the transactions contemplated by
the Transaction Agreements.
"Voting Company Debt" shall have the meaning ascribed to such term in
Section 5.3(e).
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ANNEX B
CONDITIONS OF THE OFFER
(a) Notwithstanding any other term of the Offer or the Agreement, Purchaser
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered shares of
Company Common Stock promptly after the termination or withdrawal of the Offer),
to pay for any shares of Company Common Stock tendered pursuant to the Offer
unless (i) there shall have been validly tendered and not withdrawn prior to the
expiration of the Offer that number of shares of Company Common Stock which
would represent at least a majority of the Fully Diluted Shares (the "Minimum
Tender Condition"), (ii) any waiting period under the HSR Act applicable to the
purchase of shares of Company Common Stock pursuant to the Offer shall have
expired or been terminated; and (iii) [the Company has amended its Rights Plan
so that the stockholders' rights under the Rights Plan are not triggered by the
Offer or the Agreement. The term "Fully Diluted Shares" means all outstanding
securities entitled generally to vote in the election of directors of the
Company on a fully diluted basis, after giving effect to the exercise or
conversion of all options, warrants, rights and securities exercisable or
convertible into such voting securities.
(b) Furthermore, notwithstanding any other term of the Offer or the
Agreement, Purchaser shall not be required to commence the Offer, accept for
payment or, subject as aforesaid, pay for any shares of Company Common Stock not
theretofore accepted for payment or paid for, and may terminate or amend the
Offer, (i) with the consent of the Company or (ii) if, at any time on or after
the date of the Agreement and before the acceptance of such shares for payment
or the payment therefor, any of the following conditions exists:
(i) any representation and warranty of the Company in this Agreement
that is qualified as to materiality shall not be true and correct or any
such representation and warranty that is not so qualified shall not be true
and correct in any material respect, as of the date of the Agreement and as
of such time, except to the extent such representation and warranty
expressly relates to an earlier date (in which case on and as of such
earlier date);
(ii) the Company shall have breached any of its covenants or
agreements contained in the Agreement which breaches, individually or in
the aggregate, materially adversely affects (or materially delays) the
consummation of the Offer (it being understood that a breach of Section
7.13 of the Agreement shall not result in a failure of this condition to be
satisfied unless such breach results in the failure of the condition
specified in paragraph (i) above);
(iii) there shall be threatened or pending any suit, action or
proceeding by any Governmental Authority, or any suit, action or proceeding
brought by any other Person that has a reasonable likelihood of success,
(A) challenging the acquisition by Parent or Purchaser of any Company
Common Stock, seeking to restrain or prohibit the making or consummation of
the Offer or the Merger, or seeking to obtain from the Company, Parent or
any of their respective Subsidiaries or Affiliates any damages in an amount
that would result in a Material Adverse Effect in respect of the Company,
taken as a whole, and in the case of Parent or any of its Subsidiaries or
Affiliates relating to the Transaction, (B) seeking to prohibit or limit
the ownership or operation by the Company, Parent or any of their
respective Subsidiaries or Affiliates of any Material portion of the
business or assets of the Company, Parent or any of their respective
Subsidiaries or Affiliates, or to compel the Company, Parent or any of
their respective Subsidiaries or Affiliates to dispose of or hold separate
any Material portion of the business or assets of the Company, Parent or
any of their respective Subsidiaries or Affiliates, as a result of the
Offer, the Merger or any of the other Transactions or (C) which otherwise
is reasonably likely to have a Material Adverse Effect on the Company;
(iv) there shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction threatened, proposed, sought,
enacted, entered, enforced, promulgated, amended or issued with respect to,
or deemed applicable to, or any consent or approval withheld with respect
to, (A) Parent, the Company or any of their respective Subsidiaries or
Affiliates or (B) the Offer or the Merger by any
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Governmental Authority that has or is reasonably likely to result, directly
or indirectly, in any of the consequences referred to in paragraph (iii)
above;
(v) since the date of the Agreement there shall have occurred any
event, change, effect or development that, individually or in the
aggregate, has had or is reasonably likely to have, a Material Adverse
Effect on the Company;
(vi) there shall have occurred and be continuing (A) any general
suspension of trading in, or limitation on prices for, securities on any
national securities exchange or in the over-the-counter market in the
United States or in Australia (excluding any coordinated trading halt
triggered solely as a result of a specified decrease in a market index),
(B) a declaration of a banking moratorium by any Governmental Authority or
any suspension of payments by any Governmental Authority in respect of
banks in the United States or in Australia, (C) any general limitation
(whether or not mandatory) by any Governmental Authority in the United
States or in Australia on the extension of credit by banks or other lending
institutions or (D) in the case of any of the foregoing existing on the
date of the Agreement, a material acceleration or worsening thereof;
(vii) any Person (which includes a "person" as such term is defined in
Section 13(d)(3) of the Exchange Act) other than Purchaser, any of its
Affiliates, or any group of which any of them is a member shall have
acquired beneficial ownership of more than 20% of the outstanding shares of
Company Common Stock or shall have entered into a definitive agreement or
an agreement in principle with the Company with respect to a tender offer
or exchange offer for any shares of Company Common Stock or a merger,
consolidation or other business combination with or involving the Company
or any of its Subsidiaries;
(viii) the Agreement shall have been terminated in accordance with its
terms; which, in the sole judgment of Purchaser or Parent, in any such
case, and regardless of the circumstances giving rise to any such condition
(including any action or inaction by Parent or any of its Affiliates),
makes it inadvisable to proceed with such acceptance for payment or
payment.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to such condition or may be waived by Purchaser and Parent in whole
or in part at any time and from time to time in their sole and reasonable
judgment; provided that the Minimum Tender Condition may be waived or modified
only by the mutual written consent of Purchaser and the Company. The failure by
Parent, Purchaser or any other Affiliate of Parent at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such right, the
waiver of any such right with respect to particular facts and circumstances
shall not be deemed a waiver with respect to any other facts and circumstances
and each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
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EXHIBIT 99.2
STOCKHOLDERS AGREEMENT
This Stockholders Agreement, dated as of December 14, 1999, is by and among
Solution 6 Holdings, Limited, a New South Wales, Australia corporation
("Parent"), EIG Acquisition Corp., a Delaware corporation and an indirect
wholly-owned subsidiary of Parent ("Purchaser"), and the persons listed on
Schedule A hereto (each a "Stockholder" and, collectively, the "Stockholders").
WHEREAS, concurrently with the execution of this Agreement, Parent,
Purchaser and Elite Information Group, Inc., a Delaware corporation (the
"Company"), are entering into an Agreement and Plan of Merger, dated as of the
date hereof (as the same may be amended or supplemented, the "Merger Agreement";
terms used but not defined herein have the meanings set forth in the Merger
Agreement), providing for the making of a cash tender offer (as such offer may
be amended from time to time as permitted under the Merger Agreement, the
"Offer") by Purchaser for shares of Common Stock, par value $.01 per share, of
the Company (the "Common Stock") and the merger of the Company and Purchaser
(the "Merger");
WHEREAS, each Stockholder is the beneficial owner of the shares of Common
Stock set forth opposite such Stockholder's name on Schedule A hereto; such
shares of Common Stock, as such shares may be adjusted by stock dividend, stock
split, recapitalization, combination or exchange of shares, merger,
consolidation, reorganization or other change or transaction of or by the
Company, together with shares of Common Stock that may be acquired after the
date hereof by such Stockholder, including shares of Common Stock issuable upon
the exercise of options to purchase Common Stock (as the same may be adjusted as
aforesaid), being collectively referred to herein as the "Shares" of such
Stockholder;
WHEREAS, pursuant to the Merger Agreement, the Company has irrevocably
approved the granting of the options to purchase Common Stock granted herein by
the Stockholders and the purchase of such Common Stock by the Purchaser upon
exercise of such options for purposes of Section 203 of Delaware General
Corporation Law and has irrevocably excepted such grants and purchases from the
definition of "acquiring person" and/or "triggering event" and terms of similar
import contained in the Company's Rights Plan; and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Purchaser have requested that the Stockholders enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Purchaser to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. Agreement to Sell; Tender.
(a) Subject to Section 8 below, as promptly as practicable following the
expiration of the Offer (but in no event later than 10:00 a.m., New York City
time, on the Business Day immediately after such expiration), each Stockholder
hereby severally and not jointly agrees to sell to Purchaser, and Purchaser
agrees to purchase, all the Shares owned by such Stockholder not tendered
pursuant to Section 1(b) at a price per Share equal to the price per Share paid
by Purchaser in the Offer (the "Offer Price"). The obligations of each
Stockholder to sell its Shares pursuant to this Section 1(a) is conditioned upon
Purchaser purchasing shares of Common Stock pursuant to the Offer.
(b) In addition, each Stockholder hereby severally and not jointly agrees
that if such Stockholder is directed to tender the Shares it owns as of the date
hereof and any Shares it may acquire prior to the expiration of the Offer by
Purchaser pursuant to the following sentence, it shall promptly tender all such
Shares in the Offer, and it shall not withdraw any Shares so tendered(it being
understood that the obligation contained in this sentence is unconditional,
subject to Section 8 below). In the event that Purchaser wishes to direct a
Stockholder to tender its Shares, Purchaser shall give written notice to such
Stockholder to such effect and specifying the number (if less than all) of such
Stockholder's Shares. Section 1(a) above shall be deemed satisfied upon
completion of the purchase of such Shares in the Offer.
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(c) In addition, each Stockholder hereby severally and not jointly grants
to Purchaser an irrevocable option (as to each Stockholder, the "Option") to
purchase any of or all the Shares owned by such Stockholder and any of or all
the Shares for which any stock options owned by such Stockholder are then
exercisable on the date the Option is exercised by the Purchaser (on any date,
the "Vested Options") in each case at a price per Share equal to the Offer Price
(less, in the case of Vested Options, the applicable exercise price). The Option
may be exercised at any time and from time to time after the occurrence of an
Exercise Event (as defined below) and on or prior to thirty (30) days following
the occurrence of an Exercise Event. In the event that Purchaser wishes to
exercise the Option as to a Stockholder, Purchaser shall give written notice(the
date of such notice being called the "Notice Date") to such Stockholder and to
the Company specifying the number (if less than all) of such Stockholder's
Shares, including shares of Common Stock underlying Vested Options, and a place,
time and date not later than 10 Business Days from the Notice Date for the
closing of such purchase.
As used herein, an "Exercise Event" means the occurrence of any of the
following events:
(i) at any time prior to termination of the Merger Agreement, any
corporation, partnership, individual, trust, unincorporated association, or
other entity or "person" (as defined in Section 13 (d) (3) of the Exchange
Act), other than purchaser or any of its "affiliates" (as defined in the
Exchange Act) (a "Third Party"), shall have:
(A) commenced or announced an intention to commence a tender offer or
exchange offer for any shares, the consummation of which would result in
"beneficial ownership" (as defined in the Exchange Act) by such Third Party
(together with all such Third Party's affiliates and "associates" (as
defined in the Exchange Act)) of 50% or more of the then outstanding voting
equity of the Company (either on a primary or a fully diluted basis);
(B) acquired beneficial ownership of shares that, when aggregated with
any shares already owned by such Third Party, its affiliates and
associates, would result in the aggregate beneficial ownership by such
Third Party, its affiliates and associates of 10% or more of the then
outstanding voting equity of the Company (either on a primary or a fully
diluted basis); provided, however, that "Third Party" for purposes of this
clause (B) does not include any corporation, partnership, person, other
entity or group that beneficially owns more than 10% of the outstanding
voting equity of the Company (either on a primary or a fully diluted basis)
as of the date hereof and that does not, after the date hereof, increase
such ownership percentage by more than an additional 1% of the outstanding
voting equity of the Company (either on a primary or a fully diluted
basis);
(C) acquired assets constituting 10% or more of the total assets or
earning power of the Company taken as a whole;
(D) entered into an agreement with the Company that contemplates the
acquisition of (x) assets constituting 10% or more of the total assets or
earning power of the Company taken as a whole or (y) beneficial ownership
of 10% or more of the outstanding voting equity of the Company; or
(ii) any event has occurred that would allow the Company or Parent to
terminate the Merger Agreement under circumstances in which Parent may be
or become entitled to a Termination Fee.
2. Representations and Warranties of the Stockholders. Each Stockholder
hereby severally represents and warrants to Parent and Purchaser as
follows:
(a) Such Stockholder has all requisite power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
If such Stockholder is not an individual, the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by such Stockholder. This
Agreement has been duly executed and delivered by such Stockholder and
constitutes a valid and binding obligation of the Stockholder enforceable
against such Stockholder in accordance with its terms, except as the same may be
limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar Laws relating to creditors' rights generally
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<PAGE> 3
and (b) legal principles of general applicability governing the application and
availability of equitable remedies. Except for the expiration or termination of
any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), neither the execution, delivery or
performance of this Agreement by such Stockholder nor the consummation by such
Stockholder of the transactions contemplated hereby will (i) require any filing
with, or permit, authorization, consent or approval of, any Governmental
Authority, (ii) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default under, or give rise to
any right of termination, amendment, cancellation or acceleration under, or
result in the creation of any Lien upon any of the properties or assets of such
Stockholder under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, lease, license, permit, concession, franchise, contract,
agreement or other instrument or obligation (a "Contract") to which such
Stockholder is a party or by which such Stockholder or any of such Stockholder's
properties or assets, including such Stockholder's Shares, may be bound or (iii)
violate any Order (as defined in the Merger Agreement) or any Law applicable to
such Stockholder or any of such Stockholder's properties or assets, including
such Stockholder's Shares, other than, in the case of clause (ii) above, such
items that, individually or in the aggregate, have not and could not reasonably
be expected to have a material adverse effect on the ability of such Stockholder
to perform its obligations under this Agreement.
(b) Such Stockholder's Shares and the certificates representing such Shares
are now, and at all times during the term hereof will be, held by such
Stockholder, or by a nominee or custodian for the benefit of such Stockholder,
and such Stockholder is the legal and beneficial owner of and has good and
marketable title to such Shares, free and clear of any Liens, proxies, voting
trusts or agreements, understandings or arrangements, except for any such Liens
or proxies arising hereunder and Liens described on Schedule B attached hereto.
Notwithstanding anything in this Agreement to the contrary, the obligations of
the Stockholder listed in Schedule B under this Agreement are subject to the
matters set forth on Schedule B attached hereto.
(c) No broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of such Stockholder.
(d) Such Stockholder understands and acknowledges that Parent is entering
into, and causing Purchaser to enter into, the Merger Agreement in reliance upon
such Stockholder's execution and delivery of this Agreement.
3.Representations and Warranties of Parent and the Purchaser. Parent and
the Purchaser hereby represent and warrant to the Stockholders as
follows:
(a) Each of Parent and such Purchaser has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Parent and such Purchaser and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and such Purchaser. This Agreement has
been duly executed and delivered by Parent and such Purchaser and constitutes a
valid and binding obligation of Parent and Purchaser enforceable in accordance
with its terms, except as the same may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar Laws relating
to creditors' rights generally and (ii) legal principles of general
applicability governing the application and availability of equitable remedies.
(b) The Shares will be acquired in compliance with, and such Purchaser will
not offer to sell or otherwise dispose of any Shares so acquired by it in
violation of the registration requirements of, the Securities Act of 1933, as
amended.
4.Covenants of the Stockholders. Each Stockholder severally agrees as
follows:
(a) Such Stockholder shall not, except as contemplated by the terms of this
Agreement, (i) sell, transfer, pledge, assign or otherwise dispose of, or enter
into any Contract, option or other arrangement (including any profit sharing
arrangement) or understanding with respect to the sale, transfer, pledge,
assignment or other disposition of, the Shares to any person other than
Purchaser or Purchaser's designee,
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(ii) enter into any voting arrangement, whether by proxy, voting agreement,
voting trust, power-of-attorney or otherwise, with respect to the Shares or
(iii) take any other action that would in any way restrict, limit or interfere
with the performance of its obligations hereunder or the transactions
contemplated hereby.
(b) Subject to Section 10 below, until the Merger is consummated or the
Merger Agreement is terminated, such Stockholder shall not, nor shall such
Stockholder permit any investment banker, financial adviser, attorney,
accountant or other representative or agent of such Stockholder to, directly or
indirectly (i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed or reasonably likely to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal or (ii)
participate in any discussions or negotiations regarding any Acquisition
Proposal. Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding sentence by an investment banker,
financial advisor, attorney, accountant or other representative or agent of such
Stockholder shall be deemed to be a violation of this Section 4(b) by such
Stockholder.
(c) At any meeting of stockholders of the Company called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval (including by written
consent) with respect to the Merger and the Merger Agreement is sought, such
Stockholder shall vote (or cause to be voted) such Stockholder's Shares in favor
of the Merger, the adoption by the Company of the Merger Agreement and the
approval of the other Transactions (as defined in the Merger Agreement). At any
meeting of stockholders of the Company or at any adjournment thereof or in any
other circumstances upon which the Stockholder's vote, consent or other approval
is sought, the Stockholder shall vote (or cause to be voted) the Stockholder's
Shares against (i) any merger agreement or merger (other than the Merger
Agreement and the Merger), consolidation, combination, sale of substantial
assets, reorganization, recapitalization, dissolution, liquidation or winding up
of or by the Company or any other Acquisition Proposal (collectively,
"Alternative Transactions") or (ii) any amendment of the Company's certificate
of incorporation or bylaws or other proposal or transaction involving the
Company or any of its subsidiaries, which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify the Offer,
the Merger, the Merger Agreement or any of the other Transactions (collectively,
"Frustrating Transactions").
5. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Each Stockholder hereby irrevocably grants to, and appoints, Chris
Tyler and Thomas A. Montgomery and any other individual who shall hereafter be
designated by Parent, and each of them, such Stockholder's proxy and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of such Stockholder, to vote such Stockholder's Shares, or grant a
consent or approval in respect of such Shares, at any meeting of stockholders of
the Company or at any adjournment thereof or in any other circumstances upon
which their vote, consent or other approval is sought, in favor of the Merger,
the adoption by the Company of the Merger Agreement and the approval of the
terms thereof and each of the other transactions contemplated by the Merger
Agreement and against any alternative Transaction or Frustrating Transaction.
(b) Each Stockholder represents that any proxies heretofore given in
respect of such Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(c) Each Stockholder hereby affirms that the irrevocable proxy set forth in
this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Stockholder under this Agreement. Such Stockholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked, subject to Section 8 below. Such Stockholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of the General
Corporation Law of the State of Delaware. Such irrevocable proxy shall be valid
until the termination of this Agreement pursuant to Section 8 below.
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6. Further Assurances. Each Stockholder will, from time-to-time, execute
and deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, consents and other instruments as Parent
or Purchaser may reasonably request for the purpose of effectively carrying out
the transactions contemplated by this Agreement and to vest the power to vote
such Stockholder's Shares as contemplated by Section 5. Parent and Purchaser
jointly and severally agree to use reasonable efforts to take, or cause to be
taken, all actions necessary to comply promptly with all legal requirements that
may be imposed with respect to the transactions contemplated by this Agreement
(including any applicable legal requirements of the HSR Act).
7. Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties without the prior
written consent of the other parties, except that Purchaser may assign, in its
sole discretion, any or all of its rights, interests and obligations hereunder
to Parent or to an Affiliate of Parent, but no such assignment shall relieve
Purchaser of any of its obligations under this Agreement. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of
and be enforceable by, the parties and their respective successors and assigns.
Each Stockholder agrees that this Agreement and the obligations of such
Stockholder hereunder shall attach to such Stockholder's Shares and shall be
binding upon any person or entity to which legal or beneficial ownership of such
Shares shall pass, whether by operation of law or otherwise, including such
Stockholder's heirs, guardians, administrators or successors.
8. Termination. This Agreement shall terminate upon the earlier of (i) the
Effective Time or (ii) the termination of the Merger Agreement in accordance
with its terms, except that, Section 1(c) shall survive any such termination to
the extent provided herein.
9. Stop Transfer. The Company agrees with, and covenants to, Parent and
Purchaser that the Company shall not register the transfer of any certificate
representing any Stockholder's Shares unless such transfer is made in accordance
with the terms of this Agreement.
10. Stockholder Capacity. No person executing this Agreement makes any
agreement or understanding herein in his or her capacity as a director or
officer of the Company or any subsidiary of the Company. Each Stockholder signs
solely in his or her capacity as the beneficial owner of such Stockholder's
Shares and nothing herein shall limit or affect any actions taken by a
Stockholder in its capacity as an officer or director of the Company or any
subsidiary of the Company to the extent specifically permitted by, or
specifically permitted in the Merger Agreement.
11. Performance by Purchaser. Parent covenants and agrees for the benefit
of the Stockholders that it shall cause Purchaser to perform in full each
obligation of Purchaser set forth in this Agreement.
12. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in the
State of Delaware or in any Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (I) consents to submit such party to the personal
jurisdiction of any Federal court located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such party will not
bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court located in the state
of Delaware or a Delaware state court and (iv) waives any right to trial by jury
with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of Delaware or of the United
States of America located in the State of Delaware, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
5
<PAGE> 6
13. General Provisions.
(a) All costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
expense.
(b) This Agreement may not be amended except by an instrument in writing
signed by each of the parties hereto; provided, however, that this Agreement may
be amended without the written agreement of the parties hereto to add additional
persons as "Stockholders" hereunder by execution by such persons of a signature
page hereto, in which event Parent shall amend Schedule A to reflect such
addition.
(c) All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed),
sent by overnight courier (providing proof of delivery) or mailed by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to Parent or Purchaser:
Solution 6 Holdings Limited
Town Hall House
Level 21, 456 Kent Street
Sydney, New South Wales,
Australia 2000
Attention: Thomas A. Montgomery
Telecopier No.: 011-612-9278-0702
with a copy to:
Jackson Walker L.L.P.
901 Main Street
Dallas, Texas 75202
Attention: Richard F. Dahlson
Telecopy No: (214) 953-6187
if to a Stockholder:
to the address set forth under the name
of such Stockholder on Schedule A hereto
with a copy to:
Robinson Bradshaw & Hinson P.A.
101 North Tyson Street, Suite 1900
Charlotte, North Carolina 28246
Attention: Patrick S. Bryant
Telecopier No.: (704) 378-4000
(d) When a reference is made in this Agreement to a Section, such reference
shall be to a Section of this Agreement unless otherwise indicated. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Wherever the words
"include", "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". Words in the singular
include the plural, and words in the plural include the singular.
(e) This Agreement may be executed in multiple counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
(f) This Agreement (including the documents and instruments referred to
herein) (i) constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the
6
<PAGE> 7
parties with respect to the subject matter hereof and (ii) is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
(g) This Agreement shall be governed by, and construed in accordance with,
the Laws of the State of Delaware, regardless of the Laws that might otherwise
govern under applicable principles of conflict of Law.
(h) Except as otherwise required by Law, court process or the rules of a
national securities exchange or the Nasdaq National Market or as contemplated or
provided in the Merger Agreement, for so long as this Agreement is in effect, no
Stockholder shall issue or cause the publication of any press release or other
public announcement with respect to the transactions contemplated by this
Agreement or the Merger Agreement without the consent of Parent, which consent
shall not be unreasonably withheld.
7
<PAGE> 8
IN WITNESS WHEREOF, each of Parent and Purchaser has caused this Agreement
to be signed by its officer or director there unto duly authorized and each
Stockholder has signed this Agreement, all as of the date first written above.
SOLUTION 6 HOLDINGS, LIMITED
By:
/s/ THOMAS A. MONTGOMERY
------------------------------------
Name: Thomas A. Montgomery
------------------------------------
Title: CFO
------------------------------------
EIG ACQUISITION CORP.
By:
/s/ THOMAS A. MONTGOMERY
------------------------------------
Name: Thomas A. Montgomery
------------------------------------
Title: CFO
------------------------------------
STOCKHOLDERS:
See attached signature pages
ACKNOWLEDGED AND AGREED TO AS TO
SECTION 9:
ELITE INFORMATION GROUP, INC.
By:
/s/ CHRISTOPHER K. POOLE
------------------------------------
Name: Christopher K. Poole
------------------------------------
Title: CEO
------------------------------------
8
<PAGE> 9
SIGNATURE PAGE
TO
STOCKHOLDERS AGREEMENT
This Signature Page to the Stockholders Agreement, dated as of December 14,
1999 (the "Agreement"), by and among Solution 6 Holdings, Limited, a New South
Wales, Australia corporation, EIG Acquisition Corp., a Delaware corporation, and
certain other persons, is hereby executed by the undersigned as a "Stockholder"
thereunder as of the date first set forth above.
PAR Investment Partners, L.P.
By: PAR Group, L.P., General Partner
By: PAR Capital Management,
Inc.,
General Partner
By:
/s/ ARTHUR G. EPKER III
--------------------------------
Name: Arthur G. Epker III
--------------------------------
Title: Vice President, PAR
Capital
Management, Inc.
--------------------------------
/s/ CHRISTOPHER K. POOLE
------------------------------------
Printed Name: Christopher K. Poole
------------------------------------
/s/ WILLIAM G. SEYMOUR
------------------------------------
Printed Name: William G. Seymour
------------------------------------
/s/ BARRY EMERSON
------------------------------------
Printed Name: Barry Emerson
------------------------------------
/s/ DAVID A. FINLEY
------------------------------------
Printed Name: David A. Finley
------------------------------------
/s/ ROGER NOALL
------------------------------------
Printed Name: Roger Noall
------------------------------------
/s/ ALAN RICH
------------------------------------
Printed Name: Alan Rich
------------------------------------
9
<PAGE> 10
SCHEDULE A
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON NUMBER OF
NAME AND ADDRESS STOCK OPTIONS
- ---------------- --------- ---------
<S> <C> <C>
Christopher K. Poole........................................ 5,000 195,000
Chairman & CEO
Elite Information Group, Inc.
5100 W. Goldleaf Cr. #100
Los Angeles, CA 90056
Business Phone: (323) 642-5270
Arthur G. Epker III, Vice President......................... 1,220,300 5,000
PAR Capital Management
One Financial Center #1600
Boston, MA 02111
Business Phone: (617) 526-8992
Barry Emerson............................................... -- 25,000
Chief Financing Officer
Elite Information Group, Inc.
5100 W. Goldleaf Cr. #100
Los Angeles, CA 90056
Business Phone: (323) 642-5270
Alan Rich, Chairman......................................... -- 5,000
Elite Information Systems, Inc.
9430 Kirkside Road
Los Angeles, CA 90035
Business Phone: (323) 642-5300
William G. Seymour.......................................... 436,622 3,000
PriMax Properties
1115 East Morehead Street
Charlotte, NC 28204-2814
Business Phone: (704) 344-8200 x11
David A. Finley, President.................................. 2,000 81,666
Investment Management Partners II, Inc.
21 Bedford Center Road
Bedford Hills, NY 10507
Business Phone: (914) 242-6215
Roger Noall................................................. 20,000 3,000
KeyCorp
127 Public Square
Cleveland, OH 44114-1306
Business Phone: (216) 689-5651
</TABLE>
<PAGE> 11
SCHEDULE B
EXCEPTIONS
1. Some or all of the Shares held by William G. Seymour are pledged to Bank
of America as security for loans. The obligations of William G. Seymour under
this Agreement with respect to such Shares are subject to the rights of Bank of
America as pledgee of such Shares. William G. Seymour agrees to use commercially
reasonable efforts to cause Bank of America to permit him to perform his
obligations hereunder with respect to such pledged Shares, including the tender
or sale thereof. Nothing in this Agreement shall require William G. Seymour to
breach his obligations to Bank of America with respect to such pledged Shares.
<PAGE> 1
EXHIBIT 99.3
[MACKENZIE PARTNERS, INC. LOGO]
NEWS RELEASE:
15 DECEMBER 1999
OFFER BY SOLUTION 6 HOLDINGS LIMITED FOR ELITE INFORMATION GROUP, INC.
The boards of Solution 6 Holdings Limited (SOH:ASX) and Elite Information Group,
Inc. (Nasdaq: ELTE) announced today that they have entered into a merger
agreement pursuant to which Solution 6 will acquire Elite for US$11.00 per share
in cash. The merger will reinforce Solution 6's position as the world's largest
player in practice management software for the time-based professional services
industry.
BACKGROUND ON ELITE
Elite (formerly Broadway & Seymour, Inc.) is a software product and services
company providing integrated solutions to the financial, legal and professional
services market. Elite's products are focused primarily on time tracking,
billing, internal accounting and other administrative functions including
marketing, records management, case management and conflicts of interest
prevention.
Elite is a market leader in financial and practice management software for law
firms in the US. Elite is increasingly expanding beyond the legal industry, and
in 1998 approximately 10% of its new customers were other professional time
based firms such as accounting firms, consulting practices and public relations
organisations. In 1999, Elite introduced Elite.com, an internet-based provider
of time and billing services to the professional services market. Elite is also
a founding partner in Serengeti, the world's first application service provider
(ASP) dedicated to serving the legal profession.
THE OFFER
A cash tender offer will be made by Solution 6 for all of the outstanding shares
of common stock of Elite. The offer will be on the basis of US$11.00 in cash for
each share in Elite. The offer is conditioned upon, among other things, Solution
6 acquiring a majority of the fully diluted share capital of Elite, and
expiration of certain regulatory waiting periods.
The transaction values Elite at approximately US$95.6 million (A$150.5 million),
representing a 44% premium for Elite shareholders based on the average closing
price of Elite over the last thirty trading days prior to the announcement of
the transaction.
Elite directors and officers representing approximately 20% of the fully diluted
share capital of Elite have irrevocably agreed to tender their shares in the
offer, vote in favour of the merger and have granted an option to Solution 6 to
acquire their shares under certain circumstances.
ACQUISITION FUNDING
Telstra has advised it intends to invest a further A$50 million (US$31.7
million) in Solution 6 as a partial exercise of its option to acquire 25% of
Solution 6. In addition to these funds, the transaction will be funded by
Solution 6 cash reserves and a bridge facility provided by Warburg Dillon Read
for US$60 million (A$95.2 million).
<PAGE> 2
RATIONALE
This transaction represents a major step forward in the implementation of
Solution 6's strategy of becoming a market leader in the provision of software
solutions to the time-based professional. Elite's operations will:
o with the convergence of the accounting, legal and consulting industries,
position Solution 6 as a global leader in the supply of practice management
software to the time based professional services market;
o strengthen Solution 6's position in the provision of legal practice
management software in the US, to provide a market leading position in
North America;
o provide an opportunity for Solution 6 to leverage its legal practice
management software leadership in the US into Australia, Asia and Europe.
Elite has 25 employees in London and will be opening an office in Brussels
in January 2000. Europe is Elite's primary focus outside of the United
States;
o provide a substantial distribution channel in the attractive North American
market, as Elite derives 80% of its revenue from North America;
o strengthen Solution 6's ASP strategy through Elite.com and through Elite's
partnership with Serengeti, the world's first ASP dedicated to the legal
profession; and
o provide leading edge technology. R&D spending in the last three years has
exceeded historical levels and has produced significant enhancements to the
features and functionality of its product offerings.
Warburg Dillon Read is acting as financial adviser to Solution 6 in relation to
the acquisition of Elite. Elite is being advised by Volpe Brown & Whelan.
ENQUIRIES
SOLUTION 6
Chris Tyler, Chief Executive Officer 011 612 9278 6000
Tom Montgomery, Chief Financial Officer
WARBURG DILLON READ
Robert Rankin (Australia) 011 612 9324 2508
John McElroy (US) 212 821 2873
ELITE INFORMATION GROUP INC
Christopher Poole, Chief Executive Officer 323 642 5270
VOLPE BROWN WHELAN & CO
Bill Ruckelshaus 415 274 7913
<PAGE> 3
INFORMATION ON ELITE
BACKGROUND
Established in 1947, Elite is the premier supplier of financial and practice
management systems for legal professional services with installations in more
than 650 firms internationally. Elite's business focus is to develop
high-performance client/server software for law firm, financial, and practice
management applications.
For the past decade, Elite's focus has been on meeting the information needs of
the legal industry, and more recently the professional service firm environment.
In 1981, Elite Data Processing was formed to specialize in law firm accounting
applications. From 1981 until 1988, Elite specialized in a timesharing solution
that connected law firms online with Elite's central computer system. Thus,
Elite gained valuable experience in installing and supporting a substantial
number of legal systems in a wide range of practice areas.
During 1989, the market shift to Open Systems Technology coupled with the
expanding power of relational databases, offered a unique opportunity to provide
a system designed to harness these powerful 4GL tools. Elite created a system
based on these new tools and introduced the system throughout the United States
in the early 1990s.
In addition to strong product development, Elite's personnel contribute to the
success of the company. Elite strives to hire and retain quality employees. As a
result, the staff has the highest level of expertise of any company serving the
legal market. Many of Elite's employees hold advanced accounting and technical
degrees and approximately two-thirds of the employees are devoted to the
support, training and the installation side of the business. Virtually all
employees have prior law firm, accounting and/or technical experience, and
understand the pressures, deadlines and requirements of professional service
firms.
In February 1994, Broadway & Seymour acquired Elite Data Processing and the
company name was changed to Elite Information Systems, Inc. In April 1999, Elite
became a wholly owned subsidiary of Elite Information Group, Inc., which was
formerly called Broadway & Seymour. Elite Information Group is traded on the
NASDAQ stock market under the symbol ELTE.
Elite is committed to leading edge technology. Its R&D spending over the last 3
years has exceeded historical levels and has produced significant enhancements
of the features and functionality of its product offerings. This has resulted in
Microsoft SQL Server compatible versions and Microsoft Windows NT compatible
versions of its product offerings. In addition, Elite has recently introduced
Microsoft Outlook capabilities, Elite WebView, an Intranet product and
TimeTrax(TM) a remote-entry and expense tracking product. Elite has also
developed Elite Enterprise, its 32-bit version of the suite of practice
management applications, which recently commenced beta testing.
GLOBAL CORPORATION
Elite has built strong European and Canadian operations and plans to further
broaden its international operations. It has among its clients, several of the
largest law firms in the United Kingdom, the largest law firm in Continental
Europe and some of the largest law firms in Canada. Approximately 18% of total
Elite revenue is generated from clients outside of the United States and
therefore the importance of markets beyond the United States is crucial in
developing future marketing and product strategies.
<PAGE> 4
INTERNET / ASP STRATEGY
Elite has formed Elite.com to provide web-based solutions to small professional
service firms. Elite.com provides an opportunity to extend the services and
value Elite provides to its large clients to clients of all sizes. Through
Elite.com, it is proposed that Elite will move to the next level to be at the
forefront of web initiatives, hosted applications and e-commerce developments.
Elite, in conjunction with ELF, MeltingPoint and Punch Networks announced in
September 1999 that it will offer software products and services on Serengeti,
the world's only ASP dedicated to serving the legal profession. Software in
categories such as case management, time and billing, electronic invoicing and
litigation support will be provided through the Internet for a usage or flat
fee.
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Consolidated Statement of Operations
- -----------------------------------------------------------------------------------------------------------
Year ended 31 December RESTATED
US$mm 1996 1997 1998 1998 (a)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenue 89.4 79.6 69.0 45.1
Operating expenses:
Cost of revenue 68.0 49.8 50.5 28.7
Research and development 5.8 5.9 7.5 3.1
Sales and marketing 12.3 11.1 13.2 8.9
General and administrative 11.2 10.2 11.1 4.8
Restructuring and impairment 2.3 (0.7) 0.6 --
------ ------ ------ ------
Total operating expenses 99.6 76.2 82.9 45.4
Operating income (loss) (10.3) 3.4 (13.9) (0.4)
Gain on disposition of non-strategic business units 9.7 1.2 1.9 --
Interest income 0.3 0.9 0.9 0.9
Interest expense (0.5) (0.1) (0.1) (0.1)
------ ------ ------ ------
Income (loss) before income taxes (0.8) 5.3 (11.1) 0.5
Income tax (provision) benefit (1.5) (2.4) 3.5 (0.4)
------ ------ ------ ------
Net income (loss) (2.2) 2.9 (7.6) 0.1
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Restated 1998 results reflect the sale of Elite's CRM business and
elimination of certain overhead costs along with estimated income tax effects,
as disclosed by Elite on Form 8-K dated May 19, 1999.
<PAGE> 5
<TABLE>
<CAPTION>
Consolidated Statement of Operations
- -----------------------------------------------------------------------------------
Nine Months ended 30 September
US$mm 1998 1999
- -----------------------------------------------------------------------------------
<S> <C> <C>
Net Revenue 31.6 43.8
Operating expenses:
Cost of revenue 20.6 25.3
Research and development 2.0 3.1
Sales and marketing 5.9 7.0
General and administrative 4.9 5.2
Restructuring and impairment -- --
------ ------
Total operating expenses 33.5 40.7
Operating income (loss) (1.9) 3.1
Loss on disposition of non-strategic business unit -- (0.3)
Interest income, net 0.7 0.8
------ ------
Income (loss) from continuing operations before tax (1.2) 3.6
Income tax (provision) benefit for continuing operations 0.1 (1.5)
------ ------
Income (loss) from continuing operations net of tax (1.1) 2.0
Discontinued operations:
Income (loss) from discontinued operations net of tax (4.3) (0.4)
(provision) benefit
Gain on sale of discontinued operations net of tax -- 4.9
------ ------
Net income (loss) (5.4) 6.5
- -----------------------------------------------------------------------------------
</TABLE>
For the nine month results and restated 1998 results presented, the consolidated
financial statements of Elite Information Group reflect as continuing
operations, the results of operations and financial position of Elite
Information Group's wholly owned subsidiary, Elite Information Systems, Inc.
During the third quarter of 1999, the Company began start-up operations of its
new Elite.com subsidiary, the results for which are included in the Consolidated
Statement of Operations for the nine months ended September 30, 1999. During the
second quarter of 1999, the Company sold its Customer Relationship Management
business ("CRM"). The operating results for CRM are presented in the
Consolidated Statement of Operations for the nine months ended September 30,
1999 as discontinued operations and the prior period has been restated to
reflect the Company's continuing operations. The Consolidated Statement of
Operations for the years ended 1996, 1997 and 1998 (before restatement) do not
reflect any adjustment for the sale of CRM. Also, effective March 5,1999 the
Company sold all of the outstanding shares of The Minicomputer Company of
Maryland, Inc. ("TMC") to a holding company owned by TMC management.
Revenue growth during the 3rd quarter of 1999 and the first 9 months of 1999 was
greatly influenced by the higher levels of orders received during 1998 which
were 67% above the amount of orders signed during 1997. Elite management
attributed the increase in contract signings in part to Elite's introduction of
products utilising a wider variety of database platforms and enhancements to
existing product functionality. Year 2000 considerations may have also focused
an increasing number of professional services firms on replacing their existing
systems by the end of 1999.
Elite's signed contract backlog totalled US$13.7 million as of 30 September
1999, compared to a record US$26.4 million as of 31 December 1998. Backlog
represents the amount of unearned software license and implementation revenue on
signed customer contracts.
Research and development expenses for the nine months ended 30 September 1999,
increased US$1.1 million to US$3.1 million. Research and development expenses
consist primarily of salaries and expenses of Elite's development personnel and
outside consultants. The third quarter 1999 increase over the same
<PAGE> 6
period can be attributed primarily to start-up costs related to Elite.com. The
higher expenses also reflect ongoing efforts to develop the next version of the
Elite suite of products based on an advanced object-oriented architecture with
enhanced usability features. During the nine months to 30 September 1999, no
software developments were capitalised.
<TABLE>
<CAPTION>
Balance Sheet
- ----------------------------------------------
US$mm AS AT 30/9/99
- ----------------------------------------------
<S> <C>
ASSETS
Current Assets:
Cash 30.4
Receivables 21.1
Deferred income taxes 4.2
Other current assets 0.8
---------
Total current assets 56.6
Property and equipment 1.6
Software costs 1.0
Intangibles 3.8
Other 0.2
---------
TOTAL ASSETS 63.2
LIABILITIES
Current Liabilities:
Accounts payable - trade 4.7
Accrued compensation 2.9
Other accrued liabilities 4.9
Deferred revenue 15.9
Income taxes payable 0.8
---------
Total current liabilities 29.1
Deferred income taxes 0.9
Other liabilities 0.2
---------
TOTAL LIABILITIES 30.3
---------
SHAREHOLDERS' EQUITY 32.9
- ----------------------------------------------
</TABLE>
ABOUT SOLUTION 6
Solution 6 is the world's leading supplier of business systems to the accounting
profession. The company is a market leader in Australia, New Zealand, South
Africa and the UK in the practice management, client accounting and taxation
markets and it also has a strong presence in the US and Continental Europe.
Solution 6 primarily focuses on practice management accounting, client
accounting, taxation, accounting for business and insolvency software. Solution
6 is currently leading the market with its new application service provider
(ASP) business. An ASP enables customers to operate business software via the
Internet or through private networks. In this model, customers will rent the
applications from Solution 6, and access the applications through a browser,
rather than incurring substantial hardware costs to run full applications
onsite. Solution 6 was established in 1981, became a publicly listed company in
1987 and currently has approximately 1,200 employees in 13 countries. Additional
information on Solution 6 is available at http://www.solution6.com or by sending
email to [email protected].
<PAGE> 7
FORWARD-LOOKING STATEMENTS
Certain of the above statements are forward-looking statements, which involve
risks and uncertainties. Actual results could differ materially as a consequence
of a number of factors including: uncertainties relating to acquisitions,
including operational disruptions, unexpected operating expenses and losses, and
expenses associated with the integration of such acquisitions; fluctuations in
the company's operating results due to product demand, length of sales cycle,
size and timing of individual customer transactions and similar matters, changes
in the client/server application software market including technology change,
changes in customer requirements, frequent new product introductions by
competitors and emerging standards; dependence on the legal services market;
reliance on third-party resellers; dependence on Solution 6 and Elite key
management and other factors set forth in the Australian Stock Exchange and
Securities and Exchange Commission reports and filings of Solution 6 and Elite
respectively.
# # #
<PAGE> 1
EXHIBIT 99.4
ELITE LETTERHEAD
DECEMBER 21, 1999
Dear Stockholder:
We are pleased to report that on December 14, 1999, Elite Information
Group, Inc. ("Elite") entered into an Agreement and Plan of Merger with Solution
6 Holdings Limited ("Solution 6") and one of its subsidiaries, EIG Acquisition
Corp. ("EIG Acquisition"), which provides for the acquisition of Elite common
stock at a price of $11.00 per share in cash. Under the terms of the agreement,
EIG Acquisition will commence a tender offer for all outstanding shares of Elite
common stock at $11.00 per share. Following the successful completion of the
tender offer, and upon approval as required by law, EIG Acquisition will be
merged with Elite and all shares not purchased in the tender offer will be
converted into the right to receive $11.00 per share in cash in the merger.
Your Board of Directors has unanimously approved the offer and determined
that the terms of the offer and the merger are fair to and in the best interest
of Elite's stockholders. Accordingly, the Board of Directors unanimously
recommends that all Elite stockholders accept the offer and tender their shares.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors. These factors included the opinion of
Prudential Volpe Technology Group, financial advisor to Elite, that the
consideration of $11.00 per share to be received by the holders of Elite common
stock pursuant to the offer and the merger is fair to such stockholders from a
financial point of view.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9. Also enclosed is EIG
Acquisition's Offer to Purchase and related materials, including a Letter of
Transmittal for use in tendering shares. We urge you to read the enclosed
materials carefully. The management and directors of Elite thank you for the
support you have given Elite.
On behalf of the Board of Directors,
Sincerely,
LOGO
Christopher K. Poole
Chairman of the Board and
Chief Executive Officer
<PAGE> 1
EXHIBIT 99.5
PRUDENTIAL LETTERHEAD
PRIVATE AND CONFIDENTIAL
December 14, 1999
The Board of Directors
Elite Information Group, Inc.
5100 West Goldleaf Circle, Suite 100
Los Angeles, CA 90056
Members of the Board:
Prudential Volpe Technology Group ("PVTG"), formerly Volpe Brown Whelan &
Company, LLC, has been requested to provide our opinion (the "Opinion") as to
the fairness, from a financial point of view, to the shareholders of Elite
Information Group, Inc. ("Elite" or the "Company") of the consideration to be
received by such shareholders pursuant to the Agreement and Plan of Merger (the
"Agreement") by and among Elite, Solution 6 Holdings Limited ("Solution 6") and
a wholly-owned subsidiary of Solution 6 (the "Purchaser").
The Agreement provides, in general, that the Purchaser will make a tender
offer (the "Offer") for all of the outstanding shares of Common Stock of Elite
at a price per share of $11.00 (the "Per Share Consideration") net to the seller
in cash. The Agreement further provides that, as soon as practicable after the
completion of the Offer, the Purchaser will be merged into Elite (the "Merger",
and collectively with the Offer, the "Acquisition") and each share of Common
Stock of Elite will be converted into the right to receive in cash an amount
equal to the highest price paid per share in the Offer.
The Agreement further provides that each holder of a Elite stock option
will receive a cash payment equal to the excess of (a) the Per Share
Consideration times the number of shares of Elite Common Stock subject to such
option that is vested and exercisable (including those options that become
vested and exercisable as a result of the transaction) over (b) the aggregate
exercise price of such option.
It is our understanding that the parties intend that the transaction will
be accounted for as a purchase for financial reporting purposes.
For the purposes of rendering the Opinion, we have, among other things:
(i) reviewed a copy of the December 13, 1999 draft of the Agreement;
(ii) discussed the terms of the Agreement with Elite management and
the Elite Board of Directors;
(iii) interviewed management of Elite concerning the business
prospects, financial outlook and operating plans of the Company;
(iv) reviewed certain historical and certain projected financial
statements and other relevant financial and operating data of Elite
prepared by the management of the Company;
(v) reviewed the valuation of selected publicly-traded companies we
deemed relevant for the analysis;
(vi) reviewed the historical stock trading patterns of Elite and
analyzed the premium of the Per Share Consideration in relation to
historical Elite stock trading ranges;
(vii) reviewed premiums paid in merger and acquisition transactions in
relation to the premium represented by the Per Share Consideration at
different times prior to the date of announcement;
<PAGE> 2
(viii) reviewed, to the extent publicly available, the financial terms
of selected merger and acquisition transactions that we deemed relevant for
the analysis;
(ix) performed a discounted cash flow analysis of the Elite cash flow
stream based upon financial projections of Elite management;
(x) performed a maximum price payable for no dilution analysis based
on the maximum non-dilutive price payable under purchase accounting
conventions;
(xi) performed a contribution analysis providing a valuation based on
Elite's relative contribution to Solution 6 on various metrics; and
(xii) performed such other studies, analyses and inquiries and
considered such other information as we deemed relevant.
PVTG relied without independent verification upon the accuracy and
completeness of all of the financial, accounting, legal, tax, operating and
other information provided to PVTG by Elite and has relied upon the assurances
of Elite that all such information is complete and accurate in all material
respects and that there is no additional material information known to it that
would make any of the information made available to PVTG either incomplete or
misleading.
Elite has also retained outside legal, accounting, and tax advisors to
advise on matters relating to the Acquisition. Accordingly, PVTG has assumed the
accuracy of such advice for purposes of its opinion and has not independently
verified or confirmed such advice and expresses no opinion on such matters.
Although Elite had discussions with third parties concerning possible
business combinations, for purposes of this Opinion we were not requested to
consider, and we are expressing no opinion as to, the relative merits of the
Acquisition as compared to any other business combination or alternative
business strategies that might exist for Elite or the effect of any other
business combination in which Elite might engage.
With respect to the projected financial data of Elite, all of which has
been provided or approved by the management of Elite, PVTG has relied upon
assurances of Elite that such data has been prepared in good faith on a
reasonable basis reflecting the best currently available estimates and judgments
of Elite management as to the future financial performance of Elite. Our Opinion
is based, in large part, on these projected financial data and estimates.
PVTG is relying upon the information provided to it by Elite for the
purposes of rendering the Opinion. PVTG expresses no opinion and has made no
investigation with respect to the validity, accuracy or completeness of the
information provided to it and does not warrant any projections included in such
information. Actual results that Elite might achieve in the future may vary
materially from those used in PVTG's analysis.
PVTG has assumed that the Acquisition will be consummated in accordance
with the terms of the Agreement and that no subsequent material changes or
amendments will be made prior to completion of the Acquisition. Any material
changes could impact the PVTG analysis and Opinion. PVTG has, furthermore, not
made any independent appraisals or valuations of any assets of Elite, nor has
PVTG been furnished with any such appraisals or valuations. PVTG has performed
no investigations relating to the representations and warranties made by Elite,
Solution 6 or the Purchaser, including representations with respect to
intellectual property rights and status of any litigation pending or threatened
against any company. While PVTG believes that its review, as described herein,
is an adequate basis for the Opinion, the Opinion is necessarily based upon
market, economic and other conditions that exist and can be evaluated as of the
date of the Opinion, and any change in such conditions would require a
re-evaluation of the Opinion.
The Opinion addresses only the fairness, from a financial point of view, of
the Per Share Consideration to Elite and does not address the relative merits of
the Acquisition and any alternatives to the Acquisition, Elite's decision to
proceed with or the effect of the Acquisition, or any other aspect of the
Acquisition.
2
<PAGE> 3
The preparation of a fairness opinion involves various judgments as to
appropriate and relevant quantitative and qualitative methods of financial
analyses and the application of those methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to summary
description. Accordingly, we believe our analyses and the factors utilized in
such analysis must be considered as a whole and that considering any portion of
such analyses or factors, without considering all analyses and factors could
create a misleading or incomplete view of the process underlying the Opinion. In
our analyses, we made numerous assumptions with respect to industry performance,
general business and other conditions and matters, many of which are beyond
Elite's control and are not susceptible to accurate prediction.
The Opinion does not constitute a recommendation as to the Board of
Director's decision on whether to support the Acquisition and recommend it to
Elite's shareholders and does not constitute a recommendation to shareholders as
to whether to tender their shares in the Offer or vote in favor of the Merger.
The Opinion and related materials have been prepared for the use and benefit of
the Board of Directors of Elite and may not be used for any other purpose,
except that this opinion may be included in any filing which Elite makes with
the Securities and Exchange Commission with respect to, and distributed to the
shareholders of Elite in connection with, the Acquisition. Although developments
following the date of the Opinion may affect the Opinion, PVTG assumes no
obligation to update, revise or reaffirm the Opinion.
As a customary part of its investment banking business, PVTG engages in the
valuation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, secondary distributions of securities,
private placements and valuations for corporate and other purposes. In the
ordinary course of its business, PVTG and its affiliates may actively trade the
equity securities of Elite or Solution 6 and its affiliates for their own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities.
PVTG will receive a fee for rendering its Opinion, no portion of which is
conditioned upon the Opinion being favorable. In addition, PVTG is to be paid a
fee upon the close of the Offer.
Based upon and subject to the foregoing limitations and restrictions and
after considering such other matters as we deem relevant, it is our opinion
that, as of the date hereof, the Per Share Consideration is fair, from a
financial point of view, to the shareholders of Elite.
Very truly yours,
PRUDENTIAL VOLPE TECHNOLOGY GROUP
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
3
<PAGE> 1
EXHIBIT 99.6
PERSONAL & CONFIDENTIAL
November 4, 1999
Chris Tyler, Managing Director & CEO
Solution 6 Holdings
Level 18, Town House Hall
456 Kent Street
Sydney NSW 2000 Australia
Dear Chris:
With respect to the fact that Solution 6 Holdings, the Potential Buyer
Company ("PBC"), may be interested in pursuing a transaction with Elite
Information Group, Inc., ("ELEPHANT" or "the Company"), ELEPHANT has authorized
its financial advisor, Volpe Brown Whelan & Co., ("VBW&Co") to furnish you with
certain financial, marketing, organizational, technical and other information
related to ELEPHANT (herein collectively referred to as the "Confidential
Information"). Confidential Information includes not only written information
but also information transferred orally, visually, electronically or by any
other means. In consideration of the disclosure of the Confidential Information
to you, you and ELEPHANT agree as follows:
It is agreed that any information the Company, its agents (including
VBW&Co), its affiliates and its affiliates' agents disclose verbally or in
writing to PBC, concerning ELEPHANT is being disclosed solely for the purpose of
enabling PBC to evaluate ELEPHANT in order to determine whether PBC wishes to
purchase ELEPHANT.
The Confidential Information has been and will be obtained from the records
of ELEPHANT which the Company believes to be accurate. Certain portions of the
Confidential Information may contain estimates and projections which were
developed for the Company's internal use only; nevertheless, the Company is
prepared to provide this Confidential Information to PBC based upon the
capability of the PBC to analyze such information. However, neither the Company,
its agents (including VBW&Co), its affiliates and its affiliates' agents make
any representation as to the completeness or accuracy of the Confidential
Information, including any estimates or projections, and the Company assumes no
responsibility or liability for the conclusions that PBC may derive from it. PBC
hereby waives any and all claims and causes of action against the Company, its
agents (including VBW&Co), its affiliates and its affiliates' agents for damages
or other relief caused by or arising from the incompleteness or inaccuracy of
any of the Confidential Information.
The amount of information disclosed shall be at the Company's discretion or
as mutually agreed and all such disclosures shall be made on a confidential
basis under the following terms and conditions:
1. PBC shall refrain from using the Confidential Information except
for the purposes set forth above and, except as otherwise provided herein,
PBC shall not directly or indirectly for its benefit or the benefit of
others disclose the Confidential Information to others for a period of
three (3) years from the date of this agreement. The obligations in the
preceding sentence shall not apply, however, to Confidential Information
which (a) is or becomes generally available to the public through no act or
failure to act by PBC, (b) was already known to PBC on a non-confidential
basis prior to such disclosure, which knowledge can be verified by adequate
documentation, or (c) is subsequently disclosed to PBC on a non-
confidential basis by a third party not having a confidential relationship
with the Company or our affiliates with respect to such Confidential
Information. In addition, without the prior written consent of the Company,
neither PBC nor any of its affiliates, attorneys or accountants will
disclose either the fact that discussions or negotiations are taking place
concerning a possible transaction with the Company or any of the terms,
conditions or other facts with respect to such transaction, except as may
be required by applicable law or regulation or by the rules of any exchange
upon which PBC's equity securities are listed.
2. The Confidential Information shall be revealed only to those of PBC
employees, attorneys, accountants and financial advisors (including their
support personnel) or to those of PBC's parent company, subsidiaries
(excluding CMS/Data Corp.) or affiliates whose knowledge of the
Confidential
<PAGE> 2
Information is required for PBC to make an appropriate evaluation of
ELEPHANT and who shall assume the same obligations as PBC under this
agreement. In addition, PBC agrees not to disclose the Confidential
Information or any other information pertaining to these discussions to
employees of the PBC's recently acquired subsidiary, CMS/Data Corp. PBC
shall be responsible for any breach of this agreement by any of these
persons or entities. The above notwithstanding, the Company shall be
entitled to additionally limit the disclosure of certain of the
Confidential Information to those PBC employees identified by name and job
description or to identified groups of PBC employees falling within certain
job descriptions. In such case, PBC agrees to cause such limits to be
observed provided the Company has notified PBC of such limits in advance of
any disclosure to which they apply.
3. PBC shall assume full responsibility for all conclusions PBC
derives from the Confidential Information and neither the Company, its
agents (including VBW&Co), its affiliates and its affiliates' agents shall
have any liability with respect thereto.
4. Upon the completion of PBC's evaluation or at the Company's
request, written documents in PBC's possession or in the possession of
PBC's attorneys and accountants containing the Confidential Information
will either be destroyed by PBC or returned to the Company. In addition,
all documents, memorandum, notes and other writings prepared by PBC or
PBC's affiliates, attorneys or accountants based upon the Confidential
Information will be destroyed. Such destruction shall be certified to the
Company in writing by an authorized officer or PBC's legal counsel.
5. If PBC is required by order of court of competent jurisdiction to
disclose any of the Confidential Information, PBC shall provide the Company
with prompt notice of such requirement so that the Company may seek a
protective order or other appropriate remedy or waive compliance with the
provisions of this agreement. In no event will PBC disclose Confidential
Information which is not required to be disclosed under such court order.
6. You understand and agree that this agreement is made for the
benefit of the Company and no failure or delay by the Company, its
respective agents or representatives in exercising any right, power or
privilege under this agreement shall operate as a waiver thereof, nor shall
any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any right, power or privilege under
this agreement. You further agree that money damages would not be a
sufficient remedy for any breach of this agreement by you, or your
employees, directors or representatives, and that the Company, its agents
and representatives shall be entitled to specific performance and/or
injunctive relief as a remedy for any such breach. Such remedy shall not be
deemed to be the exclusive remedy for any such breach of this agreement but
shall be in addition to all other remedies available at law or in equity.
7. Nothing in this agreement shall impose any obligation upon you or
the Company to consummate a transaction or to enter into any discussion or
negotiations with respect thereto. You also understand and agree that no
contract or agreement providing for the sale of the Company, or any portion
thereof, shall be deemed to exist unless and until a definitive Sale
Agreement has been executed and delivered, and you hereby waive, in
advance, any claims (including, without limitation, breach of contract) in
connection with the sale of the Company, or any portion thereof, unless or
until you shall have entered into a definitive Sale Agreement. You also
agree that unless and until a definitive Sale Agreement with respect to the
acquisition of ELEPHANT, or any portion thereof, has been executed and
delivered by you, none of the Board of Directors of the Company, the
Company, nor any other affiliate of the Company has any legal obligation of
any kind whatsoever with respect to any such transaction by virtue of this
agreement or any other written or oral expression with respect to such
transaction except, in the case of this agreement, for matters specifically
agreed to herein. For purposes of this paragraph the term "definitive Sale
Agreement" does not include an executed letter of intent or any other
preliminary written agreement, nor does it include any written or verbal
acceptance of any offer or bid on your part. You further understand that
(i) the Company and VBW&Co shall be free to conduct the process for the
sale of the Company, or any portion thereof, as they in their sole
discretion shall determine (including, without limitation, negotiating with
any of the prospective buyers and entering into a definitive Sale Agreement
without prior notice to you or any other person), (ii) any procedures
relating to such sale may be changed at any time
2
<PAGE> 3
without notice to you or any other person and (iii) you shall not have any
claims whatsoever against the Board of Directors of the Company, the
Company, VBW&Co or any other respective directors, officers, stockholders,
owners, affiliates or agents arising out of or relating to the sale of the
company, or any portion hereof (other than those as against the parties to
a definitive Sale Agreement with you in accordance with the terms thereof).
Neither this paragraph nor any other provision in this agreement can be
waived or amended except by written consent of the Company, VBW&Co, and
PBC, which consent shall specifically refer to this paragraph (or such
other provisions) and explicitly make such waiver or amendment.
8. Without VBW&Co's prior approval, you agree not to contact any
employee of the Company concerning your potential interest in a transaction
with the Company. All inquiries will be directed through VBW&Co.
9. The Company does not grant, expressly or by implication, any
license or right under any patent, trade secret, copyright or trademark now
or hereafter owned or controlled by the Company or its affiliates covering
the Confidential Information.
10. This agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, U.S.A., without reference to the
choice of law principles thereof.
11. Any assignment of this agreement by PBC without the Company's
prior written consent shall be void.
12. This agreement contains the entire agreement between the parties
concerning confidentiality and use of the information and modifications of
this agreement or waiver of the terms and conditions hereof shall not be
binding upon the parties unless approved in writing by each of the parties'
authorized representatives.
13. This agreement shall also govern Confidential Information
disclosed to PBC by the Company's affiliates, agent (including VBW&Co),
accountants and attorneys.
14. PBC agrees that, for a period of two (2) years from the date of
this agreement, it and its affiliates and agents will not hire for
employment any employee of the Company with whom it or they have had
contact or who became known to it or them in connection with the
consideration of the proposed transaction with the Company to become an
employee or consultant for PBC.
15. PBC acknowledges that the Confidential Information is being
furnished to it in consideration of its agreement that PBC will not propose
to the Company or any other person any transaction between you and the
Company and/or its security holders or involving any of its securities or
security holders unless the Company shall have requested in writing that
PBC make such a proposal, and that PBC will not acquire, or assist, advise
or encourage any other persons in acquiring, directly or indirectly,
control of the Company or any of the Company's securities, for a period of
two years from the date of this letter unless the Company shall have
consented in advance in writing to such acquisition. PBC also agrees that
the Company shall be entitled to equitable relief, including an injunction,
in the event of any breach of the provisions of this paragraph and that it
shall not oppose the granting of such relief
If the Company authorizes PBC to visit clinic or administrative facilities
used in ELEPHANT, PBC agrees to observe the same confidentiality and use
restrictions provided herein with respect to any technical information and
know-how which may come to PBC's attention or be disclosed to PBC's
representatives during any such visit, whether through discussion with the
Company or affiliate employees, visual inspection or otherwise.
3
<PAGE> 4
If the terms and conditions of this agreement are acceptable to PBC, please
so indicate by signing the enclosed duplicate and returning it to ELEPHANT.
ELITE INFORMATION GROUP, INC.
By: /s/ CHRIS POOLE
---------------------------------
Date: 11/11/99
-------------------------------
Chris Poole
CEO
AGREED AND ACCEPTED:
SOLUTION 6 HOLDINGS
By: /s/ THOMAS A. MONTGOMERY, CFO
------------------------------------------------------
Date: 11/11/99
----------------------------------------------------
4
<PAGE> 1
EXHIBIT 99.7
December 6, 1999
Mr. Christopher K. Poole
Chairman and Chief Executive Officer
Elite Information Group, Inc.
5100 W. Goldleaf Circle, Suite 100
Los Angeles, CA 90056-1271
Gentlemen:
Elite Information Group, Inc., a Delaware corporation ("Elite"), and
Solution 6 Holdings Limited, a New South Wales, Australia corporation
("Solution 6"), are currently in discussions concerning a possible negotiated
transaction between Elite and Solution 6 or one of its affiliates (the
"Possible Transaction"). The parties hereto and their advisors are currently
negotiating terms of the Possible Transaction and preparing documentation. As a
material inducement to Solution 6 to continue to proceed with the Possible
Transaction, Elite agrees that until 11:59 p.m., Los Angeles, California time
on December 14, 1999 (the "Due Diligence Period"), Elite will not, and will
cause its advisors, representatives, agents and advisors and its and their
respective affiliates not to, without the prior written consent of Solution 6,
enter into any agreement regarding, or negotiate with, solicit, encourage, or
furnish information to, or participate in any discussion with, any person,
entity or organization in connection with any proposal for a business
combination or acquisition or purchase involving any of such persons or
entities or the assets or capital stock of Elite, and Elite will immediately
terminate any present discussions or negotiations concerning the same.
Each party understands and agrees that no contract or agreement providing
for or with respect to a Possible Transaction shall be deemed to exist unless
and until a definitive agreement providing for and containing all material
terms and conditions with respect to a Possible Transaction (a "Definitive
Agreement") has been executed and delivered, and each party hereby waives, in
advance, any claims (including, without limitation, breach of contract) in
connection with a Possible Transaction or any purported agreement or
understanding with respect thereto unless and until the parties shall have
entered into a Definitive Agreement. The parties also agree that, unless and
until a Definitive Agreement between the parties has been executed and
delivered, neither party has any legal obligation of any kind whatsoever with
respect to any Possible
<PAGE> 2
December 6, 1999
Page 2
Transaction by virtue of this Agreement or as the result of any other written
or oral expression, whether before or after the execution of this Agreement,
with respect to a Possible Transaction except, in the case of this Agreement,
for the matters specifically agreed to herein. For purposes of this paragraph,
the term "Definitive Agreement" does not include an executed letter of intent,
memorandum of understanding, term sheet, or any other preliminary written
agreement, nor does it include any written or oral acceptance of any offer or
bid on the part of either party.
If the foregoing accurately reflects our understanding, please execute
this letter in the space provided below and return a copy to the undersigned.
This letter shall be construed in accordance with and governed by the laws of
the State of Delaware. The terms and provisions of this letter shall be subject
to the Confidentiality Agreement, by and between Solution 6 and Elite.
Very truly yours,
SOLUTION 6 HOLDINGS LIMITED
By: /s/ THOMAS A. MONTGOMERY
--------------------------
Thomas A. Montgomery,
Chief Financial Officer
AGREED TO AND ACCEPTED
as of the date first above written:
ELITE INFORMATION GROUP, INC.
By: /s/ CHRISTOPHER K POOLE
-----------------------------------------
Christopher K. Poole,
Chairman and Chief Executive Officer
<PAGE> 3
December 6, 1999
Page 3
EXCLUSIVITY LETTER1.DOC
<PAGE> 1
EXHIBIT 99.8
FIRST AMENDMENT TO RIGHTS AGREEMENT
This FIRST AMENDMENT TO RIGHTS AGREEMENT, dated December 14, 1999 (the
"Amendment") to the Rights Agreement dated as of April 14, 1999 (the "Rights
Agreement") is between Elite Information Group, Inc. f/k/a Broadway & Seymour,
Inc. (the "Company") and Equiserve Trust Company, N.A., a national banking
association (the "Rights Agent"). Capitalized terms not otherwise defined herein
shall have the meanings assigned to such terms in the Rights Agreement.
WHEREAS, pursuant to Section 7.10 of the Merger Agreement (defined
below), the Company is required to amend the Rights Agreement so that (i) none
of the execution or delivery of the Merger Agreement or the Stockholders
Agreement (defined below) or the making of the Offer (as defined in the Merger
Agreement) or the exercise of Purchaser's (as defined in the Merger Agreement)
rights under the Stockholders Agreement will cause (A) the Rights to become
exercisable under the Rights Agreement, (B) Parent (as defined in the Merger
Agreement) or Purchaser or any of their affiliates to be deemed an Acquiring
Person or (C) the Stock Acquisition Date to occur upon any such event, (ii) none
of the acceptance for payment or payment for Shares (as defined in the Merger
Agreement) by Purchaser pursuant to the Offer, the consummation of the Merger
(as defined in the Merger Agreement) or the exercise of Purchaser's rights under
the Stockholders Agreement will cause (A) the Rights to become exercisable under
the Rights Agreement or (B) Parent or Purchaser or any of their affiliates to be
deemed an Acquiring Person or (C) the Stock Acquisition Date to occur upon any
such event, and (iii) the Expiration Date shall occur no later than immediately
prior to the purchase of Shares pursuant to the Offer; and
WHEREAS, it is the intention of the Company that this Amendment
implement the Company's obligations with respect to the Rights Agreement as
stated above; and
WHEREAS, pursuant to Section 27 of the Rights Agreement, the Company
and the Rights Agent desire to amend the Rights Agreement as set forth below:
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendments to Rights Agreement. The Rights Agreement is hereby amended
as follows:
a. Amendment of Section 1. Section 1(j) of the Rights Agreement is
amended (1) by deleting the word "or" immediately preceding clause (iv)
thereof and (2) by adding the new phrase immediately following clause
(iv) thereof: "or (v) any Parent Party." Section 1 of the Rights
Agreement is further amended by adding thereto, new subsections (z),
(aa) and (bb) which shall read as follows:
"(z) "Parent Party" shall mean any of Solution 6 Holdings,
Limited, a New South Wales, Australia corporation, EIG
Acquisition Corp., a Delaware corporation and an indirect,
wholly owned subsidiary of Solution 6 Holdings, Limited and
any Associates or Affiliates of Solution 6 Holdings, Limited
or EIG Acquisition Corp."
<PAGE> 2
"(aa) "Merger Agreement" shall mean the Agreement and Plan of
Merger, dated as of December 14, 1999 by and between Company,
Solution 6 Holdings, Limited, a New South Wales, Australia
corporation, and EIG Acquisition Corp., a Delaware corporation
and an indirect, wholly owned subsidiary of Solution 6
Holdings, Limited."
"(bb) "Stockholders Agreement" shall mean the Stockholders
Agreement dated as of December 14, 1999 among Company,
Solution 6 Holdings, Limited, a New South Wales, Australia
corporation, EIG Acquisition Corp., a Delaware corporation and
an indirect wholly owned subsidiary of Solution 6 Holdings,
Limited and certain stockholders of the Company."
b. Amendment of Section 3. Section 3 of the Rights Agreement is hereby
amended by adding the following new phrase at the beginning of such
section: "Except as provided in Section 35,".
c. Amendment of Section 7. Section 7 of the Rights Agreement is hereby
amended by adding the following new phrase at the beginning of such
Section: "Except as provided in Section 35,". In addition, paragraph
(a) of Section 7 of the Rights Agreement is amended (1) by deleting the
word "or" immediately preceding clause (iii) thereof, (2) by adding the
following new phrase immediately following clause (iii) thereof: "or
(iv) immediately prior to the purchase of shares of Common Stock
pursuant to the Offer (as defined in the Merger Agreement)" and (3) by
deleting the word "and" in the last parenthetical at the end of the
sentence in Section 7(a) and adding the words "and (iv)" after "(iii)"
in the parenthetical at the end of the sentence in 7(a).
d. Amendment of Section 11. Section 11 of the Rights Agreement is hereby
amended by adding the following new phrase at the beginning of such
section: "Except as provided in Section 35,".
e. Amendment of Section 13. Section 13 of the Rights Agreement is hereby
amended by adding the following new phrase at the beginning of such
section: "Except as provided in Section 35,".
f. Addition of New Section 35. The Rights Agreement is amended by adding a
Section 35 thereof which shall read as follows:
"Section 35. Exception for Merger Agreement and Transactions
Contemplated Thereby. Notwithstanding any provision of this
Agreement to the contrary, neither a Distribution Date, a
Section 11(a)(ii) Event, a Section 13 Event, nor a Stock
Acquisition Date shall be deemed to have occurred, none of the
Parent Parties shall be deemed to have become an Acquiring
Person, and no holder of any Rights shall be entitled to
exercise such Rights under Sections 3(a), 7(a), 11(a) or 13 of
this Agreement, and in any such case, by reason of (a) the
approval, execution and delivery of the Merger
<PAGE> 3
Agreement, the Stockholders Agreement, or any amendments
thereof approved in advance by the Board of Directors of the
Company, (b) the commencement or, prior to the termination of
the Merger Agreement, the consummation of any of the
transactions contemplated by the Merger Agreement in
accordance with the provisions of the Merger Agreement,
including the Offer and the Merger (as defined in the Merger
Agreement), or (c) by the consummation of any transaction
contemplated by the Stockholders Agreement."
2. Effect of Amendment. This Amendment shall be deemed effective as of
December 14, 1999 as if executed by both parties hereto on such date.
As amended hereby, the Rights Agreement shall remain in full force and
effect.
3. Miscellaneous. This Amendment shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such state
applicable to contracts to be made and performed entirely within such
state. This Amendment may be executed in any number of counterparts,
each of such counterparts shall for all purposes be deemed an original,
and all such counterparts shall together constitute but one and the
same instrument. If any term, provision, covenant, or restriction of
this Amendment is held by a court of competent jurisdiction or other
authority to be invalid, illegal or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Amendment shall
remain in full force and effect and shall in no way be affected,
impaired, or invalidated.
IN WITNESS WHEREOF, the parties have executed this FIRST AMENDMENT TO
RIGHTS AGREEMENT as of December 14, 1999.
ELITE INFORMATION GROUP, INC.
/s/ Christopher K. Poole
--------------------------------------
Christopher K. Poole,
Chief Executive Officer
EQUISERVE TRUST COMPANY
/s/ Charles Rossi
--------------------------------------
Charles Rossi
President
