<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
------------------------
Micro Warehouse, Inc.
(Name of Subject Company)
BYOWC Partners LLC
Bridgeport Holdings Inc.
Bridgeport Acquisition Corporation
(Bidders)
Common Stock
(Title of class of securities)
------------------------
59501B105
(CUSIP number of class of securities)
------------------------
Alfred D. Boyer
9665 Wilshire Boulevard
Suite 200
Beverly Hills, California 90212
(Name, address and telephone number of person authorized to
receive notices and communications on behalf of bidders)
------------------------
WITH A COPY TO:
Joshua M. Berman, Esq.
Abbe L. Dienstag, Esq.
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, New York 10022
(212) 715-9100
------------------------
Calculation of Filing Fee
<TABLE>
<CAPTION>
Transaction Valuation* Amount of Filing Fee**
<S> <C>
$454,302,388 $90,861
</TABLE>
* For purposes of calculating fee only. Assumes the purchase by Bridgeport
Acquisition Corporation ("Acquisition") of up to 23,910,652 shares of Micro
Warehouse, Inc. (the "Company") common stock, at $19.00 per share, in
accordance with terms of the Offer described herein. The remaining
outstanding shares of common stock of the Company not owned by Acquisition
or its affiliates may be purchased by the Company in an offer with respect
to which the Company has filed a Schedule 13E-4 and has separately paid a
fee, as described herein.
** 1/50th of 1% of Transaction Valuation.
Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount previously paid: Filing party:
Form or registration no.: Date filed:
</TABLE>
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<PAGE>
This Statement relates to the third party tender offer by Bridgeport
Acquisition Corporation, a Delaware corporation ("Acquisition") and a wholly
owned subsidiary of Bridgeport Holdings Inc. ("Parent"), a Delaware corporation
and a direct subsidiary of BYOWC Partners LLC, a Delaware limited liability
company ("BYOWC"), to purchase approximately such number of the outstanding
shares of common stock, including the associated preferred share purchase rights
(the "Shares") of Micro Warehouse, Inc., a Delaware corporation (the "Company"),
which, together with Shares currently owned by BYOWC, constitutes approximately
71% of the outstanding Shares, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated December 28, 1999, annexed hereto as
Exhibit (a)(1) (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
constitute the "Offer"), at a purchase price of $19.00 per Share, net to each
tendering stockholder in cash. The Offer also includes the offer by the Company
to purchase the remaining outstanding Shares to the extent they are tendered in
the Offer. The Company has concurrently herewith filed a Schedule 13E-4 with
respect to its offer.
The item numbers below and responses thereto are in accordance with the
requirements of Schedule 14D-1.
Item 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Micro Warehouse, Inc., a Delaware
corporation. The address of the Company's principal executive offices is 535
Connecticut Avenue, Norwalk, Connecticut 06854.
(b) The securities to which this statement relates are the Shares. The
information set forth in the Introduction of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
Item 2. IDENTITY AND BACKGROUND.
(a)-(g) This Statement is being filed by BYOWC, Parent and Acquisition
(collectively, the "Reporting Persons"). Acquisition is a direct wholly owned
subsidiary of Parent. Parent is currently a direct wholly-owned subsidiary of
BYOWC. Upon consummation of certain equity financings described in the Offer to
Purchase, BYOWC's investment partners will also own equity interests of Parent.
The information set forth in Section 9 ("Certain Information Concerning
BYOWC, Parent and Acquisition") and in Schedules II, III and IV of the Offer to
Purchase is incorporated herein by reference.
Item 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Sections 9 ("Certain
Information Concerning
BYOWC, Parent and Acquisition"), 11 ("Background of the Offer and the Merger")
and 15 ("The Merger Agreement; Stockholder's Agreements") of the Offer to
Purchase is incorporated herein by reference.
Item 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 10 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
2
<PAGE>
Item 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSAL OF THE BIDDER.
(a)-(g) The information set forth in the Introduction and Sections 5
("Purpose of the Offer and the Merger; Structure of the Transaction; Short Form
Merger; Plans for the Company; Appraisal Rights; Going Private Transactions")
and 14 ("Certain Effects of the Offer") of the Offer to Purchase is incorporated
herein by reference.
Item 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Sections 9 ("Certain Information
Concerning BYOWC, Parent and Acquisition") and 15 ("The Merger Agreement;
Stockholder's Agreements") of the Offer to Purchase is incorporated herein by
reference.
Item 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Sections 5 ("Purpose of
the Offer and the Merger; Structure of the Transaction; Short Form Merger; Plans
for the Company; Appraisal Rights; Going Private Transactions"), 9 ("Certain
Information Concerning BYOWC, Parent and Acquisition"), 11 ("Background of the
Offer and the Merger"), and 15 ("The Merger Agreement; Stockholder's
Agreements") of the Offer to Purchase is incorporated herein by reference.
Item 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Sections 19 ("Fees and Expenses") and 20
("Miscellaneous") of the Offer to Purchase is incorporated herein by reference.
Item 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Sections 8 ("Certain Information Concerning the
Company") and 9 ("Certain Information Concerning BYOWC, Parent and Acquisition")
of the Offer to Purchase is incorporated herein by reference. The incorporation
by reference herein of such financial information does not constitute an
admission that such information is material to a decision by a stockholder of
the Company whether to sell, tender or hold the Shares being sought in the
Offer.
Item 10. ADDITIONAL INFORMATION.
(a) The information set forth in Sections 11 ("Background of the Offer and
the Merger") and 15 ("The Merger Agreement; Stockholder's Agreements") of the
Offer to Purchase is incorporated herein by reference.
(b)-(c) The information set forth in Section 18 ("Certain Legal Matters") of
the Offer to Purchase is incorporated herein by reference.
(d) The information set forth in Sections 14 ("Certain Effects of the
Offer") and 18 ("Certain Legal Matters") of the Offer to Purchase is
incorporated herein by reference.
(e) None
(f) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, to the extent not otherwise set forth herein, is
incorporated herein by reference.
Item 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated December 28, 1999.
(a)(2) Letter of Transmittal.
3
<PAGE>
(a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(4) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(5) Notice of Guaranteed Delivery.
(a)(6) Text of Press Release issued December 21, 1999.
(a)(7) Form of Summary Advertisement, dated December 28, 1999.
(a)(8) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(9) Text of Press Release issued December 28, 1999.
(b)(1) Commitment Letter dated December 20, 1999 among Credit Suisse First
Boston, CIBC Inc., CIBC World Markets Corp., BYOWC and FS Equity Partners IV,
L.P., included as Exhibit 2 to the Agreement and Plan of Merger filed as
Exhibit (c)(3) hereto.
(c)(1) Confidentiality Agreement dated November 22, 1999, between BYOWC and
the Company.
(c)(2) Standstill Agreement, dated December 2, 1999, between BYOWC and the
Company.
(c)(3) Agreement and Plan of Merger, dated as of December 20, 1999, among
BYOWC, Parent, Acquisition and the Company, including Exhibits 1, 2 and 3
thereto.
(c)(4) Stockholder's Agreement, dated as of December 20, 1999, among Parent,
Acquisition and Peter Godfrey.
(c)(5) Stockholder's Agreement, dated as of December 20, 1999, among Parent,
Acquisition and Felix Dennis.
(d)-(f) Not applicable.
4
<PAGE>
SIGNATURE
After due inquiry and to the best of the undersigned's knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
<TABLE>
<S> <C> <C>
BYOWC PARTNERS LLC
By: /s/ ALFRED D. BOYER
-----------------------------------------
Name: Alfred D. Boyer
Title: MANAGING MEMBER
</TABLE>
Dated: December 28, 1999
5
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SIGNATURE
After due inquiry and to the best of the undersigned's knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
<TABLE>
<S> <C> <C>
BRIDGEPORT HOLDINGS INC.
By: /s/ ALFRED D. BOYER
-----------------------------------------
Name: Alfred D. Boyer
Title: Vice President
</TABLE>
Dated: December 28, 1999
6
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SIGNATURE
After due inquiry and to the best of the undersigned's knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
<TABLE>
<S> <C> <C>
BRIDGEPORT ACQUISITION CORPORATION
By: /s/ ALFRED D. BOYER
-----------------------------------------
Name: Alfred D. Boyer
Title: Vice President
</TABLE>
Dated: December 28, 1999
7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- ----------------
<S> <C> <C>
(a)(1) Offer to Purchase, dated December 28, 1999..................
(a)(2) Letter of Transmittal.......................................
(a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees................................
(a)(4) Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees...................
(a)(5) Notice of Guaranteed Delivery...............................
(a)(6) Text of Press Release issued December 21, 1999..............
(a)(7) Form of Summary Advertisement, dated December 28, 1999......
(a)(8) Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9...............................
(a)(9) Text of Press Release issued December 28, 1999..............
(b)(1) Commitment Letter dated December 20, 1999 among Credit
Suisse First Boston, CIBC Inc., CIBC World Markets Corp.,
BYOWC and FS Equity Partners IV, L.P., included as Exhibit 2
to the Agreement and Plan of Merger filed as Exhibit (c)(3)
hereto.
(c)(1) Confidentiality Agreement, dated November 22, 1999, between
BYOWC and the Company.......................................
(c)(2) Standstill Agreement, dated December 2, 1999, between BYOWC
and the Company.............................................
(c)(3) Agreement and Plan of Merger, dated as of December 20, 1999,
among BYOWC, Parent, Acquisition and the Company, including
Exhibits 1, 2 and 3 thereto.................................
(c)(4) Stockholder's Agreement, dated as of December 20, 1999,
among Parent, Acquisition and Peter Godfrey.................
(c)(5) Stockholder's Agreement, dated as of December 20, 1999,
among Parent, Acquisition and Felix Dennis..................
</TABLE>
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Micro Warehouse, Inc.
at
$19.00 Net Per Share
by
Bridgeport Acquisition Corporation,
a wholly-owned subsidiary of
Bridgeport Holdings Inc.,
and by
Micro Warehouse, Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS EXTENDED.
Bridgeport Acquisition Corporation ("Acquisition") and Micro Warehouse, Inc.
(the "Company") are making an Offer for all of the outstanding shares of common
stock, including the associated preferred share purchase rights (collectively,
the "Shares"), of the Company. The Offer is conditioned upon, among other
things, there being validly tendered and not withdrawn prior to the expiration
of the Offer at least that number of Shares that constitutes, together with any
shares owned by BYOWC Partners LLC ("BYOWC"), an affiliate of Acquisition, 51%
of the Shares outstanding on a fully diluted basis. BYOWC currently owns
approximately 4.3% of the Shares outstanding on a fully diluted basis. Certain
stockholders of the Company who in the aggregate own approximately 10.1% of the
Shares outstanding on a fully diluted basis have agreed to tender their Shares
in the Offer. The Offer is also conditioned upon the receipt by Acquisition of
certain debt and equity financing necessary to consummate the Offer and a
follow-up merger and the availability to the Company of a new credit facility
following consummation of the Offer. Credit Suisse First Boston, New York
branch, and CIBC Inc. have executed a commitment letter to provide the debt
financing and the new credit facility. FS Equity Partners IV, L.P., a private
equity investment fund managed by Freeman Spogli & Co. LLC, has executed a
commitment letter to provide the portion of the equity financing on which the
Offer is conditioned. See Section 10 of this Offer to Purchase for a discussion
of the financings, including the conditions to the financings. The Offer is also
subject to certain other conditions. See the Introduction and Section 17 of this
Offer to Purchase.
The Company, BYOWC, Acquisition and Bridgeport Holdings Inc., the parent of
Acquisition ("Parent"), have entered into a merger agreement providing for the
acquisition of the Company by Parent pursuant to the Offer and a follow-up
merger. The Board of Directors of the Company has unanimously determined that
the transactions contemplated by the merger agreement, including the Offer and
the merger, are fair to, and in the best interests of, the Company and its
stockholders, has unanimously approved the merger agreement, the Offer and the
merger and unanimously recommends that the Company's stockholders accept the
Offer and tender their shares pursuant to the Offer.
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
Shares should either (1) complete and sign the Letter of Transmittal (or a
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, mail or deliver it and any other required documents to the
Depositary indicated thereon and either deliver the certificate(s) for such
tendered Shares to the Depositary along with the Letter of Transmittal or tender
such Shares pursuant to the procedures for book-entry transfer set forth in
Section 2 of this Offer to Purchase, or (2) request such stockholder's broker,
dealer, commercial bank, trust company or other nominee to effect the
transaction for the stockholder. Stockholders having Shares registered in the
name of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee if
they desire to tender such Shares.
A stockholder who desires to tender Shares and whose certificate(s) for
Shares are not immediately available, or who cannot comply with the procedures
for book-entry transfer on a timely basis, may tender such Shares by following
the procedures for guaranteed delivery set forth in Section 2 of this Offer to
Purchase.
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses and telephone numbers
set forth on the back cover of this Offer to Purchase. Requests for additional
copies of this Offer to Purchase, the Letter of Transmittal and the Notice of
Guaranteed Delivery may also be directed to the Information Agent or the Dealer
Manager. None of BYOWC, Parent, Acquisition or the Company will pay any fee or
commission to any broker or dealer or to any other person (other than to the
Dealer Manager, the Depositary and the Information Agent) in connection with the
solicitation of tenders of Shares pursuant to the Offer.
The Dealer Manager for the Offer is:
[LOGO]
December 28, 1999
<PAGE>
Table of Contents
<TABLE>
<S> <C>
Questions and Answers about the Offer....................... 3
INTRODUCTION................................................ 7
SECTION
1. Terms of the Offer; Extension of Tender Period;
Termination; Amendments................................. 10
2. Procedure for Tendering Shares........................ 11
3. Withdrawal Rights..................................... 14
4. Acceptance for Payment and Payment of Offer Price..... 15
5. Purpose of the Offer and the Merger; Structure of the
Transaction; Short Form Merger; Plans for the Company;
Appraisal Rights; Going Private Transactions.......... 16
6. Price Range of Shares; Dividends...................... 18
7. Certain Federal Income Tax Consequences............... 19
8. Certain Information Concerning the Company............ 19
9. Certain Information Concerning BYOWC, Parent and
Acquisition............................................. 23
10. Source and Amount of Funds............................ 23
11. Background of the Offer and the Merger................ 26
12. Recommendation of the Company's Board of Directors.... 29
13. Interests of Certain Persons in the Offer and the
Merger.................................................. 31
14. Certain Effects of the Offer.......................... 33
15. The Merger Agreement; Stockholder's Agreements........ 34
16. Dividends and Distributions........................... 45
17. Certain Conditions to the Offer....................... 46
18. Certain Legal Matters................................. 49
19. Fees and Expenses..................................... 50
20. Miscellaneous......................................... 51
</TABLE>
<TABLE>
<S> <C> <C>
Schedule I Certain Information Concerning the Directors and Executive
Officers of the Company and Other Information Pursuant to
Section 14(f) of the Securities Exchange Act of 1934, as
amended
Schedule II Certain Information Concerning the Members and Managers of
BYOWC
Schedule Certain Information Concerning the Directors and Executive
III Officers of Parent
Schedule IV Certain Information Concerning the Directors and Executive
Officers of Acquisition
Schedule V Opinion of Wasserstein Perella & Co., Inc.
</TABLE>
2
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Questions and Answers about the Offer of
BRIDGEPORT ACQUISITION CORPORATION
and
MICRO WAREHOUSE, INC.
To Purchase All of the Outstanding Shares
(Including the Associated Preferred Share Purchase Rights) of
MICRO WAREHOUSE, INC.
The following information answers certain basic questions about the Offer.
Stockholders of the Company should read this entire Offer to Purchase and
related Letter of Transmittal for a detailed description of the Offer. As used
in this section, "we" and "our" refer to Bridgeport Acquisition Corporation and
its affiliates.
Q. Who is Bridgeport Acquisition Corporation?
A. Bridgeport Acquisition Corporation, referred to in this Offer to Purchase as
"Acquisition," is a special purpose entity formed for the purpose of
conducting the Offer and consummating the follow-up merger. Acquisition is a
wholly-owned subsidiary of Bridgeport Holdings Inc., referred to in this
Offer to Purchase as "Parent," whose stockholders include or will include
BYOWC Partners LLC, referred to in this Offer to Purchase as "BYOWC," FS
Equity Partners IV, L.P., a private equity investment fund managed by
Freeman Spogli & Co. LLC, and other investors. BYOWC is a private investment
group consisting of Gary L. Wilson, Jerome B. York, Alfred D. Boyer, Michael
S. Ovitz, Alfred A. Checchi and Kenneth W. Slutsky. For more information,
please see Sections 9 and 11.
Q. What is the Offer?
A. Acquisition and the Company are offering to purchase your Shares in the
Company for $19.00 per share net to you in cash. This price represents a
premium of more than 44% over the average of the last reported sales prices
of the Shares over the 30 day trading period prior to our public
announcement of the Offer. The last reported per Share sales price on
December 20, 1999, the day prior to our public announcement of the Offer,
was $15.25. For more information, please see Sections 6, 11, and 12.
Q. What will happen after the Offer is completed?
A. If the Offer is successfully completed, Acquisition and the Company will
promptly take action so that Acquisition and the Company will be merged and
the surviving corporation in the merger will be a wholly-owned subsidiary of
Parent. In the merger, all Shares not tendered in the Offer will be
converted into the right to receive $19.00 per Share net to the stockholder
in cash. Because Acquisition will own a majority interest in the Company
following the successful completion of the Offer, a merger can be
accomplished by Acquisition without approval by the Company's other
remaining stockholders. For more information, please see Sections 14 and 15.
Q. Why is the transaction structured as a tender offer?
A. The transaction has been structured as a tender offer followed by a merger
at the request of the Board of Directors of the Company so that the
stockholders who tender their Shares in the Offer can receive the Offer
price as promptly as practicable. For more information, please see Sections
11 and 12.
Q. Why is the Company participating in the Offer?
A. BYOWC agreed to the tender offer structure on the condition that the Company
make its cash available for the purchase of Shares in the Offer. Acquisition
will purchase the first Shares tendered up to an amount which, when added to
the Shares currently owned by BYOWC, equals approximately 71% of the
outstanding Shares. The Company will purchase any additional Shares
tendered. Although Acquisition's offer and the Company's offer are
technically separate, the two offers are for all practical purposes being
conducted as a single Offer. For more information, please see Section 5.
Q. What does the Company's Board of Directors recommend?
A. This transaction has been unanimously approved by the Company's Board of
Directors and it unanimously recommends that you tender your Shares in the
Offer. For more information, please see Section 12.
3
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Q. What are the conditions to the Offer?
A. The Offer is subject to several conditions, including, among others:
- that stockholders tender at least that number of Shares which, together
with the Shares owned by BYOWC, equals 51% of the outstanding Shares on a
fully diluted basis. BYOWC currently owns approximately 4.3% of the Shares
outstanding on a fully diluted basis. This condition is referred to as the
"Minimum Condition;" and
- that we receive $320 million in debt financing and $130 million in equity
financing from our financing sources and that we also obtain a
$70 million credit facility for the Company and Acquisition upon
consummation of the Offer. Our financing sources have executed commitment
letters for the debt and equity financing and the credit facility. This
condition is referred to as the "Financing Condition."
We can waive any of the conditions to the Offer without the Company's
consent other than the Minimum Condition. For more information, please see
Section 17.
Q. What are the conditions to our financing arrangements?
A. The debt financing for the Offer is subject to various conditions. These
conditions include, among others:
- that there has not occurred any change, effect or circumstance that is or
could be reasonably expected to be materially adverse to the business,
assets, financial condition or results of operation of the Company and its
subsidiaries, taken as a whole;
- that there has not occurred a material disruption of, or a material
adverse change in, the financial or capital markets that could materially
and adversely affect the syndication of our debt financing by our lenders;
- that there is no actual or threatened litigation that could prevent or
restrain the Offer or the merger or materially impair the ability of
Parent or Acquisition to operate the Company or restrain or materially
impair the debt financing arrangements, other than, in each case, a
private litigation based upon fiduciary duty claims where the only
expected remedy is monetary damages;
- that the equity financing be received by Parent; and
- that the conditions to the purchase of Shares in the Offer have been
satisfied without giving effect to any waiver to which the debt financing
source has not consented.
The equity financing for the Offer is also subject to various conditions,
including, among others:
- that the debt financing and the credit facility are available; and
- that the conditions to the purchase of Shares in the Offer have been
satisfied without giving effect to any waiver to which the equity
financing source has not consented.
For more information, please see Section 10.
Q. When does the Offer expire? Can it be extended?
A. The initial expiration date of the Offer is 5:00 p.m. on Friday,
January 28, 2000. The Company can always consent to our extending the Offer.
We can extend the Offer without the Company's consent in the following
circumstances:
- If any of the conditions to the Offer, other than the Minimum Condition,
have not been satisfied or waived, we can extend the Offer until such time
as they are satisfied or waived.
- If the only condition to the Offer that has not been satisfied or waived
is the Minimum Condition, and the number of Shares tendered, together with
the Shares owned by BYOWC, equals at least 40% of the outstanding Shares,
we can extend the Offer for up to a total of 15 business days.
4
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- If all the conditions to the Offer, including the Minimum Condition, have
been satisfied or waived but the number of Shares tendered, together with
the Shares owned by BYOWC, is less than 90% of the outstanding Shares
(after giving effect to the reduction in the number of outstanding Shares
as a result of the Company's purchase of Shares in the Offer), we can
extend the Offer for up to a total of 20 business days. In order to do
this, Acquisition and, if applicable, the Company must accept for payment
all Shares tendered prior to such extension.
For more information, please see Section 1.
Q. How will I be notified if the Offer is extended?
A. If the Offer is extended, we will put out a press release on the Dow Jones
News Service by 9:00 a.m. on the morning after the Offer would have
otherwise expired.
Q. What happens if I do not tender my Shares in the Offer?
A. If you do not tender your Shares and the Offer is completed, your Shares
will remain outstanding and you will not receive any cash until we merge
Acquisition with the Company. Once the merger is completed, your Shares
will, subject to any statutory appraisal rights that you may have, be
converted into the right to receive $19.00 in cash without interest for each
of your Shares.
Q. Do I have statutory appraisal rights?
A. You do not have appraisal rights in connection with the Offer. However, if
you do not tender your Shares in the Offer and the merger is consummated,
you will have a statutory right to dissent and demand payment of the
judicially appraised fair market value of your Shares. This value may be
more or less than the per Share price paid in the Offer. The Company will
notify you of the procedures necessary to perfect your appraisal rights when
and if they are applicable. Accordingly, if you intend to exercise your
appraisal rights, you should not tender your Shares in the Offer. For more
information, please see Section 5.
Q. Can the merger agreement be terminated?
A. Yes. Parent and the Company can mutually agree to terminate the merger
agreement. In addition, either Parent or the Company can terminate the
merger agreement if:
- Shares are not purchased pursuant to the Offer before March 31, 2000;
- there are legal restraints preventing the merger; or
- the other party breaches in a material way its representations,
warranties, covenants or agreements set forth in the merger agreement and
the breach is not or cannot be remedied. The merger agreement cannot be
terminated on this basis, however, once Acquisition has acquired Shares in
the Offer.
Parent can also terminate the merger agreement if the Company withdraws or
modifies its approval or recommendation of the Offer, the merger agreement
or the merger in a manner adverse to Parent. In certain instances, the
Company can terminate the merger agreement to accept a superior proposal.
For more information, please see Section 15.
Q. How do I tender my Shares?
A. To tender your Shares, you should do the following:
- If you hold your Shares in your own name, complete and sign the enclosed
Letter of Transmittal and return it with your Share certificates to
EquiServe L.P., the depositary for the Offer, at one of its addresses on
the back cover of this Offer to Purchase.
- If you hold your Shares in "street name" through a broker or other
nominee, ask your broker or other nominee to tender your Shares.
For more information, please see Section 2.
5
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Q. Can I change my mind and withdraw my tender?
A. In general, yes. You can withdraw Shares that you have tendered by
delivering an appropriate notice of withdrawal to the depositary prior to
the initial expiration date of the Offer. Shares properly withdrawn can be
retendered at any time prior to the final expiration date of the Offer. Once
Shares have been accepted for payment in the Offer, they cannot be
withdrawn.
For more information, please see Sections 3 and 4.
Q. What should I do if I have questions?
A. If you have any questions about the Offer, please call either:
- MacKenzie Partners, Inc., the Information Agent
Toll Free: (800) 322-2885
Collect: (212) 929-5500
or
- Credit Suisse First Boston, the Dealer Manager
Toll Free: (800) 881-8320
6
<PAGE>
To the Holders of Common Stock of
MICRO WAREHOUSE, INC.:
INTRODUCTION
BRIDGEPORT ACQUISITION CORPORATION, a Delaware corporation ("Acquisition"),
and MICRO WAREHOUSE, INC., a Delaware corporation (the "Company" and, together
with Acquisition, the "Purchasers"), hereby offer to purchase all outstanding
shares of common stock, par value $0.01 per share, of the Company (the "Common
Stock"), together with the associated preferred share purchase rights issued
pursuant to the Rights Agreement dated as of June 17, 1996 (the "Rights
Agreement"), between the Company and State Street Bank and Trust Company NA, as
Rights Agent (the "Rights" and, together with the Common Stock, the "Shares"),
at $19.00 per Share, net to the selling stockholder in cash, upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the related
Letter of Transmittal (which together constitute the "Offer"). Acquisition is a
wholly-owned subsidiary of Bridgeport Holdings Inc., a Delaware corporation
("Parent"). Parent is an entity formed by BYOWC Partners LLC, a Delaware limited
liability company ("BYOWC"), and BYOWC is jointly and severally responsible for
each of Parent's and Acquisition's obligations in the Offer. BYOWC, Parent and
Acquisition are sometimes collectively referred to herein as the "BYOWC
Companies." For more information about Parent and BYOWC, see Section 9.
Stockholders of record who tender directly to the Depositary (as defined
below) will not be obligated to pay brokerage fees or commissions or, subject to
Instruction 6 of the Letter of Transmittal, stock transfer taxes, if any, on the
purchase of Shares by the Purchasers pursuant to the Offer. Stockholders who
hold their Shares through a bank or broker should check with such institution as
to whether they will be charged any service fees. However, any tendering
stockholder or other payee who fails to complete and sign the Substitute
Form W-9 that is included in the Letter of Transmittal may be subject to a
required federal backup withholding tax of 31% of the gross proceeds payable to
such stockholder or other payee pursuant to the Offer. See Section 2.
Acquisition will pay all charges and expenses of Credit Suisse First Boston
Corporation, as Dealer Manager ("Credit Suisse First Boston" or the "Dealer
Manager"), MacKenzie Partners, Inc., as Information Agent (the "Information
Agent"), and EquiServe L.P., as Depositary (the "Depositary"), incurred in
connection with the Offer. See Section 19.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer at least that
number of Shares that constitutes, together with the Shares owned by BYOWC, 51%
of the outstanding Shares on a fully diluted basis (the "Minimum Condition").
BYOWC currently owns 1,749,700 Shares, constituting approximately 4.3% of the
outstanding Shares on a fully diluted basis. Certain stockholders of the
Company, who in the aggregate own 4,076,925 Shares, (constituting approximately
10.1% of the outstanding Shares on a fully diluted basis), have agreed to tender
their Shares in the Offer.
The Offer is also conditioned upon the receipt by Acquisition of certain
debt and equity financing necessary to consummate the Offer and a follow-up
merger and the availability to the Company of a new credit facility following
consummation of the Offer. Credit Suisse First Boston, New York branch ("CSFB")
and CIBC Inc. have executed a commitment letter to provide the debt financing
and the new credit facility. FS Equity Partners IV, L.P., a private equity
investment fund managed by Freeman Spogli & Co. LLC ("Freeman Spogli"), has
executed a commitment letter to provide the portion of the equity financing on
which the Offer is conditioned. See Section 10 of this Offer to Purchase for a
discussion of the financings, including the conditions to the financings. The
Offer is also subject to certain other conditions. See Section 17 of this Offer
to Purchase.
For purposes of the Offer, "on a fully diluted basis" means, as of any time,
the number of Shares that are actually issued and outstanding plus the maximum
number of Shares that the Company may be required to issue pursuant to
obligations under stock options, whether or not such stock options are currently
exercisable.
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As of December 20, 1999, there were 36,070,878 Shares outstanding and there were
options to acquire 3,999,660 Shares. In addition, it is anticipated that the
Company will issue additional options to acquire 179,500 Shares prior to the
expiration of the Offer. Accordingly, the Minimum Condition will be satisfied
if, excluding the Shares currently owned by BYOWC, 18,777,820 Shares are
tendered in the Offer. Holders of 4,076,925 Shares have agreed to tender those
Shares in the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of December 20, 1999 (the "Merger Agreement"), among BYOWC, Parent,
Acquisition and the Company. The Merger Agreement provides, among other things,
that, upon the terms and subject to the conditions therein, as soon as
practicable after the consummation of the Offer, the Company will be merged with
and into Acquisition (the "Merger"), with Acquisition being the corporation
surviving the Merger (the "Surviving Corporation"). At the effective time of the
Merger (the "Effective Time"), each outstanding Share (other than Shares with
respect to which appraisal rights are properly exercised under the Delaware
General Corporation Law (the "DGCL") ("Dissenting Shares") and Shares owned by
the BYOWC Companies or any other subsidiary of BYOWC) will be converted into and
represent the right to receive $19.00 in cash or any higher price that may be
paid per Share in the Offer (the "Per Share Amount"), subject to any applicable
withholding taxes, without interest. See Section 15.
The Board of Directors of the Company has unanimously determined that the
transactions contemplated by the Merger Agreement, including the Offer and the
Merger, are fair to, and in the best interests of, the Company and its
stockholders, has unanimously approved the Merger Agreement, the Offer and the
Merger and unanimously recommends that the Company's stockholders accept the
Offer and tender their Shares pursuant to the Offer.
Wasserstein Perella & Co., Inc., the Company's financial advisor
("Wasserstein Perella"), has delivered to the Company's Board of Directors its
written opinion dated December 20, 1999 that, as of such date, the consideration
to be received by the holders of the Company's Common Stock in the Offer and the
Merger is fair to such stockholders from a financial point of view. A copy of
such opinion is included in this Offer to Purchase as Schedule V.
The Merger Agreement provides that, promptly upon the purchase of Shares
pursuant to the Offer, Parent will be entitled to designate a number of the
Company's directors which bears the same ratio to the total number of directors
on the Company's Board of Directors as the ratio of the number of Shares owned
by the BYOWC Companies following the Offer to the total number of outstanding
Shares, rounded up to the next higher whole number of directors. The Company
will, upon request of Parent, promptly increase the size of the Company's Board
of Directors and/or exercise its reasonable best efforts to secure the
resignations of such number of directors as is necessary to enable Parent's
designees to be elected to the Company's Board of Directors. See Section 15. The
designation of directors by Parent is subject to compliance with the
requirements of Section 14(f) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Certain information in Schedule I to this Offer to
Purchase is furnished in order to comply with these requirements.
If the Minimum Condition is satisfied and Acquisition acquires Shares in the
Offer, Acquisition will have sufficient voting power to cause the adoption of
the Merger Agreement by the requisite vote of the stockholders of the Company,
even if no other stockholder votes in favor of such adoption. Under the DGCL, if
a parent corporation owns at least 90% of the shares of each class of shares of
a subsidiary corporation, the parent can merge with that subsidiary in a "short
form" merger without a vote of other stockholders. If Acquisition acquires 90%
or more of the outstanding Shares (including the Shares owned by BYOWC and after
giving effect to the reduction in the number of outstanding Shares as a result
of the Company's purchase of Shares in the Offer), Acquisition would be able to
effect the Merger pursuant to the short form merger provisions of the DGCL
without the vote of the Company's other stockholders.
The Offer consists of an offer by Acquisition and an offer by the Company.
Although technically two separate offers, the offers are being conducted for
practical purposes as a single offer. The Company will only purchase Shares in
the Offer if the number of Shares tendered, together with Shares owned by BYOWC,
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exceeds approximately 71% of the outstanding Shares. Acquisition will acquire
the first approximately 71% of the currently outstanding Shares, including the
Shares currently owned by BYOWC, and the Company will acquire the remaining
Shares tendered. See Section 5.
In connection with the Offer and the Merger, the Company's Board of
Directors has approved an amendment to the Company's Rights Agreement to assure
that the Rights are not exercisable as a result of the Offer or the Merger.
The information contained herein concerning or attributed to the Company has
been supplied by the Company, and all other information contained herein has
been supplied by the BYOWC Companies. Although neither the Company nor the BYOWC
Companies have any knowledge that would indicate that any statements contained
herein based on the information provided by the other are untrue, neither the
Company nor the BYOWC Companies take any responsibility for the accuracy or
completeness of any information provided by the other or for any failure by the
other to disclose events that may have occurred and may affect the significance
or accuracy of such information but which are unknown to the Company or the
BYOWC Companies, respectively.
The Company has filed a Schedule 14D-9 with the Securities and Exchange
Commission (the "Commission"), which is being mailed to stockholders together
with this Offer to Purchase and the related Letter of Transmittal. The Company
has also filed a Schedule 13E-4 with the Commission with respect to the
Company's portion of the Offer (the "Schedule 13E-4"). See Section 20.
This Offer to Purchase and the related Letter of Transmittal contain
important information and you should read them in their entirety before making
any decision with respect to the Offer.
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1. Terms of the Offer; Extension of Tender Period; Termination; Amendments.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchasers will accept for payment and pay for all Shares which
are validly tendered and not properly withdrawn on or prior to the Expiration
Date, as soon as practicable after the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on Friday, January 28, 2000, unless
and until the Purchasers (subject to the terms and conditions of the Merger
Agreement) shall have extended the period of time for which the Offer is open,
in which event the term "Expiration Date" shall mean the latest time and date,
at which the Offer, as so extended by the Purchasers, shall expire.
The Offer is conditioned upon the satisfaction of the Minimum Condition, the
Financing Condition and the other conditions set forth in Section 17
(collectively, the "Offer Conditions"). Subject to the provisions of the Merger
Agreement, the Purchasers may waive any or all of the conditions to their
respective obligations to purchase Shares pursuant to the Offer. If by the
initial Expiration Date or any subsequent Expiration Date any or all of the
conditions to the Offer have not been satisfied or waived, subject to the
provisions of the Merger Agreement, the Purchasers may elect to (i) terminate
the Offer and return all tendered Shares to tendering stockholders, (ii) waive
all of the unsatisfied conditions and, subject to any required extension,
purchase all Shares validly tendered by the Expiration Date and not properly
withdrawn, or (iii) extend the Offer and, subject to the right of stockholders
to withdraw Shares until the new Expiration Date, retain the Shares that have
been tendered until the expiration of the Offer as extended.
Under the terms of the Merger Agreement, neither Acquisition nor the Company
may, without the prior written consent of the other, (i) decrease the Per Share
Amount or change the form of consideration payable in the Offer, (ii) reduce the
number of Shares subject to the Offer, (iii) impose conditions to the Offer in
addition to the Offer Conditions, or (iv) amend any term of the Offer in a
manner adverse to the holders of Shares. In addition, Acquisition may not,
without the prior written consent of the Company, waive or amend the Minimum
Condition.
Notwithstanding the foregoing, Acquisition may, without the consent of the
Company, extend the Offer at any time, and from time to time: (i) if any of the
Offer Conditions (other than the Minimum Condition) shall not have been
satisfied or waived, until such time as such conditions are satisfied or waived;
(ii) if all of the Offer Conditions, other than the Minimum Condition, shall
have been satisfied or waived, and the number of Shares tendered, together with
the Shares owned by BYOWC, is greater than 40% of the Shares then outstanding,
for an aggregate period of not more than 15 business days for all such
extensions; (iii) for any period required by any rule, regulation,
interpretation or position of the Commission or its staff applicable to the
Offer; or (iv) if all of the Offer Conditions shall have been satisfied or
waived but the number of Shares tendered, together with the Shares owned by
BYOWC, is less than 90% of the Shares then outstanding (after giving effect to
the reduction of outstanding Shares resulting from the purchase of Shares by the
Company in the Offer), for an aggregate period of not more than 20 business days
(for all such extensions) beyond the latest Expiration Date that would be
permitted under clause (i), (ii) or (iii) of this sentence, provided that, in
the case of any extension pursuant to this clause (iv), the Purchasers must
first accept for payment all Shares validly tendered pursuant to the Offer as of
such Expiration Date in accordance with the rules and regulations of the
Commission.
Subject to the applicable rules and regulations of the Commission and the
provisions of the Merger Agreement, Acquisition also expressly reserves the
right, in its sole discretion, at any time or from time to time, (i) to
terminate the Offer if any of the Offer Conditions have not been satisfied or
upon the occurrence of any of the events specified in Section 17 and (ii) to
waive any Offer Condition or otherwise amend the Offer in any respect, in each
case by giving oral or written notice of such extension, termination, waiver or
amendment to the Depositary and by making a public announcement thereof. If the
Purchasers accept for payment any Shares pursuant to the Offer, they will accept
for payment all Shares validly tendered prior to the Expiration Date and not
properly withdrawn, and will promptly pay for all Shares so accepted for
payment. The
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<PAGE>
Purchasers acknowledge that, notwithstanding anything to the contrary contained
in the Offer, the Purchasers shall not be required to pay for Shares tendered
and may terminate or amend the Offer only if, prior to the Expiration Date, any
of the Offer Conditions has not been satisfied or waived, or if any of the
events specified in Section 17 has occurred.
The rights reserved by the Purchasers in the preceding paragraph are in
addition to the Purchasers' rights pursuant to Section 17. Any extension, delay,
termination or amendment of the Offer will be followed as promptly as
practicable by public announcement thereof, such announcement in the case of an
extension to be issued no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date, in accordance with
the public announcement requirements of Rule 14e-1(d) under the Exchange Act.
Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, which require that any material change in the information
published, sent or given to stockholders in connection with the Offer be
promptly disseminated to stockholders in a manner reasonably designed to inform
stockholders of such change), and without limiting the manner in which the
Purchasers may choose to make any public announcement, the Purchasers shall have
no obligation to publish, advertise or otherwise communicate any such public
announcement other than by making a release to the Dow Jones News Service.
If the Purchasers make a material change in the terms of the Offer or the
information concerning the Offer, or if they waive a material condition of the
Offer, the Purchasers will disseminate additional tender offer materials
(including by public announcement as set forth above) and extend the Offer to
the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange
Act. The minimum period during which an offer must remain open following
material changes in the terms of the Offer, other than a change in price,
percentage of securities sought or inclusion of or change to a dealer's
soliciting fee, will depend upon the facts and circumstances, including the
materiality, of the changes. In the Commission's view, an offer should remain
open for a minimum of five business days from the date the material change is
first published, sent or given to stockholders, and, if material changes are
made with respect to information that approaches the significance of price and
share levels, a minimum of ten business days may be required to allow for
adequate dissemination and investor response. With respect to a change in price
or, subject to certain limitations, a change in the percentage of securities
sought or inclusion of or change to a dealer's soliciting fee, a minimum ten
business day period from the date of such change is generally required to allow
for adequate dissemination to stockholders. Accordingly, if, prior to the
Expiration Date, the Purchasers decrease the number of Shares being sought or
increase or decrease the consideration offered pursuant to the Offer, and if the
Offer is scheduled to expire at any time earlier than the tenth business day
from the date that notice of such increase or decrease is first published, sent
or given to stockholders, the Offer will be extended at least until the
expiration of such tenth business day. For purposes of the Offer, a "business
day" means any day other than a Saturday, Sunday or a federal holiday and
consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time.
In connection with the Offer, the Company has provided Acquisition with the
names and addresses of all record holders of Shares and security position
listings of Shares held in stock depositories. This Offer to Purchase, the
related Letter of Transmittal and other relevant materials will be mailed to
registered holders of Shares and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder list or, if applicable, who are
listed as participants in a clearing agency's security position listing, for
subsequent transmittal to beneficial owners of Shares.
2. Procedure for Tendering Shares.
Except as set forth below, in order for Shares to be validly tendered
pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, together with any required signature
guarantees, or an Agent's Message (as hereinafter defined) in connection with a
book-entry transfer of Shares, and any other documents required by the Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase on or prior to the Expiration
Date, and
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either (i) certificates representing tendered Shares must be received by the
Depositary, or such Shares must be tendered pursuant to the procedure for
book-entry transfer set forth below (and confirmation of receipt of such
delivery must be received by the Depositary), in each case on or prior to the
Expiration Date, or (ii) the guaranteed delivery procedures set forth below must
be complied with. No alternative, conditional or contingent tenders will be
accepted.
SIGNATURE GUARANTEES.
No signature guarantee is required on the Letter of Transmittal (i) if such
Letter of Transmittal is signed by the registered holder of the Shares tendered
therewith, unless such holder has completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" in the
Letter of Transmittal, or (ii) if Shares are tendered for the account of a firm
that is a member in good standing of the Security Transfer Agent's Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program (each being hereinafter referred to as an "Eligible
Institution"). In all other cases, all signatures on a Letter of Transmittal
must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter
of Transmittal.
If a certificate representing Shares is registered in the name of a person
other than the signatory of the Letter of Transmittal (or a facsimile thereof),
or if payment is to be made, or Shares not accepted for payment or not tendered
are to be registered in the name of a person other than the registered holder,
the certificate must be endorsed or accompanied by an appropriate stock power,
in either case signed exactly as the name(s) of the registered holder(s) appears
on the certificate, with the signature(s) on the certificate or stock power
guaranteed by an Eligible Institution. If the Letter of Transmittal or stock
powers are signed or any certificate is endorsed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing and, unless waived by the Purchasers, proper evidence
satisfactory to the Purchasers of their authority to so act must be submitted.
See Instruction 5 of the Letter of Transmittal.
BOOK-ENTRY TRANSFER.
The Depositary will establish accounts with respect to the Shares at The
Depository Trust Company ("DTC") for purposes of the Offer within two business
days after the date of this Offer to Purchase, and any financial institution
that is a participant in DTC's system may make book-entry delivery of the Shares
by causing DTC to transfer such Shares into the Depositary's account in
accordance with DTC's procedure for such transfer. However, although delivery of
Shares may be effected through book-entry transfer at DTC, a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message and any other required
documents, must, in any case, be transmitted to and received by the Depositary
at one of its addresses set forth on the back cover of this Offer to Purchase
prior to the Expiration Date, or the guaranteed delivery procedures described
below must be complied with. The term "Agent's Message" means a message
transmitted through electronic means by DTC to, and received by, the Depositary
and forming a part of a book-entry confirmation, which states that DTC has
received an express acknowledgment from the participant in DTC tendering the
Shares that such participant has received, and agrees to be bound by, the terms
of the Letter of Transmittal. Delivery of documents to DTC in accordance with
DTC's procedures does not constitute delivery to the Depositary.
GUARANTEED DELIVERY.
If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates representing Shares are not immediately available (or
the procedures for book-entry transfer cannot be
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completed on a timely basis) or time will not permit all required documents to
reach the Depositary prior to the Expiration Date, such Shares may nevertheless
be tendered, provided that all of the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution;
(b) the Depositary receives, prior to the Expiration Date, a properly
completed and duly executed Notice of Guaranteed Delivery, substantially in
the form provided by the Purchasers; and
(c) the certificates representing all tendered Shares in proper form for
transfer (or confirmation of a book-entry transfer of such Shares into the
Depositary's account at DTC), together with a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees (or, in connection with a book-entry transfer, an
Agent's Message) and any other documents required by the Letter of
Transmittal are received by the Depositary within three trading days after
the date of such Notice of Guaranteed Delivery. A "trading day" is any day
on which The Nasdaq Stock Market is open for business.
The Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by facsimile transmission or mail, to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in such
Notice of Guaranteed Delivery.
The method of delivery of all documents, including certificates for Shares,
is at the option and risk of the tendering stockholder, and the delivery will be
deemed made only when actually received by the Depositary. If delivery is by
mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.
DETERMINATION OF VALIDITY.
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tendered Shares
will be determined by the Purchasers in their sole discretion, and their
determination shall be final and binding on all persons. The Purchasers reserve
the absolute right to reject any or all tenders of any Shares that they
determine are not in appropriate form or the acceptance for payment of or
payment for which may, in the opinion of the Purchasers' counsel, be unlawful.
The Purchasers also reserve the absolute right to waive any defect or
irregularity in any tender with respect to any particular Shares or any
particular stockholder, and the Purchasers' interpretation of the terms and
conditions of the Offer will be final and binding on all persons. No tender of
Shares will be deemed to have been validly made until all defects or
irregularities relating thereto have been expressly waived or cured to the
satisfaction of the Purchasers. None of the Company, Acquisition, Parent, BYOWC,
the Depositary, the Dealer Manager, the Information Agent or any other person
will be under any duty to give notification of any defects or irregularities in
tenders, nor shall any of them incur any liability for failure to give any such
notification.
OTHER REQUIREMENTS.
By executing the Letter of Transmittal, a tendering stockholder irrevocably
appoints designees of Acquisition as such stockholder's proxies, in the manner
set forth in the Letter of Transmittal, each with full power of substitution, to
the full extent of such stockholder's rights with respect to the Shares tendered
by such stockholder and accepted for payment by the Purchasers (and any and all
other Shares or other securities or rights issued or issuable in respect of such
Shares on or after December 28, 1999), effective if, when and to the extent that
the Purchasers accept such Shares for payment pursuant to the Offer. Upon such
acceptance for payment, all prior proxies given by such stockholder with respect
to such Shares or other securities accepted for payment will, without further
action, be revoked, and no subsequent proxies may be given by such stockholder
nor any subsequent written consents executed (and, if given or executed, will
not be deemed effective). Such designees of Acquisition will, with respect to
such Shares and other securities or rights issuable in respect thereof, be
empowered to exercise all voting and other rights of such stockholder as
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they, in their sole discretion, may deem proper in respect of any annual,
special or adjourned meeting of the Company's stockholders, action by written
consent in lieu of any such meeting or otherwise. Acquisition reserves the right
to require that, in order for Shares to be deemed validly tendered, Acquisition
must be able to exercise full voting rights with respect to the Shares accepted
by Acquisition for payment immediately upon such acceptance.
The Purchasers' acceptance for payment of Shares tendered pursuant to any of
the procedures described above will constitute a binding agreement between the
tendering stockholder and the Purchasers upon the terms and subject to the
conditions of the Offer.
To prevent federal backup withholding tax on payments made to stockholders
with respect to Shares purchased pursuant to the Offer, each stockholder must
provide the Depositary with his correct taxpayer identification number ("TIN")
and certify that he is not subject to backup withholding by completing the
Substitute Form W-9 included in the Letter of Transmittal. Non-United States
holders must submit a completed Form W-8 or Form W-8BEN to avoid backup
withholding. These forms may be obtained from the Depositary. See Instructions
10 and 11 of the Letter of Transmittal.
3. Withdrawal Rights.
Tenders of Shares made pursuant to the Offer will be irrevocable, except
that Shares tendered may be withdrawn at any time prior to the Expiration Date,
and, unless theretofore accepted for payment by the Purchasers as provided
herein, may also be withdrawn on or after February 27, 2000.
For a withdrawal of Shares tendered to be effective, a written, telegraphic,
telex or facsimile transmission notice of withdrawal must be timely received by
the Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase. Any notice of withdrawal must specify the name of the person who
tendered the Shares to be withdrawn, the number of Shares to be withdrawn and
the name(s) in which the certificate(s) representing such Shares are registered,
if different from that of the person who tendered such Shares. If certificates
for Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, the name of the registered holder and the serial numbers shown on
the particular certificates evidencing such Shares to be withdrawn must also be
furnished to the Depositary prior to the physical release of the Shares to be
withdrawn. The signature(s) on the notice of withdrawal must be guaranteed by an
Eligible Institution (except in the case of Shares tendered by an Eligible
Institution). If Shares have been tendered pursuant to the procedures for
book-entry transfer set forth in Section 2, any notice of withdrawal must
specify the name and number of the account at DTC to be credited with such
withdrawn Shares and must otherwise comply with DTC's procedures.
If the Purchasers extend the Offer, are delayed in their acceptance for
payment of any Shares tendered, or are unable to accept for payment or pay for
Shares tendered pursuant to the Offer, for any reason whatsoever, then, without
prejudice to the Purchasers' rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchasers, retain tendered Shares, and such
Shares may not be withdrawn except to the extent that the tendering stockholder
is entitled to and duly exercises withdrawal rights as described in this Section
and as otherwise required by Rule 14e-1(c) under the Exchange Act. Any such
delay will be accompanied by an extension of the Offer to the extent required by
law.
Withdrawals of tenders of Shares may not be rescinded, and Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be retendered by again following the
procedures described in Section 2 at any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchasers, in their sole
discretion, and their determination will be final and binding on all persons.
None of the Company, Parent, BYOWC, Acquisition, the Depositary, the Dealer
Manager, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal,
nor shall any of them incur any liability for failure to give any such
notification.
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4. Acceptance for Payment and Payment of Offer Price.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchasers will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date (and not properly withdrawn in
accordance with Section 3) as soon as practicable after the latest to occur of
the Expiration Date and, subject to compliance with Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of the Offer Conditions. Any
determination concerning the satisfaction of such conditions shall be within the
sole discretion of the Purchasers, and such determination shall be final and
binding on all tendering stockholders. See Section 17.
The Purchasers expressly reserve the right to delay acceptance for payment
of, or payment for, Shares in order to comply in whole or in part with any
applicable law. If the Purchasers desire to delay payment for Shares accepted
for payment pursuant to the Offer, and such delay would otherwise be in
contravention of Rule 14e-1(c) of the Exchange Act, the Purchasers will extend
the Offer. See Section 1. In all cases, payment for Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of (i) certificates representing such Shares (or a timely confirmation of a
book-entry transfer of such Shares into the Depositary's account at DTC, as
described in Section 2), (ii) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees (or,
in connection with a book-entry transfer, an Agent's Message), and (iii) any
other documents required by the Letter of Transmittal.
For purposes of the Offer, the Purchasers will be deemed to have accepted
for payment, and thereby purchased, Shares tendered prior to the Expiration Date
when, as and if the Purchasers give oral or written notice to the Depositary, as
agent for the tendering stockholders, of the Purchasers' acceptance for payment
of such Shares. Payment for Shares so accepted for payment will be made by the
deposit of the purchase price therefor with the Depositary, which will act as
agent for the tendering Stockholders for the purpose of receiving such payment
from the Purchasers and transmitting such payment to tendering stockholders. If,
for any reason whatsoever, acceptance for payment of any Shares tendered
pursuant to the Offer is delayed, or the Purchasers are unable to accept for
payment Shares tendered pursuant to the Offer, then, without prejudice to the
Purchasers' rights under Section 1, the Depositary may, nevertheless, on behalf
of the Purchasers, retain tendered Shares, and such Shares may not be withdrawn,
except to the extent that the tendering Stockholders are entitled to withdrawal
rights as described in Section 3 and as otherwise required by Rule 14e-1(c)
under the Exchange Act. Under no circumstances will interest be paid on the
purchase price by reason of any delay in making such payments.
If the Purchasers have accepted for payment Shares tendered prior to the
Expiration Date but Acquisition has not reached the 90% ownership threshold
required to consummate a short form merger under the DGCL, the Purchasers may
extend the Offer for up to 20 business days. During the extension period, the
Purchasers will accept for payment and promptly pay for all Shares validly
tendered. The procedures for tendering Shares and guaranteed delivery set forth
in Section 2 will apply during the extension period.
If any tendered Shares are not accepted for payment and paid for,
certificates representing such Shares will be returned (or, in the case of
Shares delivered by book-entry transfer with DTC as permitted by Section 2, such
Shares will be credited to an account maintained with DTC) without expense to
the tendering stockholder as promptly as practicable following the expiration or
termination of the Offer.
If, prior to the Expiration Date, the Purchasers increase the consideration
to be paid for Shares pursuant to the Offer, the Purchasers will pay such
increased consideration for all Shares accepted for payment or paid for pursuant
to the Offer, whether or not such Shares have been tendered, accepted for
payment or paid for prior to such increase in the consideration.
Acquisition reserves the right to transfer or assign in whole or in part to
one or more affiliates of Acquisition the right of Acquisition to purchase
Shares tendered pursuant to the Offer, but any such transfer or
15
<PAGE>
assignment will not relieve Acquisition of its obligations under the Offer and
will in no way prejudice the rights of tendering stockholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
5. Purpose of the Offer and the Merger; Structure of the Transaction; Short
Form Merger; Plans for the Company; Appraisal Rights; Going Private
Transactions.
PURPOSE OF THE OFFER AND THE MERGER.
The purpose of the Offer and the Merger is for Parent to acquire the entire
equity interest in the Company. Through the Offer, Acquisition intends to
acquire control of, and a majority equity interest in, the Company. Following
the completion of the Offer, Parent intends to acquire any outstanding Shares
not owned by Acquisition by consummating the Merger.
Under the DGCL and the Company's Certificate of Incorporation, the approval
of the Board of Directors of the Company and the affirmative vote of a majority
of the holders of outstanding Shares are required to adopt the Merger Agreement.
The Board of Directors of the Company has approved the transactions contemplated
by the Merger Agreement, including the Offer and the Merger, and, unless the
Merger is consummated pursuant to the short form merger provisions of the DGCL
described below, the only remaining required corporate action necessary to
consummate the Merger is the adoption of the Merger Agreement by the affirmative
vote of the holders of a majority of the then outstanding Shares. If the Minimum
Condition is satisfied, Acquisition will have sufficient voting power to cause
the adoption of the Merger Agreement by the requisite vote of Company
stockholders without the affirmative vote of any other stockholder.
STRUCTURE OF THE TRANSACTION
The total amount of funds required to purchase all the outstanding Shares,
to cash-out options outstanding at the Effective Time of the Merger and to pay
all other costs and expenses of the transaction is approximately $733 million.
BYOWC has arranged to raise the equivalent of $530 million in debt and equity
financing for the transaction. The remaining funds needed for the transaction
will be derived from the Company's cash of approximately $203 million and, to
the extent Company cash is not available in that amount, other sources. BYOWC
had originally proposed to structure the transaction as a merger, in which all
of the Shares would be acquired at the same time and in which the Company's cash
would be available to pay for Shares. In the course of negotiating Acquisition's
purchase of the Company, the Board of Directors of the Company requested that
the transaction be structured as a tender offer for all outstanding Shares
followed by a merger, in which the remaining Shares would be acquired. This
two-step process would enable stockholders of the Company who tender their
Shares in the Offer to receive their cash payment as soon as practicable and
provide for a prompt and orderly transfer of the ownership of the common equity
from the public stockholders to Parent. BYOWC agreed to structure the
transaction as a tender offer and a follow-up merger provided the Company made
its cash available for the purchase of Shares in the Offer.
Acquisition and the Company will purchase Shares in the Offer according to
the following formula:
- Acquisition will first purchase all Shares tendered in the Offer up to a
number of Shares equal to the difference between the number of outstanding
Shares (less the number of Shares owned by BYOWC) and the number of Shares
that can be purchased at the Per Share Amount with $200 million.
- If additional Shares are tendered, the Company will purchase those Shares
for an aggregate purchase price of up to $200 million.
Based on this formula, it is anticipated that Acquisition will acquire up to
such number of Shares which, together with the Shares currently owned by BYOWC,
constitutes approximately 71% of the Shares currently outstanding, and the
Company will purchase the balance of the Shares tendered. Under this structure,
in order to satisfy federal margin requirements relating to Acquisition's
purchase of Shares in the Offer with the
16
<PAGE>
proceeds of the debt financing, the Company is required to guarantee the debt
financing and to secure the guarantee with its assets. The Company has agreed to
provide the guarantee and implement the required security arrangements. See
Section 10.
The Company's participation in the Offer will not affect the satisfaction of
the Minimum Condition, since the Company will not purchase any Shares tendered
until Acquisition has purchased in excess of the number of Shares needed to
satisfy the Minimum Condition.
SHORT FORM MERGER.
Under the DGCL, if Acquisition acquires at least 90% of the outstanding
Shares (after giving effect to the reduction in the number of outstanding Shares
resulting from the purchase of Shares by the Company in the Offer), Acquisition
will be able to adopt the Merger Agreement without a vote of the Company's other
stockholders. The Merger Agreement provides that if Acquisition, or any other
direct or indirect subsidiary of BYOWC or Parent, acquires at least 90% of the
outstanding Shares (after giving effect to the reduction in the number of
outstanding Shares resulting from the purchase of Shares by the Company in the
Offer), Parent, Acquisition and the Company will take all necessary and
appropriate action to cause the Merger to become effective as soon as
practicable after the expiration of the Offer without action by the other
stockholders of the Company, in accordance with Section 253 of the DGCL. In the
event that all of the conditions to the Purchasers' obligations to purchase
Shares in the Offer are satisfied or waived and the number of Shares tendered,
together with the Shares owned by BYOWC, is less than 90% of the outstanding
Shares (after giving effect to the reduction in the number of outstanding Shares
resulting from the purchase of Shares by the Company in the Offer), the
Purchasers will accept for payment all Shares validly tendered, and Acquisition
may extend the Offer for the purpose of attempting to reach the 90% threshold
required for a short form merger. Under these circumstances, the Offer may be
extended for up to 20 business days, and the Purchasers will accept for payment
and promptly pay for all Shares validly tendered during the extension period.
See Section 1. If Acquisition is unable to satisfy the requirements for a short
form merger, a significantly longer period of time may be required to effect the
Merger, because a vote of the Company's stockholders would be required under the
DGCL.
PLANS FOR THE COMPANY.
Except as otherwise set forth in this Offer to Purchase, it is expected
that, initially following the Merger, the business and operations of the Company
will be continued by the Surviving Corporation substantially as they are
currently being conducted. The directors of Acquisition will be the initial
directors of the Surviving Corporation, and the officers of the Company will be
the initial officers of the Surviving Corporation, except that it is the current
intention of Acquisition's Board of Directors to appoint Jerome B. York as the
Surviving Corporation's President and Chief Executive Officer. Upon completion
of the Offer and the Merger, Parent intends to conduct a detailed review of the
Company and its assets, corporate structure, capitalization, operations,
policies, management and personnel. After such review, Parent will determine
what actions or changes, if any, would be desirable in light of the
circumstances which then exist.
Except as described in this Offer to Purchase, none of BYOWC, Parent,
Acquisition or the Company has any present plans or proposals that would relate
to or result in (i) any extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries,
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries, (iii) any change in the Company's Board of Directors or
management, (iv) any material change in the Company's capitalization or dividend
policy, (v) any other material change in the Company's corporate structure or
business, (vi) a class of securities of the Company being delisted from a
national securities exchange or ceasing to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association,
or (vii) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g) of the Exchange Act.
17
<PAGE>
APPRAISAL RIGHTS.
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders of the Company may have certain rights
under the DGCL to dissent, and demand appraisal of, and to obtain payment for
the fair value of their Shares. Such rights, if the statutory procedures are
complied with, could lead to a judicial determination of the fair value of the
Shares (excluding any element of value arising from the accomplishment or
expectation of the Merger) required to be paid in cash to such dissenting
stockholders for their Shares. In addition, such dissenting stockholders would
be entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, a Delaware court
would be required to take into account all relevant factors. Accordingly, such
determination could be based upon considerations other than, or in addition to,
the market value of the Shares, including, among other things, asset value and
earning capacity. In WEINBERGER V. UOP, INC., the Delaware Supreme Court stated,
among other things, that "proof of value by any techniques or methods which are
generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in an appraisal proceeding. Therefore,
the value so determined in any appraisal proceeding could be higher or lower
than the price being paid in the Offer.
GOING PRIVATE TRANSACTIONS.
The Merger would have to comply with any applicable federal law operative at
the time. The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions. Acquisition does not believe
that Rule 13e-3 will be applicable to the Merger unless, among other things, the
Merger is completed more than one year after completion of the Offer. If
applicable, Rule 13e-3 would require, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the Merger and the consideration offered to minority stockholders in
the Merger be filed with the Commission and disclosed to stockholders prior to
the consummation of such transaction.
6. Price Range of Shares; Dividends.
The Shares are traded on the National Market System of The Nasdaq Stock
Market ("NASDAQ") under the symbol "MWHS." The following table sets forth, for
the periods indicated, the high and low per Share sales prices on NASDAQ as
reported by published financial sources. The Company has not declared or paid
any cash dividends on the Shares for the periods indicated.
<TABLE>
<CAPTION>
High Low
-------- --------
<S> <C> <C>
Year Ended December 31, 1997:
First Quarter............................................. $16.50 $ 9.75
Second Quarter............................................ 18.63 12.88
Third Quarter............................................. 30.00 13.00
Fourth Quarter............................................ 24.75 9.88
Year Ended December 31, 1998:
First Quarter............................................. $17.38 $10.25
Second Quarter............................................ 18.75 13.25
Third Quarter............................................. 27.63 14.63
Fourth Quarter............................................ 36.38 11.25
Year Ending December 31, 1999:
First Quarter............................................. $47.00 $12.75
Second Quarter............................................ 19.25 12.25
Third Quarter............................................. 18.50 11.31
Fourth Quarter (through December 27, 1999)................ 18.88 11.63
</TABLE>
18
<PAGE>
The average of the last reported per Share sales prices for the 30-day
period prior to the public announcement of the Offer was $13.03. On
December 16, 1999, the media reported that the Company was rumored to be
entering into an Internet marketing alliance. On that date, the last reported
per Share sales price on NASDAQ was $15.19, a $3.06 increase over the $12.13
last reported per Share sales price on the previous day. On December 20, 1999,
the last trading day prior to the public announcement of the Offer and Merger,
the last reported per Share sales price was $15.25. On December 27, 1999, the
last trading day prior to commencement of the Offer, the last reported per Share
sales price was $18.44. Stockholders are urged to obtain a current market
quotation for the Shares.
7. Certain Federal Income Tax Consequences.
The receipt of cash for Shares pursuant to the Offer (or in the Merger) will
be a taxable transaction for United States federal income tax purposes (and may
also be a taxable transaction under applicable state, local or other tax laws).
In general, a stockholder will recognize gain or loss for such purposes equal to
the difference between the amount of cash received and such stockholder's
adjusted tax basis in the Shares. Gain or loss must be determined separately for
each block of Shares (i.e., Shares acquired at the same cost in a single
transaction) sold pursuant to the Offer or converted to cash in the Merger. Such
gain or loss will be capital gain or loss if the Shares are a capital asset in
the hands of the stockholder and will be long term capital gain or loss if the
Shares were held for more than one year on the date of sale (in the case of the
Offer) or the effective time of the Merger (in the case of the Merger). The
receipt of cash for Shares pursuant to the exercise of dissenters' rights, if
any, will generally be taxed in the same manner as described above.
Payments in connection with the Offer or the Merger may be subject to
"backup withholding" at a rate of 31%. Backup withholding generally applies if
the stockholder (a) fails to furnish such stockholder's social security number
or TIN, (b) furnishes an incorrect TIN, or (c) under certain circumstances,
fails to provide a certified statement, signed under penalties of perjury, that
the TIN provided is such stockholder's correct number and that such stockholder
is not subject to backup withholding. Backup withholding is not an additional
tax but merely an advance payment, which may be refunded to the extent it
results in an overpayment of tax. Certain persons generally are entitled to
exemption from backup withholding, including corporations, non-United States
persons and financial institutions. Certain penalties apply for failure to
furnish correct information and for failure to include reportable payments in
income. Each stockholder should consult with his own tax advisor as to such
stockholder's qualification for exemption from backup withholding and the
procedure for obtaining such exemption. Tendering stockholders may be able to
prevent backup withholding by properly completing the Substitute Form W-9
included in the Letter of Transmittal.
The foregoing discussion may not be applicable to a stockholder who acquired
Shares pursuant to the exercise of employee stock options or otherwise as
compensation, to a stockholder who is related to Acquisition for purposes of
Section 302 of the Internal Revenue Code or to a stockholder who is not a United
States person for United States federal income tax purposes (including a
stockholder who is not a citizen or resident of the United States) or who is
otherwise subject to special tax treatment under the Internal Revenue Code. In
addition, the foregoing discussion does not address the tax treatment of holders
of options to acquire Shares.
The federal income tax discussion set forth above is included for general
information only and is based upon present law. Stockholders are urged to
consult their tax advisors with respect to the specific tax consequences of the
Offer and the Merger to them, including the application and effect of the
alternative minimum tax, and state, local or non-United States income and other
tax laws.
8. Certain Information Concerning the Company.
GENERAL INFORMATION. The Company is a Delaware corporation with its
principal executive offices located at 535 Connecticut Avenue, Norwalk,
Connecticut 06854. The Company began operations in 1987 as a Connecticut
corporation and was reincorporated in Delaware in 1992. The Company is a
specialty
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<PAGE>
catalog and online retailer and direct marketer of brand name personal
computers, computer software, accessories, peripheral and networking products to
commercial and consumer customers. The Company markets its products through
frequent mailings of its distinctive, colorful catalogs and dedicated
telemarketing account managers who focus on corporate, education and government
accounts. The Company also offers a full-service shopping site on the Internet
at WWW.WAREHOUSE.COM.
Except as set forth elsewhere in this Offer to Purchase or in Schedule I
hereto, (1) neither the Company nor, to the knowledge of the Company, any of the
persons listed in Schedule I hereto or any associate or majority-owned
subsidiary of the Company or any of the persons so listed, beneficially owns or
has a right to acquire any Shares or any other equity securities of the Company,
has effected any transaction in Shares or any other equity securities of the
Company during the past 60 days, or has any contract, arrangement, understanding
or relationship with any other person with respect to any securities of the
Company (including any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any such securities, joint ventures,
loan or option arrangements, puts or calls, guarantees of loans, guarantees
against loss or the giving or withholding of proxies, consents or
authorizations), (2) to the best knowledge of the Company, none of the persons
listed in Schedule I hereto, has had any business relationship or transaction
with the Company or any of its executive officers, directors or affiliates that
is required to be reported under the rules and regulations of the Commission
applicable to the Offer, and (3) there have been no contracts, negotiations or
transactions between any of the Company's subsidiaries or, to the best knowledge
of the Company, any of the persons listed in Schedule I to this Offer to
Purchase, on the one hand, and the Company or its affiliates, on the other hand,
concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors or a sale or other transfer
of a material amount of assets.
FINANCIAL INFORMATION. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the audited financial statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
(the "Form 10-K") and the unaudited quarterly information contained in the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999
(the "Form 10-Q"), which are incorporated by reference herein. More
comprehensive financial information is included in the Form 10-K, the Form 10-Q
and other documents filed by the Company with the Commission. The financial
information that follows is qualified in its entirety by reference to such
reports and other documents, including the financial statements and related
notes contained therein. Such reports and other documents may be examined and
copies may be obtained from the offices of the Commission in the manner set
forth below.
20
<PAGE>
SELECTED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Year Ended
December 31,
------------------
1998 1997
---- ----
<S> <C> <C>
Statement of Operations Data:
Net sales................................................... $2,220,018 $2,125,698
Gross profit................................................ 359,935 351,976
Restructuring, merger costs and goodwill write-off.......... -- 67,828
Litigation settlements...................................... 14,000 20,700
Income (loss) from operations before interest, income
taxes..................................................... 52,528 (42,455)
Income (loss) before income taxes........................... 61,578 (37,816)
Net income (loss)........................................... $ 30,178 $ (36,681)
Per Share Data:
Basic net income (loss) per share........................... $ 0.87 $ (1.06)
Diluted net income (loss) per share......................... $ 0.85 $ (1.06)
Shares used in per share calculation:
Basic....................................................... 34,803 34,475
Diluted..................................................... 35,349 34,475
Operating Data:
Gross profit percentage..................................... 16.2% 16.6%
Operating profit (loss) percentage.......................... 2.4% (2.0%)
Current ratio............................................... 2.2:1 2.0:1
Ratio of earnings to fixed charges.......................... 17.61 (6.20)(1)
Balance Sheet Data (at December 31):
Working capital............................................. $ 312,128 $ 262,449
Total assets................................................ 666,530 619,344
Long-term obligations....................................... -- --
Short-term debt obligations................................. -- 12,570
Stockholders' equity........................................ 398,543 348,789
Book value per share........................................ 11.25 10.07
</TABLE>
- ------------------------
(1) Excluding the 1997 restructuring, merger costs and goodwill write-off, the
1997 ratio of earnings to fixed charges is 10.66.
21
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
-----------------------------
September 30, September 30,
1999 1998
------------- -------------
(unaudited)
<S> <C> <C>
Sales....................................................... $1,782,653 $1,624,982
Cost of goods sold.......................................... 1,505,891 1,362,653
Gross profit................................................ 276,762 262,329
Selling, general and administrative expenses................ 223,219 214,673
Net income.................................................. 37,246 16,585
Net income per share........................................ $ 1.05(1) $ 0.48(2)
Net income per share (fully diluted)........................ $ 1.03(3) $ 0.47(4)
Ratio of earnings to fixed charges.......................... 22.15 14.87
</TABLE>
- ------------------------
(1) Based upon 35,611 Shares outstanding.
(2) Based upon 34,695 Shares outstanding.
(3) Based upon 36,104 Shares outstanding.
(4) Based upon 35,081 Shares outstanding.
<TABLE>
<CAPTION>
At
September 30, At
1999 December 31,
(unaudited) 1998
------------- ------------
<S> <C> <C>
Balance Sheet Data
Total assets................................................ $679,235 $666,530
Working capital............................................. 330,474 312,128
Long-term obligations....................................... -- --
Short-term obligations...................................... -- --
Total stockholders' equity.................................. 441,899 398,543
Book value per share........................................ 12.35 11.25
</TABLE>
OTHER INFORMATION.
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and, in
accordance therewith, is obligated to file periodic reports, proxy statements
and other information with the Commission relating to its business, financial
condition and other matters. Information, as of particular dates, concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is required to be
disclosed in such proxy statements and distributed to the Company's stockholders
and filed with the Commission. Such reports, proxy statements and other
information should be available for inspection at the public reference
facilities at the Commission's principal office at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549, and at the regional offices of the
Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission
maintains a site on the World Wide Web, and the reports, proxy statements and
other information filed by the Company with the Commission may be accessed
electronically on the Web at http://www.sec.gov. Copies of such material may
also be obtained by mail, upon payment of the Commission's customary fees, from
the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549.
22
<PAGE>
9. Certain Information Concerning BYOWC, Parent and Acquisition.
Acquisition is a newly formed Delaware corporation and a direct wholly-owned
subsidiary of Parent. Parent is a newly formed Delaware corporation formed by
BYOWC to hold the entire equity interest in the Surviving Corporation.
Currently, Parent is wholly-owned by BYOWC. Upon consummation of the equity
financing described in Section 10, BYOWC's investment partners will also own
equity interests in Parent. To date, neither Parent nor Acquisition has
conducted any business other than incident to its formation, the execution and
delivery of the Merger Agreement and the commencement of the Offer.
BYOWC, a Delaware limited liability company, was formed in March 1999 by a
group of private investors led by Gary L. Wilson for the purpose of investing in
the securities of the Company and pursuing the acquisition of the Company. The
members of BYOWC are Mr. Wilson, Jerome B. York, Alfred D. Boyer, Michael S.
Ovitz, Alfred A. Checchi and Kenneth W. Slutsky. Mr. Boyer is the sole managing
member of BYOWC. For information concerning the members of BYOWC, see
Schedule II to this Offer to Purchase.
Until immediately prior to the time that Acquisition purchases Shares
pursuant to the Offer, it is anticipated that neither Acquisition nor Parent
will have any significant assets or liabilities or engage in activities other
than those incident to its formation and capitalization and the transactions
contemplated by the Offer and the Merger Agreement. Since Parent and Acquisition
are newly formed and have minimal assets and capitalization, no meaningful
financial information is available.
At the present time, Messrs. Wilson, York and Boyer are the directors and
officers of Parent and Acquisition. Following the financing transactions
described in Section 10 below, it is anticipated that the number of the officers
and directors of both Parent and Acquisition will be increased to include
additional designees of BYOWC and its investment partners in Parent.
From March through September 1999, BYOWC acquired 1,749,700 Shares in the
open market. Other than its acquisition of Shares, the execution and delivery of
the Merger Agreement and the financing commitment letters and other activities
incident to the Offer and Merger, BYOWC has not engaged in any business
activities.
The address of the principal offices of each of BYOWC, Parent and
Acquisition is 9965 Wilshire Boulevard, Beverly Hills, California 90212, and the
telephone number there is (310) 247-2711.
Except as set forth in this Offer to Purchase, none of BYOWC, Parent,
Acquisition or, to the best of their knowledge, any of the persons listed in
Schedule II, Schedule III or Schedule IV to this Offer to Purchase, (a) has any
contract, arrangement, understanding or relationship with any other person with
respect to any securities of the Company, including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss, or
the giving or withholding of proxies, (b) has engaged in contacts, negotiations
or transactions with the Company or its affiliates concerning a merger,
consolidation, acquisition, tender offer or other acquisition of securities,
election of directors or a sale or other transfer of a material amount of assets
or (c) has had any other transaction with the Company or any of its executive
officers, directors or affiliates that would require disclosure under the rules
and regulations of the Commission applicable to the Offer. Other than the Shares
owned by BYOWC and the rights arising under the Merger Agreement and the
Stockholder's Agreements (as defined in Section 15), neither Parent, Acquisition
nor any of their affiliates beneficially own any Shares or have effected any
transactions in the Shares within the past 60 days.
10. Source and Amount of Funds.
The total amount of funds required by the Purchasers to purchase all of the
Shares pursuant to the Offer and the Merger, to make payments with respect to
the cash-out of employee and director stock options, and to pay all fees and
expenses contemplated by the Merger Agreement, is expected to be approximately
$733 million (including for this purpose the 1,749,700 Shares currently owned by
BYOWC valued at $19.00 per
23
<PAGE>
Share). In addition, it is anticipated that the Company, following the
completion of the Offer, and the Surviving Corporation, following the Merger,
will require at least $50 million in available credit for its general corporate
purposes.
Acquisition expects to obtain $210 million of the requisite funds in the
form of equity financing from Parent and to obtain $320 million in term
financing from the bank facilities described below. Parent will obtain the
$210 million in equity financing prior to the consummation of the Offer through
(i) a capital investment of $80 million (including for this purpose the Shares
currently owned by BYOWC valued at $19.00 per share) from BYOWC and other
investors; and (ii) $130 million in capital contributions from FS Equity
Partners IV, L.P. ("FS Partners"), a private equity investment fund managed by
Freeman Spogli, pursuant to the terms of a commitment letter between Parent and
FS Partners that is summarized below. FS Partners has indicated that it intends
to fund a portion of its commitment from other investors. The FS Partners
commitment letter is attached as Exhibit 2 to the Merger Agreement, which is
filed as an exhibit to the Schedule 14D-1 referenced in Section 20, and this
summary is qualified in its entirety by reference to the text of such letter.
The obligation of FS Partners to fund its $130 million in equity financing
is subject to the following conditions:
- The making of $80 million in capital investments by BYOWC and other
investors.
- The availability of the Term Loan Facilities and the New Credit Facility
described below.
- The absence of any legal prohibition on FS Partners purchasing the equity
interest in Parent and executing, delivering and performing under the
transaction documentation.
- The satisfaction of each condition in the Merger Agreement to
Acquisition's obligation to purchase Shares in the Offer without any
waiver to which FS Partners has not consented.
- The negotiation, execution and delivery of the various transaction
agreements relating FS Partners' purchase of equity interests in Parent.
Pursuant to a commitment letter dated December 20, 1999 (the "Bank
Commitment Letter"), CSFB and CIBC Inc. (together, the "Banks") have committed
to provide Acquisition an aggregate of up to $320 million in cash in the form of
two senior secured term loan facilities (the "Term Loan Facilities") for the
purpose of purchasing Shares in the Offer and the Merger. The Banks have
indicated that they intend to syndicate a portion of the Term Loan Facilities
and the New Credit Facility referred to below to other lending institutions. The
obligation of the Banks is subject to certain conditions, including, among
others:
- Parent's receipt of the $210 million in equity financing described above.
- The satisfaction of the Offer Conditions without giving effect to any
waiver or amendment not approved by the Banks.
- There being outstanding at the time of the closing of the financing not
more than $5 million under the Company's existing revolving credit
facility, the repayment in full of such credit facility and its
termination. The Company currently has no borrowings outstanding under
such facility.
- The Banks' receipt of a solvency opinion with respect to the Company.
- The absence of any change, effect or circumstance that is or could
reasonably be expected to be materially adverse to the business, assets,
financial condition or results of operations of the Company and its
subsidiaries taken as a whole.
- The absence of a material disruption of or a material adverse change in
financial, banking or capital market conditions that, in the reasonable
judgment of the Banks, could reasonably be expected to materially and
adversely affect the syndication of the facilities.
24
<PAGE>
- The absence of any actual or threatened legal action that could prevent or
restrain the Offer or the Merger or materially impair the ability of
Parent or Acquisition to operate the Company or materially impair the debt
financing arrangements, excluding, in each case, any private litigation
based upon state law fiduciary duty claims based upon the transactions
contemplated by the Merger Agreement where the only remedy that could
reasonably be expected to be awarded is monetary damages.
- The negotiation and execution of documentation reasonably satisfactory to
the Banks.
The Company has agreed to guarantee the obligations of Acquisition under the
Term Loan Facilities and pledge its assets to the Banks as security for such
guarantee.
In addition, the Banks have committed to make available, effective upon the
initial payment for Shares purchased pursuant to the Offer, to the Company and
Acquisition, and thereafter, following consummation of the Merger, to the
Surviving Corporation a $70 million revolving credit facility (the "New Credit
Facility"). The Banks' obligations to provide the New Credit Facility are
subject to the same conditions as their obligations to fund the Term Loan
Facilities. Prior to the Merger, $20 million under the New Credit Facility will
be available to Acquisition to pay interest and commitment fees related to the
debt financing following consummation of the Offer and $50 million will be
available to the Company for working capital purposes. Following the Merger the
full $70 million will be available to the Surviving Corporation for working
capital purposes. The Company has agreed to guarantee the borrowings of
Acquisition under the New Credit Facility and to pledge its assets to the Banks
as security for the entire New Credit Facility.
The foregoing discussion of the Bank Commitment Letter is qualified in its
entirety by reference to the text of such letter, which is attached as
Exhibit 3 to the Merger Agreement and filed as an exhibit to the Schedule 14D-1
referenced in Section 20.
The receipt by Acquisition of $130 million in equity financing from FS
Partners, the receipt by Acquisition of the proceeds of the Term Loan
Facilities, and the effectiveness of the New Credit Facility are conditions to
the Offer and are collectively referred to as the "Financing Condition." See
Section 17.
The Company has covenanted in the Merger Agreement that, until the Offer is
consummated, it will maintain on hand cash in the amount of $200 million plus
any amounts that the Company receives upon the exercise of stock options at any
time following the execution of the Merger Agreement.
25
<PAGE>
The approximate amounts of sources and uses of cash relating to the Offer
and the Merger are presented in the table below.
Sources of Cash
<TABLE>
<S> <C>
Equity investments:
From BYOWC and others................................... $ 80,000,000(1)
From FS Partners and others............................. 130,000,000
Bank financing:
Term Loan Facilities.................................... $320,000,000
Company's available cash.................................... 203,000,000(2)
------------
$733,000,000
============
</TABLE>
Uses of Cash
<TABLE>
<CAPTION>
($ in millions)
---------------
<S> <C>
Purchase of Shares.......................................... $685,350,000(1)
Cash-out of employee stock options.......................... 17,250,000
Fees and expenses........................................... 30,400,000(3)
------------
$733,000,000
============
</TABLE>
- ------------------------
(1) Includes the 1,749,700 Shares owned by BYOWC valued at $19.00 per Share.
(2) To the extent the Company's available cash is insufficient, the payment of
certain fees and expenses may be deferred or the Company may borrow under
its revolving credit facility.
(3) Does not include approximately $5,000,000 in change-of-control payments
which may become payable to certain officers of the Company upon termination
of employment six months after consummation of the Offer. See Section 13.
11. Background of the Offer and the Merger.
From time to time, the Company has considered possible acquisitions,
strategic alliances, mergers and other forms of business combination
transactions as well as a recapitalization and other similar transactions. As a
part of the Company's ongoing review of its strategic alternatives, the Company
consulted initially with Goldman, Sachs & Co. and then with Wasserstein Perella
as financial advisors to the Company. Commencing in February 1999,
representatives of the Company, including Peter Godfrey, the Chairman, President
and Chief Executive Officer of the Company, and Bruce L. Lev, Executive Vice
President of Legal and Corporate Affairs, held informal discussions with
possible financial purchasers and with various companies in the computer
reseller industry that the Company's senior management believed might have an
interest in discussing possible strategic transactions involving the Company.
In the fall of 1997, Mr. Boyer of Boyer Capital Management, investment
bankers, reviewed publicly available information concerning the Company, its
competitors and its industry, and based on this review, decided to explore the
possibility of putting together the financial and management resources that
would be required to acquire the Company in a leveraged buyout transaction. In
December 1997, Mr. Boyer contacted Mr. York, with whom he had been previously
associated, to assist in further understanding the Company's industry and the
opportunity presented by such a transaction, and with a view towards Mr. York's
leading the management of the Company if it were to be acquired. Mr. York is a
former chief financial officer of International Business Machines Corporation
and of Chrysler Corporation.
26
<PAGE>
During the first quarter of 1998, a group of private investors led by
Mr. Wilson and including Messrs. York, Boyer and Ovitz formed BYOW Partners LLC
("BYOW") for the purpose of investing in Shares and pursuing a possible
acquisition of the Company. During the second quarter of 1998, BYOW acquired
less than 5% of the Company's stock in the open market. In late July, in view of
the growing instability in the financial markets, BYOW determined that it was
not then feasible to accomplish a leveraged buyout of the Company. Accordingly,
BYOW sold its Shares and dissolved.
In the first quarter of 1999, following a fall in the market price of the
Company's stock, Mr. Boyer, after consultation with Mr. York, again determined
that an opportunity might exist to acquire the Company in a leveraged buyout. In
March 1999, the group of private investors that formed BYOW and, in addition,
Messrs. Checchi and Slutsky, formed BYOWC for the purpose of investing in Shares
and pursuing a possible acquisition of the Company. From March through
September 1999, BYOWC acquired approximately 4.9% of the Company's outstanding
Shares in the open market.
In early September 1999, Mr. Wilson contacted a number of financial
institutions, including CSFB, to discuss the possibility of providing financing
to BYOWC for a leveraged buyout of the Company. Mr. Boyer, as representative of
BYOWC, began negotiating with CSFB with respect to such financing arrangements.
On September 29, 1999, at a meeting initiated by Mr. Boyer, Messrs. Boyer
and York informed Mr. Godfrey of BYOWC's ownership interest in the Company and
proposed an acquisition of all outstanding Shares in an all cash transaction.
Mr. Boyer indicated a range of prices per share that might be payable in a
possible transaction but stated that he would not be in a position to specify an
offer price until BYOWC had an opportunity to perform a due diligence review of
the Company. The transaction proposed by BYOWC contemplated that Mr. Godfrey and
Felix Dennis, a director and co-founder of the Company who together with
Mr. Godfrey owned approximately 11% of the Company's outstanding Shares, would
participate in the proposed transaction through a contribution of some or all of
their Shares. Mr. Boyer suggested that the Company's and BYOWC's counsel should
meet to determine the next steps.
Mr. Godfrey informed the Company's Board of Directors of BYWOC's proposal
shortly thereafter. At a meeting of the Company's Board of Directors on
October 15, 1999, the Company's Board of Directors designated two independent
directors to act as a special committee (the "Special Committee") because of the
possibility that certain directors of the Company might participate as equity
investors in the proposed transaction. The Company's Board of Directors directed
the Special Committee to consider the BYOWC proposal as well as other strategic
alternatives available to the Company, to meet with Wasserstein Perella as
appropriate in order to evaluate the BYOWC proposal and to formulate a response.
The Company's Board of Directors also authorized Wasserstein Perella to contact
representatives of BYOWC in order to discuss the terms and conditions of the
BYOWC proposal.
On October 18, 1999, Mr. Lev, representatives of Jones, Day, Reavis & Pogue
("Jones Day"), counsel for the Company, and Kramer Levin Naftalis & Frankel LLP
("Kramer Levin"), counsel for BYOWC, met to discuss the general terms of a
possible transaction. At that meeting, Jones Day delivered to Kramer Levin a
draft confidentiality agreement that contained standstill provisions. During the
period October 18, 1999 through November 4, 1999, the parties and their
representatives discussed the terms of the confidentiality agreement proposed by
the Company, including its standstill provisions. The parties were unable to
agree on the term of the standstill provisions, with the Company requesting a
term of one year and BYOWC offering only a three month standstill period because
of the size of its investment in the Company. BYOWC expressed its willingness to
enter into a standstill agreement with a one year term but only if, after BYOWC
had completed its due diligence review, BYOWC did not offer to purchase the
Company in an all cash merger transaction at a price of not less than $17 per
Share.
Meanwhile, in early November 1999, Mr. Wilson contacted Freeman Spogli,
which manages FS Partners, to discuss the possibility of becoming an equity
participant with BYOWC in a leveraged buyout of the
27
<PAGE>
Company. While Mr. Boyer continued to negotiate with CSFB and other proposed
lenders concerning the terms of possible debt financing, and Mr. Wilson and Mr.
Boyer began negotiations with Freeman Spogli with regard to possible equity
financing for the proposed transaction.
At a meeting of the Special Committee on November 15, 1999, the Special
Committee received an update on the status of BYOWC's proposal. Wasserstein
Perella reviewed with the Special Committee its preliminary analysis of the
fairness to stockholders from a financial point of view of the $17 per Share
minimum price proposed by BYOWC. The Special Committee also discussed the status
of other potential strategic alliances and business combinations and the
possibility of a recapitalization or share repurchase program. Jones Day and
representatives of Wasserstein Perella reviewed the Special Committee's and
Board's fiduciary duties in the circumstances. The Special Committee authorized
the Company's management and representatives to continue negotiations with BYOWC
with regard to a potential transaction. However, the Special Committee expressed
the view that, due to the potential conflict of interest, Mr. Godfrey and
Mr. Dennis should not be equity participants in the proposed transaction. The
Special Committee also recommended that the transaction should be structured as
a tender offer for all Shares followed by a second-step merger (rather than a
single step merger transaction) to provide stockholders with payment for their
Shares as soon as practicable, that the transaction price should be higher than
the proposed $17 per Share and that the amount of any termination fee should be
reasonable.
On November 16, 1999, a representative of Wasserstein Perella contacted
Mr. Boyer to inform him of the results of the Special Committee meeting,
including that the $17 per Share minimum price was unacceptable for purposes of
making inoperative the one year standstill period requested by the Company.
During the next two days, representatives of the parties discussed the minimum
Share price and other terms of BYOWC's proposal.
On November 18, 1999, Mr. Boyer, Mr. Lev and representatives of Jones Day,
Wasserstein Perella and Kramer Levin met to discuss BYOWC's proposal. At that
meeting, Mr. Boyer indicated that BYOWC was prepared to go forward with the
transaction without the participation of Messrs. Godfrey and Dennis as equity
participants and that BYOWC was willing to structure the transaction as a tender
offer for all Shares followed by a merger so long as the Company participated in
the Offer. The parties also discussed resolving the impasse on the standstill
issue by having the parties enter into a definitive merger agreement prior to
BYOWC conducting its diligence review, with a provision that would allow BYOWC
to terminate the agreement if the results of BYOWC's diligence review were
unsatisfactory according to specified criteria.
During the period November 21 through November 29, Mr. York contacted a
number of potential investors to obtain additional equity financing in lieu of
management's participation in the proposed buy-out. During that same period, the
parties negotiated the terms of a merger agreement. On November 22, 1999, the
parties entered into a confidentiality agreement in contemplation of the
delivery of disclosure schedules in advance of executing the merger agreement.
On November 23, 1999, BYOWC offered a transaction price of $18.50 per Share.
Since Messrs. Godfrey and Dennis were not going to participate as equity
holders in the proposed transaction, it was determined that it would now be
appropriate for the transaction to be considered by the full Board of Directors
rather than the Special Committee. On November 24, 1999, management of the
Company, after consultation with members of the Company's Board of Directors,
indicated that $19.00 per Share would be an acceptable transaction price if the
parties could reach agreement on all other issues and assuming Wasserstein
Perella would render a favorable opinion as to fairness.
At a November 29, 1999 meeting of the Company's Board of Directors, members
of the Company's senior management and representatives of Jones Day and
Wasserstein Perella reported on the status of the negotiations with BYOWC.
Mr. Lev reviewed the terms of the proposed merger documents. Wasserstein Perella
presented its preliminary analysis of the fairness to stockholders from a
financial point of view of the $19.00 per Share transaction price. The Company's
Board of Directors discussed the Company's strategic alternatives, including the
possibility of a recapitalization and share repurchase program, and the status
of
28
<PAGE>
discussions with other companies regarding strategic transactions involving the
Company. The Company's Board of Directors then authorized senior management and
its legal and financial advisors to continue negotiations with BYOWC.
At the November 29, 1999 meeting of the Company's Board of Directors, the
Company's Board of Directors authorized payment of a special success bonus of
$500,000 to Mr. Lev to be paid following consummation of a change-of-control
transaction involving the Company. For a more detailed description of this bonus
arrangement, see Section 13.
On November 30, 1999, after consultation with BYOWC's financing sources,
Mr. Boyer informed Mr. Lev that BYOWC would be unable to proceed on the basis of
having the parties enter into a merger agreement prior to completion of a due
diligence review of the Company by BYOWC and its financing sources. Mr. Boyer
stated that BYOWC would enter into a one year standstill agreement immediately
in order that a due diligence review could proceed, provided that the term of
the standstill period would be limited to not more than three months (i) in the
event that BYOWC did not proceed with the proposed transaction as a result of
material adverse information regarding the Company discovered during the
diligence review, or (ii) if, following completion of the due diligence review,
BYOWC offered to proceed with the transaction but the Company declined to do so.
On December 1, 1999, the parties executed a standstill agreement containing such
provisions.
During the period December 1 through 20, 1999, representatives of the
parties negotiated the terms of the proposed merger documents, and BYOWC,
Freeman Spogli, CSFB and CIBC Inc. conducted their due diligence reviews of the
Company. During the same period, the equity financing commitment of FS Partners
were finalized, after which BYOWC and FS Partners finalized the debt financing
commitments of CSFB and CIBC and the parties negotiated the terms of the Merger
Agreement and the Stockholder's Agreements.
At meetings of the Company's Board of Directors on December 19 and 20, 1999,
the Company's senior management and representatives of Jones Day and Wasserstein
Perella reported on the discussions with BYOWC. Mr. Lev again reviewed the
fiduciary duties of the directors in these circumstances. Jones Day and Mr. Lev
reviewed the terms of the transaction documents, as well as each of the matters
relating to the proposed transaction in which the Company's Board of Directors
and the Company's management had an interest which could be said to be different
from or in addition to the interests of the Company's stockholders generally.
See Section 13. Representatives of Wasserstein Perella then presented
Wasserstein Perella's financial analysis of the proposed transaction and orally
informed the Company's Board of Directors, which advice was subsequently
confirmed in writing, that, as of December 20, 1999, in the opinion of
Wasserstein Perella, the $19.00 per Share price to be paid in the Offer and the
Merger was fair, from a financial point of view, to the holders of the Company's
Common Stock. Following the discussion, the Company's Board of Directors, by
unanimous vote, approved the Merger Agreement and the transactions contemplated
by that agreement.
Following the approval of the Company's Board of Directors, the Merger
Agreement was executed in the early morning hours of December 21, 1999 and the
transaction was publicly announced prior to the opening of business on that day.
12. Recommendation of the Company's Board of Directors.
At a meeting held on December 20, 1999, the Company's Board of Directors
unanimously approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and determined that the
transactions contemplated by the Merger Agreement, including the Offer and the
Merger, are fair to and in the best interests of the Company and its
stockholders. The Company's Board of Directors unanimously voted to recommend
that the stockholders of the Company accept the Offer and tender their Shares
pursuant to the Offer and adopt the Merger Agreement.
29
<PAGE>
In approving the Merger Agreement and the transactions contemplated thereby,
and recommending that stockholders accept the Offer and tender their Shares
pursuant to the Offer, the Company's Board of Directors considered a number of
factors including, in addition to the factors mentioned in
Section 11 above, the following:
- the Company's future prospects, ability to access the capital markets,
alternatives available to the Company as a stand-alone enterprise and the
absence of strategic alternatives available to the Company;
- the discussions held by management of the Company with certain possible
financial and strategic purchasers or partners of the Company who were not
interested in a transaction or not interested in a transaction that would
result in a premium to the stockholders similar to that represented by the
Per Share Amount being offered in this transaction;
- certain challenges facing the Company, including increased competition in
all segments of the Company's businesses from other companies,
particularly those who have demonstrated a higher growth rate and those
with a lower cost structure, and the ability of the Company's reorganized
sales force to respond to and execute competitively in the face of
heightened competition;
- the intention of Mr. Godfrey, the Company's chief executive officer, to
limit his role at the Company in the near future and the prospects of
finding a suitable replacement for Mr. Godfrey;
- the $19.00 Per Share Amount represents a premium of 24.6% over the last
reported per Share sales price ($15.25) on NASDAQ on December 20, 1999,
the last full trading day prior to the execution of the Merger Agreement,
and a premium of 56.6% over the last reported per Share sales price
($12.13) on NASDAQ on December 15, 1999, the last full trading day prior
to media reports that the Company was rumored to be entering into an
Internet marketing alliance;
- the $19.00 Per Share Amount to be paid to the stockholders in the Offer
and the Merger exceeded the highest price at which the Shares have traded
since April 27, 1999 and the highest last reported per Share sales price
since February 26, 1999;
- the financial presentation of Wasserstein Perella at the Company's
December 19, 1999 Board of Directors meeting and the oral opinion of
Wasserstein Perella, rendered on December 20, 1999, to the effect that
based upon and subject to certain matters stated in its opinion, as of
that date, the consideration to be received by the holders of the
Company's Common Stock pursuant to the Offer and the Merger is fair to the
holders, other than Parent and its affiliates, from a financial point of
view (the "Fairness Opinion"). Wasserstein Perella confirmed its opinion
in writing following the meeting of the Company's Board of Directors. THE
FULL TEXT OF THE FAIRNESS OPINION, WHICH SETS FORTH THE MATTERS CONSIDERED
AND THE ASSUMPTIONS MADE BY WASSERSTEIN PERELLA, IS ATTACHED HERETO AS
SCHEDULE V. STOCKHOLDERS ARE URGED TO READ THE FAIRNESS OPINION IN ITS
ENTIRETY. THE FAIRNESS OPINION IS DIRECTED ONLY TO FAIRNESS, FROM A
FINANCIAL POINT OF VIEW, OF THE $19.00 PER SHARE CASH CONSIDERATION TO BE
RECEIVED BY STOCKHOLDERS, OTHER THAN PARENT AND ITS AFFILIATES, PURSUANT
TO THE OFFER AND THE MERGER, AND IS NOT INTENDED TO CONSTITUTE, AND DOES
NOT CONSTITUTE, A RECOMMENDATION AS TO WHETHER ANY STOCKHOLDER SHOULD
TENDER SHARES PURSUANT TO THE OFFER OR AS TO HOW ANY HOLDER SHOULD VOTE
WITH RESPECT TO THE MERGER AND SHOULD NOT BE RELIED UPON BY ANY HOLDER FOR
THAT PURPOSE;
- the provisions of the Merger Agreement which permit the Company's Board of
Directors to consider an unsolicited superior proposal in order to comply
with the Company's Board of Directors' fiduciary duties to stockholders;
- the terms of the Merger Agreement were determined through arm's-length
negotiations between the Company and its financial and legal advisors, on
the one hand, and Acquisition and its financial and legal advisors, on the
other, and provide for the Offer to allow the stockholders to receive
payment for their Shares on an accelerated basis; and
30
<PAGE>
- the ability of the stockholders who object to the Merger to obtain "fair
value" for their Shares if they exercise and perfect their appraisal
rights under the DGCL.
In evaluating the Offer and the Merger, the members of the Company's Board
of Directors considered their knowledge of the business, financial condition and
prospects of the Company, and the advice of financial and legal advisors. In
view of the variety of factors considered in connection with its evaluation and
approval of the Offer, the Merger Agreement and the transactions contemplated
thereby, the Company's Board of Directors did not find it practicable to, and
did not, quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of the
Company's Board of Directors may have given different weight to different
factors.
The Company's Board of Directors also considered three principal relative
detriments/risks of the Offer and the Merger:
- as a result of the Offer and the Merger, the benefits of the Company's
long-term prospects would not be realized by the existing stockholders;
- the termination fee required by the terms of the Merger Agreement to be
paid by the Company in certain circumstances makes it more costly for
another potential bidder to propose to acquire the Company on a basis that
would be superior to that contemplated by the Merger Agreement; and
- the Financing Condition.
13. Interests of Certain Persons in the Offer and the Merger.
GENERAL. In considering the recommendation of the Company's Board of
Directors with respect to the Offer and the Merger and the fairness of the
consideration to be received in the Offer and the Merger, stockholders should be
aware that certain officers and directors of the Company have the interests and
relationships summarized below that may present them with potential conflicts of
interest in connection with the Offer and the Merger. The Company's Board of
Directors recognized such interests and determined that such interests neither
supported nor detracted from the fairness of the Offer and the Merger to the
stockholders.
RELATIONSHIPS WITH PETER GODFREY. Mr. Peter Godfrey is a member of the
Company's Board of Directors and is the President and Chief Executive Officer of
the Company. In addition to Mr. Godfrey's ownership of 2,800,962 Shares, he
holds options to purchase 130,000 Shares. The Company and Mr. Godfrey have
entered into an employment agreement pursuant to which the Company has agreed to
employ Mr. Godfrey as President and Chief Executive Officer through
December 31, 2000. Under the terms of the employment agreement, in the event
Mr. Godfrey terminates his employment due to a change of control of the Company,
as defined in such employment agreement, he will be entitled to receive a
lump-sum payment of approximately $1,693,994. Mr. Godfrey may not terminate his
employment pursuant to such agreement before the expiration of a six month
period after the change of control.
RELATIONSHIPS WITH WAYNE GARTEN. Mr. Wayne Garten is the Executive Vice
President and Chief Financial Officer of the Company. Mr. Garten holds options
to purchase 200,000 Shares. The Company and Mr. Garten have entered into an
employment agreement pursuant to which the Company has agreed to employ
Mr. Garten as Vice President and Chief Financial Officer through December 31,
2000. Under the terms of the employment agreement, in the event Mr. Garten
terminates his employment due to a change of control of the Company, as defined
in such employment agreement, he will be entitled to receive a lump-sum payment
of approximately $562,632. Mr. Garten may not terminate his employment pursuant
to such agreement before the expiration of a six month period after the change
of control.
31
<PAGE>
RELATIONSHIPS WITH ADAM SHAFFER. Mr. Adam Shaffer is the Executive Vice
President of Marketing, Advertising and Purchasing. Mr. Shaffer holds options to
purchase 582,761 Shares. The Company and Mr. Shaffer have entered into an
employment agreement pursuant to which the Company has agreed to employ
Mr. Shaffer as Vice President of Marketing, Advertising and Purchasing through
December 31, 2000. Under the terms of the employment agreement, in the event
Mr. Shaffer terminates his employment due to a change of control of the Company,
as defined in such employment agreement, he will be entitled to receive a
lump-sum payment of $1,082,038. Mr. Shaffer may not terminate his employment
pursuant to such agreement before the expiration of a six month period after the
change of control.
RELATIONSHIPS WITH BRUCE L. LEV. Mr. Bruce L. Lev is the Executive Vice
President of Legal and Corporate Affairs of the Company. The Company has agreed
that within two business days following the consummation of a transaction that
results in any person or group (as such term is defined in Rule 13d-3 of the
Exchange Act) acquiring more than 50% of the outstanding voting securities of
the Company, the Company will pay Mr. Lev a lump-sum cash payment of $500,000.
Mr. Lev holds options to purchase 211,000 Shares. The Company and Mr. Lev have
entered into an employment agreement pursuant to which the Company has agreed to
employ Mr. Lev as Executive Vice President of Legal and Corporate Affairs
through December 31, 2000. Under the terms of the employment agreement, in the
event Mr. Lev terminates his employment due to a change of control of the
Company, as defined in such employment agreement, he will be entitled to receive
a lump-sum payment of $1,161,349. Mr. Lev may not terminate his employment
pursuant to such agreement before the expiration of a six month period after the
change of control.
OWNERSHIP OF COMMON STOCK. As of December 20, 1999, the directors and
executive officers of the Company, as a group, beneficially owned an aggregate
of 4,084,360 Shares (representing approximately 11.3% of the then outstanding
Shares), excluding Shares subject to options. All such Shares held by such
directors and executive officers will be treated in the Merger in the same
manner as Shares held by other stockholders. See Section 15. In the aggregate,
the directors and executive officers of the Company will be entitled to receive
approximately $77,602,840 for their Shares upon consummation of the Offer and
the Merger (based on the number of Shares, excluding options, owned on
December 20, 1999), assuming a Per Share Amount of $19.00.
OPTIONS. As of December 20, 1999, the directors and executive officers of
the Company held options to acquire an aggregate of 1,787,803 Shares.
Immediately after the Effective Date, pursuant to the Merger Agreement, each
outstanding option, including those held by such directors and executive
officers, whether or not then exercisable will, in accordance with procedures
that apply to all holders of options, be canceled, and each holder of an option
will be entitled to receive from the Surviving Corporation an amount equal to
the positive difference, if any, between the Per Share Amount and the exercise
price of the option multiplied by the number of Shares subject to the option.
For additional information concerning directors and executive officers of
the Company, please see Schedule I hereto. The Company's Board of Directors was
aware of these actual and potential conflicts of interest and considered them
along with the other matters described under Section 12.
INDEMNIFICATION AND INSURANCE. For a discussion of certain agreements by
Parent with respect to indemnification of, and insurance for, directors and
officers of the Company, see Section 15.
To the best knowledge of the Company, all of the executive officers and
directors of the Company currently intend to tender all Shares owned by them
pursuant to the Offer.
32
<PAGE>
14. Certain Effects of the Offer.
INDEBTEDNESS OF THE COMPANY.
The Company currently has an unsecured credit facility under which no
borrowings are currently outstanding. Under the terms of the Merger Agreement,
the Company is required to maintain $200 million available for the purchase of
Shares in the Offer and the Merger, and, as a result, the Company may need to
borrow prior to consummation of the Offer for working capital purposes. Upon
consummation of the Offer, the Company will guarantee Acquisition's debt
financing for the Offer and will enter into the New Credit Facility. Because of
the dedication of the Company's cash to the purchase of Shares in the Offer and
the Merger, it is anticipated that the Company may need to borrow under the New
Credit Facility for working capital. The guarantee and the New Credit Facility
will be secured by a pledge of substantially all of the Company's assets. The
guarantee and the New Credit Facility will also impose various covenants on the
Company. These covenants could restrict the Company's financial and operating
flexibility.
EFFECT ON THE MARKET FOR THE COMPANY'S SHARES.
The purchase of Shares pursuant to the Offer will reduce the number of
holders of Shares and the number of Shares that might otherwise trade publicly.
Consequently, depending upon the number of Shares purchased and the number of
remaining holders of Shares, the purchase of Shares pursuant to the Offer may
adversely affect the liquidity and market value of the remaining Shares held by
the public. The Purchasers cannot predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for, or marketability of, the Shares or whether it
would cause future market prices to be greater or less than the Offer price.
STOCK QUOTATIONS.
The Shares are currently listed and traded on NASDAQ, which constitutes the
principal trading market for the Shares. Depending upon the aggregate market
value and the number of Shares not purchased pursuant to the Offer, the Shares
may no longer meet the quantitative maintenance criteria for continued inclusion
on NASDAQ and may cease to be authorized for quotation on such market. Pursuant
to the maintenance criteria, issuers on NASDAQ are required to have (i) (A) at
least 750,000 publicly held shares, (B) at least 400 holders of round lots,
(C) a market value of publicly held shares of at least $5 million, (D) a minimum
bid price per share of $1, and (E) net tangible assets of at least $4 million or
(ii) (A) at least 1.1 million publicly held shares, (B) at least 400 holders of
round lots, (C) a market value of publicly held shares of at least $15 million,
(D) a market capitalization of at least $50 million or total assets and total
revenue of at least $50 million (each for the most recently completed fiscal
year or two of the last three most recently completed fiscal years), (E) a
minimum bid price per share of $5, and (F) at least four registered and active
market makers for the Shares. Shares held directly or indirectly by directors,
officers or beneficial owners of more than 10% of the Shares outstanding are not
considered as being publicly held for this purpose.
If, as a result of the purchase of Shares pursuant to the Offer, the Shares
no longer meet the requirements for continued inclusion in NASDAQ or in any
other tier of The Nasdaq Stock Market, the market for Shares could be adversely
affected. In the event that the Shares no longer meet the requirements for
continued inclusion in any tier of The Nasdaq Stock Market, it is possible that
Shares would continue to trade in the over-the-counter market and that price
quotations would be reported on the Nasdaq bulletin board or by other sources.
The extent of the public market for the Shares and the availability of such
quotations would, however, depend upon the number of holders of Shares remaining
at such time, the interest in maintaining a market in Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act, as described below, and other factors.
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REGISTRATION UNDER THE EXCHANGE ACT.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if such Shares are not listed on a national securities exchange and there are
fewer than 300 holders of record of the Shares. The termination of the
registration of the Shares under the Exchange Act would substantially reduce the
information required to be furnished by the Company to its stockholders and to
the Commission, and would make certain of the provisions of the Exchange Act,
such as the short-swing profit recovery provisions of Section 16(b) and the
requirement of furnishing a proxy statement in connection with stockholders'
meetings and the related requirement of an annual report to stockholders, and
the requirements of Rule 13e-3 with respect to going private transactions, no
longer applicable with respect to the Shares or to the Company. Furthermore, if
registration of the Shares under the Exchange Act were terminated, the ability
of "affiliates" of the Company and persons holding "restricted securities" of
the Company to dispose of such securities pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended, may be impaired or, with respect to
certain persons, eliminated. If the Shares were no longer registered under the
Exchange Act, they would not be eligible for listing on any tier of The Nasdaq
Stock Market or for quotation on NASDAQ. According to the Company, as of
December 20, 1999, there were 165 holders of record of the Shares. Parent
intends to cause the Company to make an application for termination of
registration of the Shares as soon as possible after consummation of the Offer
if the Shares are then eligible for such termination.
MARGIN SECURITIES.
The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on such Shares as collateral. Depending on factors similar to those described
above regarding listing and market quotations, it is possible the Shares would
no longer constitute "margin securities" for purposes of the Federal Reserve
Board's margin regulations and therefore could no longer be used as collateral
for loans made by brokers. If registration of the Shares under the Exchange Act
were terminated, the Shares would no longer be "margin securities."
15. The Merger Agreement; Stockholder's Agreements.
THE MERGER AGREEMENT
The following summary of certain provisions of the Merger Agreement is
qualified in its entirety by reference to the text of the Merger Agreement, a
copy of which has been filed as an exhibit to the Schedule 14D-1 referred to in
Section 20 and is incorporated herein by reference. The following summary may
not contain all of the information important to you. The Merger Agreement may be
examined and copies may be obtained from the Commission in the same manner as
set forth in Section 8. Capitalized terms used in the following summary and not
otherwise defined in this Offer to Purchase shall have the meanings set forth in
the Merger Agreement.
THE OFFER.
The Merger Agreement contemplates the commencement of the Offer and
prescribes the conditions to the consummation of the Offer. For a description of
the Offer Conditions, see Section 17. Assuming the prior satisfaction or waiver
of the Offer Conditions, the Purchasers will accept for payment and pay for, in
accordance with the terms of the Offer, all Shares validly tendered, according
to the following priority:
- First, Acquisition shall accept for payment and purchase Shares up to a
maximum number of Shares equal to the Acquisition Share Number; and
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- Second, the Company shall accept for payment and purchase Shares up to a
maximum number of Shares equal to the Company Share Number.
The "Company Share Number" means the sum of (x) $200,000,000 and (y) the
aggregate exercise price of all options to acquire stock of the Company
exercised following the date of the Merger Agreement and prior to consummation
of the Offer, divided by the Per Share Amount. The "Acquisition Share Number"
means the total number of issued and outstanding Shares less the Shares
currently owned by BYOWC and less the Company Share Number. The Company agrees
that no Shares held by the Company or any subsidiary of the Company will be
tendered pursuant to the Offer.
THE MERGER.
The Merger Agreement provides that, following the consummation of the Offer
and subject to the terms and conditions thereof, at the Effective Time the
Company shall be merged with and into Acquisition and, as a result of the
Merger, the separate corporate existence of the Company shall cease, and
Acquisition shall continue as the Surviving Corporation and a direct subsidiary
of Parent.
CONDITIONS TO THE MERGER.
The respective obligations of the BYOWC Companies, on the one hand, and the
Company, on the other hand, to effect the Merger are subject to the satisfaction
or waiver of the following conditions: (i) the Offer shall have been
consummated, (ii) the Merger Agreement shall have been adopted by the requisite
vote of the stockholders, if required by applicable law, (iii) the absence of
any legal restraint preventing the consummation of the Merger and (iv) all
consents of any Governmental Authority required for the consummation of the
Merger and the transactions contemplated by the Agreement shall have been
obtained, other than where the failure to obtain such consents will not have a
material adverse effect on the business, assets, condition (financial or other),
liabilities or results of operations of the Surviving Corporation and its
subsidiaries taken as a whole.
CONVERSION OF SHARES.
At the Effective Time, (i) each issued and outstanding Share (other than
Shares that are held by stockholders properly exercising dissenters' rights
under the DGCL and Shares to be cancelled pursuant to clause (ii) below) will be
converted into the right to receive the Per Share Amount in cash payable to the
holder thereof, without interest, upon surrender of the certificate representing
such Share. From and after the Effective Time, the holders of certificates
evidencing ownership of Shares outstanding immediately prior to the Effective
Time shall cease to have any rights with respect to such Shares except as
otherwise provided for in the Merger Agreement or by applicable law, (ii) each
Share owned by the Company, BYOWC, Parent, Acquisition or any direct or indirect
wholly owned subsidiary of BYOWC immediately prior to the Effective Time shall
be canceled, and no payment or other consideration shall be made with respect
thereto and (iii) the shares of Acquisition common stock issued and outstanding
immediately prior to the Merger will be converted into a number of validly
issued, fully paid and nonassessable shares of common stock of the Surviving
Corporation equal to the number of Shares owned by BYOWC, Parent, Acquisition or
any direct or indirect wholly owned subsidiary of BYOWC immediately prior to the
Effective Time, which shares will constitute all of the issued and outstanding
capital stock of the Surviving Corporation and shall be owned by Parent.
In addition, at the Effective Time, the Surviving Corporation shall issue to
Parent a warrant to purchase common stock at $19.00 per share, on the terms set
forth in the Merger Agreement. This warrant enables Parent to purchase shares of
the Surviving Corporation so that, upon exercise, the number of outstanding
shares of the Surviving Corporation would be substantially the same as the
number of Shares outstanding immediately prior to the Offer.
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THE COMPANY'S BOARD OF DIRECTORS.
The Merger Agreement provides that promptly upon the purchase by Acquisition
of Shares pursuant to the Offer (and provided that the Minimum Condition has
been satisfied), Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Board of Directors of the Company as
will give Parent, 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 which equals the product of the total number of directors on
the Board of Directors of the Company (giving effect to the directors appointed
or elected pursuant to this sentence and including current directors serving as
officers of the Company) multiplied by the percentage that the aggregate number
of Shares beneficially owned by Acquisition or any other affiliate of Parent
(including such Shares as are accepted for payment by Acquisition pursuant to
the Offer, but excluding Shares held by the Company) bears to the number of
Shares outstanding (after reduction for Shares accepted for payment by the
Company pursuant to the Offer). At such time, if requested by Parent, the
Company will also cause each committee of the Board of Directors of the Company
to include persons designated by Parent constituting the same percentage of each
such committee as Parent's designees are of the Board of Directors of the
Company. The Company shall, upon request by Parent, promptly increase the size
of the Board of Directors of the Company or exercise reasonable best efforts to
secure the resignations of such number of directors as is necessary to enable
Parent's designees to be appointed or elected to the Board of Directors of the
Company in accordance with terms described in this section and to cause Parent's
designees so to be appointed or elected; PROVIDED, HOWEVER, that, in the event
that Parent's designees are appointed or elected to the Board of Directors of
the Company in accordance with these terms, until the Effective Time the Board
of Directors of the Company shall have at least two directors who are directors
on the date of the Merger Agreement, each of whom is neither an officer of the
Company nor a designee, stockholder, affiliate or associate (within the meaning
of the federal securities laws) of BYOWC (such directors, the "Continuing
Directors") or such persons having such qualifications who are designated as
"Independent Directors" by a majority of the Continuing Directors in office at
the time of such designation (such persons, together with the Continuing
Directors, the "Independent Directors"). Notwithstanding anything in the Merger
Agreement to the contrary, subsequent to the designation of the directors by
Parent and prior to the Effective Time, the unanimous vote of the Independent
Directors shall be required to (i) amend or terminate the Merger Agreement on
behalf of the Company, (ii) exercise or waive any of the Company's rights or
remedies thereunder, (iii) extend the time for performance of Parent's,
Acquisition's or BYOWC's obligations thereunder, (iv) take any other action by
the Company in connection with the Merger Agreement required to be taken by the
Board of Directors of the Company or (v) amend the Company's Certificate of
Incorporation or the Company's Bylaws, each as in effect on the date of the
Merger Agreement.
STOCKHOLDERS' MEETING.
Pursuant to the Merger Agreement, the Company will, if required by
applicable law in order to consummate the Merger, take all steps necessary so
that the Merger Agreement and the Merger will be presented for the approval of
the Company's stockholders, either at a stockholders meeting duly called for
such purpose or by written consent of stockholders in lieu of a meeting in
accordance with the DGCL. BYOWC, Parent and Acquisition have agreed to use their
reasonable best efforts to cause such meeting or consent (or the short form
merger described in the next following paragraph) to occur within six months
after completion of the Offer. The Merger Agreement provides that the Company
will, if required by applicable law in order to consummate the Merger, prepare
and file with the Commission and, when cleared by the Commission, will mail to
stockholders a proxy statement relating to the adoption of the Merger Agreement
and the transactions contemplated thereby, or an information statement, as
appropriate, satisfying all requirements of the Exchange Act. If Acquisition
acquires at least a majority of the outstanding Shares, it will have sufficient
voting power to approve the Merger, even if no other stockholder votes in favor
of the Merger.
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The Merger Agreement provides that the Company shall not be required to take
the foregoing actions if Parent or Acquisition may consummate the Merger without
the vote or approval of the Company's stockholders in accordance with the short
term merger provisions of Section 253 of the DGCL.
OPTIONS
The Company shall provide a period of 30 days ending on the Effective Time
in which each option outstanding to purchase Shares under the Company's stock
option plans (including the plans formerly maintained by Inmac Corporation)
(each such option, and any other stock option of the Company, a "Company
Option"), whether or not then exercisable, may be exercised, provided that such
exercise with respect to an otherwise unvested option shall be contingent upon
the subsequent occurrence of the Effective Time. At the Effective Time, each
Company Option, whether or not then vested or exercisable, shall be cancelled
and the holder thereof shall receive from the Surviving Corporation as soon as
practicable following consummation of the Merger an amount in cash equal to the
positive difference, if any, between the Per Share Amount and the exercise price
of the Company Option multiplied by the number of Shares for which the Company
Option was granted, subject to reduction only for any applicable withholding
taxes. In no event will any Company Options be exercisable after the Effective
Time.
INTERIM OPERATIONS.
COVENANTS.
The Merger Agreement requires the Company and its subsidiaries, from the
date of the Merger Agreement until the Effective Time, to operate their
respective businesses in the ordinary course and to use their reasonable efforts
to preserve intact their business organizations, to keep available the services
of their present officers, employees and consultants and to preserve their
relationships with persons having significant business relations with them. The
Merger Agreement restricts the Company and its subsidiaries from entering into
certain types of transactions outside the ordinary course of business without
the consent of the Parent, including, among others, amending its organizational
documents, issuing additional shares of capital stock or rights to acquire its
capital stock, making material dispositions of assets, paying dividends, making
changes in its capital structure, redeeming its capital stock, settling any
stockholder actions against the Company, acquiring businesses, incurring certain
additional indebtedness, authorizing certain capital expenditures, entering into
or amending certain material contracts, amending its employee benefit or
compensation plans, changing accounting policies, making tax elections or
compromises and discharging certain liabilities.
NO SOLICITATION.
Pursuant to the Merger Agreement, the Company shall not, directly or
indirectly, through any officer, director, employee, representative or agent of
the Company or any of the Company's subsidiaries, solicit or encourage the
initiation of (including by way of furnishing information) any inquiries or
proposals regarding any merger, sale of assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transactions
involving the Company or any of its subsidiaries that if consummated would
constitute an Alternative Transaction (as defined below) (any of the foregoing
inquiries or proposals, an "Acquisition Proposal"). The Board of Directors of
the Company is not, however, prevented from (i) furnishing information to a
third party which has made a BONA FIDE Acquisition Proposal that is a Superior
Proposal (as defined below) not solicited in violation of the Merger Agreement,
provided that such third party has executed an agreement with confidentiality
provisions substantially similar to those then in effect between the Company and
BYOWC or (ii) subject to compliance with the other terms of the Merger
Agreement's "No Solicitation" provision, considering and negotiating a BONA FIDE
Acquisition Proposal that is a Superior Proposal not solicited in violation of
the Merger Agreement; PROVIDED, HOWEVER, that, as to each of clauses (i) and
(ii), (x) such actions occur at a time prior to the initial consummation of the
Offer and (y) the Board of Directors of the Company determines (after due
consultation with independent counsel, which may be Jones Day) that it is
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or is reasonably likely to be required to do so in order to discharge properly
its fiduciary duties; PROVIDED, FURTHER, that if a third person has made an
Acquisition Proposal and the Company cannot determine based upon the information
provided by the third person whether the Acquisition Proposal is a Superior
Proposal, it may so indicate to the third person. For purposes of the Merger
Agreement, a "Superior Proposal" means any proposal made by a third party to
acquire, directly or indirectly, for consideration consisting of cash and/or
securities, all of the equity securities of the Company entitled to vote
generally in the election of directors or all the assets of the Company, on
terms which the Board of Directors of the Company reasonably believes (after
consultation with a financial advisor of nationally recognized reputation) to be
more favorable from a financial point of view to its stockholders than the Offer
and the Merger and the transactions contemplated by the Merger Agreement taking
into account at the time of determination any changes to the financial terms of
the Merger Agreement which as of that time had been proposed by Parent.
"Alternative Transaction" means any of (i) a transaction pursuant to which any
person (or group of persons) other than Parent or its affiliates (a "Third
Party") acquires or would acquire more than 30% of the outstanding shares of any
class of equity securities of the Company, whether from the Company or pursuant
to a tender offer or exchange offer or otherwise, (ii) a merger or other
business combination involving the Company pursuant to which any Third Party
acquires more than 30% of the outstanding equity securities of the Company or
the entity surviving such merger or business combination, (iii) any transaction
pursuant to which any Third Party acquires or would acquire control of assets
(including for this purpose the outstanding equity securities of subsidiaries of
the Company and securities of the entity surviving any merger or business
combination including any of the Company's subsidiaries) of the Company or any
of its subsidiaries having a fair market value (as determined by the Board of
Directors of the Company in good faith) equal to more than 30% of the fair
market value of all the assets of the Company and its the subsidiaries, taken as
a whole, immediately prior to such transaction, or (iv) any other consolidation,
business combination, recapitalization or similar transaction involving the
Company or any of the Company's subsidiaries that are "significant" under
Regulation S-X at a level of 30% or more, other than the transactions
contemplated by the Merger Agreement; PROVIDED, HOWEVER, that the term
Alternative Transaction shall not include any acquisition of securities by a
broker dealer in connection with a BONA FIDE public offering of such securities.
The Merger Agreement requires the Company to immediately notify Parent and
Acquisition after receipt of any Acquisition Proposal, or any modification of or
amendment to any Acquisition Proposal, or any request for nonpublic information
relating to the Company or any of its subsidiaries in connection with an
Acquisition Proposal or for access to the properties, books or records of the
Company or any subsidiary by any person or entity that informs the Board of
Directors of the Company or such subsidiary that it is considering making, or
has made, an Acquisition Proposal. Such notice to Parent shall be made orally
and in writing, and shall indicate the identity of the person making the
Acquisition Proposal or intending to make an Acquisition Proposal or requesting
non-public information or access to the books and records of the Company, the
terms of any such Acquisition Proposal or modification or amendment to an
Acquisition Proposal, and whether the Company is providing or intends to provide
the person making the Acquisition Proposal with access to information concerning
the Company as provided above. The Company shall also promptly notify Parent,
orally and in writing, if it enters into negotiations concerning any Acquisition
Proposal.
Except to the extent that the Company's Board of Directors determines (after
due consultation with independent counsel which may be Jones Day) that it is or
is reasonably likely to be required to do so in order to properly discharge its
fiduciary duties, neither the Company nor the Board of Directors of the Company
shall withdraw or modify, or propose to withdraw or modify, in a manner adverse
to Parent or Acquisition, the approval of such Board of Directors of the Merger
Agreement, the Offer or the Merger; PROVIDED, HOWEVER, that in no event may the
Board of Directors withdraw or modify its recommendation earlier than the second
full business day following Parent's receipt of written notice of the intention
of the Board of Directors to do so.
The Company and the Board of Directors of the Company shall not (i) redeem
the Rights, or waive or amend any provision of the Rights Agreement, in any such
case to permit or facilitate the consummation of any Acquisition Proposal or
Alternative Transaction, or (ii) enter into any agreement with respect to, or
otherwise
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approve or recommend to stockholders, or publicly propose to approve or
recommend, any Acquisition Proposal or Alternative Transaction, unless the
Merger Agreement has been terminated in accordance with its terms. A deferral of
the distribution of Rights following the commencement of a tender offer or
exchange offer is not prohibited under the Merger Agreement.
The Merger Agreement does not restrict the Company from taking and
disclosing to its stockholders a position required by Rule 14e-2(a) promulgated
under the Exchange Act or from making any disclosure to the Company's
stockholders required by applicable law, rule or regulation.
The Company is required to ensure that the officers and directors of the
Company and the Company Significant Subsidiaries and any investment banker or
other advisor or representative retained by the Company are aware of the
restrictions set forth above. The Company is responsible for any failure of such
advisors or representatives to comply with such restrictions.
INDEMNIFICATION AND INSURANCE.
Pursuant to the Merger Agreement, the Certificate of Incorporation and
Bylaws of the Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Certificate of Incorporation and the Bylaws of
the Company, which provisions shall not be amended, modified or otherwise
repealed for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder as of the Effective Time of
individuals who at the Effective Time were directors, officers, employees or
agents of the Company, unless such modification is required after the Effective
Time by law.
The Merger Agreement further provides that the Surviving Corporation shall,
to the fullest extent permitted under applicable law or under the Surviving
Corporation's Certificate of Incorporation or Bylaws, indemnify and hold
harmless, each present and former director, officer or employee of the Company
or any of its subsidiaries (collectively, the "Indemnified Parties") against any
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, (x) arising out of or pertaining to the
transactions contemplated by the Merger Agreement or (y) otherwise with respect
to any acts or omissions occurring at or prior to the Effective Time, to the
same extent as provided in the Company's Certificate of Incorporation or Bylaws
or any applicable contract or agreement as in effect on the date hereof, in each
case for a period of six years after the date hereof. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time) and subject to the specific terms of any
indemnification contract, (i) any counsel retained by the Indemnified Parties
for any period after the Effective Time shall be reasonably satisfactory to the
Surviving Corporation (and, for these purposes, Jones Day shall be deemed
reasonably satisfactory to the Surviving Corporation), (ii) after the Effective
Time, the Surviving Corporation shall pay the reasonable fees and expenses of
such counsel, promptly after statements therefor are received and (iii) the
Surviving Corporation will cooperate in the defense of any such matter;
PROVIDED, HOWEVER, that the Surviving Corporation shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld or delayed); and PROVIDED, FURTHER, that, in the event
that any claim or claims for indemnification are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim or
claims shall continue until the disposition of any and all such claims. The
Indemnified Parties as a group may retain only one law firm to represent them in
each applicable jurisdiction with respect to any single action unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties,
in which case each Indemnified Person with respect to whom such a conflict
exists (or group of such Indemnified Persons who among them have no such
conflict) may retain one separate law firm in each applicable jurisdiction. The
Merger Agreement also provides that the Surviving Corporation shall honor the
Company's obligations under existing indemnification and employment agreements.
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In addition, Parent will provide, or cause the Surviving Corporation to
provide, for a period of not less than six years after the Effective Time, the
Company's current directors and officers an insurance and indemnification policy
that provides coverage for events occurring at or prior to the Effective Time
(the "D&O Insurance") that is no less favorable than the existing policy or, if
substantially equivalent insurance coverage is unavailable, the best available
coverage; PROVIDED, HOWEVER, that Parent and the Surviving Corporation shall not
be required to pay an annual premium for the D&O Insurance in excess of 300% of
the annual premium currently paid by the Company for such insurance, but in such
case shall purchase as much such coverage as possible for such amount.
The Merger Agreement provides that the foregoing provisions are intended to
benefit the Indemnified Parties and shall be binding on all successors and
assigns of the Surviving Corporation and shall be enforceable by the Indemnified
Parties.
Parent has agreed to guarantee the performance by the Surviving Corporation
of the indemnification obligations set forth above.
REPRESENTATIONS AND WARRANTIES.
Pursuant to the Merger Agreement, the Company has made customary
representations and warranties to Parent with respect to, among other things,
its organization, subsidiaries, capitalization, authority relative to the Merger
Agreement, the absence of contractual or legal violations resulting from the
Merger Agreement, governmental approvals with respect to the Merger Agreement,
compliance with laws, governmental permits, securities filings, financial
statements, the absence of material adverse effects on the Company and certain
other events since September 30, 1999, the absence of undisclosed liabilities,
litigation, employee benefit plans, labor matters, disclosure documents, the
absence of limitations on conduct of business, title to property, taxes,
environmental matters, brokers and investment bankers, intellectual property,
interested party transactions, insurance, product liability and recalls,
fairness opinion, and the amendment of the Rights Agreement.
Pursuant to the Merger Agreement, Parent and BYOWC have made customary
representations and warranties to the Company with respect to, among other
things, their organization, authority relative to the Merger Agreement,
governmental approvals with respect to the Merger Agreement, the absence of
contractual or legal violations resulting from the Merger Agreement, disclosure
documents, finders and investment bankers, the commitments for Parent's
financing arrangements, the activities of Acquisition, Parent's "interested
stockholder" status, BYOWC's beneficial ownership of Shares and the solvency of
the Surviving Corporation.
Certain representations and warranties in the Merger Agreement are qualified
as to "materiality" or "Material Adverse Effect." For purposes of the Merger
Agreement and this Offer to Purchase, the capitalized term "Material Adverse
Effect" means any change, effect or circumstance that is materially adverse to
the business, assets (including intangible assets), financial condition or
results of operations of the Company and its subsidiaries, or Parent, BYOWC or
any of their respective subsidiaries, as the case may be, in each case taken as
a whole; PROVIDED, HOWEVER, that effects of changes that are applicable to or
arise on account of (A) any changes in economic, regulatory, or political
conditions generally, (B) the United States securities markets, (C) the Merger
Agreement or the transactions contemplated by the Merger Agreement, (D) the
computer reseller industry generally, or (E) the effect of the public
announcement of the transactions contemplated hereby, including, without
limitation, any effect on current or prospective customers or employees of the
Company, is excluded from the definition of "Material Adverse Effect" and from
any determination as to whether a Material Adverse Effect has occurred or may
occur.
The failure of a representation or warranty to be true and correct, either
individually or together with the failure of other representations or warranties
to be true and correct, or the failure to perform an obligation, agreement or
covenant is deemed to have a Material Adverse Effect if (x) the business, assets
(including
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intangible assets), financial condition, or results of operations of the Company
and its subsidiaries, or Parent, BYOWC or any of their respective subsidiaries,
as the case may be, in each case taken as a whole, are or are reasonably likely
to be materially worse than if such representation or warranty had been true and
correct or such obligation, agreement or covenant had been performed, excluding,
however, the effects of the changes specified in the proviso set forth in
preceding paragraph, (y) in the case of the Company, such representation or
warranty materially misstates the capitalization of the Company and/or its
subsidiaries or (z) the failure of such representation or warranty to be true
and correct or the failure to perform such obligation, agreement of covenant
materially and adversely affects the ability of the Company or Parent, as the
case may be, timely to consummate the transactions contemplated by the Merger
Agreement.
REASONABLE EFFORTS.
Under the Merger Agreement, each of the Company, BYOWC, Parent and
Acquisition has agreed to use reasonable efforts to take all actions and to do
all things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by the Merger Agreement.
In addition, the Company has agreed to cooperate reasonably with BYOWC, Parent
and Acquisition in connection with the negotiation and documentation of the debt
financing.
PUBLIC ANNOUNCEMENTS.
So long as the Merger Agreement is in effect, the Company, and Parent, have
agreed not to issue or cause the publication of any press release or any other
announcement with respect to the Offer or the Merger or the transactions
contemplated thereby without the consent of the other party, which shall not to
be unreasonably withheld, except where such release or announcement is required
by applicable law or pursuant to any applicable listing agreement with, or rules
or regulations of NASDAQ, if it has used all reasonable efforts to consult with
the other party.
EMPLOYEE MATTERS.
Under the Merger Agreement, Parent shall cause the Surviving Corporation to
(i) satisfy all obligations of the Company under each existing severance
agreement or employment agreement between the Company and any of its officers or
employees, and (ii) for a period of one year beginning on the Effective Time,
provide each individual who, as of the Effective Time, is an employee of the
Company or any subsidiary of the Company (a "Company Employee"), so long as he
or she remains employed by the Surviving Corporation or a subsidiary thereof
during such one-year period, with (x) health and welfare benefits that are
comparable in the aggregate to such benefits as are provided to Company
Employees immediately prior to the Effective Time; (y) severance benefits
pursuant to the Company's Severance Pay Plan in effect immediately prior to the
Effective Time; and (z) 401(k) plan benefits and deferred compensation benefits
as in effect under the Company's 401(k) plan and deferred compensation plan in
effect immediately prior to the Effective Time. Notwithstanding the foregoing,
Parent, the Surviving Corporation, or any subsidiary thereof may (A) terminate,
amend or modify any health and welfare employee benefit plan, program or
arrangement in any respect, (B) terminate the employment of any employee of, or
the service of any independent contractor, leased employee or other service
provider to, the Surviving Corporation or any subsidiary thereof, and
(C) modify the terms and conditions of the employment of any such employee or
the service of any such independent contractor, leased employee or other service
provider. The Merger Agreement expressly provides that the provisions of the
foregoing paragraph are not enforceable by any third party, including, without
limitation, any Company Employee, collective bargaining unit or employee
organization.
The Merger Agreement provides that the Company shall use its reasonable best
efforts to obtain from each holder of a Company Option his or her consent to the
provisions described above under "--Options" prior to the initial Expiration
Date of the Offer. The Company has agreed to obtain such consent from the
holders of 80% of such Company Options within 15 business days after the date of
the Merger Agreement.
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FINANCING COVENANTS.
Parent has agreed not to, without the prior consent of the Company (which
consent shall not be unreasonably withheld), materially amend, modify or waive
any of the terms of the financing arrangements for the Offer if such amendment,
modification or waiver would, among other things, have a significant adverse
effect on or significantly delay the consummation of the Offer and/or the
Merger. BYOWC and Parent have further agreed to enforce, to the fullest extent
permitted under applicable law, the obligations of the respective investment and
financing sources to provide the financing for the Offer and the Merger and will
use their reasonable best efforts to consummate such financing arrangements.
The Company has agreed (i) until the Offer is consummated, to maintain on
hand cash, cash equivalents and/or marketable securities equal to $200,000,000
plus the aggregate exercise price of Company Options exercised after the date of
the Merger Agreement; (ii) to guarantee and secure the Term Loan Facilities to
be entered into by Acquisition; and (iii) to enter into the New Credit Facility.
TERMINATION; FEES.
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the stockholders of the Company of the
Merger:
(a) by duly authorized mutual written consent of Parent and the
Company;
(b) by either Parent or the Company if the initial consummation of the
Offer shall not have occurred on or before March 31, 2000, PROVIDED,
HOWEVER, that the right to terminate the Merger Agreement pursuant to this
clause shall not be available to any party whose failure to fulfill any of
its obligations under the Merger Agreement results in the failure of the
Offer to be consummated by such time;
(c) by either Parent or the Company if, as the result of the failure of
the Minimum Condition or any of the other conditions set forth in
Section 17, the Offer shall have terminated or expired in accordance with
its terms without Acquisition having purchased any Shares pursuant to the
Offer, PROVIDED that if the failure to satisfy any conditions set forth in
Section 17 shall be a basis for termination of the Merger Agreement under
any other clause of this section, a termination pursuant to this clause
shall be deemed a termination under such other clause;
(d) by either Parent or the Company if any Governmental Authority shall
have issued a non-appealable final order, decree or ruling or taken any
other action permanently restraining, enjoining or otherwise prohibiting the
consummation of the Merger;
(e) by Parent if, whether or not permitted to do so by the Merger
Agreement, the Board of Directors of the Company or the Company shall have
(x)(i) withdrawn or modified in a manner adverse to Parent its approval or
recommendation of the Offer, the Merger Agreement or the Merger;
(ii) approved or recommended to the stockholders of the Company any
Acquisition Proposal or Alternative Transaction; or (iii) approved or
recommended that the stockholders of the Company tender their Shares in any
tender or exchange offer that is an Alternative Transaction; or (y) taken
any public position or made any disclosures to the Company's stockholders,
whether or not permitted pursuant to the "No Solicitation" provisions of the
Merger Agreement described above, which has the effect of any of the
foregoing;
(f) by Parent or the Company, if any representation or warranty of the
other party in the Merger Agreement shall not have been true when made
(without for this purpose giving effect to qualifications of materiality
contained in such representations and warranties), if such failure to be
true and correct, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect; PROVIDED that, if such
misrepresentation is curable prior to the initial Expiration Date (or any
extension thereof) through the exercise of the misrepresenting party's
reasonable best efforts and for so long as such party continues to exercise
such reasonable best efforts, the other party may not terminate the Merger
Agreement pursuant to this clause;
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(g) by Parent or the Company, if any representation or warranty of the
other party shall have become untrue (without for this purpose giving effect
to qualifications of materiality contained in such representations and
warranties), other than as a result of a breach or failure to perform by
such party of any of its covenants or agreements under the Merger Agreement,
if such failure to be true and correct, individually or in the aggregate,
would be reasonably likely to have a Material Adverse Effect; PROVIDED, that
if such misrepresentation is curable prior to the initial Expiration Date
(or any extension, thereof) through the exercise of the misrepresenting
party's reasonable best efforts, and for so long as such party continues to
exercise such reasonable best efforts, the other party may not terminate the
Merger Agreement pursuant to this clause;
(h) by Parent or the Company, if the other party shall have materially
breached any of its covenants or other agreements contained in the Merger
Agreement; PROVIDED, THAT, except for any breach of the Company's
obligations under the "No Solicitation" provision of the Merger Agreement
described above, if such breach is curable by the breaching party prior to
the initial Expiration Date (or any extension thereof) through the exercise
of such party's reasonable best efforts and for so long as such party
continues to exercise such reasonable best efforts, the other party may not
terminate the Merger Agreement under this clause. The parties have agreed
that for purposes of this clause (h), (x) the Company's failure to obtain
the consent of the holders of 80% of the Company's Options described under
"--Options" above shall be deemed a material breach, and (y) a failure by
Parent, Acquisition, or BYOWC to comply with its financing covenants set
forth in the Merger Agreement and summarized above under "--Financing
Covenants" shall be deemed a material breach; and
(i) by the Company, in order to accept a Superior Proposal, PROVIDED,
THAT, the Offer shall not theretofore have been initially consummated; the
Board of Directors of the Company reasonably determines (after due
consultation with independent counsel, which may be Jones Day), that it is
or is reasonably likely to be required to accept such proposal in order to
discharge properly its fiduciary duties; the Company has given Parent two
full business days' advance notice of the Company's intention to accept such
Superior Proposal; the Company shall in fact accept such proposal; the
Company shall have paid the fee and expenses contemplated by the Merger
Agreement; and the Company shall have complied in all respects with the
provisions of the section regarding "No Solicitation."
Notwithstanding the foregoing, the right to terminate the Merger Agreement
pursuant to clauses (e), (f), (g) and (h) above shall not be available to Parent
if Acquisition or any other affiliate of Parent shall have acquired Shares
pursuant to the Offer.
In the event of termination of the Merger Agreement in accordance with its
terms, the Merger Agreement generally shall become void with no liability on the
part of any party thereto or of any of its affiliates, directors, officers or
stockholders except for any obligation of the Company or Parent to pay certain
fees and expenses as set forth in the Merger Agreement. Notwithstanding the
foregoing, no such termination shall relieve any party from any liability for
any willful breach of the Merger Agreement prior to termination and nothing
shall relieve BYOWC and the Company or any of their affiliates of their
obligations under the Confidentiality Agreement.
The Merger Agreement provides that if the Merger Agreement is terminated:
(i) by Parent or the Company pursuant to the provision described in
clause (b) or (c) above and an Alternative Transaction is publicly announced
by the Company or any third party within nine months following the date of
such termination and such transaction is at any time thereafter consummated
on substantially the terms theretofore announced. For purposes of this
provision, all references to 30% in the definition of Alternative
Transaction are deemed to refer to 40%.
(ii) by Parent pursuant to the provisions described in clause (e)
above; or
(iii) by the Company pursuant to the provision described in clause (i)
above,
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then the Company shall pay Parent a fee of $14.5 million and shall also pay
Parent $3 million to reimburse Parent for documented expenses relating to the
transactions contemplated by the Merger Agreement (which expenses shall include
all fees and expenses payable to any financing sources).
The Merger Agreement also provides that if the Merger Agreement is
terminated by Parent pursuant to clauses (f) or (h) above, the Company will pay
Parent's actual, documented and reasonable out-of-pocket expenses relating to
the transactions contemplated by the Merger Agreement (including, but not
limited to, fees and expenses of counsel and accountants) in an aggregate amount
not to exceed $3 million, and shall also pay Parent's actual and documented
out-of-pocket expenses in the nature of fees, costs and expenses paid to
financing sources.
The Merger Agreement further provides that if the Merger Agreement is
terminated by the Company pursuant to clauses (f) or (h) above, Parent will pay
the Company's actual, documented and reasonable out-of-pocket expenses relating
to the transactions contemplated by the Merger Agreement (including, but not
limited to, fees and expenses of counsel and accountants and out-of-pocket
expenses of financial advisors) in an aggregate amount not to exceed
$3 million.
The Merger Agreement provides that no fee or expenses will be paid to a
party if such party was in material breach of its obligations immediately prior
to the termination that triggered payment of such fee or expenses.
OBLIGATIONS OF BYOWC.
BYOWC has agreed to be jointly and severally responsible with Parent and/or
Acquisition for each and every obligation of Parent and Acquisition under the
Merger Agreement to be performed at or prior to the Effective Time.
STOCKHOLDER'S AGREEMENTS.
As an inducement to the BYOWC Companies to enter into the Merger Agreement
with the Company, Mr. Godfrey and Mr. Dennis (the "Stockholders"), who in the
aggregate own approximately 10.1% of the outstanding Shares on a fully diluted
basis, have each entered into a stockholder's agreement (the "Stockholder's
Agreements") with Parent and Acquisition.
The following summary of certain provisions of the Stockholder's Agreements,
copies of which are filed as exhibits to the Schedule 14D-1, is qualified in its
entirety by reference to the text of the Stockholder's Agreements. You may
examine or obtain copies of the Stockholder's Agreements in accordance with the
procedures set forth in Section 8.
Each Stockholder has agreed that he shall tender all his Shares in the Offer
and that he shall not withdraw any Shares so tendered.
In addition, each Stockholder has agreed not to transfer, or consent to any
transfer of any or all of such Stockholder's Shares or any interest therein
(except as contemplated by the applicable Stockholder's Agreement), enter into
any contract, option or other agreement or understanding with respect to any
transfer of any or all of his Shares or any interest therein, grant any proxy,
power-of-attorney or other authorization or consent in or with respect to the
Shares or any interest therein except with respect to election of directors at
the Company's annual meeting, deposit the Shares into a voting trust or enter
into a voting arrangement or agreement with respect to the Shares or take any
other action that would in any way restrict, limit or interfere with his
obligations under the applicable Stockholder's Agreement.
Each Stockholder, only in his capacity as a stockholder, has also agreed not
to, directly or indirectly, solicit, initiate or encourage the submission of any
Acquisition Proposal or participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.
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Each Stockholder, only in his capacity as a stockholder, has agreed to vote
such Stockholder's Shares against, or refrain from giving consent in favor of
(i) any merger agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial assets, reorganization,
joint venture, recapitalization, dissolution, liquidation or winding up of or by
the Company and (ii) any amendment of the Company's Certificate of Incorporation
or Bylaws or other proposal or transaction (including any consent solicitation
to remove or elect any directors of the Company) involving the Company or any of
its subsidiaries, which amendment or other proposal or transaction would in any
manner impede, frustrate, prevent or nullify, or result in a breach of any
covenant, representation or warranty or any other obligation or agreement of the
Company under or with respect to, the Offer, the Merger, the Merger Agreement or
any of the other transactions contemplated by the Merger Agreement.
Each Stockholder has made certain representations and warranties in his
Stockholder's Agreement, including with respect to (i) ownership of his Shares,
(ii) the authority to enter into and perform his obligations under such
Stockholder's Agreement and the absence of required consents and statutory or
contractual conflicts or violations, (iii) the absence of liens, claims,
security interests, proxies, voting trusts or other arrangements or any other
encumbrances on or in respect of his Shares, except for those disclosed to
Acquisition (iv) finder's fees, and (v) an acknowledgment of Parent's reliance
upon the Stockholder's execution of the Stockholder's Agreement in entering
into, and causing to enter into, the Merger Agreement.
Each Stockholder's Agreement, and all rights and obligations thereunder,
shall terminate upon the earlier of (a) the date upon which the Merger Agreement
is terminated in accordance with its terms or (b) the date that Parent or
Acquisition shall have purchased and paid for the Shares of such stockholder
pursuant to the terms of the respective Stockholder's Agreement; PROVIDED,
HOWEVER, that the termination of the Stockholder's Agreement shall not relieve
any party of liability for breach of such agreement prior to its termination.
16. Dividends and Distributions.
As discussed in Section 15, the Merger Agreement provides that the Company
will not take certain actions such as paying dividends on, or making any other
distributions in respect of, any of its capital stock, splitting, combining, or
reclassifying any of its capital stock or purchasing, redeeming, or otherwise
acquiring any shares of capital stock of the Company.
If, on or after the date of the Merger Agreement and notwithstanding the
provisions thereof, the Company should (i) split, combine or otherwise change
the Shares or its capitalization, (ii) acquire presently outstanding Shares or
otherwise cause a reduction in the number of outstanding Shares except in
accordance with the Offer or (iii) issue or sell any shares of any class or any
securities convertible into any such shares, or any rights, warrants or options
to acquire any such shares or convertible securities (other than Shares issued
pursuant to, and in accordance with the terms in effect on the date of the
Merger Agreement of, stock options issued prior to such date), then, without
prejudice to Acquisition's rights under the Merger Agreement, Acquisition
(subject to the Merger Agreement), in its sole discretion, may make such
adjustments in the Offer price and other terms of the Offer as it deems
appropriate to reflect such action.
If, on or after the date of the Merger Agreement and notwithstanding the
provisions thereof, the Company should declare or pay any cash, non-cash or
stock dividend or other distribution on, or issue any rights with respect to,
the Shares, payable or distributable to stockholders of record on a date prior
to the transfer to the name of Acquisition or its nominees or transferees on the
Company's stock transfer records of the Shares purchased pursuant to the Offer,
then, without prejudice to Acquisition's rights under the Merger Agreement,
(i) the price per Share payable by Purchasers pursuant to the Offer may, subject
to the provisions of the Merger Agreement, in the sole discretion of
Acquisition, be reduced by the amount of any such cash dividend or distribution
and (ii) any non-cash dividend, distribution or right to be received by the
tendering stockholders will (a) be received and held by the tendering
stockholders for the account of Acquisition and will be required to be promptly
remitted and transferred by each tendering stockholder to the Depositary for the
account of Acquisition, accompanied by appropriate documentation of transfer or
(b) at the direction of Acquisition, be exercised for the benefit of
Acquisition, in which case the proceeds of such exercise will promptly be
remitted
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to Purchaser. Pending such remittance, Acquisition will be entitled, subject to
applicable law, to all rights and privileges as owner of any such non-cash
dividend, distribution or right or such proceeds and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof, as
determined by Acquisition in its sole discretion.
17. Certain Conditions to the Offer.
CONDITIONS TO ACQUISITION'S OFFER.
Notwithstanding any other provision of the Offer, Acquisition shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) of the Exchange Act
(relating to the obligation of Acquisition to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for, and (subject to
any such rules and regulations) may delay the acceptance for payment of any
tendered Shares and (except as provided in the Merger Agreement) amend or
terminate Acquisition's obligations to purchase Shares under the Offer, if
(i) the Minimum Condition shall not have been satisfied, (ii) any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976
(the "HSR Act") shall not have expired or been terminated prior to the
expiration of the Offer or (iii) at any time after the date of the Merger
Agreement and before the initial time of acceptance of Shares for payment
pursuant to the Offer, any of the following conditions exists:
(a) there shall be in effect an injunction or other order, decree,
judgment or ruling by a Governmental Authority of competent jurisdiction or
a law rule or regulation shall have been promulgated, or enacted by a
Governmental Authority of competent jurisdiction which in any such case
(i) restrains or prohibits the making or consummation of the Offer or the
consummation of the Merger, (ii) prohibits or restricts the ownership or
operation by Parent (or any of its affiliates or subsidiaries) of any
portion of the Company's business or assets, which is material to the
business of the Company taken as a whole or which would substantially
deprive Parent and/or its affiliates or subsidiaries of the benefit of
ownership of the Company's business or assets, or compels Parent (or any of
its affiliates or subsidiaries) to dispose of or hold separate any portion
of the Company's business or assets, or its or BYOWC's business or assets or
which would substantially deprive Parent and/or its affiliates and/or
subsidiaries of the benefit of ownership of the Company's business or
assets, or (iii) imposes material limitations on the ability of Purchaser
effectively to acquire or to hold or to exercise full rights of ownership of
the Shares, including, without limitation, the right to vote Shares
purchased by Acquisition pursuant to the Offer or acquired by Parent in the
Merger on all matters properly presented to the stockholders of the Company,
or (iv) imposes any material limitations on the ability of Parent and/or its
affiliates or subsidiaries effectively to control in any material respect
the business and operations of the Company (other than prior to the
Effective Time, by reason of there being minority stockholders in the
Company); or
(b) there shall have been instituted, pending or threatened (in writing
or by public announcement) an action by a Governmental Authority seeking (i)
to restrain or prohibit the making or consummation of the Offer or the
consummation of the Merger or (ii) to impose any other restriction,
prohibition or limitation referred to in the foregoing paragraph (a); or
(c) the Merger Agreement shall have been terminated by the Company or
Parent in accordance with its terms; or
(d) Parent and the Company shall have agreed in writing that
Acquisition shall amend the Offer to terminate the Offer or postpone the
payment for Shares pursuant thereto; or
(e) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in the Shares on NASDAQ, or (ii) a
declaration of a banking moratorium or any general suspension of payments in
respect of banks in the United States; or
(f) all proceeds of the $130 million of equity financing to which FS
Partners has committed and the Term Loan Facilities necessary to consummate
the Offer shall not have been received by Acquisition or the New Credit
Facility shall not be in effect; PROVIDED that this condition shall not
apply if (i) the failure of
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Acquisition to receive the proceeds of such financing or the failure of the
New Credit Facility to be in effect shall have been occasioned by the action
or inaction by BYOWC or Parent, which action or inaction also constitutes a
breach of any material covenant, representation or warranty of BYOWC or
Parent under the Merger Agreement, or (ii) the failure of Acquisition to
receive the proceeds of the equity financing to which FS Partners has
committed shall have been occasioned by the inability to document such
financing in a manner reasonably satisfactory to FS Partners; or
(g) any of the representations and warranties made by the Company in
the Merger Agreement shall not have been true and correct when made, or
shall thereafter have ceased to be true and correct as if made as of such
later date (other than representations and warranties made as of a specified
date) (in each case without for this purpose giving effect to qualifications
of materiality contained in such representation and warranty), or the
Company shall not have performed each obligation and agreement and complied
with each covenant to be performed and complied with by it under the Merger
Agreement, if such failure to be true and correct or such failure to
perform, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect, PROVIDED, HOWEVER, that such breach or failure to
perform is incapable of being cured or has not been cured prior to the
initial Expiration Date (as it may be extended); or
(h) the Company's Board of Directors shall have modified or amended its
recommendation of the Offer in any manner adverse to Parent or shall have
withdrawn its recommendation of the Offer, or shall have recommended
acceptance of any Acquisition Proposal or shall have resolved to do any of
the foregoing; or
(i) any corporation, entity or "group" (as defined in Section 13(d)(3)
of the Exchange Act)
("person/group"), other than Parent and Acquisition and any person/group
identified in the Company's Proxy Statement dated June 3, 1999), shall have
acquired beneficial ownership of more than 15% of the outstanding Shares, or
shall have been granted any options or rights, conditional or otherwise, to
acquire a total of more than 15% of the outstanding Shares and which, in
each case, does not tender the Shares beneficially owned by it in the Offer;
(ii) any new group shall have been formed which beneficially owns more than
15% of the outstanding Shares and which does not tender the Shares
beneficially owned by it in the Offer; or (iii) any person/group (other than
Parent or one or more of its affiliates) shall have entered into an
agreement in principle or definitive agreement with the Company with respect
to a tender or exchange offer for any Shares or a merger, consolidation or
other business combination with or involving the Company; or
(j) any change, development, effect or circumstance shall have occurred
or be threatened that is reasonably likely to have a Material Adverse Effect
with respect to the Company; or
(k) the Rights shall have become exercisable; or
(l) the Company shall commence a case under any chapter of Title XI of
the United States Code or any similar law or regulation; or a petition under
any chapter of Title XI of the United States Code or any similar law or
regulation is filed against the Company which is not dismissed within 2
business days; or
(m) the Company's offer shall not be consummated at the same time as
Acquisition's offer (other than by reason of the fact that the number of
Shares tendered in the Offer were not sufficient to require the purchase of
Shares by the Company in the Offer pursuant to the Merger Agreement).
The foregoing conditions are for the sole benefit of Parent and Acquisition
and may be asserted by Parent and Acquisition regardless of the circumstances
giving rise to any such condition, and may be waived by Parent and Acquisition,
in whole or in part, at any time and from time to time, in the sole discretion
of Parent and Acquisition. The failure by Parent or Acquisition at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any right,
the waiver of such right with respect to any particular facts or circumstances
shall not be deemed a waiver with respect to any other facts or circumstances,
and each right shall be deemed an ongoing right which may be asserted at any
time and from time to time.
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Should Acquisition's obligation to purchase Shares under the Offer be
terminated pursuant to the foregoing provisions, all tendered Shares not
theretofore accepted for payment shall forthwith be returned to the tendering
stockholders.
CONDITIONS TO THE COMPANY'S OFFER.
Notwithstanding any other provision of the Offer, the Company shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) of the Exchange Act
(relating to the obligation of the Company to pay for or return tendered Shares
promptly after termination or withdrawal of the Company's offer), pay for any
Shares and (subject to any such rules or regulations) may delay the acceptance
for payment of any tendered Shares and (except as provided in the Merger
Agreement) amend or terminate the Company's obligations to purchase Shares under
the Offer if (i) the Minimum Condition shall not have been satisfied or
(ii) any applicable waiting period under the HSR Act shall not have expired or
been terminated prior to the expiration of the Offer or (iii) at any time after
the date of the Merger Agreement and before the initial time of acceptance of
Shares for payment pursuant to the Offer, any of the following conditions
exists:
(a) there shall be in effect an injunction or other order, decree,
judgment or ruling by a Governmental Authority of competent jurisdiction or
a law, rule or regulation shall have been promulgated, or enacted by a
Governmental Authority of competent jurisdiction which in any such case
restrains or prohibits the making or consummation of the Offer or the
consummation of the Merger; or
(b) there shall have been instituted, pending or threatened (in writing
or by public announcement) an action by a Governmental Authority seeking to
restrain or prohibit the making or consummation of the Offer or the
consummation of the Merger; or
(c) the Merger Agreement shall have been terminated by the Company or
Parent in accordance with its terms including by the Company to accept a
Superior Proposal in accordance with the terms of the Merger Agreement; or
(d) Parent and the Company shall have agreed that Acquisition shall
amend the Offer to terminate the Offer or postpone the payment for Shares
pursuant thereto; or
(e) there shall have occurred (i) any general suspension of, or
limitation on prices for, trading in the Shares on NASDAQ or (ii) a
declaration of a banking moratorium or any general suspension of payments in
respect of banks in the United States; or
(f) any of the representations and warranties made by Parent in the
Merger Agreement shall not have been true and correct when made, or shall
thereafter have ceased to be true and correct as if made as of such later
date (other than representations and warranties made as of a specified date)
(in each case without for this purpose giving effect to qualifications of
materiality contained in such representation and warranty), or Parent shall
not have performed each obligation and agreement and complied with each
covenant to be performed and complied with by it under this Agreement, if
such failure to be true and correct or such failure to perform, individually
or in the aggregate, is reasonably likely to have a Material Adverse Effect,
PROVIDED, however, that such breach or failure to perform is incapable of
being cured or has not been cured prior to the initial Expiration Date (as
it may be extended); or
(g) the New Credit Facility shall not be in effect, PROVIDED that this
condition shall not apply if the failure of the New Credit Facility to be in
effect shall have been occasioned by the action or inaction of the Company,
which action or inaction also constitutes a breach of any material covenant,
representation or warranty of the Company under the Merger Agreement; or
(h) Acquisition's offer shall not be consummated at the same time as
the Company's offer.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition, and may be waived by the Company, in whole or in part, at any time
and from time to time, in the sole discretion of the Company. The failure by the
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Company at any time to exercise any of the foregoing rights shall not be deemed
a waiver of any right, the waiver of such right with respect to any particular
facts or circumstances shall not be deemed a waiver with respect to any other
facts or circumstances, and each right shall be deemed an ongoing right which
may be asserted at any time and from time to time.
Should the Company's obligation to purchase Shares under the Offer be
terminated pursuant to the foregoing provisions, all tendered Shares not
theretofore accepted for payment pursuant thereto shall forthwith be returned to
the tendering stockholders.
18. Certain Legal Matters.
GENERAL.
Except as described in this Section 18, based on a review of publicly
available filings by the Company with the Commission and other publicly
available information concerning the Company, the BYOWC Companies are not aware
of any license or regulatory permit that appears to be material to the business
of the Company and that might be adversely affected by the Purchasers'
acquisition of Shares pursuant to the Offer, or of any approval or other action
by any governmental, administrative or regulatory agency or authority, domestic
or foreign, that would be required for the acquisition or ownership of Shares by
the Purchasers pursuant to the Offer. Should any such approval or other action
be required, it is presently contemplated that such approval or action would be
sought, except as described below under "--State Takeover Laws." While the
Purchasers do not currently intend to delay acceptance for payment of Shares
tendered pursuant to the Offer pending the outcome of any such matter, there can
be no assurance that any such approval or other action, if required, would be
obtained without substantial conditions or that adverse consequences would not
result to the Company's business or that certain parts of the Company's business
would not have to be disposed of in the event that such approvals were not
obtained or such other actions were not taken or in order to obtain any such
approval or other action. If certain types of adverse action are taken with
respect to the matters discussed below, Acquisition may decline to accept for
payment or pay for any Shares tendered. See Section 17.
STATE TAKEOVER LAWS.
The Company and certain of its subsidiaries conduct business in a number of
states throughout the United States, some of which have adopted laws and
regulations applicable to offers to acquire shares of corporations that are
incorporated or have substantial assets, stockholders and/or a principal place
of business in such states. In EDGAR V. MITE CORP., the Supreme Court of the
United States held that the Illinois Business Takeover Statute, which involved
state securities laws that made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and was therefore
unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA, however, the
Supreme Court of the United States held that a state may, as a matter of
corporate law and, in particular, those laws concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of a
target corporation without prior approval of the remaining stockholders,
PROVIDED that such laws were applicable only under certain conditions, in
particular, that the corporation has a substantial number of stockholders in and
is incorporated under the laws of such state.
The Company is incorporated under the laws of the State of Delaware. In
general, Section 203 of the DGCL ("Section 203") prevents an "interested
stockholder" (including a person who owns or has the right to acquire 15% or
more of the corporation's outstanding voting stock) from engaging in a "business
combination" (defined to include mergers and certain other actions) with a
Delaware corporation for a period of three years following the date such person
became an interested stockholder. The Board of Directors of the Company has
taken all appropriate action so that neither BYOWC, Parent nor Acquisition is or
will be considered an "interested stockholder" pursuant to Section 203.
Neither Parent nor Acquisition has determined whether any other state
takeover laws and regulations will by their terms apply to the Offer or the
Merger, and, except as set forth above, neither Parent nor Acquisition
49
<PAGE>
has presently sought to comply with any state takeover statute or regulation.
Parent and Acquisition reserve the right to challenge the applicability or
validity of any state law or regulation purporting to apply to the Offer or the
Merger, and neither anything in this Offer to Purchase nor any action taken in
connection herewith is intended as a waiver of such right. In the event it is
asserted that one or more state takeover statutes is applicable to the Offer or
the Merger and an appropriate court does not determine that such statute is
inapplicable or invalid as applied to the Offer or the Merger, Parent or
Acquisition might be required to file certain information with, or to receive
approval from, the relevant state authorities, and Acquisition might be unable
to accept for payment or pay for Shares tendered pursuant to the Offer, or be
delayed in consummating the Offer.
ANTITRUST.
Under the HSR Act and the rules that have been promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition transactions may not
be consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. Because Parent and
Acquisition are newly formed entities and upon consummation of the Offer, no
person is expected to own 50% or more of the voting securities of Parent, Parent
and Acquisition do not believe that the acquisition of Shares in the Offer and
Merger will be subject to notification under the HSR Act.
The HSR Act may be applicable to the acquisition of voting securities of
Parent by certain investors as the formation of a corporate joint venture. If
applicable to a particular investor, the acquisition by such investor of voting
securities of Parent may not be consummated until the expiration of a
30-calendar day waiting period after the filing of certain required information
and documentary material with the Antitrust Division and the FTC (unless earlier
terminated pursuant to a request therefor, which requests will be made). If,
within such 30-day waiting period, either the Antitrust Division or the FTC
requests additional information or documentary material, the waiting period
would be extended for an additional period of 20 calendar days following the
date of substantial compliance with such request. Only one extension of the
waiting period pursuant to a request for additional information is authorized by
the rules promulgated under the HSR Act. Thereafter, such waiting period may be
extended only by court order or by agreement of Parent. The only investors in
Parent to whom the HSR Act is expected to apply are BYOWC and FS Partners. Each
of BYOWC and FS Partners expects to file a Notification and Report Form with
respect to the Offer under the HSR Act on December 29, 1999, and, in such event,
the required waiting period with respect to the Offer will expire at
11:59 p.m., New York City time, on January 27, 1999 unless a request for
additional information or documentary material is received or the Antitrust
Division or the FTC terminates the waiting period prior thereto.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed purchase of Shares by
Acquisition pursuant to the Offer. At any time before or after such purchase,
the Antitrust Division or the FTC could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, including
seeking to enjoin the transaction or seeking divestiture of the Shares so
acquired or divestiture of substantial assets of Parent or its subsidiaries.
Litigation seeking similar relief could also be brought by private persons and
the state attorneys general.
Based upon an examination of publicly available information relating to the
businesses in which the Company, BYOWC and the other persons expected to invest
in Parent are engaged, Parent and Acquisition do not believe that consummation
of the Offer or the acquisition of interests in Parent will result in violation
of any applicable antitrust laws. However, there can be no assurance that a
challenge to the Offer on antitrust grounds will not be made, or, if such a
challenge is made, what the result would be. See Section 17 for certain
conditions to the Offer, including conditions with respect to certain judicial
or governmental actions.
19. Fees and Expenses. The BYOWC Companies and the Company have retained
Credit Suisse First Boston to act as Dealer Manager, and the BYOWC Companies
have retained MacKenzie Partners, Inc. to act as the Information Agent and
EquiServe L.P. to act as the Depositary in connection with the Offer. The
Information Agent may contact holders of Shares by mail, telephone, telex,
telecopy and personal interview
50
<PAGE>
and may request brokers, dealers and other nominee stockholders to forward the
Offer materials to beneficial owners. The Dealer Manager, the Information Agent
and the Depositary will receive reasonable and customary compensation for
services relating to the Offer and will be reimbursed for certain out-of-pocket
expenses. The BYOWC Companies and the Company have agreed to indemnify the
Dealer Manager, and Acquisition has agreed to indemnify the Information Agent
and the Depositary, against certain liabilities and expenses in connection with
the Offer, including certain liabilities under the federal securities laws.
None of BYOWC, the Company, Parent or Acquisition will pay any fees or
commissions to any broker or dealer or to any other person (other than to the
Dealer Manager, the Depositary and the Information Agent) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies will, upon request, be reimbursed by the
Purchasers for customary mailing and handling expenses incurred by them in
forwarding offering materials to their customers.
20. Miscellaneous. The Offer is being made to all holders of Shares. The
Purchasers are not aware of any jurisdiction where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If the Purchasers becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchasers will make a good faith effort to comply with any such state statute
or seek to have such statute declared inapplicable to the Offer. If, after such
good faith effort, the Purchasers cannot comply with any such state statute, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares in such state. In any jurisdiction where the securities,
blue sky or other laws require the Offer to be made by a licensed broker or
dealer, the Offer will be deemed to be made on behalf of the Purchasers by one
or more registered brokers or dealers licensed under the laws of such
jurisdiction.
No person has been authorized to give any information or make any
representation on behalf of the BYOWC Companies or the Company not contained in
this Offer to Purchase or in the related Letter of Transmittal and, if given or
made, such information or representation must not be relied upon as having been
authorized.
Parent, Acquisition and BYOWC have filed with the Commission a Tender Offer
Statement on Schedule 14D-1, together with all exhibits thereto, pursuant to
Rule 14d-3 of the General Rules and Regulations under the Exchange Act (the
"Exchange Act Rules"), furnishing certain additional information with respect to
the Offer. The Company has filed a Solicitation/Recommendation Statement on
Schedule 14D-9, together with all exhibits thereto, pursuant to Rule 14d-9 of
the Exchange Act Rules and a Schedule 13E-4 together with all exhibits thereto,
pursuant to Rule 13(e)-4 of the Exchange Act Rules. Such Schedules and any
amendments thereto, including exhibits, may be inspected and copies may be
obtained from the offices of the Commission in the manner set forth in Section 8
(except that they will not be available at the regional offices of the
Commission).
BRIDGEPORT ACQUISITION CORPORATION
MICRO WAREHOUSE, INC.
DECEMBER 28, 1999
51
<PAGE>
SCHEDULE I
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 28, 1999 as
part of the Offer to Purchase. Capitalized terms used herein and not otherwise
defined shall have the meanings set forth in the Offer to Purchase. You are
receiving this Information Statement in connection with the possible election of
persons designated (the "Parent Designees") by Parent to the Company's Board of
Directors. This Information Statement is required by Section 14(f) of the
Exchange Act, and Rule 14f-1 promulgated thereunder. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action in connection with this Information Statement.
The Offer commenced on December 28, 1999 and is scheduled to expire at
5 p.m. New York City Time, on Friday, January 28, 2000, unless extended upon the
terms set forth in the Offer to Purchase.
The information contained in this Information Statement concerning Parent
and Acquisition has been furnished by Parent. The Company assumes no
responsibility for the accuracy or completeness of that information.
Voting Securities of the Company
The Shares constitute the only class of voting securities of the Company
outstanding. Each Share has one vote. As of December 20, 1999, there were
36,070,878 Shares issued and outstanding.
Designation of Directors
The Merger Agreement provides that, promptly upon payment by Acquisition for
Shares pursuant to the Offer (provided the Minimum Condition is satisfied),
Parent is entitled to designate such number of directors, rounded up to the next
whole number, on the Company's Board of Directors that will give Parent, subject
to compliance with Section 14(f) of the Exchange Act, representation on the
Company's Board of Directors equal to at least that number of directors which
equals the product of the total number of directors on the Company's Board of
Directors (giving effect to the directors appointed or elected pursuant to such
provision and including current directors serving as officers of the Company)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Acquisition or any other affiliate of Parent (including for the
purposes of such provision, such Shares as are accepted for payment by
Acquisition pursuant to the Offer, but excluding Shares held by the Company)
bears to the number of Shares outstanding (after reduction for Shares accepted
for payment by the Company pursuant to the Offer). At such time, if requested by
Parent, the Company will also cause each committee of the Company's Board of
Directors to include persons designated by Parent constituting the same
percentage of each such committee as Parent's designees are of the Company's
Board of Directors. The Merger Agreement also provides that the Company shall,
upon request by Parent, promptly increase the size of the Company's Board of
Directors or exercise reasonable best efforts to secure the resignations of such
number of directors as is necessary to enable Parent's designees to be elected
to the Company's Board of Directors and shall cause Parent's designees to be so
elected. However, in the event that Parent's designees are appointed or elected
to the Company's Board of Directors, until the Effective Time the Company's
Board of Directors shall have at least two directors who are directors on the
date hereof, each of whom is neither an officer of the Company nor a designee,
stockholder, affiliate or associate (within the meaning of the federal
securities laws) of BYOWC (such directors, the "Continuing Directors") or such
persons having such qualifications who are designated as "Independent Directors"
by a majority of Continuing Directors in office at the time of such designation.
BYOWC and FS Partners have agreed that, in the event Parent is entitled to
designate directors pursuant to the foregoing provisions, such Parent designees
shall be appointed by BYOWC and FS Partners in the
I-1
<PAGE>
same proportion as BYOWC and FS Partners are each entitled to appoint their
respective representatives to the Board of Directors of the Surviving
Corporation. Parent has informed the Company that it will select its designees
from the following individuals:
Parent Director Designees
<TABLE>
<CAPTION>
Present Principal Occupation or
Employment and Five-Year
Name Age Employment History Other Directorships
- ---- -------- ------------------------------- ---------------------------
<S> <C> <C> <C>
Gary L. Wilson....................... 59 See Schedule II Northwest Airlines Corp.,
CB Richard Ellis, Inc.
(real estate services), On
Command Corp. (hotel movie
distribution systems), and
The Walt Disney Company.
Jerome B. York....................... 61 See Schedule II Apple Computer, Inc.,
Metro-Goldwyn-Mayer, Inc.,
MGM Grand, Inc., National
TechTeam, Inc. (information
technology provider) and
Waste Management, Inc.
Alfred D. Boyer...................... 49 See Schedule II --
Alfred A. Checchi.................... 50 See Schedule II Northwest Airlines Corp.
Michael S. Ovitz..................... 53 See Schedule II J. Crew Group, Inc.
(apparel) and Yankee Candle
Corporation (candle
manufacturer).
Bradford M. Freeman.................. 57 General Partner, Freeman Spogli CB Richard Ellis, Inc. and
(Investments), since 1983. RDO Equipment Company
(agricultural and
industrial equipment
distributor).
William C. Johnson................... 59 Affiliated Operating Executive, Century Maintenance Supply,
Freeman Spogli, since 1993; Inc. (distributor of
Vice Chairman, Brylane Inc. maintenance, repair and
(catalog retailer) since 1993; supply products to the
Chief Executive Officer, multi- family housing
Grolier Incorporated industry), and Medical Arts
(publishing and printing Press (direct marketer of
company) 1990-1994. office supplies to
healthcare professionals).
Jon D. Ralph......................... 35 General Partner, Freeman Envirosource, Inc.
Spogli, since 1998; various (environmental and
other capacities at Freeman industrial services), The
Spogli since 1989. Pantry, Inc. (convenience
store chain), Hudson
Respiratory Care Inc.
(medical devices), River
Holding Corp. (medical
devices) and Century
Maintenance Supply, Inc.
Charles P. Rullman................... 51 General Partner, Freeman The Pantry, Inc., Hudson
Spogli, since 1995; General Respiratory Care Inc. and
Partner Westar Capital River Holding Corp.
(Investments), 1992-1995.
</TABLE>
I-2
<PAGE>
Security Ownership of Certain Beneficial Holders and Management
Security Ownership of Certain Beneficial Holders
The following table sets forth certain information concerning the beneficial
ownership as of December 20, 1999 (the "Measurement Date") regarding those
persons known to the Company to have been owners on such date of more than 5% of
the Shares then outstanding based on filings pursuant to Rule 13d of the
Exchange Act.
<TABLE>
<CAPTION>
Amount Beneficially Percentage of Common
Name And Address Of Beneficial Owner Owned(1) Stock Outstanding
- ------------------------------------ ------------------- --------------------
<S> <C> <C>
Massachusetts Financial Services Company(2).......... 4,370,921 12.1%
500 Boylston Street
Boston, MA 02116
Peter Godfrey(3)..................................... 2,901,628 8.0%
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
MFS Series Trust II-MFS Emerging Growth Fund(2)...... 2,857,100 7.9%
500 Boylston Street
Boston, MA 02116
Mellon Bank Corporation(4)........................... 1,900,000 5.3%
One Mellon Bank Center
Pittsburgh, PA 15258
</TABLE>
- ------------------------
(1) Unless otherwise indicated, each person or group has sole voting and
dispositive power with respect to all these Shares.
(2) Information concerning beneficial ownership by Massachusetts Financial
Services Company ("MFS") and MFS Series Trust II-MFS Emerging Growth Fund
("MEG") is based on a report on Schedule 13G filed with the Securities and
Exchange Commission dated February 11, 1999. This report indicates that, of
the 4,370,921 Shares, MFS has sole voting power with respect to 4,357,371
Shares and no shared voting power and has sole dispositive power with
respect to 4,370,921 Shares. Additionally, of the 4,370,921 Shares
beneficially owned by MFS, 2,857,100 Shares or 7.9% are also beneficially
owned by MEG and 1,513,821 Shares are also beneficially owned by certain
other non-reporting entities as well as MFS. In total, MFS and MEG
beneficially own 4,370,921 Shares or 12.1% of the outstanding Shares. MFS
and MEG have their principal business offices at 500 Boylston Street,
Boston, MA 02116.
(3) Includes 100,666 Shares that Mr. Godfrey has the right to acquire within
60 days of the Measurement Date through the exercise of stock options.
(4) Information regarding beneficial ownership by Mellon is based on the
Company's information and belief. To the Company's knowledge there have been
no Commission filings confirming this information.
Security Ownership of Management
The following table sets forth certain information concerning the beneficial
ownership of Common Stock as of the Measurement Date by:
-- the Directors
-- each of the Executive Officers named in the Summary Compensation Table
-- all Directors and Executive Officers as a group.
I-3
<PAGE>
The Amount and Nature of Beneficial Ownership column includes Shares that
may be acquired within 60 days of the Measurement Date through the exercise of
stock options.
<TABLE>
<CAPTION>
Stock Options
that will be
Amount Exercisable as of Percent of
Beneficially February 26, Class
Name And Address of Beneficial Owner Owned(1) 2000 Outstanding
- ------------------------------------ ------------ ----------------- -----------
<S> <C> <C> <C>
Peter Godfrey........................................ 2,901,628 100,666 8.0%
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Felix Dennis......................................... 1,275,963 -- 3.5%
39 Goodge Street
London, England W1P 1FD
Frederick H. Fruitman................................ 45,000 45,000 *
Loeb Partners Corporation
61 Broadway 24th Floor
New York, NY 10006
Joseph M. Walsh...................................... 45,000 40,000 *
Curtis Circulation Company
730 River Road
New Milford, NJ 07646
Wayne P. Garten...................................... 121,667 121,667 *
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Bruce L. Lev......................................... 158,467 158,467 *
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Adam Shaffer......................................... 392,345 392,345 *
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Jeffrey Gentile...................................... 16,400 16,400 *
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
All Directors and Officers as a Group (31 persons)... 5,089,136 1,004,776 14.1%
</TABLE>
I-4
<PAGE>
- ------------------------
* Represents less than one percent
(1) Unless otherwise indicated, each person or group has sole voting and
dispositive power with respect to all these Shares.
Information Concerning the Board of Directors and Executive Officers
Identification of Directors
The names, ages and related information of the directors of the Company as
of the Measurement Date appear below.
<TABLE>
<CAPTION>
Name Age Present Offices Held in the Company Director Since
- ---- -------- ------------------------------------------ --------------
<S> <C> <C> <C>
Felix Dennis......................... 52 Director and Principal Consultant 1992
Frederick H. Fruitman................ 49 Director 1992
Peter Godfrey........................ 54 Director, Chairman of the Board, President 1987
and Chief Executive Officer
Joseph M. Walsh...................... 56 Director 1993
</TABLE>
FELIX DENNIS, 52, co-founder, has served as a director since October 1992
and as a principal consultant from the Company's inception in 1987 through
December 31, 1998. Since 1972, Mr. Dennis has been Chairman of Dennis
Publishing, Ltd., an independently owned publishing company that publishes
MACUSER and COMPUTER SHOPPER magazines, as well as other magazines in the United
Kingdom and the United States.
FREDERICK H. FRUITMAN, 49, became a director in December of 1992. Since 1990
he has been a Managing Director of Loeb Partners Corporation, an investment
banking firm. Mr. Fruitman is a director of FIND/SVP, Inc.
PETER GODFREY, 54, co-founder, was appointed Chairman on January 25, 1994
and has served as President and Chief Executive Officer from the Company's
inception until October 1996 and from October 1997 to the present. Mr. Godfrey
has served as a director since the Company's inception.
JOSEPH M. WALSH, 56, became a director in February of 1993. Since
December 1992 he has served as Chairman and Chief Executive Officer of Curtis
Circulation Company. From 1972 through 1974 and from 1982 through November 1992
he served as President of Curtis. From 1974 through 1982 he was Executive Vice
President of Cadence Industries Corporation and President of certain of its
subsidiaries including Data Systems for Health (a computerized national billing
company), US Pencil and Stationery Company (primarily an advertising specialty
mail-order company) and Perfect Subscription Companies (which were formerly
Perfect School Plans, Moore-Cottrell and Keystone Readers Service). He is a
Certified Public Accountant.
I-5
<PAGE>
Executive Officers
Set forth below is certain information concerning the executive officers of
the Company:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- -------- -------------------------------------------------------
<S> <C> <C>
Peter Godfrey(1)..................... 54 Chairman of the Board, President and Chief Executive
Officer
Stephen J. Carline................... 39 Executive Vice President of Sales
Wayne P. Garten...................... 47 Executive Vice President & Chief Financial Officer
Bruce L. Lev......................... 56 Executive Vice President of Legal & Corporate Affairs,
General Counsel and Secretary
Adam Shaffer......................... 34 Executive Vice President of Marketing, Advertising and
Purchasing
Geoffrey Boytos...................... 41 Senior Vice President of Database Marketing and Brand
Management
Jeffrey Gentile...................... 36 Senior Vice President of Merchandising
</TABLE>
- ------------------------
(1) Additional information with respect to Mr. Godfrey can be found above under
"Identification of Directors."
STEPHEN J. CARLINE has served as Executive Vice President of Sales since
October 1998. Mr. Carline was co-founder and from November 1997 through
November 1998 served as principal member of Discovery Training & Development,
L.L.C., a telesales and teleservice training and consulting firm specializing in
business-to-business sales for the IT industry. From September 1996 to
July 1997 Mr. Carline was Vice President of Sales of Insight Enterprises, Inc.,
a direct marketer of computers and computer-related products. From 1986 through
1996 he served in a variety of positions at Careertrack, Inc., an international
direct marketer of training and development programs, including Vice President
of Sales and Operations from 1995 to 1996, Director, Sales Division from 1991 to
1995, Director, Operations Division from 1989 to 1991 and Manager Customer
Service Department from 1986 through 1989.
WAYNE P. GARTEN has served as Executive Vice President and Chief Financial
Officer since December 1997 and as Senior Vice President and Chief Financial
Officer from February 1997 to December 1997. From 1983 to August 1996
Mr. Garten was employed by Hanover Direct, Inc., a specialty brand direct
marketer, and its predecessor company The Horn and Hardart Company, where he
served as Executive Vice President and Chief Financial Officer from 1989 until
1996. Mr. Garten is a Certified Public Accountant.
BRUCE L. LEV has served as Executive Vice President of Legal and Corporate
Affairs, General Counsel and Secretary since December 1997. From April 1995
until December 1997 he served as Vice President, General Counsel and Secretary.
Mr. Lev has served as Secretary since inception. The law firm of which he was
Senior Partner has served as an outside counsel since our inception. A successor
to that firm, Lev & Berlin, P.C., continues in this capacity and Mr. Lev is of
counsel to the firm. Prior to joining us, Mr. Lev had been a lawyer in private
practice since 1968.
ADAM SHAFFER has served as Executive Vice President of Marketing,
Advertising and Purchasing since December 1997 and served as Vice President of
Product and Marketing from November 1996 to December 1997. Mr. Shaffer served as
Vice President of Worldwide Marketing from January 1996 to November 1996. From
April 1993 to January 1996 he served as Vice President of Marketing. From
April 1992 to March 1993 he served as director of our MacShopper division.
GEOFFREY BOYTOS has served as Senior Vice President of Database Marketing
and Brand Management since January of 1998 and served as Vice President of
Database Marketing from November 1996 to January 1998. From 1992 to 1996
Mr. Boytos served as our Director of Database Marketing.
I-6
<PAGE>
JEFFREY GENTILE has served as Senior Vice President of Merchandising since
January 1998. Mr. Gentile has been with the Company since 1992 serving in a
variety of management-level positions including Director of Datacom Warehouse
and Group Director of Marketing.
BOARD OF DIRECTORS MEETINGS, COMPENSATION OF CERTAIN DIRECTORS,
AND COMMITTEES OF THE BOARD
The Board of Directors of the Company (the "Board") held a total of four
meetings during 1998. Each Director attended in person or by telephone all of
the meetings of the Board and their respective committee meetings.
Frederick H. Fruitman became a Director in December 1992 and Joseph M. Walsh
became a Director in February 1993. Neither of them is an officer, employee or
consultant. Each receives an annual fee of $20,000 for services rendered as a
Director and as a member of the Board's Committees. In addition, each received a
bonus payment of $50,000 in early 1998 attributable to special assistance
provided beyond the normal scope of his Director responsibilities. As of
January 1, 1999 each also receives a fee of $1,000 per Board meeting attended
and $500 per Committee meeting attended.
AUDIT COMMITTEE
The Audit Committee's responsibilities include recommending to the Board the
independent public accountants to conduct the annual audit of our books and
accounts, reviewing the proposed scope of the audit and approving the audit fees
to be paid. The Audit Committee also reviews with the independent public
accountants and with management the adequacy and effectiveness of the Company's
internal auditing, accounting, financial and ethical business conduct controls.
In addition, the Audit Committee reviews audited financial statements with the
independent public accountants. The members of the Audit Committee are
Messrs. Fruitman and Walsh. The Audit Committee held four meetings during 1998.
COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee's responsibilities include
reviewing the Company's executive compensation policy and approving the salaries
of all officers and certain other of the Company's employees. It also supervises
the administration of all stock option and benefit plans and other matters
affecting executive compensation, subject to further approval of the Board. The
members of the Compensation and Stock Option Committee are Messrs. Fruitman and
Walsh. The Compensation and Stock Option Committee held four meetings during
1998.
NOMINATING COMMITTEE
The Nominating Committee's responsibilities include proposing a slate of
directors for selection by the stockholders at each annual meeting and proposing
candidates to fill vacancies on the Board. The members of the Nominating
Committee are Messrs. Fruitman and Walsh.
I-7
<PAGE>
REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE
GENERAL
One of the principal tasks of the Board has been to formulate an effective
compensation policy designed to balance the short-term need to attract qualified
executives with the long-term need to provide incentives to those executives and
other employees in a manner that will encourage a long-term commitment to the
Company's growth and enhancement of stockholder value.
COMPENSATION PHILOSOPHY AND OBJECTIVES
In order to attract qualified executives, the Company's philosophy has been
and continues to be to provide a total compensation package that is competitive
within the hardware, software and direct marketing industries and bears a close
relationship to individual performance and the Company's long-term business
objectives. The total direct compensation package for the Company's executive
officers is presently made up of three elements:
-- an annual base salary
-- a short-term incentive program in the form of a performance based bonus
(with certain discretionary components)
-- a longer-term incentive program in the form of stock options.
ANNUAL BASE SALARY
The Company reviews the salaries of its officers annually. In determining
salaries, the Company considers, among other factors, the officer's scope of
responsibility, prior experience and data on comparable salaries in relevant
markets and industries. The annual base salaries of individual officers were
increased in 1998 as a result of promotions, individual periodic performance
reviews and cost of living adjustments.
PERFORMANCE-BASED BONUS
The Company continues to believe that incentive awards tied to achievement
of the Company's goals as well as goals and objectives for individual employees
should be an important portion of each employee's compensation. In early 1998
the Company instituted the 1998 Incentive Plan for the Company's executive
management that tied incentive compensation directly to budgeted profits and the
achievement of the executives' individual goals and objectives. The incentive
plan for all other employees ties bonuses to the overall profit achievement of
either the Company's U.S. operations or, for non-U.S. employees, the appropriate
international business unit. In many instances bonuses will also be tied to
agreed-upon individual goals and objectives. For 1998 the Company paid a total
of $5,676,397 to employees as incentive-based bonuses.
STOCK OPTIONS
The purpose of the stock option program is to provide additional incentives
to all employees to work to maximize stockholder value. To encourage growth in
stockholder value, the Company believes that employees should have a significant
stake in the ongoing success of the business and that stock options align the
employee's financial interests with that of the stockholders. In addition, the
option plan utilizes vesting periods to encourage employees to continue in the
Company's employ. During 1998 the Company granted options to purchase 1,854,650
shares of Common Stock to certain employees at exercise prices ranging from
$11.34 to $28.41 per share. The Company intends to continue granting stock
options on a periodic basis to employees, directors and consultants.
I-8
<PAGE>
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
The 1998 base salary of Mr. Godfrey was $558,916 pursuant to an employment
agreement effective as of January 1, 1995. Mr. Godfrey did not participate in
the Executive Management 1998 Incentive Plan. He did, however, receive a
discretionary bonus of $436,084 in early 1999 attributable to his leadership in
the Company's strong financial and operating performance in 1998. Additionally,
pursuant to his employment agreement, in February 1998 Mr. Godfrey was granted
40,000 options to purchase Shares with an exercise price of $13.59 per share. As
of January 1, 1999 Mr. Godfrey entered into a new two-year employment agreement.
The Compensation and Stock Option Committee believes that the Company's
compensation programs of base salary, incentive plans and stock option grants
are appropriate for Mr. Godfrey and other executive officers on the basis of
industry standards, competitive practices and the Company's performance.
TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code disallows a deduction for
executive compensation exceeding one million dollars per year unless certain
conditions are satisfied. The Committee has reviewed and approved all of the
Company's option plans and compensation programs. While the Company generally
intends to preserve the income tax deductibility under Section 162(m) of
executive compensation, it reserves the right to pay executives as it determines
appropriate. In this connection, the Company has determined not to have the
Executive Management Incentive Plan and grants of stock options to certain
executives comply with Section 162(m) and will retain discretion to authorize
the payment of compensation that does not qualify for income tax deductibility.
By retaining this discretion, the Company will maintain its flexibility to
motivate and reward excellent performance without compromising the expectations
of the Company's executives.
The Compensation and Stock Option Committee
Frederick H. Fruitman
Joseph M. Walsh
I-9
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth compensation information for the three years
ending December 31, 1996, 1997 and 1998 with respect to:
-- the Chief Executive Officer
-- the four most highly compensated executive officers other than the CEO
who were serving as executive officers as of December 31, 1998
-- two additional individuals for each of whom disclosure would have been
provided above except for the fact that the individual was not serving
as an executive officer as of December 31, 1998.
<TABLE>
<CAPTION>
Long-term Compensation
Other Annual Securities Underlying All Other
Name and Principal Position Year Salary Compensation Options/SARs (#) Compensation
- --------------------------- -------- --------- ------------ ---------------------- ------------
<S> <C> <C> <C> <C> <C>
Peter Godfrey............ 1998 $558,916 $436,084 40,000 --
Chairman, President and 1997 528,902 -- 40,000 --
Chief Executive Officer 1996 513,633 -- 50,000 --
Wayne P. Garten.......... 1998 339,882 323,375 100,000 $4,571(1)
Executive Vice President 1997 203,077 91,384 100,000 --
and 1996 -- -- -- --
Chief Financial
Officer(2)
Bruce L. Lev............. 1998 347,106 331,799 100,000 16,390(3)
Executive Vice President 1997 325,712 150,000 48,000 14,194(3)
of Legal And Corporate 1996 319,459 -- 23,000 12,942(3)
Affairs and General
Counsel
Adam Shaffer............. 1998 333,937 323,375 500,000 4,903(1)
Executive Vice President 1997 233,856 194,887 50,000 2,375(1)
of Marketing, Advertising 1996 277,500 77,500 -- 2,325(1)
and Purchasing
Jeffrey Gentile.......... 1998 197,588 87,863 14,250 4,755(1)
Senior Vice President of 1997 157,667 40,000 30,500 2,375(1)
Merchandising 1996 140,400 34,450 -- 2,375(1)
Stephen England.......... 1998 258,989 351,285 100,000 4,703(1)
Former Executive Vice 1997 231,388 88,798 20,000 2,375(1)
President of Sales(4) 1996 202,245 86,152 30,000 2,375(1)
Jeffrey Sheahan.......... 1998 204,642 -- -- 82,142(6)
Former Senior Vice 1997 204,391 -- 35,000 91,922(6)
President and President 1996 206,479 42,500 13,000 78,617(6)
of European Operations(5)
</TABLE>
- ------------------------
(1) Represents matching contributions under our 401(k) Savings Plan.
(2) Mr. Garten became an executive officer and employee in February 1997.
(3) Includes the following additional compensation to Mr. Lev:
<TABLE>
<CAPTION>
Insurance 401(K) Matching
Year Premiums Contributions
- ---- --------- ---------------
<S> <C> <C>
1998........ $11,819 $4,571
</TABLE>
I-10
<PAGE>
<TABLE>
<CAPTION>
Insurance 401(K) Matching
Year Premiums Contributions
- ---- --------- ---------------
<S> <C> <C>
1997........ 11,747 2,375
1996........ 6,553 1,195
</TABLE>
(4) Mr. England resigned pursuant to an October 19, 1998 severance agreement.
(See "Severance Agreement with Named Executive Officer").
(5) Mr. Sheahan resigned effective October 9, 1998.
(6) Includes the following additional compensation to Mr. Sheahan:
<TABLE>
<CAPTION>
Housing, Living and
Education 401(K) Matching
Year Expenses Contributions
- ---- ------------------- ---------------
<S> <C> <C>
1998 $77,514 $4,628
1997 89,547 2,375
1996 76,164 2,453
</TABLE>
OPTIONS GRANTED IN LAST FISCAL YEAR
The table below shows the individual grants of non-qualified stock options
to the Chief Executive Officer and the other executive officers named in the
Summary Compensation Table during 1998.
<TABLE>
<CAPTION>
Potential Realized Value
Assumed Value Rates
of Stock Price
Shares % of Total Appreciation for
Underlying Options Exercise Option Term(3)
Grant Options Granted in Price per Expiration --------------------------
Name Date(1) Granted FY 1998 Share($) Date(2) 5%($) 10%($)
- ---- -------- ---------- ---------- --------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peter Godfrey.......... 2/26/98 40,000 2.16% $13.59 2/26/08 $ 340,075 $ 863,505
Wayne P. Garten........ 2/26/98 100,000 5.39% $13.59 2/26/08 $ 850,188 $ 2,158,763
Bruce L. Lev........... 2/26/98 100,000 5.39% $13.59 2/26/08 $ 850,188 $ 2,158,763
Adam Shaffer........... 2/26/98 500,000 29.96% $13.59 2/26/08 $4,250,942 $10,793,816
Jeffrey Gentile........ 1/12/98 14,250 0.77% $12.50 1/12/08 $ 106,219 $ 274,645
Stephen England........ 2/26/98 100,000 5.39% $13.59 2/26/08 $ 850,188 $ 2,158,763
Jeffrey Sheahan........ -- -- -- -- -- --
</TABLE>
- ------------------------
(1) The grants made to Messrs. Godfrey, Garten, Lev, Shaffer and England on
February 26, 1998 vest in equal installments on each of the first three
anniversaries of their grants. The grant to Mr. Gentile on January 12, 1998
vests in equal installments on each of the first five anniversaries of the
grant.
(2) Each of the options granted above has a ten-year term.
(3) The potential realizable value portion of the foregoing table illustrates
value that might be realized upon exercise of the options immediately prior
to the expiration of their term, assuming the specified compounded rates of
appreciation on the Shares over the full term of the options.
The rates of appreciation are established by the Commission and are not
intended as a forecast of future appreciation. The actual gain, if any, realized
by the recipient will depend upon the actual performance of the Shares. There
can be no assurance that the amounts reflected in this table will be achieved.
I-11
<PAGE>
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The table below lists the shares acquired on exercise of options by the
Chief Executive Officer and the other executive officers named in the Summary
Compensation Table during 1998 and certain information as to options unexercised
at December 31, 1998.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-the-
Options at December 31, money Options
Shares 1998(1) at December 31, 1998
Acquired on Value --------------------------- -----------------------------
Name Exercise # Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- --------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter Godfrey............. 0 -- 71,333 58,677 $ 529,752 $1,217,273
Wayne P. Garten........... 0 -- 43,334 156,666 $ 893,472 $3,322,528
Bruce L. Lev.............. 0 $777,719 99,684 111,316 $1,303,144 $2,205,894
Adam Shaffer.............. 0 $820,914 200,303 382,458 $4,100,267 $7,781,663
Jeffrey Gentile........... 14,400 $111,397 -- 32,150 -- $ 682,959
Stephen England........... 68,500 $905,737 48,834 84,166 $1,014,953 $1,718,934
Jeffrey Sheahan........... 28,859 $258,554 -- -- -- --
</TABLE>
- ------------------------
(1) Values have been calculated based on the closing price of the Shares
reported on the Nasdaq National Market on December 31, 1998 at $33.8125 per
share.
SEVERANCE AGREEMENT WITH STEPHEN ENGLAND
STEPHEN ENGLAND. On October 19, 1998 the Company entered into a Severance
Agreement and General Release with Stephen England. Pursuant to the agreement,
Mr. England resigned as Executive Vice President of Sales and the Company agreed
to pay his annual base salary of $250,000 (as adjusted annually for cost of
living adjustments) on the regular payroll cycle through December 31, 2000. In
addition, Mr. England received incentive compensation plus his targeted
commission for 1998 in an aggregate amount of $351,285. Mr. England's
outstanding stock options continue to vest until December 31, 2000 and each may
be exercised until the earlier of (i) its expiration date or (ii) the later of
12 months after it vests or December 31, 1999.
STOCK OPTION PLANS
The Company's Board and stockholders approved the 1992 Stock Option Plan and
1994 Stock Option Plan both of which provide for the grant of stock options to
the Company's and its subsidiaries' officers, directors, employees and
consultants. Under these stock option plans, the Company may grant options that
are intended to qualify as Incentive Stock Options within the meaning of
Section 422A of the Internal Revenue Code and options not intended to qualify as
Incentive Stock Options, also referred to as Nonstatutory Stock Options.
Incentive Stock Options may not be granted to consultants who are not also the
Company's employees. A total of up to 6,000,000 Shares may be issued upon the
exercise of options granted under the plans.
The Company also succeeded to all of the obligations and responsibilities of
Inmac Corp.'s 1983 and 1992 Stock Option Plans and 1988 Director's Stock Option
Plan when the Company acquired Inmac in January 1996. A total of up to 943,920
Shares may be issued upon the exercise of options granted under these plans.
I-12
<PAGE>
All of our stock option plans may be administered by the Board or the
Compensation and Stock Option Committee. Subject to the provisions of each of
the stock option plans, the Board has the authority to select the employees,
directors or consultants to whom options are granted and determine the terms of
each option, including:
-- the number of shares of Common Stock the option entitles the holder to
purchase
-- the date on which the option becomes exercisable
-- the price at which the option may be exercised, which must be equal to
the fair market value of the Shares as of the date of grant for
Incentive Stock Options and 85% of fair market value for Nonstatutory
Stock Options
-- the duration of the option, which may not exceed ten years.
SECTION 401(K) SAVINGS PLAN
The Company sponsors a 401(k) savings plan that covers full-time employees
who meet its eligibility requirements. Participants may make tax deferred
contributions of up to 15% of annual compensation (subject to other limitations
specified by the Internal Revenue Code). As of January 1, 1998 the Company
increased from 25% to 50% the matching contribution for amounts which do not
exceed 6% of the participant's annual compensation. Although the Company is
entitled to make discretionary profit sharing contributions to the plan, the
Company has not made any such contributions.
COMPENSATION AND STOCK OPTION
COMMITTEE INTERLOCKS AND INSIDERS PARTICIPATION
Members of the Compensation and Stock Option Committee are Messrs. Fruitman
and Walsh, neither of whom is an officer, employee or consultant. There were no
committee interlocks during 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CONSULTING AGREEMENT
In 1998 Mr. Dennis received fees of $50,000 plus expenses for consulting
services to the Company under a consulting agreement dated January 1, 1989. The
consulting agreement expired on December 31, 1998. Additionally, Mr. Dennis has
agreed that he will not receive options under any of the Company's stock option
plans.
DENNIS PUBLISHING, LTD.
MacUser, PC Pro, MacShopper and Computer Shopper magazines are owned and
published in the United Kingdom by Dennis Publishing, Ltd., of which Felix
Dennis is a controlling stockholder and Chairman. Mr. Godfrey holds a 5%
interest in Computer Shopper magazine. The Company may from time to time
purchase advertising space in and rent subscriber lists from these magazines for
purposes of marketing products in the United Kingdom. Neither Mr. Dennis nor
Mr. Godfrey participates in any decision relating to the purchase of advertising
space or rental of subscription lists from these magazines, and all related fees
are negotiated on an arm's-length basis between the Company's operating
representatives and representatives of Dennis Publishing. Dennis
Publishing, Ltd. and Mr. Dennis are also affiliated with two companies that
publish the non-computer magazines, Maxim Magazine and Stuff Magazine, in which
two magazines Mr. Godfrey holds 12.5% interests. The Company has not purchased
advertising space or rented subscriber lists from these magazines. The Company
also is utilizing the services of a division of Dennis Publishing, Ltd., Dennis
Interactive, for the creation of a multi-media presentation in support of the
Company's outbound telemarketing efforts.
I-13
<PAGE>
CHARTERED AIRCRAFT
The Company periodically charters an aircraft owned and operated by a
company wholly owned by Mr. Godfrey. The Company paid a total of $7,825 in 1998
for the use of such aircraft for business purposes.
LEASES
The Company leases 12,000 square feet of executive office space in South
Norwalk, Connecticut from Mr. Godfrey and 13,500 square feet of office space in
South Norwalk from an entity 50% owned by Mr. Godfrey under leases that expire
December 31, 1999. The Company paid a total of $292,339 in 1998 for rent of
these premises.
I-14
<PAGE>
SCHEDULE II
Certain Information Concerning the Members
and Managing Member of BYOWC Partners LLC
The following table sets forth the name, current business address, present
principal occupation or employment, and material occupations, positions, offices
or employment for the past five years of each member and the managing manager of
BYOWC. Each such person is a citizen of the United States of America. None of
the listed persons, during the past five years, has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which such person 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.
<TABLE>
<CAPTION>
Present Principal
Occupation or Employment
Name and Position Held Current Business Address and Five-Year Employment History
- ---------------------- ------------------------ --------------------------------
<S> <C> <C>
Gary L. Wilson, 300 N. Delfern Drive Chairman of the Board of Directors,
Member Los Angeles, CA 90077 Northwest Airlines Corp., since
1997; Co-Chairman of the Board of
Directors, Northwest Airlines Corp.,
1991-1997.
Jerome B. York, 7939 Rio Rico Drive Chief Executive Officer, Harwinton
Member Las Vegas, NV 89113 Corporation (investments and
consulting), since 1999; Vice
Chairman, Tracinda Corporation,
1995-1999; Senior Vice President and
Chief Financial Officer,
International Business Machines
Corporation, 1993-1995.
Alfred D. Boyer, 9665 Wilshire Boulevard, Suite 200 Partner, Gary L. Wilson Partners
Managing Member Beverly Hills, CA 90212 (investments), since 1996; Managing
Partner, Boyer Capital Management
(investments), since 1994.
Michael S. Ovitz, 9465 Wilshire Boulevard, Sixth Floor Artists Management Group, LLC since
Member Beverly Hills, CA 90212 1998; President, The Walt Disney
Company, 1995-1996; Founding
Partner, Creative Artists Agency,
1975-1995.
Alfred A. Checchi, 920 Manhattan Beach Boulevard Private Investor since 1997; Co-
Member Suite #1 Chairman of the Board of Directors,
Manhattan Beach, CA 90266 Northwest Airlines Corp., 1991-1997.
Kenneth W. Slutsky, 920 Manhattan Beach Boulevard Vice-Chairman, Candle Corporation
Member Suite #1 (computer software) since 1993.
Manhattan Beach, CA 90266
</TABLE>
II-1
<PAGE>
SCHEDULE III
Certain Information Concerning the Directors and
Executive Officers of Parent
The following table sets forth the name, current business address, present
principal occupation or employment, and material occupations, positions, offices
or employment for the past five years of each director and executive officer of
Parent. Each such person is a citizen of the United States of America. None of
the listed persons, during the past five years, has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or was a party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which such person 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.
<TABLE>
<CAPTION>
Present Principal
Occupation or Employment
Name and Position Held Current Business Address and Five-Year Employment History
- ---------------------- ------------------------ --------------------------------
<S> <C> <C>
Gary L. Wilson, See Schedule II See Schedule II
President
Jerome B. York, See Schedule II See Schedule II
Vice President and
Treasurer
Alfred D. Boyer, See Schedule II See Schedule II
Vice President and
Secretary
</TABLE>
III-1
<PAGE>
SCHEDULE IV
Certain Information Concerning the Directors
and Executive Officers of Purchaser
The following table sets forth the name, current business address, present
principal occupation or employment, and material occupations, positions, offices
or employment for the past five years of each director and executive officer of
Purchaser. Each such person is a citizen of the United States of America. None
of the listed persons, during the past five years, has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which such person 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.
<TABLE>
<CAPTION>
Present Principal
Occupation or Employment
Name and Position Held Current Business Address and Five-Year Employment History
- ---------------------- ------------------------ --------------------------------
<S> <C> <C>
Gary L. Wilson, See Schedule II See Schedule II
President
Jerome B. York, See Schedule II See Schedule II
Vice President and
Treasurer
Alfred D. Boyer, See Schedule II See Schedule II
Vice President and
Secretary
</TABLE>
IV-1
<PAGE>
Schedule V
[LETTERHEAD OF WASSERSTEIN PERELLA & CO., INC.]
December 20, 1999
Board of Directors
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, par value $0.01 per
share (the "Shares") of Micro Warehouse, Inc. (the "Company") of the
consideration to be received by such holders pursuant to the terms of the
Agreement and Plan of Merger, dated as of December 20, 1999 (the "Merger
Agreement"), among the Company, Bridgeport Holdings Inc. ("Parent"), and
Bridgeport Acquisition Corporation ("Sub"). The Merger Agreement provides for,
among other things, cash tender offers by Sub and the Company to acquire,
collectively, all of the outstanding Shares at a price of $19.00 per Share (the
"Tender Offer"), and for a subsequent merger of the Company with and into Sub
pursuant to which each remaining outstanding Share not purchased in the Tender
Offer (other than any Shares held in the treasury of the Company or owned by
Parent, Sub or their respective subsidiaries) will be converted into the right
to receive $19.00 in cash (the "Merger" and, together with the Tender Offer, the
"Transaction"). The terms and conditions of the Transaction are set forth in
more detail in the Offer to Purchase relating to the Tender Offer (the "Offer to
Purchase") and the Merger Agreement.
In connection with rendering our opinion, we have reviewed a draft of the
Merger Agreement, and for purposes hereof, we have assumed that the final form
thereof will not differ in any material respect from the draft provided to us.
We have also reviewed and analyzed certain publicly available business and
financial information relating to the Company for recent years and interim
periods to date, as well as certain internal financial and operating
information, including financial forecasts, analyses and projections prepared by
or on behalf of the Company and provided to us for purposes of our analysis, and
we have met with management of the Company to review and discuss such
information and, among other matters, the Company's business, operations,
assets, financial condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the personal computer retail industry that we believe to be
reasonably comparable to the Transaction or otherwise relevant to our inquiry.
We have also performed such other financial studies, analyses, and
investigations and reviewed such other information as we considered appropriate
for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all of the historical financial
and other information provided to or discussed with us or publicly available,
and we have not assumed any responsibility for independent verification of any
of such information. We have also assumed and relied upon the reasonableness and
accuracy of the financial projections, forecasts and analyses provided to us,
and we have assumed that such projections, forecasts and analyses were
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the Company's management as to the matters
covered thereby. We express no
V-1
<PAGE>
Board of Directors
December 20, 1999
Page 2
opinion with respect to such projections, forecasts and analyses or the
assumptions upon which they are based. In addition, we have not reviewed any of
the books and records of the Company, or assumed any responsibility for
conducting a physical inspection of the properties or facilities of the Company,
or for making or obtaining an independent valuation or appraisal of the assets
or liabilities of the Company, and no such independent valuation or appraisal
was provided to us. We also have assumed that the transactions described in the
Merger Agreement will be consummated without waiver or modification of any of
the material terms or conditions contained therein by any party thereto. Our
opinion is necessarily based on economic and market conditions and other
circumstances as they exist and can be evaluated by us as of the date hereof.
It should be noted that in the context of our engagement by the Company,
except for a very limited number of preliminary contacts with non-strategic
financial buyers, we were not authorized to and did not solicit third party
indications of interest in acquiring all or any part of the Company or otherwise
perform what is commonly known as a "market check."
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
We are acting as financial advisor to the Company in connection with the
proposed Transaction and will receive a fee for our services, a significant
portion of which is contingent upon the consummation of the Transaction. In
addition, we have performed various investment banking services in the past for
entities with which principals of Parent have previously been affiliated and
have received customary fees for rendering such services.
Our opinion addresses only the fairness from a financial point of view to
the holders of Shares of the consideration to be received by such holders
pursuant to the Transaction, and we do not express any views on any other terms
of the Transaction. Specifically, our opinion does not address the Company's
underlying business decision to effect the transactions contemplated by the
Merger Agreement, or the merits of the Merger relative to any other alternative
transaction or business strategy that may be available to the Company.
It is understood that this letter is for the benefit and use of the Board of
Directors of the Company in its consideration of the Transaction and except for
inclusion in its entirety in any proxy statement required to be circulated to
holders of Shares relating to the Merger or tender offer recommendation
statement on Schedule 14D-9 from the Company to holders of Shares relating to
the Transaction or in the Schedule 14D-1 relating to the Transaction, may not be
quoted, referred to or reproduced at any time or in any manner without our prior
written consent. This opinion does not constitute a recommendation to any holder
of Shares with respect to whether such holder should tender Shares pursuant to
the Tender Offer or as to how such holder should vote with respect to the
Merger, and should not be relied upon by any holder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof,
the $19.00 per Share cash consideration to be received by the holders of Shares
pursuant to the Tender Offer and the Merger is fair to such holders from a
financial point of view.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC.
V-2
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each stockholder of the Company or his broker, dealer, commercial
bank, trust company or other nominee to the Depositary at one of its addresses
set forth below:
The Depositary for the Offer is:
EquiServe
<TABLE>
<S> <C> <C> <C>
BY FIRST CLASS MAIL: BY HAND: BY OVERNIGHT, CERTIFIED FOR FACSIMILE
OR EXPRESS MAIL DELIVERY: TRANSMISSION:
State Street Bank & Securities Transfer & State Street Bank & (Eligible Institutions
Trust Company Reporting Services, Inc. Trust Company Only)
Corporate Actions c/o Boston EquiServe L.P. Corporate Actions (781) 575-4827
P.O. 9573 100 William 40 Campanelli Drive For Information:
Boston, MA 02205-9573 Street/Galleria Braintree, MA 02184 (800) 426-5523
New York, NY 10038
</TABLE>
Any questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth below. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal may be
directed to the Information Agent or the Depositary. Stockholders may also
contact their brokers, dealers, commercial banks, trust companies or other
nominees for assistance concerning the Offer.
The Information Agent for the Offer is:
abcdef
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
(800) 322-2885 (toll free)
The Dealer Manager for the Offer is:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, New York 10010
Call Toll Free: (800) 881-8320
<PAGE>
Letter of Transmittal
to Tender Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Micro Warehouse, Inc.
Pursuant to the Offer to Purchase Dated December 28, 1999
by
Bridgeport Acquisition Corporation,
a wholly-owned subsidiary of
Bridgeport Holdings Inc.,
and by
Micro Warehouse, Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS EXTENDED.
THE DEPOSITARY FOR THE OFFER IS:
EquiServe
<TABLE>
<S> <C> <C> <C>
BY FIRST CLASS MAIL: BY HAND: BY OVERNIGHT, BY FACSIMILE
CERTIFIED OR TRANSMISSION:
EXPRESS MAIL
DELIVERY:
State Street Bank & Securities Transfer & State Street (For Eligible
Trust Company Reporting Services, Inc. Bank & Institutions
Corporate Actions c/o Boston EquiServe L.P. Trust Company Only)
P.O. 9573 100 William Street/Galleria Corporate (781) 575-4827
Boston, New York, NY 10038 Actions For
MA 02205-9573 40 Campanelli Information:
Drive (800) 426-5523
Braintree, MA
02184
</TABLE>
Delivery of this instrument to an address other than as set forth above or
transmissions of instructions via facsimile transmission to a number other than
as set forth above does not constitute a valid delivery. You must sign this
Letter of Transmittal in the appropriate space therefor provided below and
complete the Substitute Form W-9 set forth below.
The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed.
This Letter of Transmittal is to be completed by stockholders either if
certificates representing Shares (as defined below) are to be forwarded herewith
or, unless an Agent's Message (as defined in Instruction 2) is utilized, if
delivery is to be made by book-entry transfer to the account maintained by the
Depositary at The Depository Trust Company ("DTC") pursuant to the procedures
set forth in Section 2 of the Offer to Purchase dated December 28, 1999 (the
"Offer to Purchase"). Stockholders whose certificates are not immediately
available, or who cannot deliver their certificates or confirmation of the
book-entry transfer of their Shares into the Depositary's account at DTC
("Book-Entry Confirmation") and all other documents required hereby to the
Depositary on or prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase), must tender their Shares according to the guaranteed
delivery procedures set forth in Section 2 of the Offer to Purchase. See
Instruction 2. Delivery of documents to DTC does not constitute delivery to the
Depositary.
<PAGE>
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY AT DTC AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution: _____________________________________________
Account Number: ____________________________________________________________
Transaction Code Number: ___________________________________________________
/ / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s): ___________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
2
<PAGE>
<TABLE>
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s)
(Please fill in, if blank exactly as name(s) Certificate(s) Tendered
appear on the Certificate(s)) (Attach additional lists if necessary)
- ---------------------------------------------------------------------------------------------------------------
Total Number of
Shares Number of
Certificate Represented by Shares
Number(s)* Certificate(s) Tendered**
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
Total Shares
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares represented
by any certificates delivered to the Depositary are being tendered hereby.
See Instruction 4.
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
Shares tendered hereby. The certificates and number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
Note: Signatures must be provided below.
Please read the accompanying instructions carefully.
/ / Check here if certificates have been lost, destroyed or stolen. See
Instruction 8.
3
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Bridgeport Acquisition Corporation, a
Delaware corporation ("Acquisition") and a wholly-owned subsidiary of Bridgeport
Holdings Inc., a Delaware corporation ("Parent") and an affiliate of BYOWC
Partners LLC, a Delaware limited liability company ("BYOWC"), and Micro
Warehouse, Inc., a Delaware company (the "Company" and, together with
Acquisition, the "Purchasers"), the above-described shares of common stock, par
value $.01 per share, including the associated preferred share purchase rights
(collectively, the "Shares"), of the Company, pursuant to the Purchasers' offer
to purchase all of the outstanding Shares at a price of $19.00 per Share, net to
the tendering stockholder in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated December 28, 1999 (the "Offer to
Purchase"), receipt of which is hereby acknowledged, and in this Letter of
Transmittal (which, including any amendments or supplements thereto collectively
constitute the "Offer"). The Purchasers reserve the right to transfer or assign,
in whole or from time to time in part, to BYOWC or to one or more affiliates of
BYOWC, the right to purchase Shares tendered pursuant to the Offer.
Subject to, and effective upon, acceptance for payment of and payment for
the Shares tendered herewith in accordance with the terms and subject to the
conditions of the Offer, the undersigned hereby sells, assigns, and transfers
to, or upon the order of, the Purchasers all right, title and interest in, to
and under all of the Shares that are being tendered hereby (and any and all
other Shares or other securities or rights issued or issuable in respect thereof
on or after December 28, 1999) and irrevocably appoints the Depositary the true
and lawful agent and attorney-in-fact of the undersigned with respect to such
Shares (and any such other Shares or securities or rights), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver certificates representing such Shares
(and any such other Shares or securities or rights), or transfer ownership of
such Shares (and any such other Shares or securities or rights) on the account
books maintained by DTC, together in either such case with all accompanying
evidences of transfer and authenticity, to or upon the order of the Purchasers
upon receipt by the Depositary, as the undersigned's agent, of the purchase
price (adjusted, if appropriate, as provided in the Offer to Purchase),
(b) present such Shares (and any such other Shares or securities or rights) for
registration and transfer on the books of the Company, and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any such other Shares or securities or rights), all in accordance
with the terms of the Offer.
The undersigned hereby irrevocably appoints Gary L. Wilson, Alfred D. Boyer
and any other designee of Acquisition, the attorneys-in-fact and proxies of the
undersigned, each with full power of substitution and resubstitution, to vote in
such manner as each such attorney-in-fact and proxy or his substitute shall, in
his sole discretion, deem proper, and otherwise act (including pursuant to
written consent) with respect to all the Shares tendered hereby which have been
accepted for payment by the Purchasers prior to the time of such vote or action
(and any and all other Shares or securities or rights issued or issuable in
respect thereof on or after December 28, 1999), which the undersigned is
entitled to vote at any meeting of stockholders (whether annual or special and
whether or not an adjourned meeting) of the Company, or by consent in lieu of
any such meeting, or otherwise. This proxy and power of attorney is coupled with
an interest in the Shares tendered hereby, is irrevocable, is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares (and any such other Shares or securities or rights) by the Purchasers in
accordance with the terms of the Offer. Such acceptance for payment shall revoke
all prior proxies granted by the undersigned at any time with respect to such
Shares (and any such other Shares or securities or rights) and no subsequent
proxies will be given (and if given will be deemed to be ineffective) with
respect thereto by the undersigned. The undersigned acknowledges that in order
for Shares to be deemed validly tendered, immediately upon the acceptance for
payment of such Shares, Acquisition or Acquisition's designee must be able to
exercise full voting and other rights of a record and beneficial holder with
respect to such Shares.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Shares tendered
hereby (and any and all other Shares or securities or rights issued or issuable
in respect thereof on or after December 28, 1999), and that, when the same are
accepted for payment by the Purchasers, the Purchasers will acquire good and
unencumbered title thereto, free and clear of all liens, restrictions, charges
and encumbrances and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any additional documents
deemed by the Depositary or the Purchasers to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby (and
any such other Shares or securities or rights).
No authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall be affected by, and all such authority shall survive, the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the successors, assigns, heirs, executors,
administrators and legal representatives of the undersigned. Except as stated in
the Offer to Purchase, this tender is irrevocable.
4
<PAGE>
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 2 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchasers upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that, under certain circumstances set forth in
the Offer to Purchase, the Purchasers may not be required to accept for payment
any of the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
representing Shares not tendered or accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates
representing Shares not tendered or accepted for payment (and accompanying
documents, as appropriate) to the registered holder(s) appearing under
"Description of Shares Tendered" at the address shown below such registered
holder(s) name(s). In the event that either or both the Special Delivery
Instructions and the Special Payment Instructions are completed, please issue
the check for the purchase price and/or return any certificates representing
Shares not tendered or accepted for payment in the name(s) of, and deliver such
check and/or return such certificates to, the person or persons so indicated.
Stockholders tendering Shares by book-entry transfer may request that any Shares
not accepted for payment be returned by crediting such stockholder's account
maintained at DTC. The undersigned recognizes that the Purchasers have no
obligation pursuant to the "Special Payment Instructions" to transfer any Shares
from the name of the registered holder(s) thereof if the Purchasers does not
accept for payment any of the Shares so tendered hereby.
5
<PAGE>
- -------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if certificates representing Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be issued in the name of someone other than the undersigned, or if Shares
tendered by book-entry transfer which are not purchased are to be returned by
credit to an account maintained at DTC other than that account designated
above.
Issue check and/or certificate(s) to:
Name: ________________________________________________________________________
(Please Print)
Address: _____________________________________________________________________
______________________________________________________________________________
(Include Zip Code)
______________________________________________________________________________
(Tax Identification or Social Security No.)
Credit unpurchased Shares tendered by book-entry transfer to the DTC
account set forth below
______________________________________________________________________________
(Account Number)
- -------------------------------------------------------------
- -------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7)
To be completed ONLY if certificates representing Shares not tendered or not
purchased and/or the check for the purchase price of Shares purchased are to
be sent to someone other than the undersigned, or to the undersigned at an
address other than that shown under "Description of Shares Tendered."
Issue check and/or certificate(s) to:
Name: ________________________________________________________________________
(Please Print)
Address: _____________________________________________________________________
______________________________________________________________________________
(Include Zip Code)
- -------------------------------------------------------------
6
<PAGE>
- --------------------------------------------------------------------------------
IMPORTANT
SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE
____________________________________________________________________________
____________________________________________________________________________
Signature(s) of Holder(s) of Shares
Dated ____________________
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, agents, officers of
corporations or others acting in a fiduciary or representative capacity,
please set forth the full title and see Instruction 5.)
Name(s) ____________________________________________________________________
____________________________________________________________________________
(Please Print)
Capacity (full title) ______________________________________________________
Address ____________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No. ( ) _______________________________________
Tax Identification or Social Security No. _________________________________
(Please Complete Substitute Form W-9 on Reverse Side)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
FOR USE BY FINANCIAL INSTITUTIONS ONLY
PLACE MEDALLION GUARANTEE IN SPACE BELOW
Authorized Signature(s) ____________________________________________________
Name _______________________________________________________________________
(Please Print)
Title ______________________________________________________________________
Name of Firm _______________________________________________________________
Address ____________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number ( ) ____________________________________
Dated: _____________________________________________________________________
- --------------------------------------------------------------------------------
7
<PAGE>
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Offer
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder(s) of the Shares (which term, for purposes of this document,
shall include any participant in DTC whose name appears on a security position
listing as the owner of Shares) tendered herewith, unless such holder has
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on this Letter of Transmittal, or
(ii) if such Shares are tendered for the account of a firm that is a member in
good standing of the Security Transfer Agent's Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program (each being hereinafter referred to as an "Eligible Institution"). In
all other cases, all signatures on this Letter of Transmittal must be guaranteed
by an Eligible Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by stockholders either if certificates
representing Shares are to be forwarded herewith to the Depositary or, unless an
Agent's Message (as defined below) is utilized, if tenders of Shares are to be
made pursuant to the procedures for delivery by book-entry transfer set forth in
Section 2 of the Offer to Purchase. Certificates representing all physically
tendered Shares, or any book-entry confirmation of Shares, as the case may be,
together with a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or, in connection
with a book-entry transfer, an Agent's Message, and any other documents required
by this Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein on or prior to the Expiration Date (as defined in
Section 1 of the Offer to Purchase). If a stockholder's certificate(s)
representing Shares are not immediately available (or the procedure for the
book-entry transfer cannot be completed on a timely basis) or time will not
permit all required documents to reach the Depositary on or prior to the
Expiration Date, such stockholder's Shares may nevertheless be tendered if the
procedures for guaranteed delivery set forth in Section 2 of the Offer to
Purchase are followed. Pursuant to such procedure, (i) such tender must be made
by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
the Purchasers, must be received by the Depositary on or prior to the Expiration
Date, and (iii) the certificates representing all tendered Shares, in proper
form for transfer, or Book-Entry Confirmation of Shares, as the case may be, in
each case together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees (or,
in connection with a book-entry transfer, an Agent's Message) and any other
documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq Stock Market trading days after the date of
execution of such Notice of Guaranteed Delivery, all as provided in Section 2 of
the Offer to Purchase. The term "Agent's Message" means a message transmitted
through electronic means by DTC to, and received by, the Depositary and forming
a part of a Book-Entry Confirmation, which states that DTC has received an
express acknowledgment from the DTC participant tendering the Shares that such
participant has received, and agrees to be bound by, this Letter of Transmittal.
The method of delivery of this Letter of Transmittal, the certificate(s)
representing Shares and all other required documents, including delivery through
DTC, is at the option and sole risk of the tendering stockholder. The delivery
will be deemed made only when actually received by the Depositary. If such
delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
insure timely delivery.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or facsimile thereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
8
<PAGE>
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER SHARES BY
BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any
certificate submitted are to be tendered, fill in the number of Shares that are
to be tendered in the box entitled "Number of Shares Tendered." In such case,
new certificate(s) representing the remainder of the Shares that were
represented by the old certificate(s) will be sent to the registered holder(s),
unless otherwise provided in the appropriate box on this Letter of Transmittal,
as soon as practicable after the Expiration Date. All Shares represented by
certificate(s) delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond exactly with the name(s) as
written on the face(s) of the certificate(s) without alteration, enlargement or
any change whatsoever. If any of the Shares tendered hereby are owned of record
by two or more joint owners, all such owners must sign this Letter of
Transmittal. If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and tendered hereby, no endorsements of certificates or separate
stock powers are required, unless payment or certificates for Shares not
tendered or accepted for payment are to be issued to a person other than the
registered holder(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificates or stock powers are signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
the Purchasers of such person's authority so to act must be submitted.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution, unless the signature is that of an Eligible Institution.
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchasers will pay or cause to be paid any stock transfer taxes with respect to
the transfer and sale of purchased Shares to them or their order pursuant to the
Offer. If, however, payment of the purchase price is to be made to, or if
certificates representing Shares not tendered or accepted for payment are to be
registered in the name of, any person other than the registered holder, or if
tendered certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder or such other person) payable on
account of the transfer to such person will be deducted from the purchase price,
unless satisfactory evidence of the payment of such taxes or exemption therefrom
is submitted.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or
certificates representing Shares not tendered or accepted for payment are to be
issued in the name of a person other than the signer of this Letter of
Transmittal or if a check is to be sent and/or such certificates are to be
returned to someone other than the signer of this Letter of Transmittal or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Stockholders tendering Shares by book-entry
transfer may request that Shares not accepted for payment be credited to such
account maintained at DTC as such stockholder may designate herein. If no such
instructions are given, such Shares not accepted for payment will be returned by
crediting the account at DTC designated above.
9
<PAGE>
8. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost, destroyed or stolen certificates have been followed. To
expedite replacement, call Shareholder Services at EquiServe at 1-800-426-5523.
9. WAIVER OF CONDITIONS. The conditions to the Offer may be waived by the
Purchasers, in whole or in part, at any time and from time to time in the
Purchasers' sole discretion (subject to the provisions of the Merger Agreement
referred to in the Offer to Purchase).
10. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN"), generally
the stockholder's social security or federal employer identification number, on
the Substitute Form W-9, which is provided below, and to certify whether the
stockholder is subject to backup withholding of United States federal income
tax. If a tendering stockholder is subject to federal backup withholding, the
stockholder must cross out item (2) of the "Certification" box of the Substitute
Form W-9. Failure to provide the information on the Substitute Form W-9 may
subject the tendering stockholder to a 31% federal backup withholding tax on the
payment of the purchase price. If the tendering stockholder has not been issued
a TIN and has applied for a number or intends to apply for a number in the near
future, the stockholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days
of its receipt of the Substitute Form W-9, the Depositary will withhold 31% on
all payments of the purchase price until a TIN is provided to the Depositary.
11. NON-UNITED STATES HOLDERS. Non-United States holders must submit a
completed IRS Form W-8 or Form W-8BEN to avoid backup withholding. IRS Form W-8
or Form W-8BEN may be obtained by contacting the Depositary at one of the
addresses on the face of this Letter of Transmittal.
12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to the Information Agent at the address set forth below.
Additional copies of the Offer to Purchase, this Letter of Transmittal, the
Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 may be obtained from the
Information Agent or the Dealer Manager at their addresses set forth below or
from your broker, dealer, commercial bank, trust company or other nominee.
Important: This Letter of Transmittal (or a facsimile thereof), together
with certificates representing Shares or confirmation of book-entry transfer and
all other required documents, or the Notice of Guaranteed Delivery, must be
received by the Depositary on or prior to the Expiration Date.
10
<PAGE>
IMPORTANT TAX INFORMATION
Under United States federal income tax law, a stockholder whose tendered
Shares are accepted for payment is required to provide the Depositary (as payer)
with such stockholder's correct social security number, individual taxpayer
identification number, or employer identification number (each a Taxpayer
Identification Number or a "TIN") on Substitute Form W-9 provided below. If such
stockholder is an individual, the TIN is such person's social security number.
The TIN of a resident alien who does not have and is not eligible to obtain a
social security number is such person's IRS individual taxpayer identification
number. If a tendering stockholder is subject to federal backup withholding, the
stockholder must cross out item (2) of the Certification box on the Substitute
Form W-9. If the Depositary is not provided with the correct TIN, the
stockholder may be subject to a $50 penalty imposed by the Internal Revenue
Service ("IRS"). In addition, payments that are made to such stockholder with
respect to Shares purchased pursuant to the Offer may be subject to federal
backup withholding.
Certain stockholders (including, among others, all corporations and certain
non-United States individuals) are not subject to federal backup withholding. In
order for a non-United States individual to qualify as an exempt recipient, that
stockholder must submit to the Depositary a properly completed IRS Form W-8 or
Form W-8BEN, signed under penalties of perjury, attesting to that individual's
exempt status. Such forms may be obtained from the Depositary. Exempt
stockholders, other than non-United States individuals, should furnish their
TIN, write "EXEMPT" on the face of the Substitute Form W-9 below, and sign, date
and return the Substitute Form W-9 to the Depositary. See the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9 for additional instructions.
If federal backup withholding applies, the Depositary is required to
withhold 31% of any payments made to the stockholder. Federal backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
Purpose of Substitute Form W-9
To prevent federal backup withholding on payments that are made to a
stockholder with respect to Shares purchased pursuant to the Offer, the
stockholder is required to notify the Depositary of such stockholder's correct
TIN by completing the Substitute Form W-9 below certifying that the TIN provided
on such form is correct (or that such stockholder is awaiting a TIN) and that
(i) such holder is exempt from federal backup withholding, (ii) such holder has
not been notified by the IRS that such holder is subject to federal backup
withholding as a result of a failure to report all interest or dividends, or
(iii) the IRS has notified such holder that such holder is no longer subject to
federal backup withholding (see Part 2 of Substitute Form W-9).
What Number to give the Depositary
The stockholder is required to give the Depositary the TIN of the record
owner of the Shares. If the Shares are in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidelines
on which number to report. If the tendering stockholder has not been issued a
TIN and has applied for a number or intends to apply for a number in the near
future, such stockholder should write "Applied For" in the space provided for in
the TIN in Part 1, and sign and date the Substitute Form W-9. If "Applied For"
is written in Part 1 and the Depositary is not provided with a TIN within
60 days, the Depositary may withhold 31% on all payments of the purchase price
until a TIN is provided to the Depositary.
11
<PAGE>
PAYER'S NAME: EQUISERVE
<TABLE>
<C> <S> <C>
- -------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN Social Security number OR
FORMW-9 IN THE BOX AT RIGHT AND CERTIFY Employer identification number
Department of the Treasury BY SIGNING AND DATING BELOW ----------------------
Internal Revenue Service (If awaiting TIN write "Applied For")
----------------------------------------------------------------------------
Payer's Request for Taxpayer Part 2--For Payees exempt from backup withholding, see the enclosed
Identification Number (TIN) Guidelines for Certification of Taxpayer Identification Number (TIN) on
and Certification Substitute Form W-9 and complete as instructed therein.
- -------------------------------------------------------------------------------------------------------------------------
CERTIFICATION--Under the penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or a Taxpayer Identification Number has
not been issued to me and either (a) I have mailed or delivered an application to receive a Taxpayer Identification
Number to the appropriate Internal Revenue Service ("IRS") or Social Security Administration office or (b) I intend
to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer
Identification Number within sixty (60) days, 31% of all reportable payments made to me thereafter may be withheld
until I provide a number); and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, (b) I have not been notified
by the IRS that I am subject to backup withholding as a result of a failure to report all interest or dividends, or
(c) the IRS has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS; You must cross out item (2) above if you have been notified by the IRS that you are
currently subject to backup withholding because you have failed to report all interest and dividends on your tax return.
If after being notified by the IRS that you were subject to backup withholding, you received another notification from
the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the
enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9).
NAME:
(please
print)
ADDRESS:
(please
print)
Signature
------------------------------------------------------------------------------------------------------------------------ Date
-------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL INFORMATION.
THE INFORMATION AGENT FOR THE OFFER IS:
abcdef
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
(800) 322-2885 (toll free)
THE DEALER MANAGER FOR THE OFFER IS:
Credit Suisse First Boston Corporation
Eleven Madison Avenue
New York, NY 10010
Call Toll Free: (800) 881-8320
<PAGE>
<TABLE>
<S> <C>
CREDIT SUISSE FIRST BOSTON CORPORATION
[LOGO]
Eleven Madison Avenue Telephone
212 325 2000
New York, NY 10010-3629
</TABLE>
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Micro Warehouse, Inc.
at
$19.00 Net Per Share
by
Bridgeport Acquisition Corporation,
a wholly-owned subsidiary of
Bridgeport Holdings Inc.,
and by
Micro Warehouse, Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS EXTENDED
December 28, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Bridgeport Acquistion Corporation, a Delaware
corporation ("Acquisition") and a wholly-owned subsidiary of Bridgeport
Holdings Inc., a Delaware corporation ("Parent") and an affiliate of BYOWC
Partners LLC, a Delaware limited liability company ("BYOWC"), and by Micro
Warehouse, Inc., a Delaware corporation (the "Company" and, together with
Acquisition, the "Purchasers"), to act as Dealer Manager in connection with the
Purchasers' offer to purchase all of the outstanding shares of common stock, par
value $.01 per share, including the associated preferred share purchase rights
(collectively, the "Shares"), of the Company, at a price of $19.00 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated December 28, 1999 (the "Offer to Purchase")
and the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer"), copies of which are
enclosed herewith. The Offer is being made in connection with the Agreement and
Plan of Merger, dated as of December 20, 1999 (the "Merger Agreement"), among
BYOWC, Parent, Acquisition and the Company.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold Shares registered in your name or in the name of your
nominee.
For your information and for forwarding to your clients, we are enclosing
the following documents:
1. The Offer to Purchase.
2. The Letter of Transmittal to be used by stockholders of the Company
in accepting the Offer, including a Certification of Taxpayer Identification
Number on Substitute Form W-9. Facsimile copies of the Letter of Transmittal
(with manual signatures) may be used to tender Shares.
<PAGE>
<TABLE>
<S> <C>
CREDIT SUISSE FIRST BOSTON CORPORATION
[LOGO]
</TABLE>
3. A letter to stockholders of the Company from Peter Godfrey, Chairman
of the Board, Chief Executive Officer and President of the Company, together
with a Solicitation/Recommendation Statement on Schedule 14D-9, dated
December 28, 1999 filed by the Company with the Securities and Exchange
Commission.
4. A printed form of letter which may be sent to your clients for whose
account you hold Shares in your name or in the name of your nominee with
space provided for obtaining such clients' instructions with regard to the
Offer.
5. The Notice of Guaranteed Delivery to be used to accept the Offer if
certificates representing Shares are not immediately available or if time
will not permit all required documents to reach the Depositary (as defined
below) prior to the Expiration Date (as defined in Section 1 of the Offer to
Purchase) or if the procedures for book-entry transfer cannot be completed
on a timely basis.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9. Stockholders who fail
to complete and sign the Substitute Form W-9 may be subject to a required
federal backup withholding tax of 31% of the gross proceeds payable to such
stockholder or other payee pursuant to the Offer. See Section 2 of the Offer
to Purchase.
7. A return envelope addressed to EquiServe L.P., c/o State Street
Bank & Trust Company, Corporate Actions, P.O. 9573, Boston, MA 02205-9573
(the "Depositary").
Your attention is directed to the following:
1. The tender price is $19.00 per Share, net to the seller in cash,
without interest, upon the terms and conditions set forth in the Offer to
Purchase.
2. The Board of Directors of the Company has unanimously determined that
the transactions contemplated by the Merger Agreement, including the Offer
and the Merger (as defined in the Offer to Purchase), are fair to, and in
the best interests of, the Company and its stockholders, has unanimously
approved the Merger Agreement, the Offer and the Merger and unanimously
recommends that the holders of Shares accept the Offer and tender their
Shares pursuant to the Offer.
3. The Offer and withdrawal rights will expire at 5:00 P.M, New York
City time, on Friday, January 28, 2000, unless the Offer is extended.
4. The Offer is being made for all of the outstanding Shares. The Offer
is conditioned upon, among other things, there being validly tendered and
not withdrawn prior to the expiration of the Offer at least that number of
Shares that constitutes, together with any Shares owned by BYOWC, 51% of the
Shares outstanding on a fully diluted basis. BYOWC currently owns
approximately 4.3% of the Shares outstanding on a fully diluted basis.
Certain stockholders of the Company who collectively own approximately 10.1%
of the Shares outstanding on a fully diluted basis have agreed to tender
their Shares in the Offer. The Offer is also conditioned upon the receipt by
Acquisition of certain debt and equity financing necessary to consummate the
Offer and the Merger and the availability to the Company of a new credit
facility following consummation of the Offer. Credit Suisse First Boston,
New York branch, and CIBC Inc. have executed a commitment letter to provide
the debt financing and the new credit facility. FS Equity Partners IV, L.P.,
a private equity investment fund managed by Freeman Spogli & Co. LLC, has
executed a commitment letter to provide the portion of the equity financing
on which the Offer is conditioned. See Section 10 of the Offer to Purchase
for a discussion of the financings, including the conditions to the
financings. The Offer is also subject to certain other conditions. See
Section 17 of the Offer to Purchase.
2
<PAGE>
<TABLE>
<S> <C>
CREDIT SUISSE FIRST BOSTON CORPORATION
[LOGO]
</TABLE>
5. Stockholders who tender Shares will not be obligated to pay brokerage
fees or commissions to the Dealer Manager, the Information Agent or the
Depositary or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the
Purchasers pursuant to the Offer.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchasers will accept for payment and pay for all Shares which
are validly tendered on or prior to the Expiration Date and not theretofore
properly withdrawn pursuant to the Offer. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates representing such Shares (or a
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, pursuant to the procedures
described in Section 2 of the Offer to Purchase), (ii) a properly completed and
duly executed Letter of Transmittal (or facsimile thereof) with any required
signature guarantees (or, in connection with a book-entry transfer, an Agent's
Message (as defined in Section 2 of the Offer to Purchase)), and (iii) all other
documents required by the Letter of Transmittal.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents prior to the expiration
of the Offer, a tender may be effected by following the guaranteed delivery
procedures specified under Section 2 of the Offer to Purchase.
The Purchasers will not pay any fees or commissions to any broker or dealer
or to any other person (other than the Depositary, the Information Agent and the
Dealer Manager) in connection with the solicitation of tenders of Shares
pursuant to the Offer. The Purchasers will, however, upon request, reimburse you
for customary mailing and handling expenses incurred by you in forwarding the
enclosed materials to your clients. The Purchasers will pay or cause to be paid
any stock transfer taxes payable on the transfer of Shares to them, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
Your prompt action is requested. We urge you to contact your clients as
promptly as possible. Please note that the Offer and withdrawal rights will
expire at 5:00 P.M., New York City time, on Friday, January 28, 2000, unless the
Offer is extended.
Any inquiries you may have with respect to the Offer should be directed to,
and additional copies of the enclosed materials may be obtained by contacting,
the undersigned at (800) 881-8320 (call toll free).
Very truly yours,
Credit Suisse First Boston Corporation
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY PERSON AS AN AGENT OF THE PURCHASERS, PARENT, BYOWC, THE DEPOSITARY, THE
DEALER MANAGER OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THE
FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE
ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM IN CONNECTION WITH
THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED
THEREIN.
3
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Micro Warehouse, Inc.
at
$19.00 Net Per Share
by
Bridgeport Acquisition Corporation,
a wholly-owned subsidiary of
Bridgeport Holdings Inc.,
and by
Micro Warehouse, Inc.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated December 28,
1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer") relating to the offer by Bridgeport Acquisition Corporation, a Delaware
corporation ("Acquisition") and a wholly-owned subsidiary of Bridgeport
Holdings Inc., a Delaware corporation ("Parent") and an affiliate of BYOWC
Partners, LLC, a Delaware limited liability company ("BYOWC"), and Micro
Warehouse, Inc., a Delaware corporation (the "Company" and, together with
Acquisition, the "Purchasers"), to purchase all of the outstanding shares of
common stock, par value $.01 per share, including the associated preferred share
purchase rights (collectively, the "Shares"), of the Company, at a price of
$19.00 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer. The Offer is being made in connection with
the Agreement and Plan of Merger, dated as of December 20, 1999 (the "Merger
Agreement"), among BYOWC, Parent, Acquisition and the Company.
We are the holder of record (directly or indirectly) of Shares for your
account. A tender of such Shares can be made only by us or our nominees as the
holder of record and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Shares held by us for your account.
We request instructions as to whether you wish to have us tender on your
behalf any or all of the Shares held by us for your account, pursuant to the
terms and subject to the conditions set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $19.00 per Share, net to you in cash, without
interest.
2. The Board of Directors of the Company has unanimously determined that the
transactions contemplated by the Merger Agreement, including the Offer and the
Merger (as defined in the Offer to Purchase), are fair to, and in the best
interests of, the Company and its stockholders, has unanimously approved the
Merger Agreement, the Offer and the Merger and unanimously recommends that the
holders of Shares accept the Offer and tender their Shares pursuant to the
Offer.
3. The Offer and withdrawal rights will expire at 5:00 P.M., New York City
time, on Friday, January 28, 2000, unless the Offer is extended.
4. The Offer is being made for all of the outstanding Shares. The Offer is
conditioned upon, among other things, there being validly tendered and not
withdrawn prior to the expiration of the Offer at least that number
<PAGE>
of Shares that constitutes, together with any Shares owned by BYOWC, 51% of the
Shares outstanding on a fully diluted basis. BYOWC currently owns approximately
4.3% of the Shares outstanding on a fully diluted basis. Certain stockholders of
the Company who collectively own approximately 10.1% of the Shares outstanding
on a fully diluted basis have agreed to tender their Shares in the Offer. The
Offer is also conditioned upon the receipt by Acquisition of certain debt and
equity financing necessary to consummate the Offer and the Merger and the
availability to the Company of a new credit facility following consummation of
the Offer. Credit Suisse First Boston, New York branch, and CIBC Inc. have each
executed a commitment letter to provide the debt financing and the new credit
facility. FS Equity Partners IV, L.P., a private equity investment fund managed
by Freeman Spogli & Co. LLC, has executed a commitment letter to provide the
portion of the equity financing on which the Offer is conditioned. See
Section 10 of the Offer to Purchase for a discussion of the financings,
including the conditions to the financings. The Offer is also subject to certain
other conditions. See Section 17 of the Offer to Purchase.
5. Stockholders who have Shares registered in their own name and who tender
Shares directly to the Depositary (as defined in the Offer to Purchase) will not
be obligated to pay brokerage fees, commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase
of Shares by the Purchasers pursuant to the Offer.
If you wish to have us tender any or all of your Shares, please complete,
sign and return the instruction form set forth below. An envelope to return your
instructions to us is enclosed. If you authorize the tender of your Shares, all
such Shares will be tendered unless otherwise specified on the instruction form
set forth below. Please forward your instructions to us as soon as possible to
allow us ample time to tender your Shares on your behalf prior to the expiration
of the Offer.
The Offer is made solely by the Offer to Purchase and the related Letter of
Transmittal and any supplements and amendments thereto. The Purchasers are not
aware of any state where the making of the Offer is prohibited by administrative
or judicial action pursuant to any valid state statute. If the Purchasers become
aware of any valid state statute prohibiting the making of the Offer or the
acceptance of Shares pursuant thereto, the Purchasers will make a good faith
effort to comply with any such state statute or seek to have such statute
declared inapplicable to the Offer. If, after such good faith effort, the
Purchasers cannot comply with any such state statute, the Offer will not be made
to (nor will tenders be accepted from or on behalf of) the holders of Shares in
such state. In any jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer, the Offer will be
deemed to be made on behalf of the Purchasers by Credit Suisse First Boston or
one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
2
<PAGE>
Instructions with Respect to the Offer to Purchase
for Cash All Outstanding Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Micro Warehouse, Inc.
The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase, dated December 28, 1999, ("Offer to Purchase") and the related
Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer") relating to the offer by
Bridgeport Acquistion Corporation, a Delaware corporation ("Acquisition") and a
wholly-owned subsidiary of Bridgeport Holdings Inc., a Delaware corporation and
an affiliate of BYOWC Partners LLC, a Delaware limited liability company, and
Micro Warehouse, Inc., a Delaware corporation (the "Company" and, together with
Acquisition, the "Purchasers"), to purchase all of the outstanding shares of
common stock, par value $.01 per share, including the associated preferred share
purchase rights (collectively, the "Shares"), of the Company, at a price of
$19.00 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer.
This will instruct you to tender to the Purchasers the number of Shares
indicated below (or, if no number is indicated below, all Shares) held by you
for the account of the undersigned, upon the terms and subject to the conditions
set forth in the Offer.
<TABLE>
<S> <C>
Number of Shares to be Tendered:* SIGN HERE
Shares ---------------------------------------------------
---------------------------------------------------
Dated
Signature(s)
---------------------------------------------------
---------------------------------------------------
Print Name(s)
---------------------------------------------------
---------------------------------------------------
Address(es)
---------------------------------------------------
Area Code and Telephone Number
---------------------------------------------------
Taxpayer ID or Social Security Number
</TABLE>
- ------------------------
* Unless otherwise indicated, it will be assumed that all of your Shares held
by us for your account are to be tendered.
3
<PAGE>
Notice of Guaranteed Delivery
for
Tender of Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Micro Warehouse, Inc.
to
Bridgeport Acqusition Corporation,
a wholly-owned subsidiary of
Bridgeport Holdings Inc.,
and
Micro Warehouse, Inc.
(Not to be used for Signature Guarantees)
This form, or one substantially equivalent hereto, must be used to accept
the Offer (as defined below) if certificates representing shares of common
stock, par value $.01 per share, including the associated preferred share
purchase rights (collectively, the "Shares"), of Micro Warehouse, Inc., a
Delaware corporation (the "Company"), are not immediately available (or if the
procedure for book-entry transfer cannot be completed on a timely basis), or if
time will not permit all required documents to reach the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined
below)). Such form may be delivered by hand, transmitted by facsimile
transmission or mailed to the Depositary at the addresses and facsimile number
set forth below. See Section 2 of the Offer to Purchase.
THE DEPOSITARY FOR THE OFFER IS:
EquiServe
<TABLE>
<S> <C> <C> <C>
BY FIRST CLASS MAIL: BY HAND: BY OVERNIGHT, CERTIFIED BY FACSIMILE
OR EXPRESS MAIL TRANSMISSION:
DELIVERY:
State Street Bank & Securities Transfer & State Street Bank & (For Eligible
Trust Company Reporting Services, Inc. Trust Company Institutions Only)
Corporate Actions c/o Boston EquiServe Corporate Actions (781) 575-4827
P.O. 9573 L.P. 40 Campanelli Drive For Information:
Boston, MA 02205-9573 100 William Braintree, MA 02184 (800) 426-5523
Street/Galleria
New York, NY 10038
</TABLE>
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via facsimile transmission to a
number other than as set forth above does not constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message (as defined in Section 2 of the Offer to Purchase) and
certificates representing the Shares to the Depositary within the time period
specified herein. Failure to do so could result in a financial loss to the
Eligible Institution.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Bridgeport Acquisition Corporation, a
Delaware corporation ("Acquisition") and a wholly-owned subsidiary of Bridgeport
Holdings Inc., a Delaware corporation ("Parent") and an affiliate of BYOWC
Partners LLC, a Delaware limited liability company, and Micro Warehouse, Inc., a
Delaware corporation (the "Company" and, together with Acquisition, the
"Purchasers"), upon the terms and subject to the conditions set forth in the
Offer to Purchase dated December 28, 1999 (the "Offer to Purchase") and the
related Letter of Transmittal (which, including any amendments or supplements
thereto, collectively constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Shares specified below pursuant to the guaranteed
delivery procedures set forth in Section 2 of the Offer to Purchase.
Number of Shares
- --------------------------------------------------------------------------------
Certificate No(s). (if available)
- --------------------------------------------------------------------------------
Name(s) of Record Holder(s)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Type or Print)
Address(es) and (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/ / Check box if Shares will be tendered by book-entry transfer.
Name of Tendering Institution:
- --------------------------------------------------------------------------------
Area Code and Tel. No(s).
- --------------------------------------------------------------------------------
Account Number
- --------------------------------------------------------------------------------
Signature(s)
- --------------------------------------------------------------------------------
Dated
- --------------------------------------------------------------------------------
2
<PAGE>
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, a member in good standing of the Security Transfer Agent's
Medallion Program, the New York Stock Exchange Medallion Signature Program or
the Stock Exchange Medallion Program (each, an "Eligible Institution"),
(a) represents that the above named person(s) own(s) the Shares tendered hereby
within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), (b) represents that such tender of
Shares complies with Rule 14e-4 under the Exchange Act, and (c) guarantees
delivery to the Depositary, at one of its addresses set forth above, of
certificates representing the Shares tendered hereby in proper form for
transfer, or confirmation of book-entry transfer of such Shares into the
Depositary's accounts at The Depository Trust Company, in each case with
delivery of a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) with any required signature guarantees, or an Agent's Message
in the case of a book-entry transfer, and any other required documents, within
three Nasdaq Stock Market trading days after the date hereof.
<TABLE>
<S> <C>
- ----------------------------------------------- -----------------------------------------------
(Name of Firm) (Authorized Signature)
- ----------------------------------------------- -----------------------------------------------
(Address) (Name) (Please Type or Print)
----------------------------------------------- -----------------------------------------------
(Zip code) (Title)
- ----------------------------------------------- -----------------------------------------------
(Area Code and Tel. No.) Date
</TABLE>
Note: Do not send certificates for Shares with this Notice of Guaranteed
Delivery. Certificates representing Shares should be sent with your Letter of
Transmittal.
3
<PAGE>
NORWALK, CT.--(BUSINESS WIRE)--December 21, 1999--Micro Warehouse, Inc. (NASDAQ:
MWHS, NEWS, MSGS), a leading direct marketer of computer products with annual
revenues of $2.2 billion, today announced it has agreed to be acquired by a
group of investors led by Gary L. Wilson, Chairman and investor in Northwest
Airlines; former IBM CFO Jerome B. York; and investment firm Freeman Spogli &
Co. Inc.
Under the definitive merger agreement unanimously approved by the Micro
Warehouse Board of Directors, shareholders will receive $19 in cash for each
Micro Warehouse share, representing a 44% premium to the Company's average stock
price over the past 30 days. The transaction is valued at approximately $725
million.
A cash tender offer will be commenced within five business days for all Micro
Warehouse shares, and the acquisition is expected to be completed by the end of
January. Credit Suisse First Boston and CIBC World Markets have committed to
fund $320 million in senior debt financing at the closing of the transaction.
In addition to Wilson, York and Freeman Spogli, the investors include Alfred D.
Boyer, Alfred Checchi and Michael Ovitz. Upon completion of the tender offer,
York will succeed Micro Warehouse co-founder Peter Godfrey as Chairman and Chief
Executive Officer. Upon completion of the merger, a new seven-member Board of
Directors will be established for Micro Warehouse: York, Wilson, Boyer, Checchi
and three representatives of Freeman Spogli.
"This transaction is an outstanding opportunity for Micro Warehouse," said Peter
Godfrey. "The Company will benefit from the tremendous management resources that
Gary Wilson, Jerry York and these other distinguished investors bring to Micro
Warehouse."
"Micro Warehouse is a leader in direct marketing of computer products, a
distribution business facing many challenges in a changing industry," said Gary
Wilson. "Peter Godfrey has done an outstanding job of building Micro Warehouse
since he co-founded it in 1987, and we hope to build on the strong platform he
created to take the Company to the next level. I am very pleased that my partner
Jerry York has agreed to become Chairman and CEO, and I expect to work closely
with him while continuing my active involvement with Northwest Airlines."
"I am looking forward to the opportunity to lead Micro Warehouse at this
critical juncture in its development," said Jerome York. "Although the Company
faces significant challenges, I am very impressed with Micro Warehouse's strong
operating management, talented work force and good customer relationships. I
look forward to working closely with all of these constituencies for the benefit
of our employees, customers, suppliers and investors."
"We are pleased to be partnering with such an accomplished group of investors,"
said Bradford M. Freeman, a founding partner of Freeman Spogli. "The Company has
a well-established brand and we believe the experience and leadership provided
by the investor group will help Micro Warehouse reach its full potential."
The acquisition is subject to completion of the tender offer and customary
closing conditions, and includes a termination fee payable to the investor group
in certain circumstances. Alfred D. Boyer of Boyer Capital Management initiated
the transaction and represented the investor group. Micro Warehouse was advised
by Wasserstein Perella & Co., Inc.
<PAGE>
For the senior secured credit facilities, Credit Suisse First Boston is acting
as lead arranger, book manager and administrative agent, and CIBC World Markets
is acting as syndication agent. Credit Suisse First Boston will also be
dealer-manager for the tender offer.
Micro Warehouse, Inc. is a specialty catalog and online retailer and direct
marketer of brand name personal computers, computer software, accessories,
peripheral and networking products to commercial and consumer customers. The
Company markets its products through frequent mailings of its distinctive,
colorful catalogs and dedicated telemarketing account managers who focus on
corporate, education and government accounts.
Freeman Spogli & Co. Inc. is a Los Angeles-based private investment firm that
invests together with management in companies positioned for growth. The firm,
founded in 1983, invests primarily in consumer-related companies, operating in
the retailing, direct marketing and service businesses. Since its inception, the
firm has invested over $1.6 billion in 30 companies with aggregate enterprise
values of more than $10 billion.
Information Concerning Forward-Looking Statements
With the exception of historical information this release contains
"forward-looking statements" based on management's expectations. Factors that
could cause future results to differ from these expectations include, but are
not limited to, continued growth in the market for computer products; increased
competition from other catalog, retail store, online and other resellers and
manufacturers of computer products; reductions in manufacturers' incentive
programs; other competitive, pricing and supply issues; results of our foreign
operations; successful and timely integration of new systems; quarterly
fluctuations and seasonality of our business; and our ability to recruit, train
and retain sales account representatives and other key personnel. We discuss
these and other risks and contingencies in more detail in Management's
Discussion and Analysis of Financial Condition and Results of Operations in our
1998 Annual Report to Stockholders and our Form 10-Q for the quarter ended
September 30, 1999. We warn you not to place undue reliance on the
forward-looking statements contained in this release because they speak only as
of the date of this release and we have no obligation to update or revise them
in the future.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Shares (as defined below). The Offer (as defined below) is made
solely by the Offer to Purchase dated December 28, 1999, and the related
Letter of Transmittal and any amendments or supplements thereto, and is being
made to all holders of Shares. The Offer, however, is not being made to, nor
will tenders be accepted from or on behalf of, holders of Shares in any
jurisdiction in which the making of the Offer or the acceptance thereof would
not be in compliance with the laws of such jurisdiction. The Purchasers (as
defined below) may in their discretion, however, take such actions as they
may deem necessary to make the Offer in any jurisdiction and extend the Offer
to holders of Shares in such jurisdiction. In jurisdictions whose laws
require that the Offer be made by a licensed broker or dealer, the Offer
shall be deemed to be made on the Purchasers' behalf by Credit Suisse First
Boston Corporation ("Credit Suisse First Boston" or the "Dealer Manager") or
by one or more registered brokers or dealers licensed under the laws of such
jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Share Purchase Rights)
of
Micro Warehouse, Inc.
at
$19.00 Net Per Share
by
Bridgeport Acquisition Corporation,
a wholly owned subsidiary of Bridgeport Holdings Inc.,
and by
Micro Warehouse, Inc.
Bridgeport Acquisition Corporation, a Delaware corporation ("Acquisition
Company"), and Micro Warehouse, Inc., a Delaware corporation (the "Company"
and, together with Acquisition Company, the "Purchasers"), are severally
offering to purchase all outstanding shares of common stock, par value $0.01
per share, of the Company (the "Common Stock"), together with the associated
preferred share purchase rights issued pursuant to the Rights Agreement dated
as of June 17, 1996, between the Company and State Street Bank and Trust
Company NA, as Rights Agent (the "Rights" and, together with the Common
Stock, the "Shares"), at $19.00 per Share, net to the selling stockholder in
cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in the Offer to Purchase dated December
28, 1999 (the "Offer to Purchase") and in the related Letter of Transmittal
(the "Letter of Transmittal") (the Offer to Purchase and the Letter of
Transmittal, as amended or supplemented from time to time, together
constitute the "Offer"). Acquisition Company's offer is for up to
approximately 71% ofthe Shares currently outstanding (including the Shares
owned by BYOWC (as defined below)). If more than such number of Shares are
tendered in the Offer,
<PAGE>
the Company's offer is for those additional Shares. Acquisition Company is a
wholly owned subsidiary of Bridgeport Holdings Inc., a Delaware corporation
("Parent"). Parent is an entity formed by BYOWC Partners LLC, a Delaware
limited liability company ("BYOWC"), and BYOWC is jointly and severally
responsible for each of Acquisition Company's and Parent's obligations in the
Offer. Stockholders of record who tender directly to the Depositary (as
defined below) will not be obligated to pay brokerage fees or commissions or,
subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes,
if any, on the purchase of Shares by the Purchasers pursuant to the Offer.
Stockholders who hold their Shares through a broker or bank should consult
such institution as to whether it charges any service fees. Acquisition
Company will pay all charges and expenses of the Dealer Manager, EquiServe
L.P., which is acting as depositary (the "Depositary"), and MacKenzie
Partners, Inc., which is acting as the information agent (the "Information
Agent"), incurred in connection with the Offer.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY
TIME, ON FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the Expiration Date (as defined below) at
least that number of Shares that constitutes 51% of the Shares outstanding on
a fully diluted basis (including the Shares owned by BYOWC) (the "Minimum
Condition"). BYOWC currently owns approximately 4% of the Shares outstanding
on a fully diluted basis. Certain stockholders of the Company who
collectively own approximately 10% of the Shares outstanding on a fully
diluted basis have each entered into a stockholder's agreement with Parent
and Acquisition Company pursuant to which they have agreed to tender all of
their Shares in the Offer and not withdraw any Shares so tendered. The Offer
is also conditioned upon the receipt by Acquisition Company of certain debt
and equity financing necessary to consummate the Offer and the Merger (as
defined below) and the availability to the Company of a new credit facility
following consummation of the Offer. Credit Suisse First Boston, New York
branch, and CIBC Inc. have executed a commitment letter to provide the debt
financing and the new credit facility. FS Equity Partners IV, L.P., a private
equity investment fund managed by Freeman Spogli & Co. LLC, has executed a
commitment letter to provide the portion of the equity financing on which the
Offer is conditioned. The Offer is also subject to certain other conditions.
The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of December 20, 1999 (the "Merger Agreement"), among BYOWC, Parent,
Acquisition Company and the Company. The Merger Agreement provides, among
other things, that following the completion of the Offer and the satisfaction
or waiver, if permissible, of all conditions set forth in the Merger
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the
<PAGE>
"DGCL"), the Company will be merged with and into Acquisition Company (the
"Merger"), with Acquisition Company surviving the Merger as a wholly owned
subsidiary of Parent. In the Merger, each outstanding Share (other than
Dissenting Shares (as defined in the Merger Agreement), if any, and Shares
owned by the Company or any of its subsidiaries, or by BYOWC, Parent,
Acquisition Company or any direct or indirect wholly owned subsidiary of
BYOWC) will be converted into the right to receive the Offer Price or any
higher price per Share paid in the Offer, without interest thereon. The
Merger Agreement is more fully described in Section 15 of the Offer to
Purchase.
The Board of Directors of the Company has unanimously determined that the
Offer, the Merger and the transactions contemplated by the Merger Agreement
are fair to and in the best interests of the Company and its stockholders,
has unanimously approved the Merger Agreement, the Offer and the Merger and
unanimously recommends that the stockholders of the Company accept the Offer
and tender their Shares pursuant to the Offer.
For purposes of the Offer, the applicable Purchaser shall be deemed to have
accepted for payment, and thereby purchased, Shares validly tendered and not
properly withdrawn when, as and if the applicable Purchaser gives oral or
written notice to the Depositary, as agent for the tendering stockholders, of
its acceptance for payment of such Shares. Payment for Shares so accepted will
be made by deposit of the purchase price therefor with the Depositary, which
will act as agent for tendering stockholders for the purpose of receiving
payment from the Purchasers and transmitting payment to validly tendering
stockholders. In all cases, payment for Shares accepted for payment pursuant to
the Offer will be made only after timely receipt by the Depositary of (i)
certificates representing such Shares (or timely confirmation of a book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company ("DTC")), (ii) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees or an
Agent's Message (as defined in the Offer to Purchase) in connection with a
book-entry transfer and (iii) any other documents required by the Letter of
Transmittal.
The term "Expiration Date" means 5:00 P.M., New York City time, on Friday,
January 28, 2000, unless and until Acquisition Company (subject to the terms
and conditions of the Merger Agreement) extends the period of time for which
the Offer is open, in which event the term "Expiration Date" shall mean the
latest time and date at which the Offer, as so extended by Acquisition
Company, shall expire. Acquisition Company expressly reserves the right, in
its sole discretion, to extend the Offer at any time and from time to time
(i) if any condition to the consummation of the Offer other than the Minimum
Condition has not been satisfied or waived, in which case such extension may
continue until such conditions are satisfied or waived, (ii) if all
conditions to the consummation of the Offer have been satisfied or waived
other than the Minimum Condition, and the number of Shares tendered is
greater than 40% of the Shares then outstanding (including the Shares owned
by BYOWC), in which case such extension may continue for an aggregate period
not to exceed 15 business days, (iii) for any period
<PAGE>
required by any rule, regulation, interpretation or position of the Securities
and Exchange Commission or its staff applicable to the Offer or (iv) if all
conditions to the consummation of the Offer have been satisfied or waived but
the number of Shares tendered is less than 90% of the Shares then outstanding
(including the Shares owned by BYOWC and after giving effect to the reduction in
the number of Shares outstanding as a result of the Company's purchase of Shares
in the Offer), in which case such extension may continue for an aggregate period
not to exceed 20 business days and only if Acquisition Company and,
if applicable, the Company first accept for payment all Shares validly tendered
prior to such extension. Acquisition Company shall cause any such extension by
giving oral or written notice of such extension to the Depositary, which will be
followed by public announcement thereof no later than 9:00 a.m., New York City
time, on the next business day after the previously scheduled Expiration Date.
During any such extension, all Shares previously tendered and not properly
withdrawn will remain subject to the Offer, subject to the right, if any, of a
tendering stockholder to withdraw such stockholder's Shares.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions set forth in the Merger Agreement, including, if required,
the adoption of the Merger Agreement by the requisite vote of the
stockholders of the Company. The stockholder vote necessary to adopt the
Merger Agreement is the affirmative vote of the holders of a majority of the
Shares outstanding. If the Minimum Condition is satisfied and Acquisition
Company and, if applicable, the Company purchase Shares pursuant to the
Offer, Acquisition Company and Parent will be able to effect the Merger
without the affirmative vote of any other stockholder. If Acquisition Company
acquires at least 90% of the Shares then outstanding (including the Shares
owned by BYOWC and after giving effect to the reduction in the number of
Shares outstanding as a result of the Company's purchase of Shares in the
Offer) pursuant to the Offer or otherwise, the parties to the Merger
Agreement shall 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 meeting of stockholders of the Company in accordance with the short
form merger provisions of the DGCL.
Under no circumstances will interest be paid on the purchase price to be
paid for the Shares pursuant to the Offer, regardless of any extension of the
Offer or any delay in making such payment. Similarly, no interest will be
paid on the consideration to be paid in the Merger to stockholders who do not
tender their Shares pursuant to the Offer, regardless of any delay in
effecting the Merger or making such payment.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date, and, unless theretofore accepted for payment pursuant to
the Offer, may also be withdrawn at any time on or after February 27, 2000,
or at such later time as may apply if the Offer is extended. If all
conditions to the Offer have been satisfied or waived and Acquisition Company
extends the Expiration Date because less than 90% of the Shares then
outstanding (including the Shares owned by BYOWC and after giving effect to
the reduction in the number of Shares
<PAGE>
outstanding as a result of the Company's purchase of Shares in the Offer) have
been tendered, stockholders who have properly tendered, or will properly
tender, Shares will no longer have any withdrawal rights and any Shares so
tendered will be accepted for payment and paid for by the Purchasers. If, for
any reason whatsoever, acceptance for payment of any Shares tendered pursuant
to the Offer is delayed, or the Purchasers are unable to accept for payment
or pay for Shares tendered pursuant to the Offer, then, without prejudice to
the Purchasers' rights, the Depositary may, nevertheless, on behalf of the
Purchasers, retain tendered Shares and such Shares may not be withdrawn
except to the extent that the tendering stockholder is entitled to and duly
exercises withdrawal rights pursuant to Section 3 of the Offer to Purchase.
For a withdrawal of Shares tendered to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary
at one of its addresses set forth in the Offer to Purchase. Any notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name(s) in which the
certificate(s) representing such Shares are registered, if different from
that of the person who tendered such Shares. If certificates for Shares to be
withdrawn have been delivered or otherwise identified to the Depositary, the
name of the registered holder and the serial numbers shown on the particular
certificate evidencing the Shares to be withdrawn must also be furnished to
the Depositary prior to the physical release of the Shares to be withdrawn.
The signature(s) on the notice of withdrawal must be guaranteed by an
Eligible Institution (as defined in the Offer to Purchase) (except in the
case of Shares tendered by an Eligible Institution). If Shares have been
tendered pursuant to the procedures for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at DTC to be
credited with such withdrawn Shares and must otherwise comply with DTC's
procedures. All questions as to the form and validity (including time of
receipt) of notices of withdrawal will be determined by the Purchasers, in
their sole discretion, and their determination will be final and binding on
all parties.
The information required to be disclosed by Rule 13e-4(d)(1) and
Rule14d-6(e)(1)(vii) of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended, is contained in the Offer to
Purchase and is incorporated herein by reference.
In connection with the Offer, the Company has provided Acquisition Company
with the names and addresses of all record holders of Shares and security
position listings of Shares held in stock depositories. The Offer to
Purchase, the related Letter of Transmittal and other related materials will
be mailed to registered holders of Shares and will be furnished to brokers,
dealers, commercial banks, trust companies and similar persons whose names,
or the names of whose nominees, appear on the Company's stockholder list or,
if applicable, who are listed as participants in a clearing agency's security
position listing for subsequent transmittal to beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain
important information that should be read carefully before any decision is
made with respect
<PAGE>
to the Offer.
Any questions or requests for assistance or for additional copies of the
Offer to Purchase, the related Letter of Transmittal and other related tender
offer materials may be directed to the Information Agent or the Dealer
Manager at their respective addresses and telephone numbers set forth below,
and copies will be furnished promptly at Acquisition Company's expense. None
of BYOWC, Parent, Acquisition Company or the Company will pay any fees or
commissions to any broker or dealer or any other person (other than the
Dealer Manager, the Depositary and the Information Agent) in connection with
the solicitation of tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[Logo of Mackenzie Partners]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
Call Toll Free (800) 322-2885
The Dealer Manager for the Offer is:
[Logo of Credit Suisse First Boston]
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 881-8320
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
FOR THIS TYPE OF ACCOUNT: GIVE THE NAME AND SOCIAL
SECURITY NUMBER OF:
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GIVE THE NAME AND
FOR THIS TYPE OF ACCOUNT: EMPLOYER
IDENTIFICATION
NUMBER OF:
- -------------------------------------------------------------------------------
1. Individual The individual
<C> <S> <C> <C>
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
4. a. The usual revocable The grantor-trustee(1)
savings trust (grantor is
also trustee)
b. So-called trust account The actual owner(1)
that is not a legal or valid
trust under state law
5. Sole proprietorship The owner(3)
6. Sole proprietorship The owner(3)
7. A valid trust, estate, or The legal entity(4)
pension trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable, educational
organization or other tax-
exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the Department The public entity
of Agriculture in the name of
a public entity (such as a
state or local government,
school district, or prison)
that receives agriculture
program payments
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<C> <S> <C> <C>
- -------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish. If
only one person on a joint account has a social security number, that
person's number must be furnished.
(2) Circle the minor's name and furnish the minor's social security number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use either your social security number or
your employer identification number (if you have one).
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the tax identification number of the personal representative
or trustee unless the legal entity itself is not designated in the account
title.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number, or Form
SS-4, Application for an Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply for
a number. United States resident aliens who cannot obtain a social security
number must apply for an ITIN (Individual Taxpayer Identification Number) on
Form W-7.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Even if the payee does not provide a TIN in the manner required, you are NOT
REQUIRED to backup withhold on any payments you make if the payee is:
1. An organization exempt from tax under section 501(a), any IRA, or a
custodial account under section 403(b)(7) if the account satisfies the
requirements of section 401(f)(2).
2. The United States or any of its agencies or instrumentalities.
3. A state, the District of Columbia, a possession of the United States, or any
of their political subdivisions or instrumentalities.
4. A foreign government or any of its political subdivisions, agencies, or
instrumentalities.
5. An international organization or any of its agencies or instrumentalities.
Other payees that MAY BE EXEMPT from backup withholding include:
6. A corporation.
7. A foreign central bank of issue.
8. A dealer in securities or commodities required to register in the United
States, the District of Columbia, or a possession of the United States.
9. A futures commission merchant registered with the Commodity Futures Trading
Commission.
10. A real estate investment trust.
11. An entity registered at all times during the tax year under the Investment
Company Act of 1940.
12. A common trust fund operated by a bank under section 584(a).
13. A financial institution.
14. A middleman known in the investment community as a nominee or who is listed
in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List.
15. A trust exempt from tax under section 664 or described in section 4947.
INTEREST AND DIVIDEND PAYMENTS. All listed payees are exempt except the payee in
item 9.
BROKER TRANSACTIONS. All payees listed in items 1 through 13 are exempt. A
person registered under the Investment Advisors Act of 1940 who regularly acts
as a broker is also exempt.
PAYMENTS EXEMPT FROM BACKUP WITHHOLDING
Payments that are not subject to information reporting also are not subject
to backup withholding.
DIVIDENDS AND PATRONAGE DIVIDENDS that generally are exempt from backup
withholding include:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident alien partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) distributions made by an ESOP.
INTEREST PAYMENTS that generally are exempt from backup withholding include:
- Payments of interest on obligations issued by individuals. However, if you
pay $600 or more of interest IN THE COURSE OF YOUR TRADE OR BUSINESS to a
payee, you must report the payment. Backup withholding applies to the
reportable payment if the payee has not provided a TIN or has provided an
incorrect TIN.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding.
FILE THE FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE
"EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS
ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a requester, you
are subject to a penalty of $50 for each such failure unless your failure is
due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
(4) MISUSE OF TAXPAYER IDENTIFICATION NUMBER.--If the requester discloses or
uses taxpayer identification numbers in violation of Federal law, the
requester may be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit 99(a)(9)
Tuesday, December 28, 1999 08:04 AM
NORWALK, CT--(BUSINESS WIRE)--December 28, 1999--Micro Warehouse, Inc.
(NASDAQ:MWHS) and Bridgeport Acquisition Corporation, an affiliate of an
investor group led by Gary Wilson, Jerome York and Freeman Spogli and Co., today
commenced their previously announced cash tender offer to acquire all of the
outstanding common shares of Micro Warehouse at a price of $19 per share, net to
the seller in cash. The tender offer is scheduled to expire at 5:00 p.m., New
York City time, on Friday, January 28, 2000, unless the offer is extended.
The investor group currently owns approximately 4.3% of Micro Warehouse shares
outstanding on a fully diluted basis, and certain Micro Warehouse stockholders
who collectively own approximately 10.1% of Micro Warehouse shares outstanding
on a fully diluted basis have agreed to tender their shares in the offer.
The offer is conditioned upon 51% (including shares owned by the investor group)
of the outstanding common shares of Micro Warehouse being validly tendered and
not withdrawn prior to the expiration of the offer, receipt of debt financing
under a commitment letter from Credit Suisse First Boston and CIBC Inc., receipt
of equity financing under a commitment letter from Freeman Spogli and Co., and
certain customary closing conditions.
Credit Suisse First Boston is the Dealer Manager for the offer. The complete
terms and conditions of the offer are set forth in the Offer to Purchase being
filed today with the Securities and Exchange Commission, copies of which are
available from MacKenzie Partners, the information agent for the offer.
Micro Warehouse, Inc. is a specialty catalog and online retailer
and direct marketer of brand name personal computers, computer
software, accessories, peripheral and networking products to
commercial and consumer customers.
CONTACT: George Sard/Heather Reeves
Sard Verbinnen & Co
212/687-8080
<PAGE>
Exhibit 99.(c)(1)
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
November 22, 1999
BYOWC Partners LLC
9965 Wilshire Boulevard
Beverly Hills, California 90212
Ladies and Gentlemen:
We are prepared to furnish to you information which is confidential,
proprietary or otherwise not generally available to the public in connection
with the negotiation of a transaction document in the negotiation of a possible
transaction (a "Transaction"). In consideration thereof and as a condition
thereto, we each agree (as to ourselves and our respective affiliates) as
follows:
1. NONDISCLOSURE OF INFORMATION. Subject to Section 2 hereof, each
of us will (a) keep the Information furnished to us by the other party and its
Representatives confidential and (b) not use any such Information other than in
connection with the Transaction. Each of us may, however, disclose any such
Information to our respective Representatives, but only if such Representatives
reasonably need to know such Information in connection with the Transaction.
Each of us will (i) inform our respective Representatives receiving any such
Information of the confidential nature thereof and of this letter agreement,
(ii) direct our respective Representatives to treat any such Information
confidentially and not to use it other than in connection with the Transaction,
and (iii) be responsible for any of our respective Representatives' improper use
of any such Information (including without limitation by such Representatives
who, subsequent to the first date of disclosure of Information hereunder, become
our former Representatives). Subject to Section 2 hereof, without the prior
consent of the other party, each of us will not, and will each direct our
respective Representatives not to, disclose to any third person (1) that any
such Information has been made available to us, (2) that discussions relating to
a possible Transaction are taking place, or (3) any other facts with respect to
any such discussions.
2. NOTICE PRECEDING COMPELLED DISCLOSURE. If we or any of our
respective Representatives are requested to disclose any of the Information
furnished to us by the other party and its Representatives, we will promptly
notify the party furnishing such Information to permit it to seek a protective
order or take other appropriate action. Each of us will also cooperate in such
party's efforts to obtain a protective order or other reasonable assurance that
confidential treatment will be accorded such Information. If, in the absence of
a protective order, either of us or our respective Representatives
<PAGE>
BYOWC Partners LLC
November 22, 1999
Page 2
are, in the opinion of our respective counsel, compelled as a matter of law to
disclose any such Information to a third party, we may disclose to the third
party compelling disclosure only the part of such Information as the disclosing
party determines in good faith is required by law to be disclosed (in which
case, prior to such disclosure, we will use reasonable efforts to advise and
consult with the party furnishing such Information and its counsel as to such
disclosure and the nature and wording of such disclosure) and we will each use
our respective reasonable efforts, at the providing party's request and expense,
to obtain confidential treatment therefor.
3. TREATMENT OF INFORMATION. Each of us will treat and maintain the
Information furnished to us by the other party and its Representatives under
this letter agreement in substantially the same manner as we treat and maintain
confidential information in the ordinary course of our respective business. As
soon as possible upon the written request of such other party or upon the
termination of negotiations relating to the Transaction by either of us, we and
our respective Representatives will return to the other party all tangible
Information which has been provided to us by the other party and its
Representatives and will destroy (or, at our option, return to the other party)
all Information that has been prepared by the receiving party and its
Representatives. Such destruction (or return) will be confirmed in writing to
such other party. Any such Information that is not so destroyed (or returned)
will remain subject to this letter agreement. You hereby acknowledge that you
are aware and that your Representatives have been advised by us that applicable
securities laws may prohibit any person who has material, non-public information
from purchasing or selling our securities or from communicating the information
to any other person or entity.
4. PUBLIC INFORMATION. Each of us agrees that this letter agreement
will not apply to such portions of the Information furnished to us by the other
party or its Representatives which (a) are or become generally available to the
public through no action of the party to which such Information was furnished
and their Representatives or (b) are or become available to the party to which
it was furnished hereunder on a nonconfidential basis from a source, other than
from the other party or its Representatives, which the receiving party believes,
after reasonable inquiry, was not prohibited from so disclosing such portions by
a contractual, legal or fiduciary obligation to the providing party.
5. CERTAIN ACTIONS. (A) COORDINATION OF CONTACTS. During the course
of negotiations relating to the Transaction prior to the execution of a
definitive agreement with respect to the Transaction (a "Definitive Agreement"),
we each agree that we will not, and will instruct our respective Representatives
not to initiate contact with any director, officer, employee or person known to
us to be a lender, securityholder, or member of the other party in connection
with the Transaction, except as authorized by an Authorized Representative of
the other party. The Company's Authorized Representatives are Frederick H.
Fruitman and Bruce L. Lev. Your Authorized Representative is Alfred D. Boyer. If
negotiations relating to the Transaction is terminated by either of us, we and
our respective Representatives will permanently cease all such contacts, whether
or not previously
<PAGE>
BYOWC Partners LLC
November 22, 1999
Page 3
authorized, other than contacts with the Authorized Representatives unless such
Authorized Representatives authorize further contacts.
(b) NO SOLICITATION. You agree that for a period of two years from
the date of this letter agreement, except within the terms of our specific prior
written consent, neither you, nor any of your Representatives on your behalf,
will directly or indirectly solicit for employment or hire any director, officer
or employee of the Company or any subsidiary whose salary and bonus exceeded
$100,000 in the year prior to the earlier of the date of such solicitation or
the date of hire, except that you will not be precluded from hiring any such
employee who (i) responds to a public advertisement placed by you or (ii) has
terminated employment with the Company prior to commencement of solicitation of
such employee.
(c) NO DISPARAGEMENT. If, prior to entering into a Definitive
Agreement, our Board of Directors (the "Board") publicly discloses that it is
considering or that it has approved any transaction with a third party involving
a merger, consolidation, material joint venture, sale of substantial assets or
stock or other form of business combination or acquisition transaction (an
"Alternative Transaction"), you agree that, from the time you first learn that
the Board is considering an Alternative Transaction until the end of one year
from the date of this Agreement, (I) neither you nor your Representatives will
(a) publicly disparage or privately disparage the Company in a manner meant to
harm the Company or its reputation as opposed to the expression of a view in a
personal conversation that is not meant to interfere with an Alternative
Transaction by disparaging the Company, or (b) appear before or otherwise
communicate with any governmental authority, including without limitation, any
anti-competition and or regulatory authority, that has direct or indirect
authority over the Company, the third party or their respective affiliates (a
"Regulatory Authority") to oppose, or influence the Regulatory Authority to
oppose, the Alternative Transaction and (II) the Company will not publicly
disparage or privately disparage you or your members in a manner meant to harm
you or your members or their reputation as opposed to the expression of a view
in a personal conversation. The foregoing covenant will not, however, (i)
preclude or limit you from exercising any right you or the Company may have
under any existing contract or interfere with the conduct of the existing
business with the Company or any of our affiliates, on the one hand, and you or
any of your affiliates, on the other hand, or (ii) prohibit you from responding
to any specific written request from a Regulatory Authority (so long as it did
not solicit or encourage that request, it being understood that disclosure to
the Regulatory Authority of the existence of the terms of this Agreement in
response to an oral request from a Regulatory Authority will not constitute
solicitation or encouragement of a written request).
(d) SURVIVAL. The foregoing provisions of this Paragraph 5 will
remain in effect for the periods specified herein notwithstanding that some or
all of the Information has become publicly disclosed or outdated or that any
portion of this letter agreement has become inoperative as to any portion of the
Information.
<PAGE>
BYOWC Partners LLC
November 22, 1999
Page 4
6. CERTAIN OBLIGATIONS ONLY ON DEFINITIVE AGREEMENT. No agreement
providing for any Transaction will be deemed to exist unless and until a
Definitive Agreement has been executed and delivered by each of us and each of
the other parties thereto, and we each hereby irrevocably waive any claims
(including without limitation breach of contract) in connection with any
Transaction contemplated hereby unless and until a Definitive Agreement has been
so executed and delivered and then only pursuant to the terms thereof and
applicable law. Unless and until a Definitive Agreement has been so executed and
delivered, neither of us nor any of our respective Representatives has any legal
obligation to the other or any of its affiliates of any kind with respect to any
Transaction because of this letter agreement or any other written or oral
expression with respect to any Transaction, except, in the case of this letter
agreement, for the matters specifically agreed to herein. For purposes of this
Paragraph 6, the term "Definitive Agreement" does not include a letter of intent
or any other preliminary written agreement, whether or not executed, nor does it
include any actual or purported written or verbal acceptance of any offer or
proposal. Except as otherwise expressly agreed in writing or as expressly
provided herein, each of us and our respective Representatives will be free to
conduct the process relating to any Transaction as they in their sole discretion
determine (including without limitation changing any procedures relating to a
Transaction, or negotiating with and entering into a Definitive Agreement with
any other person, without in any such case prior notice to the other of us or
any other person). Neither party will have any claims against the other party or
any of its Representatives arising out of or relating to any Transaction other
than those, if any, arising under this letter agreement in accordance with the
terms hereof or as parties to a Definitive Agreement.
7. GENERAL PROVISIONS. (a) No failure or delay in exercising any
right hereunder will operate as a waiver thereof, nor will any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right. No document or other action purporting to have been signed
on behalf of or to bind either of us will be operative for purposes of this
letter agreement unless it is in writing and is signed by an Authorized
Representative. This letter agreement will be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns. Money
damages would not be a sufficient remedy for any violation of the terms of this
letter agreement and, accordingly, each of us will be entitled to specific
performance and injunctive relief as remedies for any violation, in addition to
all other remedies available at law or equity. We consent to personal
jurisdiction in any action brought in any federal or state court within the
State of New York having subject matter jurisdiction in the matter for purposes
of any action arising out of this letter agreement. This letter agreement will
be governed by and construed in accordance with the laws of the State of New
York, without giving effect to the principles of conflict of laws thereof.
(b) Each of us is a sophisticated legal entity and was advised and
will continue to be advised by experienced counsel, and to the extent we deem
appropriate other advisors, in connection with any Transaction. We agree that as
between us (and any of our respective representatives) our rights pursuant to
the Definitive Agreement will be the sole and exclusive rights, obligations and
remedies with respect to the use of the Information by us or any of our
Representatives and any
<PAGE>
BYOWC Partners LLC
November 22, 1999
Page 5
Transaction. Without limiting the generality or effect of the foregoing, as a
material inducement to the furnishing of the Information, and in light of, among
other factors, the acknowledgments contained herein, we each hereby waive any
claim or cause of action that we otherwise might assert, including without
limitation under common law (including without litigation common law fraud,
constructive fraud, negligent misrepresentation and similar theories) or federal
or state securities laws (including without limitation Rule 10b-5 under the
Securities Exchange Act of 1934), trade regulation, environmental or other laws,
by reason of any Transaction, except for claims or causes of action brought
under and subject to the terms of a Definitive Agreement. We agree that neither
of us will have any liability or obligation to the other or its Representatives
in respect of any claim or cause of action that is or may be brought in respect
of the use of the Information by us or any of our Representatives or any
Transaction except pursuant to a Definitive Agreement.
(c) Without limiting the generality or effect of any other provision
of this letter agreement, we hereby acknowledge and agree on behalf of ourselves
and our affiliates that, regardless of the facts and circumstances, (i) none of
our respective Representatives had, has or will have any duty to the other of us
in connection with any Transaction and (ii) neither of us has any right to
recovery against any of the other's Representatives in respect of any
Transaction on any theory, whether for alleged breach of contract, negligent
misrepresentation, actual or constructive fraud, federal or state securities or
other laws or otherwise.
8. CERTAIN DEFINITIONS. As used in this letter agreement, (a) the
"Company" means, Micro Warehouse, Inc. and the affiliates controlled by it, and
"you" means BYOWC Partners LLC and the affiliates controlled by it and any group
of which it is a member (as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934 and Rule 13d-3 promulgated thereunder), (b) the
term "we," "us," and "our" includes the Company and you, (c) the terms or
phrases "affiliate," "beneficial owner," "election contest," "equity security,"
"group," "participant," "person," "proxy," "security" and "solicitation" (and
the plurals thereof) have the meanings ascribed to such terms under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder, (d) all information (written or otherwise) that is confidential,
proprietary or otherwise not generally available to the public and is furnished
by one party to the other, whether furnished by such party or by its respective
Representatives, together with all written or electronically stored
documentation prepared by the party receiving such information or its respective
Representatives to the extent derived from or containing such information (such
prepared documentation being deemed for purposes of this letter agreement to
have been "furnished") is herein referred to as the "Information", and (e) any
director, member, officer, employee, agent, lender, equity participant or other
financing source or representative, including without limitation any accountant,
attorney and financial advisor, is herein referred to as a "Representative."
<PAGE>
BYOWC Partners LLC
November 22, 1999
Page 6
Please sign and return one copy of this letter agreement to evidence
your acceptance of and agreement to the foregoing, whereupon this letter
agreement will become the binding obligation of each of the undersigned.
MICRO WAREHOUSE, INC.
By: /s/ BRUCE L. LEV
------------------------------------
Name: Bruce L. Lev
Title: Executive Vice President -
General Counsel
Accepted and agreed to as of
the date first above written:
BYOWC PARTNERS LLC
By: /s/ ALFRED D. BOYER
--------------------------------
Name: Alfred D. Boyer
Title: Managing Member
<PAGE>
Exhibit 99(C)(2)
MICRO WAREHOUSE, INC.
535 Connecticut Avenue
Norwalk, CT 06854
December 2, 1999
BYOWC Partners LLC
9965 Wilshire Blvd.
Beverly Hills, CA 90212
Attention: Alfred D. Boyer
Gentlemen:
Over the past several weeks, representatives of BYOWC Partners LLC
("BYOWC") and Micro Warehouse, Inc. (the "Company") have been discussing the
possibility of BYOWC's proposing to acquire the Company for cash, have been
discussing a range of prices per share at which such proposal might be made, and
have been negotiating the form of agreement which would govern such a proposed
transaction. The parties acknowledge that any final agreement is subject to
approval of the Company's Board of Directors, receipt by the Company of a
fairness opinion from its financial advisor and completion by BYOWC of its due
diligence investigation.
BYOWC has requested that the Company provide it with non-public
information to assist BYOWC in completing its diligence investigation and its
evaluation of this possible transaction. The Company is willing to provide this
information to BYOWC, but the Company is requiring BYOWC to agree to certain
standstill provisions, and the parties have agreed to certain other provisions,
as follows:
I. A. Promptly following the execution of this letter agreement, the
Company shall:
(1) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of BYOWC, reasonable access
during normal business hours to its properties, books, contracts,
commitments and records;
(2) furnish to BYOWC all information concerning its business,
properties and personnel as BYOWC may reasonably request or has
reasonably requested;
(3) make available during normal business hours to the
officers, employees, accountants, counsel, financing sources and other
representatives of BYOWC the appropriate individuals (including
management personnel, attorneys, accountants and other professionals)
for discussion of the Company's business, properties, prospects and 8
personnel as BYOWC may reasonably request, in each case so as to
provide BYOWC with a meaningful opportunity to complete its diligence
investigation of the Company's
<PAGE>
BYOWC Partners LLC
December 2, 1999
Page 2
non-public information and to make a determination prior to
December 17, 1999 (the "Determination Date") whether or not to proceed
with the proposed transaction.
B. If on or prior to the Determination Date BYOWC provides written
notice to the Company that it wishes but is unable to make a Qualifying Offer
(as defined below) by reason of its lack of financing for a Qualified Offer on
commercially reasonable terms, the Determination Date shall be extended to
January 7, 2000 for the purpose of enabling BYOWC to arrange for such financing.
II. As of the date of this letter agreement, except as
previously disclosed to the Company in writing, BYOWC does not own
beneficially any securities entitled to be voted generally in the
election of directors of the Company or any direct or indirect options
or other rights to acquire any such securities ("Voting Securities").
BYOWC agrees that for a period of one year from the date of this letter
agreement (the "Standstill Period"), without the written approval of
the Company, neither BYOWC nor any of its members or its or their
controlled affiliates, will publicly propose or publicly announce or
otherwise disclose an intent to propose, or enter into or agree to
enter into, singly or with any other person, directly or indirectly,
(i) any form of business combination, acquisition or similar
transaction relating to the Company, (ii) any form of restructuring,
recapitalization or similar transaction with respect to the Company; or
(iii) any demand, request or proposal to amend, waive or terminate any
provision of this paragraph II, nor except as aforesaid, during such
period will BYOWC or any of its members or its or their controlled
affiliates:
(1) acquire, or offer, propose or agree to acquire, by
purchase or otherwise, any of the Company's Voting Securities, other
than by reason of a stock dividend, stock split, rights offering or
similar action initiated by the Company; PROVIDED, HOWEVER, BYOWC may
acquire additional Voting Securities so long as the aggregate amount
beneficially owned by BYOWC does not exceed 10% of the total
outstanding capital stock of the Company;
(2) make, or in any way participate in, any solicitation of
proxies with respect to any such Voting Securities (including by the
execution of action by written consent), become a participant in any
election contest with respect to the Company, seek to influence any
person with respect to any such Voting Securities or demand a copy of
the list of the Company's stockholder or other books and records;
(3) participate in or encourage the formation of any
partnership, syndicate or other group which owns or seeks or offers to
acquire beneficial ownership of any such Voting Securities (other than
the 10% permitted in subsection (2) above), or which seeks to affect
the Company's control or has the purpose of circumventing any provision
of this letter agreement;
(4) otherwise act, alone or in concert with others (including
by providing financing for another person), to seek or to offer to
control or influence, in any manner,
<PAGE>
BYOWC Partners LLC
December 2, 1999
Page 3
the Company's management, Board of Directors, or policies
other than communications with management or the Board in BYOWC's
capacity as a stockholder without the purpose or effect of changing
control of the Company or effecting any of the actions otherwise
prohibited by this paragraph II; or
(5) make any proposal or other communication designed to
compel or which has the effect of compelling the Company to make a
public announcement thereof in respect of any matter referred to in
this letter.
Without limiting the generality or effect of the foregoing, BYOWC
agrees that, in consideration of the covenants herein contained, if the Company
publicly announces that it has entered into an agreement providing for, or is
engaged in discussions with a third party relating to, a tender offer, merger,
consolidation or other similar transaction including a third party, BYOWC may
not, except within the terms of a specific written request from the Company
prior thereto, submit an alternative or competing proposal.
III. Notwithstanding anything to the contrary in the preceding
paragraph II:
A. If on or prior to the Determination Date BYOWC offers to purchase
the Company for cash in a tender offer and merger transaction, pursuant to a
merger agreement with terms substantially similar to the terms discussed by the
parties, at a price per share that is not less than the per share price
discussed by the parties (a "Qualifying Offer"), the following provisions will
apply:
(1) The provisions contained in paragraph II above (the
"Standstill Provisions") will terminate at the close of business on
February 29, 2000; provided, however, that if the Determination Date is
extended pursuant to paragraph I.B above, the Standstill Provisions
will remain in effect for such number of additional days as is equal to
the number of days after December 17, 1999 that BYOWC makes a
Qualifying Offer.
(2) The Standstill Provisions will terminate sooner upon the
happening of any of the following events:
(a) the board of directors of the Company approves a
transaction with any other person that would result
in--
(i) such person acquiring all or substantially
all of the assets of the Company (or any
successor company), or
(ii) such person beneficially owning more than
40% of the outstanding voting securities of
the Company (or any successor company); or
<PAGE>
BYOWC Partners LLC
December 2, 1999
Page 4
(b) any person or group has commenced or publicly
announced its intention to commence a bona fide
tender offer for more than 50% of the outstanding
Voting Securities of the Company.
B. If BYOWC does not make a Qualifying Offer by reason of its
discovery:
(1) that the business, assets (including intangible assets),
financial condition or results of operations of the Company and its
subsidiaries taken as a whole are materially and adversely different
than as set forth in the Company's periodic filings with the Securities
and Exchange Commission prior to the date hereof (the "Public Reports")
or otherwise disclosed in writing to BYOWC prior to the date hereof
("Disclosed Information");
(2) of any facts or circumstances not disclosed in the
Company's Public Reports or the Disclosed Information, which in the
good faith judgment of BYOWC would reasonably be expected to increase
the cost of consummating a Qualifying Offer by more than $10,000,000
above the cost reasonably expected to be incurred based upon the
information set for in the Public Reports and the Disclosed
Information; or
(3) of any facts or circumstances not disclosed in the
Company's Public Reports or the Disclosed Information, which in the
good faith judgment of BYOWC would materially interfere, restrict or
otherwise adversely affect the ability of BYOWC or the Company to
consummate a Qualifying Offer,
it shall so notify the Company in writing promptly following the Determination
Date, setting forth in reasonable detail the basis as aforesaid for not making a
Qualifying Offer. In such case, the Standstill Provisions will terminate at the
close of business on February 29, 2000.
C. If the Company and BYOWC enter into a merger agreement and the
merger agreement is terminated other than by reason of a breach by BYOWC of its
representations, warranties, covenants or agreements set forth in such
agreement, the Standstill Provisions will terminate contemporaneously with the
termination of the merger agreement.
IV. During the period beginning on the date hereof through and
including the December 17, 1999, the Company shall not, directly or indirectly,
through any officer, director, employee, representative or agent of the Company
or any of its subsidiaries, solicit or encourage the initiation of (including by
way of furnishing information), negotiate or in any way respond to (including by
way of furnishing information) any inquiries or proposals, regarding any merger,
sale of assets, sale of shares of capital stock (including without limitation by
way of tender offer) or similar transactions involving the Company or any of its
subsidiaries (an "Alternative Proposal"). The Company shall immediately cease
and cause to be terminated any existing discussions or negotiations with any
persons (other than BYOWC) conducted heretofore with respect to any Alternative
Proposal.
<PAGE>
BYOWC Partners LLC
December 2, 1999
Page 5
At this time BYOWC and the Company have not entered into any
agreement or understanding to effect a merger transaction, and this letter
should not be construed to imply that the parties have done so.
Your signature below will confirm our mutual agreement as
hereinabove provided.
Very truly yours,
MICRO WAREHOUSE, INC.
By: /S/ BRUCE L. LEV
------------------------
Bruce L. Lev
Executive Vice President
AGREED TO:
BYOWC PARTNERS LLC
By: /s/ ALFRED D. BOYER
-----------------------------
Alfred D. Boyer
Managing Member
<PAGE>
Exhibit 99(c)(3)
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BYOWC PARTNERS LLC,
BRIDGEPORT HOLDINGS INC.,
BRIDGEPORT ACQUISITION CORPORATION
and
MICRO WAREHOUSE, INC.
Dated as of December 20, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I TENDER OFFER AND MERGER.........................................................2
SECTION 1.01 THE OFFER..........................................................2
SECTION 1.02 TERMS AND CONDITIONS OF THE OFFER..................................2
SECTION 1.03 COMPANY ACTION.....................................................5
SECTION 1.04 DIRECTORS..........................................................5
SECTION 1.05 THE MERGER.........................................................6
SECTION 1.06 EFFECTIVE TIME.....................................................7
SECTION 1.07 CONVERSION OF SHARES...............................................7
SECTION 1.08 DISSENTING SHARES..................................................7
SECTION 1.09 SURRENDER OF SHARES................................................8
SECTION 1.10 OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN...........................9
SECTION 1.11 CERTIFICATE OF INCORPORATION AND BYLAWS...........................10
SECTION 1.12 DIRECTORS AND OFFICERS............................................10
SECTION 1.13 OTHER EFFECTS OF MERGER...........................................10
SECTION 1.14 PROXY STATEMENT...................................................10
SECTION 1.15 ADDITIONAL ACTIONS................................................11
SECTION 1.16 MERGER WITHOUT MEETING OF STOCKHOLDERS............................11
SECTION 1.17 LOST, STOLEN OR DESTROYED CERTIFICATES............................11
SECTION 1.18 MATERIAL ADVERSE EFFECT...........................................11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................12
SECTION 2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES......................12
SECTION 2.02 CERTIFICATE OF INCORPORATION AND BYLAWS...........................12
SECTION 2.03 CAPITALIZATION....................................................13
SECTION 2.04 AUTHORITY RELATIVE TO THIS AGREEMENT..............................14
SECTION 2.05 CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.............14
SECTION 2.06 COMPLIANCE; PERMITS...............................................15
SECTION 2.07 SEC FILINGS; FINANCIAL STATEMENTS.................................16
SECTION 2.08 ABSENCE OF CERTAIN CHANGES OR EVENTS..............................16
SECTION 2.09 NO UNDISCLOSED LIABILITIES........................................16
SECTION 2.10 ABSENCE OF LITIGATION.............................................17
SECTION 2.11 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS.....................17
SECTION 2.12 LABOR MATTERS.....................................................19
SECTION 2.13 DISCLOSURE DOCUMENTS..............................................19
SECTION 2.14 RESTRICTIONS ON BUSINESS ACTIVITIES...............................20
SECTION 2.15 TITLE TO PROPERTY.................................................20
SECTION 2.16 TAXES.............................................................20
SECTION 2.17 ENVIRONMENTAL MATTERS.............................................22
SECTION 2.18 BROKERS...........................................................23
SECTION 2.19 INTELLECTUAL PROPERTY.............................................23
SECTION 2.20 INTERESTED PARTY TRANSACTIONS.....................................24
SECTION 2.21 INSURANCE.........................................................24
SECTION 2.22 PRODUCT LIABILITY.................................................25
SECTION 2.23 OPINION OF FINANCIAL ADVISOR......................................25
SECTION 2.24 RIGHTS AGREEMENT..................................................25
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT....................................25
SECTION 3.01 ORGANIZATION AND GOOD STANDING....................................25
SECTION 3.02 AUTHORIZATION; BINDING AGREEMENT..................................26
SECTION 3.03 GOVERNMENTAL APPROVALS............................................26
SECTION 3.04 NO VIOLATIONS.....................................................26
SECTION 3.05 DISCLOSURE DOCUMENTS..............................................26
SECTION 3.06 FINDERS AND INVESTMENT BANKERS....................................27
SECTION 3.07 FINANCING ARRANGEMENTS............................................27
SECTION 3.08 NO PRIOR ACTIVITIES...............................................28
SECTION 3.09 DGCL SECTION 203..................................................28
SECTION 3.10 BENEFICIAL OWNERSHIP OF SHARES....................................28
SECTION 3.11 SURVIVING CORPORATION AFTER THE MERGER............................28
ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER.......................................29
SECTION 4.01 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.............29
SECTION 4.02 NO SOLICITATION...................................................31
ARTICLE V ADDITIONAL AGREEMENTS.........................................................33
SECTION 5.01 APPROVAL OF THE MERGER............................................33
SECTION 5.02 VOTING OF SHARES BY PURCHASER.....................................33
SECTION 5.03 ACCESS TO INFORMATION; CONFIDENTIALITY............................33
SECTION 5.04 CONSENTS; APPROVALS...............................................34
SECTION 5.05 INDEMNIFICATION AND INSURANCE.....................................34
SECTION 5.06 NOTIFICATION OF CERTAIN MATTERS...................................36
SECTION 5.07 FURTHER ACTION....................................................36
SECTION 5.08 PUBLIC ANNOUNCEMENTS..............................................36
SECTION 5.09 CONVEYANCE TAXES..................................................37
SECTION 5.10 OPTION PLANS AND BENEFITS, ETC. ..................................37
SECTION 5.11 EMPLOYEE MATTERS..................................................37
SECTION 5.12 COMPLIANCE WITH STATE PROPERTY TRANSFER STATUTES..................37
SECTION 5.13 FINANCING COVENANTS...............................................38
ARTICLE VI CONDITIONS TO THE MERGER.....................................................39
SECTION 6.01 OFFER.............................................................39
SECTION 6.02 STOCKHOLDER APPROVAL..............................................39
SECTION 6.03 NO INJUNCTION OR ACTION...........................................39
SECTION 6.04 GOVERNMENTAL APPROVALS............................................39
ARTICLE VII TERMINATION.................................................................40
SECTION 7.01 TERMINATION.......................................................40
SECTION 7.02 [INTENTIONALLY OMITTED]...........................................42
SECTION 7.03 EFFECT OF TERMINATION.............................................42
SECTION 7.04 FEES AND EXPENSES.................................................42
ARTICLE VIII GENERAL PROVISIONS.........................................................43
SECTION 8.01 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.......43
SECTION 8.02 CERTAIN LIMITATIONS...............................................44
SECTION 8.03 NOTICES...........................................................45
SECTION 8.04 CERTAIN DEFINITIONS...............................................46
SECTION 8.05 AMENDMENT.........................................................47
SECTION 8.06 WAIVER............................................................47
SECTION 8.07 HEADINGS..........................................................47
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 8.08 SEVERABILITY......................................................47
SECTION 8.09 ENTIRE AGREEMENT..................................................47
SECTION 8.10 ASSIGNMENT........................................................47
SECTION 8.11 PARTIES IN INTEREST...............................................48
SECTION 8.12 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.............48
SECTION 8.13 ENFORCEMENT; GOVERNING LAW; JURISDICTION..........................48
SECTION 8.14 COUNTERPARTS......................................................49
SECTION 8.15 WAIVER OF JURY TRIAL..............................................49
SECTION 8.16 OBLIGATIONS OF BYOWC..............................................49
SECTION 8.17 INTERPRETATION....................................................49
ANNEX I............................................................................51
ANNEX II...........................................................................54
Summary of Terms of Warrant..............................................................56
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 20, 1999
(this "AGREEMENT"), among BYOWC Partners LLC, a Delaware limited liability
company ("BYOWC"), Bridgeport Holdings Inc. ("PARENT"), a Delaware corporation
and a subsidiary of BYOWC, Bridgeport Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Parent ("PURCHASER"), and Micro
Warehouse, Inc., a Delaware corporation (the "COMPANY").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of BYOWC, the
Company, Purchaser and Parent have determined that it is in the best interests
of their respective stockholders and members for Purchaser to acquire the
Company; and
WHEREAS, in furtherance thereof Parent has formed Purchaser
for the purpose of making a tender offer (the "PURCHASER OFFER") to acquire
shares of common stock of the Company (the "COMPANY COMMON STOCK"), par value
$.01 (the "SHARES"), for $19.00 per share in cash, or such higher price as may
be paid in the Offer (the "PER SHARE AMOUNT"), subject to any applicable
withholding, net to the seller in cash without interest; and
WHEREAS, the Company has agreed to simultaneously make an
offer to acquire Shares (the "COMPANY OFFER", and, together with the Purchaser
Offer, the "OFFER") for the Per Share Amount, subject to any applicable
withholding, net to the seller in cash without interest; and
WHEREAS, the Purchaser Offer and the Company Offer shall
together be an offer to acquire all of issued and outstanding Shares, subject to
the priority set forth in this Agreement; and
WHEREAS, also in furtherance thereof, the Boards of Directors
of the Company, Purchaser and Parent have each approved this Agreement and the
merger of Purchaser with the Company (the "MERGER") following the Offer, upon
the terms and subject to the conditions set forth herein and in accordance with
the applicable provisions of the General Corporation Law of the State of
Delaware (the "DGCL"); and
WHEREAS, the Board of Directors of the Company has approved
this Agreement and the Merger and resolved to recommend acceptance of the Offer
and the adoption of this Agreement to the Company's stockholders and has
determined that the Offer and the Merger are fair to and in the best interest of
the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, and intending to be legally
bound hereby, BYOWC, Parent, Purchaser and the Company hereby agree as follows:
<PAGE>
ARTICLE I
TENDER OFFER AND MERGER
SECTION 1.01 THE OFFER. (a) Provided that this Agreement shall
not have been terminated in accordance with SECTION 7.1 hereof and that none of
the events set forth in ANNEX I or ANNEX II hereto shall have occurred and be
existing, Purchaser shall commence (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "SECURITIES EXCHANGE ACT")) the Purchaser Offer, and the Company
shall commence the Company Offer, as promptly as practicable, but in no event
later than five business days following the first public announcement of the
execution of this Agreement, and each shall use reasonable best efforts to
consummate the Offer.
(b) The Purchaser Offer and the Company Offer shall be
conducted for practical purposes as a single offer, with Shares being accepted
for payment and purchased in the Offer according to the following order of
priority: first, Purchaser shall accept for payment and purchase Shares up to a
maximum number of Shares equal to the Purchaser Share Number; and second, the
Company shall accept for payment and purchase Shares up to a maximum number of
Shares equal to the Company Share Number. "COMPANY SHARE NUMBER" means the sum
of (x) $200,000,000 and (y) the aggregate exercise price of all options to
acquire stock of the Company exercised following the date hereof and prior to
consummation of the Offer (the "OPTION EXERCISE AMOUNT") divided by the Per
Share Amount. "PURCHASER SHARE NUMBER" means the total number of issued and
outstanding Shares less the Shares otherwise owned by BYOWC, Parent or Purchaser
and less the Company Share Number. The Company agrees that no Shares held by the
Company or any subsidiary of the Company will be tendered pursuant to the Offer.
(c) The Per Share Amount payable in the Offer shall be net to
each seller in cash, subject to reduction only for any applicable withholding
taxes and, if (but only if) the Per Share Amount is to be paid other than to a
registered holder of Shares, any applicable transfer taxes payable by such
seller.
SECTION 1.02 TERMS AND CONDITIONS OF THE OFFER. (a) The
obligation of Purchaser to accept for payment any Shares tendered shall be
subject to the satisfaction of only those conditions set forth in ANNEX I hereto
and the obligation of the Company to accept for payment any Shares tendered
shall be subject to the satisfaction of only those conditions set forth in ANNEX
II hereto.
(b) Without the prior written consent of the Company, Purchaser
will not, and Parent will cause Purchaser not to, (i) decrease or change the
form of the Per Share Amount, (ii) decrease the number of Shares sought in the
Purchaser Offer, (iii) amend or waive the Minimum Condition (as defined in Annex
I hereto), or impose conditions other than the conditions set forth in Annex I
on the Offer, or (iv) amend any term of the Purchaser Offer in any manner
materially adverse to stockholders of the Company; PROVIDED, HOWEVER, that
subject to applicable legal requirements, Parent may cause Purchaser to waive
the conditions set forth in Annex I, other than the Minimum Condition and the
conditions set forth in paragraph (c) and (d) of Annex I, in Parent's sole
discretion. Assuming the prior satisfaction or waiver of the conditions set
forth in Annex I, Parent will cause Purchaser to accept for payment, and pay
for, in accordance with the
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terms of the Purchaser Offer, Shares validly tendered and not withdrawn pursuant
to the Purchaser Offer as soon as practicable after the Initial Expiration Date
(as defined below) or any extension thereof and in any subsequent offering
period of the Purchaser Offer, up to a number of Shares equal to the Purchaser
Share Number, in the order of priority set forth in Section 1.01(b).
(c) Without the prior written consent of Parent, the Company
will not (i) decrease or change the form of the Per Share Amount, (ii) decrease
the number of Shares sought in the Company Offer, (iii) impose conditions other
than the conditions set forth in Annex II on the Company Offer, or (iv) amend
any term of the Company Offer in any manner materially adverse to Parent or
Purchaser; PROVIDED, HOWEVER, that subject to applicable legal requirements, the
Company may waive any condition set forth in Annex II other than the conditions
set forth in paragraphs (c) and (d) of Annex II in the Company's sole
discretion. Assuming the prior satisfaction or waiver of the conditions in Annex
II, the Company will accept for payment, and pay for, in accordance with the
terms of the Company Offer, Shares validly tendered and not withdrawn pursuant
to the Offer as soon as practicable after the Initial Expiration Date or any
extension thereof and in any subsequent offering period of the Offer, up to a
number of Shares equal to the Company Share Number, in the order of priority set
forth in Section 1.01(b). All Shares purchased by the Company pursuant to the
Company Offer shall, at the election of the Company, be immediately cancelled or
returned to the treasury of the Company.
(d) The Offer shall initially expire on the later to occur of
(x) twenty (20) business days after the date of its commencement and (y) January
28, 2000 (the "INITIAL EXPIRATION DATE"), unless this Agreement is terminated in
accordance with SECTION 7.01 hereof, in which case the Offer (whether or not
previously extended in accordance with the terms hereof) shall expire on such
date of termination. Purchaser and the Company shall not terminate or withdraw
the Offer or extend the expiration date of the Offer unless at the expiration
date of the Offer the conditions to the Offer described in ANNEX I and ANNEX II
hereto shall not have been satisfied or earlier waived. Notwithstanding the
foregoing, but subject in all events to Section 7.01, Purchaser may, without the
consent of the Company, extend the Offer at any time, and from time to time, (i)
if at the then scheduled expiration date of the Offer any of the conditions to
the obligations of Purchaser and the Company to accept Shares for payment (other
than the Minimum Condition, as to which this clause does not apply) shall not
have been satisfied or waived, until such time as such conditions are satisfied
or waived; (ii) if all conditions to the obligations of Purchaser and the
Company to accept Shares for payment (other than the Minimum Condition) shall
have been satisfied or waived, the Minimum Condition has not been satisfied but
the number of Shares tendered, together with the Shares otherwise owned by
BYOWC, Parent or Purchaser, is greater than 40% of the Shares outstanding, for
an aggregate period of not more than fifteen (15) business days (for all such
extensions); (iii) for any period required by any rule, regulation,
interpretation or position of the Securities and Exchange Commission (the "SEC")
or its staff applicable to the Offer; or (iv) if all conditions to the
obligations of Purchaser and the Company to accept for payment and pay for
Shares are satisfied or waived but the number of Shares tendered, together with
the Shares otherwise owned by BYOWC, Parent or Purchaser, is less than 90% of
the then outstanding number of Shares (and after giving effect to the reduction
of outstanding Shares resulting from the purchase of Shares by the Company
pursuant to the Company Offer), for an aggregate period of not more than twenty
(20) business days (for all such extensions) beyond the latest expiration date
that would
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be permitted under clauses (i), (ii) or (iii) of this sentence, and in the case
of any extension pursuant to this clause (iv) Purchaser and/or the Company, as
the case may be, shall accept for payment all Shares validly tendered pursuant
to the Offer as of the most recently expired expiration date in accordance with
the rules and regulations of the SEC, including Rule 14d-11 promulgated under
the Securities Exchange Act.
(e) The Offer shall be made by means of an offer to purchase
(the "OFFER TO PURCHASE") having only the conditions set forth in ANNEX I and
ANNEX II hereto. BYOWC, Parent, the Company and Purchaser shall cooperate in
good faith in the timely preparation of the Offer to Purchase and the other
Offer Documents (as defined below).
(f) As soon as practicable on the date the Offer is commenced,
(x) Purchaser shall file with the SEC a Tender Offer Statement on Schedule 14D-1
(together with all amendments and supplements thereto, the "SCHEDULE 14D-1") and
(y) the Company Shall file an Issuer Tender Offer Statement on Schedule 13E-4
(the "SCHEDULE 13E-4") and a Solicitation/Recommendation Statement on Schedule
14D-9 (the "SCHEDULE 14D-9") with respect to the Offer, each of which will
comply in all material respects with the provisions of, and satisfy in all
material respects the requirements of, such Schedule 14D-1, Schedule 13E-4 and
Schedule 14D-9, respectively, and all applicable federal securities laws and, in
the case of the Schedule 14D-1 and Schedule 13E-4, will contain as an exhibit or
incorporate by reference the Offer to Purchase and forms of the related letter
of transmittal and summary advertisement (which documents, together with any
supplements or amendments thereto, and any other SEC schedule or form which is
filed in connection with the Offer and related transactions, are referred to
collectively herein as the "OFFER DOCUMENTS"). Each of Parent, Purchaser and the
Company agrees promptly to correct any information provided by it for use in the
Schedule 14D-1, the Schedule 13E-4, the Schedule 14D-9 or the Offer Documents if
and to the extent that such information shall have become false or misleading in
any material respect and to supplement the information provided by it
specifically for use in the Schedule 14D-1, the Schedule 13E-4, the Schedule
14D-9 or the other Offer Documents to include any information that shall become
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Parent, Purchaser and the Company,
as applicable, shall take all steps necessary to cause the (x) Schedule 14D-1,
the Schedule 13E-4 and the Schedule 14D-9, as so corrected or supplemented, to
be filed with the SEC and (y) the Offer Documents and the Schedule 14D-9, as so
corrected or supplemented, to be disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities laws.
(g) The Company and its counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-1 before it is filed with
the SEC, and Purchaser shall consider any such comments in good faith. Parent,
Purchaser and their counsel shall be given a reasonable opportunity to review
and comment on the Schedule 13E-4 and Schedule 14D-9 before it is filed with the
SEC, and the Company shall consider any such comments in good faith.
(h) The Per Share Amount shall be appropriately adjusted to
reflect fully the effect of any stock split, reverse stock split, stock dividend
(including any dividend or distribution of securities convertible into Shares),
distribution, exercise or exchange of the Rights (as defined in Section 4.02(d))
or such Rights becoming exercisable, reorganization,
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recapitalization, split up, combination or exchange of shares or other like
event with respect to the Shares occurring after the date hereof and prior to
the consummation of the Offer or the Merger, as the case may be.
SECTION 1.03 COMPANY ACTION. (a) The Company represents and
warrants that the Board of Directors of the Company, at a meeting duly called
and held on December 20, 1999, at which all the Directors were present in person
or by telephone, duly approved and adopted this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, resolved to recommend
that stockholders of the Company accept the Offer, tender their Shares pursuant
to the Offer and adopt this Agreement, and determined that this Agreement and
the transactions contemplated hereby, including the Offer and the Merger, are
fair to and in the best interests of the stockholders of the Company. The
Company hereby consents to the inclusion in the Offer Documents of such
recommendation of the Board of Directors of the Company. The Company represents
that its Board of Directors has received the written opinion (the "FAIRNESS
OPINION") of Wasserstein Perella & Co., Inc. (the "FINANCIAL ADVISOR") that the
proposed consideration to be received by the holders of Shares pursuant to the
Offer and the Merger is fair to such holders from a financial point of view. The
Company has been authorized by the Financial Advisor to permit, subject to the
prior review and consent by the Financial Advisor (such consent not to be
unreasonably withheld), the inclusion of the Fairness Opinion (or a reference
thereto) in the Offer Documents, the Schedule 14D-9 and the Proxy Statement (as
hereinafter defined).
(b) In connection with the Offer, the Company shall promptly
upon execution of this Agreement furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and security
position listings of Shares held in stock depositories, each as of a recent
date, and shall promptly furnish Purchaser with such additional information
reasonably available to the Company, including updated lists of stockholders,
mailing labels and security position listings, and such other information and
assistance as Purchaser or its agents may reasonably request for the purpose of
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable law and except as necessary to disseminate the
Offer Documents and otherwise for the purpose of effecting the transactions
contemplated hereby, BYOWC, Parent and Purchaser shall hold in confidence the
materials furnished pursuant to this SECTION 1.03(b), use such information only
in connection with the Offer, the Merger and the other transactions contemplated
by this Agreement and, if this Agreement is terminated, as promptly as
practicable return to the Company such materials and all copies thereof in the
possession of BYOWC, Parent and Purchaser.
SECTION 1.04 DIRECTORS. Promptly upon the purchase by
Purchaser of Shares pursuant to the Offer (and provided that the Minimum
Condition has been satisfied), Parent shall be entitled to designate such number
of directors, rounded up to the next whole number, on the Board of Directors of
the Company as will give Parent, subject to compliance with Section 14(f) of the
Securities Exchange Act, representation on the Board of Directors of the Company
equal to at least that number of directors which equals the product of the total
number of directors on the Board of Directors of the Company (giving effect to
the directors appointed or elected pursuant to this sentence and including
current directors serving as officers of the Company) multiplied by the
percentage that the aggregate number of Shares beneficially owned by Purchaser
or any other affiliate of Parent (including for purposes of this SECTION 1.04
such Shares
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as are accepted for payment pursuant to the Purchaser Offer, but excluding
Shares held by the Company) bears to the number of Shares outstanding (after
reduction for Shares accepted for payment pursuant to the Company Offer). At
such time, if requested by Parent, the Company will also cause each committee of
the Board of Directors of the Company to include persons designated by Parent
constituting the same percentage of each such committee as Parent's designees
are of the Board of Directors of the Company. The Company shall, upon request by
Parent, promptly increase the size of the Board of Directors of the Company or
exercise reasonable best efforts to secure the resignations of such number of
directors as is necessary to enable Parent's designees to be elected to the
Board of Directors of the Company in accordance with the terms of this SECTION
1.04 and to cause Parent's designees so to be elected; PROVIDED, HOWEVER, that,
in the event that Parent's designees are appointed or elected to the Board of
Directors of the Company, until the Effective Time (as hereinafter defined) the
Board of Directors of the Company shall have at least two directors who are
directors on the date hereof, each of whom is neither an officer of the Company
nor a designee, stockholder, affiliate or associate (within the meaning of the
federal securities laws) of BYOWC (such directors, the "CONTINUING DIRECTORS")
or such persons having such qualifications who are designated as "Independent
Directors" by a majority of Continuing Directors in office at the time of such
designation (such persons, together with the Continuing Directors, the
"INDEPENDENT DIRECTORS"). Subject to applicable law, the Company shall promptly
take all action necessary pursuant to Section 14(f) of the Securities Exchange
Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations
under this SECTION 1.04 and shall include in the Schedule 14D-9 mailed to
stockholders promptly after the commencement of the Offer (or in an amendment
thereof or an information statement pursuant to Rule 14f-1 if Parent has not
theretofore designated directors) such information with respect to the Company
and its officers and directors as is required under Section 14(f) and Rule 14f-1
in order to fulfill its obligations under this SECTION 1.04. Parent will supply
the Company, and be solely responsible for, any information with respect to
itself and its nominees, officers, directors and affiliates required by such
Section 14(f) and Rule 14f-1. Notwithstanding anything in this Agreement to the
contrary, subsequent to the designation of the directors by Parent referred to
in the first sentence of this Section 1.04 and prior to the Effective Time, the
unanimous vote of the Independent Directors shall be required to (i) amend or
terminate this Agreement on behalf of the Company, (ii) exercise or waive any of
the Company's rights or remedies hereunder, (iii) extend the time for
performance of Parent's, Purchaser's or BYOWC's obligations or other acts
required hereunder, (iv) take any other action by the Company in connection with
this Agreement required to be taken by the Board of Directors of the Company or
(v) amend the Company's Certificate of Incorporation or the Company's Bylaws,
each as in effect on the date of this Agreement.
SECTION 1.05 THE MERGER. Upon the terms and subject to the
conditions of this Agreement, the Merger shall be consummated in accordance with
the DGCL. At the Effective Time (as defined in SECTION 1.06 hereof), upon the
terms and subject to the conditions of this Agreement, the Company shall be
merged with and into Purchaser in accordance with the DGCL and the separate
existence of the Company shall thereupon cease, and Purchaser, as the surviving
corporation in the Merger (the "SURVIVING CORPORATION"), shall continue its
corporate existence under the laws of the State of Delaware as a direct
subsidiary of Parent. The parties shall prepare and execute a certificate of
merger (the "CERTIFICATE OF MERGER") that complies in all respects with the
requirements of the DGCL and with the provisions of this Agreement.
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SECTION 1.06 EFFECTIVE TIME. The Merger shall become effective
at the time of the filing of the Certificate of Merger with the Secretary of
State of Delaware in accordance with the applicable provisions of the DGCL or at
such later time as may be specified in the Certificate of Merger. As soon as
practicable (and in any event within three business days) after all the
conditions set forth in ARTICLE VI of this Agreement have been satisfied or
waived by the party or parties entitled to the benefit of the same, the parties
hereto shall cause the Merger to become effective. Parent and the Company shall
mutually determine the exact time of such filing and the place where the closing
of the Merger (the "CLOSING") shall occur. The time when the Merger shall become
effective is herein referred to as the "EFFECTIVE TIME," and the date on which
the Effective Time occurs is herein referred to as the "CLOSING DATE."
SECTION 1.07 CONVERSION OF SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holder of any of the securities specified below:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than Shares to be cancelled pursuant to SECTION 1.07(b)
and other than any Dissenting Shares (as hereinafter defined)) shall be
converted into the right to receive the Per Share Amount in cash payable to the
holder thereof, without interest, upon surrender of the certificate representing
such Share in accordance with SECTION 1.09 hereof. From and after the Effective
Time, the holders of certificates evidencing ownership of Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares except as otherwise provided for herein or by applicable
law.
(b) Each Share owned by the Company or any of its
subsidiaries, BYOWC, Parent, Purchaser or any direct or indirect wholly owned
subsidiary of BYOWC immediately prior to the Effective Time shall be canceled,
and no payment or other consideration shall be made with respect thereto.
(c) The shares of Purchaser common stock issued and
outstanding immediately prior to the Merger shall be converted into and
constitute a number of validly issued, fully paid and nonassessable shares of
common stock of the Surviving Corporation equal to the number of Shares owned by
BYOWC, Parent, Purchaser or any direct or indirect wholly owned subsidiary of
BYOWC immediately prior to the Effective Time.
In addition, the Surviving Corporation shall at the Effective Time issue to
Parent a Warrant to purchase common stock on the terms set forth in Exhibit 1.
SECTION 1.08 DISSENTING SHARES. (a) Notwithstanding any
provision of this Agreement to the contrary, any Shares issued and outstanding
immediately prior to the Effective Time and held by a holder who has demanded
and perfected his demand for appraisal of his Shares in accordance with the DGCL
and as of the Effective Time has neither effectively withdrawn nor lost his
right to such appraisal ("DISSENTING SHARES") shall not be converted into or
represent a right to receive cash pursuant to SECTION 1.07 hereof, but the
holder thereof shall be entitled only to such rights as are granted by the DGCL.
(b) Notwithstanding the provisions of SECTION 1.08(a) hereof,
if any holder of Shares who demands appraisal of his Shares under the DGCL shall
effectively withdraw or lose
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(through failure to perfect or otherwise) his right to appraisal, then as of the
Effective Time or the occurrence of such event, whichever occurs later, such
holder's Shares shall automatically be converted into and represent only the
right to receive cash as provided in SECTION 1.07(a) hereof, without interest
thereon, upon surrender of the certificate or certificates representing such
Shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal or payment of the fair value of any Shares,
withdrawals of such demands and any other instruments served pursuant to the
DGCL received by the Company after the date hereof and (ii) the opportunity to
direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. The Company shall not voluntarily make any payment with respect
to any demands for appraisal and shall not, except with the prior written
consent of Parent, settle or offer to settle any such demands.
SECTION 1.09 SURRENDER OF SHARES. (a) Prior to the Effective
Time, Parent shall appoint EquiServe or such other commercial bank or trust
company designated by Parent and reasonably acceptable to the Company to act as
exchange agent hereunder (the "EXCHANGE AGENT") for the payment of the Per Share
Amount upon surrender of certificates representing the Shares. All the fees and
expenses of the Exchange Agent shall be borne by the Surviving Corporation;
PROVIDED, HOWEVER, that, if the Merger shall not be consummated, such fees and
expenses shall be borne by Parent.
(b) On or before the Effective Time, Parent shall cause the
Surviving Corporation to provide the Exchange Agent with cash in amounts
necessary to pay for all the Shares pursuant to SECTION 1.07(a) hereof
(including, if necessary, by providing or causing to be provided cash for this
purpose to the Surviving Corporation).
(c) On the Closing Date, the Surviving Corporation shall
instruct the Exchange Agent to mail promptly to each holder of record of a
certificate representing any Shares canceled upon the Merger pursuant to
SECTIONS 1.07(a) hereof (i) a form of letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
shall pass, only upon delivery of the certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
certificates. Each holder of a certificate or certificates representing any
Shares canceled upon the Merger pursuant to SECTIONS 1.07(a) hereof may
thereafter surrender such certificate or certificates to the Exchange Agent, as
agent for such holder, to effect the surrender of such certificate or
certificates on such holder's behalf for a period ending one year after the
Effective Time. Upon the surrender of certificates representing the Shares, the
Surviving Corporation shall cause the Exchange Agent to pay the holder of such
certificates in exchange therefor cash in an amount equal to the Per Share
Amount multiplied by the number of Shares represented by such certificate. Until
so surrendered, each such certificate (other than certificates representing
Dissenting Shares) shall represent solely the right to receive the aggregate Per
Share Amount relating thereto.
(d) If payment of cash in respect of canceled Shares is to be
made to a person other than the person in whose name a surrendered certificate
is registered, it shall be a condition to such payment that the certificate so
surrendered shall be properly endorsed or shall otherwise be in proper form for
transfer by delivery and that the person requesting such payment shall have paid
any transfer and other taxes required by reason of such payment in a name other
than that of
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the registered holder of the certificate or instrument surrendered or shall have
established to the satisfaction of Parent or the Exchange Agent that such tax
either has been paid or is not payable.
(e) At the Effective Time, the stock transfer books of the
Company shall be closed, and no transfer of Shares shall be made thereafter,
other than transfers of Shares that have occurred prior to the Effective Time.
In the event that, after the Effective Time, certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged for cash as provided
in SECTIONS 1.07(a).
(f) The Per Share Amount paid in the Merger shall be net to
the holder of Shares in cash, and without interest thereon, subject to reduction
only for any applicable withholding taxes and, but only if the Per Share Amount
is to be paid other than to the registered holder, any applicable stock transfer
taxes payable by such holder.
(g) Promptly following the date which is one year after the
Effective Time, the Exchange Agent shall deliver to the Surviving Corporation
all cash, certificates and other documents in its possession relating to the
transactions contemplated hereby, and the Exchange Agent's duties shall
terminate. Thereafter, each holder of a certificate representing Shares (other
than certificates representing Dissenting Shares and certificates representing
Shares held directly or indirectly by the Surviving Corporation, Parent or
BYOWC) may surrender such certificate to the Surviving Corporation and (subject
to any applicable abandoned property, escheat or similar law) receive in
consideration therefor the aggregate Per Share Amount relating thereto, without
any interest thereon.
(h) None of the Company, Parent, Purchaser, BYOWC, the
Surviving Corporation or the Exchange Agent shall be liable to any holder of
Shares for any cash delivered to a public official pursuant to any abandoned
property, escheat or similar law, rule, regulation, statute, order, judgment or
decree.
SECTION 1.10 OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN. (a) The
Company shall provide a period of 30 days ending on the Effective Time in which
each option ("COMPANY PLAN OPTIONS") outstanding under the Company option plans
listed on Section 2.11 of the Company Disclosure Schedule (as hereinafter
defined) ("COMPANY STOCK OPTION PLANS"), whether or not then vested or
exercisable, may be exercised, provided that such exercise with respect to an
otherwise unvested option shall be contingent upon the subsequent occurrence of
the Effective Time.
(b) Each Company Plan Option and each other option to purchase
Shares under any stock option plan or agreement of the Company outstanding
immediately prior to the Effective Time (a "COMPANY OPTION"), whether or not
then vested or exercisable, shall be cancelled and the holder thereof shall
receive from the Surviving Corporation as soon as practicable following
consummation of the Merger an amount in cash equal to the positive difference,
if any, between the Per Share Amount and the exercise price of the Company
Option multiplied by the number of Shares for which the Company Option was
exercisable immediately prior to the Effective Time, subject to reduction only
for any applicable withholding taxes. In no event will any Company Options be
exercisable after the Effective Time, except to receive cash as provided in the
first sentence of this Section 1.10(b).
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SECTION 1.11 CERTIFICATE OF INCORPORATION AND BYLAWS. Subject
to SECTION 5.05 hereof, unless otherwise determined by Parent prior to the
Effective Time, at and after the Effective Time (a) the Certificate of
Incorporation of Purchaser, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended as provided by the DGCL; and (b) the Bylaws of
Purchaser shall be the Bylaws of the Surviving Corporation in effect at the
Effective Time (subject to any subsequent amendments).
SECTION 1.12 DIRECTORS AND OFFICERS. At and after the
Effective Time, the directors of Purchaser immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation, and the
officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
successors are duly elected or appointed and qualified.
SECTION 1.13 OTHER EFFECTS OF MERGER. The Merger shall have
all further effects as specified in the applicable provisions of the DGCL.
SECTION 1.14 PROXY STATEMENT. (a) Following the consummation
of the Offer and if required by the Securities Exchange Act because an action by
the Company's stockholders is necessary in order to consummate the Merger, the
Company shall prepare and file with the SEC and, when cleared by the SEC, shall
mail to stockholders, a proxy statement in connection with a meeting of the
Company's stockholders to vote upon the adoption of this Agreement and the
Merger and the transactions contemplated hereby, or an information statement, as
appropriate, satisfying all requirements of the Securities Exchange Act (such
proxy or information statement in the form mailed by the Company to its
stockholders, together with any and all amendments or supplements thereto, is
herein referred to as the "PROXY STATEMENT").
(b) Parent will furnish the Company with such information
concerning BYOWC, Parent and its subsidiaries as is necessary in order to cause
the Proxy Statement, insofar as it relates to Parent and its subsidiaries, to
comply with applicable Law. Parent agrees promptly to advise the Company if, at
any time prior to the meeting of stockholders of the Company referenced herein,
any Parent Information (as defined below) in the Proxy Statement is or becomes
incorrect or incomplete in any material respect and to provide the Company with
the information needed to correct such inaccuracy or omission. Parent will
furnish the Company with such supplemental information as may be necessary in
order to cause the Proxy Statement, insofar as it relates to BYOWC and its
subsidiaries, to comply with applicable law after the mailing thereof to the
stockholders of the Company.
(c) The Company and Parent agree to cooperate in making any
preliminary filings of the Proxy Statement with the SEC, as promptly as
practicable, pursuant to Rule 14a-6 or Rule 14c-5, as applicable, under the
Securities Exchange Act.
(d) The Company shall provide Parent for its review a copy of
the Proxy Statement prior to each filing thereof, with reasonable time and
opportunity for such review. Parent authorizes the Company to utilize in the
Proxy Statement the information concerning Parent and its subsidiaries provided
to the Company in connection with, or contained in, the Proxy Statement.
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SECTION 1.15 ADDITIONAL ACTIONS. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Purchaser or the Company or otherwise to carry
out this Agreement, the officers and directors of the Company and Purchaser
shall be authorized to execute and deliver, in the name and on behalf of
Purchaser or the Company, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of Purchaser or the
Company, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or otherwise to
carry out this Agreement.
SECTION 1.16 MERGER WITHOUT MEETING OF STOCKHOLDERS.
Notwithstanding the foregoing provisions of this ARTICLE I, in the event that
Purchaser, or any other direct or indirect subsidiary of Parent, shall own or
acquire at least 90 percent of the outstanding Shares, the parties hereto agree
to 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
meeting of stockholders of the Company, in accordance with Section 253 of the
DGCL.
SECTION 1.17 LOST, STOLEN OR DESTROYED CERTIFICATES. In the
event any certificates representing Shares shall have been lost, stolen or
destroyed, the Exchange Agent shall make such payment in exchange for such lost,
stolen or destroyed certificates upon the making of an affidavit of that fact by
the holder thereof; PROVIDED, HOWEVER, that the Surviving Corporation may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificates to deliver a bond in such
sum as it may reasonably direct as indemnity against any claim that may be made
against Parent, the Surviving Corporation or the Exchange Agent with respect to
the certificates alleged to have been lost, stolen or destroyed.
SECTION 1.18 MATERIAL ADVERSE EFFECT. (a) When used in
connection with the Company or any of its subsidiaries, or Parent, BYOWC or any
of their respective subsidiaries, as the case may be, the term "MATERIAL ADVERSE
EFFECT" means any change, effect or circumstance that is materially adverse to
the business, assets (including intangible assets), financial condition or
results of operations of the Company and its subsidiaries, or Parent, BYOWC or
any of their respective subsidiaries, as the case may be, in each case taken as
a whole; PROVIDED, HOWEVER, that effects of changes that are applicable to or
arise on account of (A) any changes in economic, regulatory, or political
conditions generally, (B) the United States securities markets, (C) this
Agreement or the transactions contemplated by this Agreement, (D) the computer
reseller industry generally, or (E) the effect of the public announcement of the
transactions contemplated hereby, including, without limitation, any effect on
current or prospective customers or employees of the Company, shall be excluded
from the definition of "Material Adverse Effect" and from any determination as
to whether a Material Adverse Effect has occurred or may occur.
(b) The failure of a representation or warranty to be true and
correct, either individually or together with the failure of other
representations or warranties to be true and correct, or the failure to perform
an obligation, agreement or covenant shall be deemed to have a Material Adverse
Effect if (x) the business, assets (including intangible assets), financial
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condition, or results of operations of the Company and its subsidiaries, or
Parent, BYOWC or any of their respective subsidiaries, as the case may be, in
each case taken as a whole, are or are reasonably likely to be materially worse
than if such representation or warranty had been true and correct or such
obligation, agreement or covenant had been performed, excluding, however, the
effects of the changes specified in the proviso set forth in Section 1.18(a),
(y) in the case of the Company, such representation or warranty materially
misstates the capitalization of the Company and/or its subsidiaries or (z) the
failure of such representation or warranty to be true and correct or the failure
to perform such obligation, agreement of covenant materially and adversely
affects the ability of the Company or Parent, as the case may be, timely to
consummate the transactions contemplated by this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent that,
except as disclosed in forms, reports and other documents filed by the Company
with the SEC since December 31, 1998 through the date of this Agreement (the
"COMPANY SEC DOCUMENTS") or set forth in the corresponding section of the
disclosure schedule delivered by the Company to Parent prior to the execution of
this Agreement (the "COMPANY DISCLOSURE SCHEDULE"):
SECTION 2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
Each of the Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority necessary to
own, lease and operate the properties it purports to own, operate or lease and
to carry on its business as it is now being conducted, except where the failure
to be so organized, existing and in good standing or to have such power or
authority is not reasonably likely to have a Material Adverse Effect. Each of
the Company and its subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except where the
failure to be so duly qualified or licensed and in good standing is not
reasonably likely to have a Material Adverse Effect. The Company's only
"significant" subsidiary, as defined in Regulation S-X, is Micro Warehouse Ltd.,
a U.K. company (the "COMPANY SIGNIFICANT SUBSIDIARIES"). Section 2.01 of the
Company Disclosure Schedule describes the jurisdiction of incorporation of each
subsidiary and the percentage of each such subsidiary's outstanding capital
stock owned by the Company or another subsidiary of the Company. Except for the
capital stock and other ownership interests in its Subsidiaries, the Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity (other than its wholly-owned subsidiaries), with
respect to which interest the Company has invested (and currently owns) or is
required to invest $100,000 or more, excluding securities in any publicly-traded
company held for investment by the Company and comprising less than five percent
of the outstanding stock of such company.
SECTION 2.02 CERTIFICATE OF INCORPORATION AND BYLAWS. The
Company has heretofore made available to Parent a complete and correct copy of
its Certificate of
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Incorporation and Bylaws as amended to date (the "COMPANY CHARTER DOCUMENTS"),
and will make available to Parent at Parent's request, as promptly as
practicable, the Certificate of Incorporation and Bylaws (or equivalent
organizational documents) of each Company Significant Subsidiary (the
"SUBSIDIARY DOCUMENTS"). Such Company Charter Documents and Subsidiary Documents
are in full force and effect. Neither the Company nor any of the Company
Significant Subsidiaries is in violation of any of the provisions of its
Certificate of Incorporation or Bylaws or equivalent organizational documents,
except for violations of the Subsidiary Documents which do not and are not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect. Neither the Company nor any of its subsidiaries is in violation of any
of the provisions of its Certificate of Incorporation or Bylaws or equivalent
organizational documents, except for violations of such documents which,
individually or in the aggregate, do not and are not reasonably likely to have a
Material Adverse Effect.
SECTION 2.03 CAPITALIZATION. The authorized capital stock of
the Company consists of 100,000,000 shares of Company Common Stock, 100,000
shares of Preferred Stock, $.01 par value ("COMPANY PREFERRED STOCK"), and
45,000 shares of Series A Junior Participating Preferred Stock, $.01 par value
("COMPANY SERIES A PREFERRED STOCK"). As of November 30, 1999, (i) 36,059,088
shares of Company Common Stock were issued and outstanding, all of which are
validly issued, fully paid and nonassessable (excluding shares which are issued
but not outstanding all of which are not entitled to vote), (ii) there were no
shares of Company Common Stock which were held by subsidiaries of the Company,
(iii) 6,000,000 shares of Company Common Stock were reserved for grants pursuant
to the Company Stock Option Plans, and 4,028,320 shares of Company Common Stock
were subject to existing grants under the Company Stock Option Plans, and (iv)
no shares of Company Preferred Stock or Company Series A Preferred Stock were
issued and outstanding. No change in such capitalization has occurred since
November 30, 1999, except for changes resulting from the exercise of Stock
Options. Except for existing option grants referred to in clause (iii) above,
options whose issuance is permitted after the date hereof pursuant to Section
4.01, Rights under the Rights Agreement and the Warrant contemplated by Section
1.07, there are no options, warrants or other rights, agreements, arrangements
or commitments of any character binding on the Company or any of its
subsidiaries relating to the issued or unissued capital stock of the Company or
any of its subsidiaries or obligating the Company or any of its subsidiaries to
issue or sell any shares of capital stock of, or other equity interests in, the
Company or any of its subsidiaries. All shares of Company Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully-paid and nonassessable. There are no obligations,
contingent or otherwise, of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any shares of Company Common Stock or
the capital stock of any subsidiary. There are no obligations, contingent or
otherwise, of the Company or any of its subsidiaries to provide funds to or make
any investment (in the form of a loan, capital contribution or otherwise) in any
such subsidiary or any other entity other than guarantees of bank obligations of
subsidiaries entered into in the ordinary course of business. All of the
outstanding shares of capital stock (other than directors' qualifying shares) of
each of the Company's Significant Subsidiaries are duly authorized, validly
issued, fully-paid and nonassessable, and all such shares (other than directors'
qualifying shares and a de minimis number of shares owned by employees of such
subsidiaries) are owned by the Company or another subsidiary free and clear of
all security interests, liens, claims, pledges, agreements,
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limitations in the Company's voting rights, charges or other encumbrances of any
nature whatsoever.
SECTION 2.04 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company
has all necessary corporate power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the adoption of this Agreement by the Company's
stockholders in accordance with the DGCL and the Company's Charter Documents and
the filing of the appropriate documents with respect to the Merger in accordance
with the DGCL). As of the date of this Agreement, the Board of Directors of the
Company has determined that it is advisable and in the best interest of the
Company's stockholders for the Company to enter into this Agreement and to
consummate the Offer and the Merger upon the terms and subject to the conditions
of this Agreement and has adopted resolutions so that Section 203 of the DGCL is
not applicable to the Offer, the Merger or the other transactions contemplated
by this Agreement. This Agreement has been duly and validly executed and
delivered by the Company and, assuming the due authorization, execution and
delivery hereof by BYOWC, Parent and Purchaser, constitutes a legal, valid and
binding obligation of the Company.
SECTION 2.05 CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND
CONSENTS. (a) Section 2.05(a) of the Company Disclosure Schedule includes, as of
the date of this Agreement, a list of (i) other than intercompany agreements,
all loan agreements, indentures, mortgages, pledges, conditional sale or title
retention agreements, security agreements, equipment obligations, guaranties,
standby letters of credit, equipment leases or lease purchase agreements, each
in an amount equal to or exceeding $275,000 to which the Company or any of its
subsidiaries is a party or by which any of them is bound; (ii) all contracts,
agreements, commitments or other understandings or arrangements to which the
Company or any of its subsidiaries is a party or by which any of them or any of
their respective properties or assets are bound or affected, but excluding
contracts, agreements, commitments or other understandings or arrangements
entered into in the ordinary course of business or involving, in the case of any
such contract, agreement, commitment, or other understanding or arrangement,
individual payments or receipts by the Company or any of its subsidiaries of
less than $100,000 over the term of such contract, commitment, agreement, or
other understanding or arrangement; and (iii) all agreements which are required
to be filed as "material contracts" with the SEC pursuant to the requirements of
the Securities Exchange Act but have not been so filed with the SEC.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company will not,
(i) conflict with or violate the Certificate of Incorporation or Bylaws of the
Company, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Company or any of its subsidiaries or by
which its or any of their respective properties is bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default), or impair the Company's or any of
its subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment,
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acceleration or cancellation of, or result in the creation of a lien or
encumbrance on (including a right to purchase) any of the properties or assets
of the Company or any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its subsidiaries is a
party or by which the Company or any of its subsidiaries or its or any of their
respective properties is bound or affected, except, in the case of clauses (ii)
or (iii), for any such conflicts, violations, breaches, defaults or other
occurrences that are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect.
(c) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with or
notification to (each, a "CONSENT"), any governmental or regulatory authority,
domestic or foreign (each, a "GOVERNMENTAL AUTHORITY"), except (i) for
applicable requirements, if any, of the Securities Exchange Act, state
securities laws ("BLUE SKY LAWS"), the pre-merger notification requirements of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR ACT"), filings and consents under any
applicable foreign laws intended to prohibit, restrict or regulate actions
having the purpose or effect of monopolization or restraint of trade ("FOREIGN
MONOPOLY LAWS"), filings and consents as may be required under any
environmental, health or safety law or regulation pertaining to any
notification, disclosure or required approval triggered by the Merger or the
transactions contemplated by this Agreement ("ENVIRONMENTAL, HEALTH AND SAFETY
LAWS"), and the filing and recordation of appropriate merger or other documents
as required by the DGCL, (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or materially delay consummation of the Merger, or otherwise
prevent or materially delay the Company from performing its material obligations
under this Agreement, or is not otherwise reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect, or (iii) as to which any
necessary consents, approvals, authorizations, permits, filings or notifications
have heretofore been obtained or filed, as the case may be, by the Company.
SECTION 2.06 COMPLIANCE; PERMITS. (a) Neither the Company nor
any of its subsidiaries is in conflict with, or in default or violation of, (i)
any law, rule, regulation, order, judgment or decree applicable to the Company
or any of its subsidiaries or by which its or any of their respective properties
is bound or affected or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries or its or any of their respective properties
is bound or affected, except in the case of clauses (i) and (ii) for any such
conflicts, defaults or violations which are not reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect.
(b) The Company and its subsidiaries hold all permits,
licenses, easements, variances, exemptions, consents, certificates, orders and
approvals from governmental authorities which are material to the operation of
the business of the Company and its subsidiaries taken as a whole as it is now
being conducted (collectively, the "COMPANY PERMITS"), except where the failure
to hold such Company Permits is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect. The Company and its subsidiaries
are in compliance with the terms of the Company Permits, except as described in
the Company SEC Reports or where the
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failure to so comply is not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect.
SECTION 2.07 SEC FILINGS; FINANCIAL STATEMENTS. (a) The
Company has filed all forms, reports and documents required to be filed by it
with the SEC since December 31, 1996. All such forms, reports and documents (i)
were prepared in all material respects in accordance with the requirements of
the Securities Act or the Securities Exchange Act, as the case may be, and (ii)
did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of the Company's subsidiaries is required to file any forms,
reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including,
in each case, any related notes thereto) contained in the forms, reports and
documents referred to in Section 2.07(a) (or if amended or superceded by a
filing prior to the date of this Agreement to restate or reclassify amounts
shown thereon, then as restated or reclassified) was prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or in the Company SEC Reports), and each fairly presents in
all material respects the consolidated financial position of the Company and its
subsidiaries as at the respective dates thereof and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount.
SECTION 2.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since
September 30, 1999, the Company has conducted its business in the ordinary
course and there has not occurred: (i) any changes, effects or circumstances
constituting or which is reasonably likely to constitute, individually or in the
aggregate, a Material Adverse Effect; (ii) any amendments or changes in the
Certificate of Incorporation or Bylaws of the Company; (iii) any damage to,
destruction or loss of any asset of the Company (whether or not covered by
insurance) that is reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect; (iv) any material change by the Company in its
accounting methods, principles or practices (other than changes required by GAAP
after the date of this Agreement); or (v) other than in the ordinary course of
business, any sale of a material amount of assets of the Company.
SECTION 2.09 NO UNDISCLOSED LIABILITIES. Neither the Company
nor any of its subsidiaries has any liabilities (absolute, accrued, contingent
or otherwise), except liabilities (a) in the aggregate adequately provided for
in the Company's unaudited balance sheet (including any related notes thereto)
as of September 30, 1999 included in the Company's Quarterly Report of Form 10-Q
for the quarter ended September 30, 1999 (the "1999 BALANCE SHEET"), (b)
incurred in the ordinary course of business and not required under GAAP to be
reflected on the 1999 Balance Sheet, (c) incurred since September 30, 1999 in
the ordinary course of business, (d) incurred in connection with this Agreement,
the Offer or the Merger or the other transactions contemplated hereby, or (e)
which is not reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect.
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SECTION 2.10 ABSENCE OF LITIGATION. Except for those arising
out of transactions contemplated by this Agreement, there are no claims,
actions, suits, proceedings or investigations pending or, to the knowledge of
the Company, threatened against the Company or any of its subsidiaries, or any
properties or rights of the Company or any of its subsidiaries, before any
court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign, that is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect.
SECTION 2.11 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS.
(a) Section 2.11(a) of the Company Disclosure Schedule lists, all employee
pension benefit plans (as defined in Section 3(2) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")), all employee welfare benefit
plans (as defined in Section 3(1) of ERISA), and all other bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance and other similar fringe or employee benefit plans, programs or
arrangements (including those which contain change of control provisions or
pending change of control provisions), and any employment, executive
compensation or severance agreements (including those which contain change of
control provisions or pending change of control provisions), written or
otherwise, as amended, modified or supplemented, for the benefit of, or relating
to, any former or current employee, officer, director or consultant (or any of
their beneficiaries) of the Company or any other entity (whether or not
incorporated) which is a member of a controlled group including the Company or
which is under common control with the Company within the meaning of Sections
414(b), (c), (m) or (o) of the Code or Section 4001(a) (14) or (b) of ERISA (a
"COMPANY ERISA Affiliate"), or any subsidiary of the Company, excluding any
plans that have not been maintained or contributed to in the six year period
ending on the date hereof, as well as each plan with respect to which the
Company or a Company ERISA Affiliate could incur liability under Title IV of
ERISA or Section 412 of the Code (together for the purposes of this Section
2.11, the "COMPANY EMPLOYEE PLANS"). The Company has made available to Parent,
prior to the date of this Agreement, copies of (i) each such written Company
Employee Plan (or a written description of any Company Employee Plan which is
not written) and all related trust agreements, insurance and other contracts
(including policies), summary plan descriptions, summaries of material
modifications and communications distributed to plan participants, (ii) the
three most recent annual reports on Form 5500 series, with accompanying
schedules and attachments, filed with respect to each Company Employee Plan
required to make such a filing, (iii) the latest reports which have been filed
with the Department of Labor with respect to each Company Employee Plan required
to make such filing and (iv) the most recent favorable determination letters
issued for each Company Employee Plan and related trust which is intended to be
qualified under Section 401(a) of the Code (and, if an application for such
determination is pending, a copy of the application for such determination).
(b) (i) None of the Company Employee Plans promises or
provides retiree medical or other retiree welfare benefits to any person, and
none of the Company Employee Plans is a "multiemployer plan" as such term is
defined in Section 3(37) of ERISA; (ii) to the knowledge of the Company, no
party in interest or disqualified person (as defined in Section 3(14) of ERISA
and Section 4975 of the Code) has at any time engaged in a transaction with
respect to any Company Employee Plan which could subject the Company or any
Company ERISA Affiliate, directly or indirectly, to a material tax, penalty or
other material liability for prohibited transactions under ERISA or Section 4975
of the Code; (iii) to the knowledge of the
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Company, no fiduciary of any Company Employee Plan has breached any of the
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA,
which breach is reasonably likely to result in any material liability to the
Company or any Company ERISA Affiliate; (iv) all Company Employee Plans have
been established and maintained substantially in accordance with their terms and
have operated in compliance in all material respects with the requirements of
applicable law (including but not limited to the applicable notification and
other requirements of COBRA, the Health Insurance Portability and Accountability
Act of 1996, the Newborns' and Mothers' Health Protection Act of 1996, the
Mental Health Parity Act of 1996, and the Women's Health and Cancer Rights Act
of 1998), and may (to the knowledge of the Company without a duty of inquiry) by
their terms be amended and/or terminated at any time to the greatest extent
permitted by applicable law, and the Company and each of its subsidiaries have
performed all material obligations required to be performed by them under, are
not in any material respect in default under or violation of, and have no
knowledge of any default or violation by any other party to, any of the Company
Employee Plans; (v) each Company Employee Plan which is intended to be qualified
under Section 401(a) of the Code is the subject of a favorable determination
letter from the IRS, and, to the Company's knowledge, nothing has occurred which
is reasonably likely to impair such determination; (vi) other than routine
claims for benefits made in the ordinary course of the operation of the Company
Employee Plans, there are no pending, nor to the Company's knowledge any
threatened, claims, investigations or causes of action with respect to any
Company Employee Plan, whether made by a participant or beneficiary of such a
plan, a governmental agency or otherwise, against the Company, any Company
director, officer or employee, any Company Employee Plan or any fiduciary of a
Company Employee Plan; and (vii) there are no communications to any employee,
former employee or any other person who may be entitled to benefits under any
Company Employee Plan that are materially inconsistent with any provision of any
Company Employee Plan.
(c) Section 2.11(c) of the Company Disclosure Schedule sets
forth a true and complete list ,as of the date of this Agreement, of each
current or former employee, officer or director of the Company or any of its
subsidiaries who holds (i) any option to purchase Company Common Stock as of the
date hereof, together with the number of shares of Company Common Stock subject
to such option, the option price of such option (to the extent determined as of
the date hereof), and the expiration date of such option; (ii) any shares of
Company Common Stock that are restricted; and (iii) any other right, directly or
indirectly, to receive Company Common Stock, together with the number of shares
of Company Common Stock subject to such right.
(d) To the extent not already included and so labeled in
Section 2.11(a) of the Company Disclosure Schedule, Section 2.11(d) of the
Company Disclosure Schedule sets forth a true and complete list, as of the date
of this Agreement, of (i) all employment agreements with officers of the Company
or any of its subsidiaries; (ii) all agreements with consultants who are
individuals that obligate the Company or any of its subsidiaries to make annual
cash payments in an amount exceeding $100,000; (iii) all agreements with respect
to the services of independent contractors or leased employees whether or not
they participate in any of the Company Employee Plans that obligate the Company
or any of its subsidiaries to make annual cash payments exceeding $100,000; (iv)
all officers of the Company or any of its subsidiaries who have executed a
non-competition agreement with the Company or any of its subsidiaries; and (v)
all plans, programs, agreements and other arrangements of the Company which
contain change of control provisions.
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(e) None of the Company Employee Plans is subject to Section
302 of ERISA, Section 412 of the Code or Title IV of ERISA.
(f) (i) The Company has never maintained an employee stock
ownership plan (within the meaning of Section 4975(e)(7) of the Code) or any
other Company Employee Plan that invests in Company stock; (ii) since December
8, 1999, the Company has not proposed nor agreed to any increase in benefits
under any Company Employee Plan (or the creation of new benefits) or change in
employee coverage which would materially increase the expense of maintaining any
Company Employee Plan; (iii) the consummation of the transactions contemplated
by this Agreement will not result in an increase in the amount of compensation
or benefits or accelerate the vesting or timing of payment of any benefits or
compensation payable in respect of any employee; and (iv) no person will be
entitled to any severance benefits under the terms of any Company Employee Plan
solely by reason of the consummation of the transactions contemplated by this
Agreement.
(g) The Company has no stock purchase plan or similar plan
pursuant to which employees of the Company or its subsidiaries are offered the
right or option to purchase securities of the Company other than the Company's
1992 and 1994 Stock Option Plans.
SECTION 2.12 LABOR MATTERS.
(a) There are no controversies, including any strikes,
slowdowns, work stoppages, lockouts, pending or, to the knowledge of the
Company, threatened, between the Company or any of its subsidiaries and any of
their respective employees, which controversies have had, or are reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect.
(b) Neither the Company nor any of its subsidiaries is a party
to any collective bargaining agreement or other labor union contract applicable
to persons employed by the Company or its subsidiaries, nor does the Company or
any of its subsidiaries know of any activities or proceedings of any labor union
to organize any significant number of such employees.
(c) The Company is in compliance with all applicable laws
(including any legal obligation to engage in affirmative action), agreements and
contracts relating to employment practices, terms and conditions of employment,
and the employment of former, current and prospective employees, independent
contractors and "leased employees" (within the meaning of Section 414(n) of the
Code) of the Company including all such laws, agreements and contracts relating
to wages, hours, collective bargaining, employment discrimination, immigration,
disability, civil rights, fair labor standards, occupational safety and health,
workers' compensation, pay equity, wrongful discharge and violation of the
potential rights of such former, current, and prospective employees, independent
contractors and leased employees, and has timely prepared and filed all
appropriate forms (including Immigration and Naturalization Service Form I-9)
required by any relevant governmental authority, except where the failure to be
in compliance is not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect.
SECTION 2.13 DISCLOSURE DOCUMENTS. The Schedule 13E-4 and the
Schedule 14D-9 will comply in all material respects with the Securities Exchange
Act, except that no
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representation or warranty is being made by the Company with respect to the
Parent Information (as defined below) included in the Schedule 13E-4 or the
Schedule 14D-9. Neither the Schedule 13E-4 nor the Schedule 14D-9 nor any of the
information relating to the Company or its affiliates provided by or on behalf
of the Company specifically for inclusion in the Schedule 14D-1 or the Offer
Documents will, at the respective times the Schedule 13E-4, the Schedule 14D-9,
the Schedule 14D-1 and the Offer Documents are filed with the SEC and are first
published, sent or given to stockholders of the Company, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. The Proxy
Statement will comply in all material respects with the applicable requirements
of the Securities Exchange Act, except that no representation or warranty is
being made by the Company with respect to the Parent Information included in the
Proxy Statement. The Proxy Statement will not, at the time the Proxy Statement
is filed with the SEC or first sent to stockholders or at the time of the
Company's stockholders' meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading except that no representation or warranty is
being made by the Company with respect to the Parent Information included in the
Proxy Statement.
SECTION 2.14 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for
this Agreement, to the Company's knowledge, there is no agreement, judgment,
injunction, order or decree binding upon the Company or any of its subsidiaries
which has or is reasonably likely to have the effect of prohibiting or impairing
the conduct of business by the Company or any of its subsidiaries as currently
conducted by the Company or such subsidiary, except for any prohibition or
impairment as is not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect.
SECTION 2.15 TITLE TO PROPERTY. The Company and each of its
subsidiaries have good title to all of their real properties and other assets,
free and clear of all liens, charges and encumbrances, except liens for taxes
not yet due and payable and such liens or other imperfections of title, if any,
as do not materially interfere with the present use of the property affected
thereby or which are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect, and except for liens which secure indebtedness
reflected in the 1999 Balance Sheet; and, to the knowledge of the Company, all
leases pursuant to which the Company or any of its subsidiaries lease from
others any real or personal property, are valid and effective in accordance with
their respective terms, and there is not, to the knowledge of the Company, under
any of such leases, any existing material default or event of default (or event
which with notice or lapse of time, or both, would constitute a material
default), except where the lack of such validity and effectiveness or the
existence of such default or event of default is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect.
SECTION 2.16 TAXES. Except as is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect:
(a) The Company and each of its subsidiaries has timely and
accurately filed, or caused to be timely and accurately filed, all material Tax
Returns (as hereinafter defined) required to be filed by it, and has paid,
collected or
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withheld, or caused to be paid, collected or withheld, all material amounts of
Taxes (as hereinafter defined) required to be paid, collected or withheld, other
than such Taxes for which adequate reserves in the 1999 Balance Sheet have been
established or which are being contested in good faith. There are no material
claims or assessments pending against the Company or any of its subsidiaries for
any alleged deficiency in any Tax, there are no pending audits or investigations
or, to the knowledge of the Company's Vice President/Controller or any other
officer senior thereto, threatened of or relating to any liability in respect of
any Taxes, and the Company has not been notified in writing of any proposed Tax
claims or assessments against the Company or any of its subsidiaries (other than
in each case, claims and assessments for which adequate reserves in the 1999
Balance Sheet have been established or which are being contested in good faith
or claims or assessments that are immaterial in amount). Neither the Company nor
any of its subsidiaries has executed any waivers or extensions of any applicable
statute of limitations to assess any material amount of Taxes. The federal
income tax returns of the Company and its subsidiaries have been audited by the
IRS for the taxable year through 1995. The statute of limitations period for
assessment of federal income taxes has expired for all taxable years through the
taxable year ending 1995. There are no outstanding requests by the Company or
any of its subsidiaries for any extension of time within which to file any
material Tax Return or within which to pay any material amounts of Taxes shown
to be due on any Tax Return. To the best knowledge of the Company, there are no
liens for material amounts of Taxes on the assets of the Company or any of its
subsidiaries except for statutory liens for current Taxes not yet due and
payable. Other than with respect to the Company and its subsidiaries, neither
the Company nor any of its subsidiaries is liable for Taxes of any other Person,
or is currently under any contractual obligation to indemnify any person with
respect to Taxes (except for customary agreements to indemnify lenders or
security holders in respect of taxes other than income taxes), or is a party to
any tax sharing agreement or any other agreement providing for payments by the
Company or any of its subsidiaries with respect to Taxes. Neither the Company
nor any of its subsidiaries will be required to include any adjustment in
taxable income for any period ending after the Closing under Section 481 of the
Code (or under any similar provision of the Tax laws of any jurisdiction) as a
result of a change in the method of accounting for a period ending on or before
the Closing or pursuant to an agreement with a Tax authority with regard to the
Tax liability of the Company or any of its subsidiaries for any period ending on
or before the Closing. There are no outstanding powers of attorney enabling any
party to represent the Company or any of its subsidiaries with respect to Tax
matters. Neither the Company nor any of its subsidiaries is a party to any joint
venture, partnership or other arrangement or contract which is or is reasonably
likely to be treated as a partnership for federal income tax purposes. None of
the Company's property is "tax exempt use property" within the meaning of
Section 168(h) of the Code. There are no private letter rulings in respect of
any Tax pending between the Company or its subsidiaries and any taxing
authority. The Company is not a party to any agreement, contract, arrangement or
plan that would result (taking into account the transactions contemplated by
this Agreement), separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code.
(b) For purposes of this Agreement, the term "TAX" shall mean
any United States federal, state, local, non-United States or provincial income,
gross receipts, property, sales, use, license, excise, franchise, employment,
payroll, alternative or add-on minimum, ad valorem, transfer or excise tax, or
any other tax, custom, duty, governmental fee or other like assessment or charge
imposed by any Governmental Authority, together with any interest or
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penalty imposed thereon. The term "TAX RETURN" shall mean a report, return or
other information (including any attached schedules or any amendments to such
report, return or other information) required to be supplied to or filed with a
Governmental Authority with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
SECTION 2.17 ENVIRONMENTAL MATTERS. (a) Except as is not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect, the operations and properties of the Company and its subsidiaries are in
compliance with applicable Environmental Laws (as hereinafter defined), which
compliance includes the possession by the Company and its subsidiaries of all
permits and governmental authorizations required under applicable Environmental
Laws, and compliance with the terms and conditions thereof.
(b) Except as is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect, there are no Environmental Claims
(as hereinafter defined), including claims based on "arranger liability,"
pending or, to the knowledge of the Company, threatened in writing against the
Company or any of its subsidiaries or against any person or entity whose
liability for any Environmental Claim the Company or any of its subsidiaries has
retained or assumed.
(c) There are no past or present actions, circumstances,
conditions, events or incidents, including the release, emission, discharge,
presence or disposal of any Materials of Environmental Concern (as hereinafter
defined), that are reasonably likely to form the basis of any Environmental
Claim against the Company or any of its subsidiaries or against any person or
entity whose liability for any Environmental Claim the Company or any of its
subsidiaries have retained or assumed, except for such Environmental Claims that
are not reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect.
(d) Except as is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect or as set forth in Section 2.17(d)
of the Company Disclosure Schedule or the Company SEC Reports, (i) the Company
has not been notified in writing that any locations where the Company or any of
its subsidiaries has stored, disposed or arranged for the disposal of Materials
of Environmental Concern which have been listed on the National Priority List,
or any analogous state site list, and the Company and its subsidiaries have not
been notified that any of them is a potentially responsible party at any such
location; (ii) there are no underground storage tanks located on property owned
or leased by the Company or any of its subsidiaries; (iii) there is no friable
asbestos containing material contained in or forming part of any building,
building component, structure or office space owned, leased or operated by the
Company or any of its subsidiaries; and (iv) there are no polychlorinated
biphenyls (PCBs) or PCB-containing items contained in or forming part of any
building, building component, structure or office space owned, leased or
operated by the Company or any of its subsidiaries; PROVIDED, HOWEVER, that
other than in the case of a Company Facility, the representations in clause
(ii), (iii), and (iv) are made to the knowledge of the Company.
(e) For purposes of this Agreement:
(i) "ENVIRONMENTAL CLAIM" means any written claim, action,
cause of action, investigation or written notice by any person or entity
alleging potential liability (including
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potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from the presence, or
release into the environment, of any Material of Environmental Concern at any
location, owned, leased or operated by the Company or any of its subsidiaries to
the extent occurring at the time of such ownership, lease or operation or at any
other time to the extent liability therefor has been retained or assumed by the
Company or any of its subsidiaries.
(ii) "ENVIRONMENTAL LAWS" means all United States federal,
state, local and non-United States laws, regulations, codes and ordinances,
relating to pollution or protection of human health and the environment
(including ambient air, surface water, ground water, land surface or sub-surface
strata), including but not limited to CERCLA, RCRA, TSCA, OSHA, the Clean Air
Act, the Clean Water Act, each as amended or supplemented, and any applicable
transfer statutes or laws.
(iii) "MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals,
pollutants, contaminants, hazardous materials, hazardous substances and
hazardous wastes, medical waste, toxic substances, petroleum and petroleum
products, asbestos-containing materials, polychlorinated biphenyls, and any
other chemicals, pollutants or substances regulated under any Environmental Law.
(iv) "COMPANY FACILITY" means each of the Company Warehouse,
Bldg. 11, 3336 State Route 73, Wilmington, Ohio and the Company Corporate
Headquarters at 535 Connecticut Avenue, Norwalk, Connecticut.
SECTION 2.18 BROKERS. No broker, finder or investment banker
(other than the Financial Advisor, the fees and expenses of whom will be paid by
the Company) is entitled to any brokerage, finder's or other fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company. The Company has heretofore
furnished to Parent a complete and correct copy of all agreements between the
Company and the Financial Advisor pursuant to which such firm would be entitled
to any payment relating to the transactions contemplated hereunder.
SECTION 2.19 INTELLECTUAL PROPERTY. (a) As used herein, the
term "INTELLECTUAL PROPERTY ASSETS" shall mean all worldwide intellectual
property rights, including, without limitation, patents, trademarks, service
marks and copyrights, and registrations and applications therefor, trade names,
common law marks, know-how, trade secrets, computer software programs and
proprietary information. As used herein, "COMPANY INTELLECTUAL PROPERTY ASSETS"
shall mean the Intellectual Property Assets used or owned by the Company or any
of its subsidiaries that are material to the business of the Company and its
subsidiaries as currently conducted.
(b) The Company and/or each of its subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use all Company
Intellectual Property Assets without conflict with the rights of others.
(c) Except as is not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect, no claims (i) are currently
pending or, to the knowledge of the Company, are threatened in writing by any
person with respect to the Company Intellectual
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Property Assets, or (ii) are currently pending or, to the knowledge of the
Company, threatened by any person with respect to the Intellectual Property
Assets of a third party (the "THIRD PARTY INTELLECTUAL PROPERTY ASSETS") to the
extent arising out of any use, reproduction or distribution of such Third Party
Intellectual Property Assets by or through the Company or any of its
subsidiaries.
(d) Except as is not reasonably likely to have a Material
Adverse Effect, neither the Company nor any of its subsidiaries knows of any
valid grounds for any bona fide claim to the effect that the licensing or use by
the Company or any of its subsidiaries of any product now licensed or used or
proposed for license or use by the Company or any of its subsidiaries infringes
on any Third Party Intellectual Property Assets, PROVIDED, HOWEVER, that nothing
in this Section 2.19(d) shall be deemed to apply to products purchased or
licensed by the Company for resale in the ordinary course of the Company's
business.
(e) The Company and/or each of its subsidiaries has made all
necessary filings and recordations to protect and maintain its interest in the
patents, patent applications, trademark and service mark registrations,
trademark and service mark applications, copyright registrations and copyright
applications and licenses included in the Company Intellectual Property Assets,
except where the failure to so protect or maintain is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect.
(f) (i) Each patent, patent application, trademark or service
mark registration, and trademark or service mark application and copyright
registration or copyright application of the Company and/or each of its
subsidiaries included in the Company Intellectual Property Assets is valid and
subsisting and (ii) each material license of Company Intellectual Property
Assets is valid, subsisting and enforceable.
(g) To the knowledge of the Company, there is no material
unauthorized use, infringement or misappropriation of any of the Company
Intellectual Property Assets by any third party, including any employee, former
employee, independent contractor or consultant of the Company or any of its
subsidiaries which is reasonably likely, individually or in the aggregate, to
result in a Material Adverse Effect.
(h) The disclosure under the heading "Year 2000" contained in
the Company's Quarterly Report on Form 10-Q for the period ended September 30,
1999 is accurate and in compliance with applicable law in all material respects.
SECTION 2.20 INTERESTED PARTY TRANSACTIONS. Except for events
as to which the amounts involved do not, in the aggregate, exceed $100,000,
since the Company's proxy statement dated April 30, 1999, no event has occurred
that would be required to be reported as a Certain Relationship or Related
Transaction pursuant to Item 404 of Regulation S-K promulgated by the SEC.
SECTION 2.21 INSURANCE. All material fire and casualty,
general liability, business interruption, product liability and sprinkler and
water damage insurance policies maintained by the Company or any of its
subsidiaries are with reputable insurance carriers, provide coverage appropriate
in character and amount for the businesses of the Company and its
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subsidiaries and their respective properties and assets, except as is not
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect.
SECTION 2.22 PRODUCT LIABILITY. Since January 1, 1998, the
Company has not received written notice of any claim, pending or threatened,
against the Company or any of its subsidiaries for injury to person or property
of employees or any third parties suffered as a result of the sale of any
product or performance of any service by the Company or any of its subsidiaries,
including claims arising out of the defective or unsafe nature of its products
or services, which is reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect.
SECTION 2.23 OPINION OF FINANCIAL ADVISOR. The Board of
Directors of the Company has been advised by the Financial Advisor to the effect
that in its opinion, as of the date of this Agreement, the Per Share Amount is
fair to the holders of Shares from a financial point of view.
SECTION 2.24 RIGHTS AGREEMENT. The Board of the Directors of
the Company has authorized and approved, and the Company has executed, an
amendment to the Rights Agreement (as defined in Section 4.02(d)) to the effect
that (i) none of Parent, Purchaser or their affiliates, either individually or
as a group, shall become an "Acquiring Person" (as defined in the Rights
Agreement) by virtue of the approval, execution or delivery of this Agreement,
the consummation of the transactions contemplated hereby or any announcement of
the same, and (ii) no Distribution Date or Share Acquisition Date (as each such
term is defined in the Rights Agreement) (each a "RIGHTS EVENT") shall occur by
virtue of the approval, execution or delivery of this Agreement, the
consummation of the transactions contemplated hereby or any announcement of the
same. The Company will use its reasonable best efforts to cause the Rights Agent
(as defined in the Rights Agreement) to execute such amendment as promptly as
practicable.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
Except as would not prevent or delay consummation of the
Merger or otherwise materially and adversely affect the ability of Parent, BYOWC
and Purchaser to perform their respective obligations under this Agreement or as
set forth in the disclosure schedule delivered by the Parent to the Company
prior to the execution of this Agreement (the "PARENT DISCLOSURE SCHEDULE"),
Parent and BYOWC, jointly and severally, hereby represent and warrant to the
Company as follows:
SECTION 3.01 ORGANIZATION AND GOOD STANDING. BYOWC is a
limited liability company duly organized, validly existing and in good standing
under the laws of Delaware and has all requisite limited liability company power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Each of Parent and Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of Delaware
and has all requisite corporate power and authority to own, lease and operate
its properties and to carry on its business as now being conducted. Other than
Purchaser, Parent has no subsidiaries.
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SECTION 3.02 AUTHORIZATION; BINDING AGREEMENT. BYOWC, Parent
and Purchaser have all requisite limited liability company or corporate power
and authority, as the case may be, to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation by Parent, Purchaser and BYOWC of the
transactions contemplated hereby (including, but not limited to, the Offer and
the Merger), have been duly and validly authorized by the members of BYOWC and
by the Boards of Directors of Parent and Purchaser, as applicable, and no other
limited liability company or corporate proceedings on the part of Parent,
Purchaser or BYOWC are necessary to authorize the execution and delivery of this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Parent, Purchaser and BYOWC
and, assuming due authorization, execution, and delivery by the Company,
constitute the legal, valid and binding obligations of Parent, Purchaser and
BYOWC.
SECTION 3.03 GOVERNMENTAL APPROVALS. No Consent from or with
any Governmental Authority on the part of Parent, Purchaser or BYOWC is required
in connection with the execution or delivery by Parent, Purchaser and BYOWC of
this Agreement, or the consummation by Parent, Purchaser and BYOWC of the
transactions contemplated hereby, other than filings with the SEC, any filings
under the HSR Act, compliance with applicable Blue-Sky Laws and any applicable
Foreign Monopoly Laws, such filings and consents as may be required under any
Environmental, Health and Safety Laws, and the filing and recordation of
appropriate merger or other documents as required by the DGCL.
SECTION 3.04 NO VIOLATIONS. The execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby and
compliance by Parent, Purchaser and BYOWC with any of the provisions hereof will
not (i) conflict with or result in any breach of any provision of the
Certificate of Formation and Operating Agreement of BYOWC or the Certificate of
Incorporation and Bylaws of Parent and Purchaser, (ii) require any Consent under
or result in a violation or breach of, or constitute (with or without notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of, any material note, bond, mortgage, indenture, contract, lease, license,
agreement or instrument to which Parent, Purchaser or BYOWC is a party or by
which Parent, Purchaser or BYOWC, or any of their assets or property is subject,
(iii) result in the creation or imposition of any material lien or encumbrance
of any kind upon any of the assets of Parent, Purchaser or BYOWC or (iv) subject
to obtaining the Consents from Governmental Authorities referred to in SECTION
3.03 hereof, violate any Law to which Parent, Purchaser or BYOWC or their
respective assets or properties are subject, except in any such case for any
such conflicts, violations, breaches, defaults or other occurrences that would
not prevent or delay consummation of the Offer or the Merger, or otherwise
materially and adversely affect the ability of Parent, Purchaser and BYOWC to
perform their respective obligations under this Agreement.
SECTION 3.05 DISCLOSURE DOCUMENTS. None of the information
supplied by Parent, Purchaser or BYOWC or their respective officers, directors,
managers, members, representatives, agents or employees (the "PARENT
INFORMATION") for inclusion in the Proxy Statement will, at the time the Proxy
Statement is filed with the SEC or first mailed to the Company's stockholders,
at the time of the Company's stockholders' meeting, contain any untrue statement
of a material fact, or will omit to state any material fact necessary in order
to
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make the statements therein, in light of the circumstances in which they were
made not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for such stockholders'
meeting which has become false or misleading. Neither the Schedule 14D-1 or the
Offer Documents or any amendments thereof or supplements thereto nor any of the
Parent Information provided specifically for inclusion in the Schedule 13E-4 or
the Schedule 14D-9 will, at the respective times the Schedule 14D-1, the Offer
Documents, the Schedule 13E-4 or the Schedule 14D-9 are filed with the SEC or
first published, sent or given to the Company's stockholders, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. Notwithstanding the foregoing, neither Parent
nor BYOWC makes any representation or warranty with respect to any information
that has been supplied by the Company or its accountants, counsel or other
authorized representatives for use in any of the foregoing documents. The
Schedule 14D-1 and the Offer Documents will comply as to form in all material
respects with the provisions of the Securities Exchange Act.
SECTION 3.06 FINDERS AND INVESTMENT BANKERS. Except for Credit
Suisse First Boston Corporation ("CSFB"), whose fees and expenses will be paid
by Parent, none of BYOWC, Parent, Purchaser, and their respective officers or
directors has employed any broker, finder or financial advisor or otherwise
incurred any liability for any brokerage fees, commissions or financial
advisors' or finders' fees in connection with the transactions contemplated
hereby.
SECTION 3.07 FINANCING ARRANGEMENTS. (a) Parent has, on or
prior to the date of this Agreement, entered into one or more subscription
agreements pursuant to which the subscribers thereunder have, subject to the
conditions set forth in this Agreement and no other conditions, agreed to make
an equity investment in Parent of an aggregate of $80 million in cash or Shares
valued at $19.00 per share for use in connection with the Offer and Merger (the
"EQUITY INVESTMENT").
(b) Parent has, on or prior to the date hereof, entered into a
commitment letter with an investment fund managed by Freeman Spogli & Co.
LLC ("FREEMAN SPOGLI") attached hereto as Exhibit 2, pursuant to which Freeman
Spogli has agreed, subject to the terms and conditions contained in such letter
and no other conditions, to make an equity investment in Parent (the "EQUITY
FINANCING") of an aggregate of $130 million in cash for use in connection with
the Offer and the Merger.
(c) Parent has, on or prior to the date hereof, entered into a
commitment letter with CSFB, CIBC Inc. ("CIBC") and CIBC World Markets Corp.
("CIBC WORLD") attached hereto as Exhibit 3, pursuant to which CSFB, CIBC and
CIBC World have committed, subject to the conditions contained in such letter
and no other conditions, to lend an aggregate of up to $320 million to Purchaser
in cash to the Purchaser for purposes of financing the Purchaser Offer (the
"DEBT FINANCING" and together with the Equity Financing, the "FINANCING") and,
effective upon the initial acceptance for payment of Shares pursuant to the
Offer, to make available to the Company and Purchaser a revolving credit
facility in the amount of up to $70 million (the "NEW COMPANY CREDIT FACILITY").
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(d) The Equity Investment and the Financing are sufficient,
together with the Company Contribution Amount, to pay the aggregate
consideration to the holder of Shares and Company Options as contemplated by
this Agreement and to make all other necessary payments of fees and expenses
required to be paid by Parent and Purchaser in connection with the transactions
contemplated by this Agreement.
SECTION 3.08 NO PRIOR ACTIVITIES. Except for obligations or
liabilities incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions contemplated
hereby (including any financing in connection therewith), Purchaser has not
incurred any obligations or liabilities and has not engaged in any business or
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any person or entity.
SECTION 3.09 DGCL SECTION 203. Other than by reason of this
Agreement or the transactions contemplated hereby, Parent is not an "interested
stockholder" of the Company, as that term is defined in Section 203 of the DGCL.
SECTION 3.10 BENEFICIAL OWNERSHIP OF SHARES. Except as
previously disclosed in writing to the Company, none of Parent, BYOWC or
Purchaser "beneficially owns" (as defined in Rule 13d-3 under the Securities
Exchange Act) any of the outstanding shares of Company Common Stock or any
securities convertible into or exchangeable for Company Common Stock.
SECTION 3.11 SURVIVING CORPORATION AFTER THE MERGER. At and
immediately after the Effective Time, and after giving effect to the Offer and
the Merger, any indebtedness incurred in connection with the Offer and the
Merger and any other transactions contemplated in connection therewith (and any
changes in the Surviving Corporation's assets and liabilities as a result
thereof), the Surviving Corporation will not (i) be insolvent (either because
its financial condition is such that the sum of its debts is greater than the
fair value of its assets or because the present fair saleable value of its
assets will be less than the amount required to pay its probable liabilities on
its debts as they mature), (ii) have unreasonably small capital with which to
engage in its business, or (iii) have incurred or plan to incur debts beyond its
ability to pay as they mature.
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ARTICLE IV
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 4.01 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
MERGER. The Company covenants and agrees that, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, unless Parent shall otherwise agree in writing,
and except as set forth in Section 4.01 of the Company Disclosure Schedule, the
Company shall conduct its business and shall cause the businesses of its
subsidiaries to be conducted only in, and the Company and its subsidiaries shall
not take any action except in, the ordinary course of business and in a manner
consistent with past practice; and the Company shall use reasonable commercial
efforts to preserve substantially intact the business organization of the
Company and its subsidiaries, to keep available the services of the present
officers, employees and consultants of the Company and its subsidiaries and to
preserve the present relationships of the Company and its subsidiaries with
customers, suppliers and other persons with which the Company or any of its
subsidiaries has significant business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, neither the Company nor
any of its subsidiaries shall, during the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Effective Time, and except as set forth in Section 4.01 of the Company
Disclosure Schedule, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Parent, which in the case of
clauses (c), (d)(iv), (e), (f), (h) or (i) will not be unreasonably withheld or
delayed:
(a) amend or otherwise change the Company's Certificate of
Incorporation or By-Laws;
(b) issue, sell, pledge, dispose of or encumber, or authorize
the issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest (including, without limitation, any phantom interest) in the
Company, any of its subsidiaries or affiliates (except for the issuance of
shares of Company Common Stock issuable pursuant to Company Options under the
Company Stock Option Plans, which options are outstanding on the date hereof);
(c) sell, pledge, dispose of or encumber any assets of the
Company or any of its subsidiaries (except for (i) sales of assets in the
ordinary course of business and in a manner consistent with past practice, (ii)
dispositions of obsolete or worthless assets, and (iii) sales of immaterial
assets not in excess of $250,000 in the aggregate);
(d) (i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, except that a wholly-owned subsidiary of
the Company may declare and pay a dividend to its parent, (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, (iii) except as required by the terms of any
security as in effect on the date hereof or expressly permitted hereunder, amend
the terms or change the period of exercisability of, purchase, repurchase,
redeem or otherwise
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acquire, or permit any subsidiary to amend the terms or change the period of
exercisability of, purchase, repurchase, redeem or otherwise acquire, any of its
securities or any securities of its subsidiaries, including, without limitation,
shares of Company Common Stock, or any option, warrant or right, directly or
indirectly, to acquire any such securities, or propose to do any of the
foregoing, or (iv) settle, pay or discharge any claim, suit or other action
brought or threatened against the Company with respect to or arising out of a
stockholder equity interest in the Company;
(e) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership or other business organization or
division thereof other than those listed on Section 4.01(e) of the Company
Disclosure Schedule; (ii) incur any indebtedness for borrowed money, except for
(x) borrowings and reborrowings under the Company's existing credit facilities
not in excess of $5 million and (y) other borrowings not in excess of $500,000
or issue any debt securities or assume, guarantee (other than guarantees of the
Company's subsidiaries entered into in the ordinary course of business) or
endorse or otherwise as an accommodation become responsible for, the obligations
of any person, or make any loans or advances, except in the ordinary course of
business consistent with past practice; or (iii) authorize any capital
expenditures or purchases of fixed assets which are, in the aggregate, in excess
of $8,000,000 from the date hereof until March 31, 2000; or (iv) enter into or
materially amend any contract, agreement, commitment or arrangement to effect
any of the matters prohibited by this Section 4.01(e);
(f) except as set forth in Section 4.01(f) of the Company
Disclosure Schedule, increase the compensation or severance payable or to become
payable to its directors, officers or employees, except for increases in salary
or wages of employees of the Company or its subsidiaries (who are not directors
or executive officers of the Company) in accordance with past practices, or
grant any severance or termination pay (except to make payments required to be
made under obligations existing on the date hereof in accordance with the terms
of such obligations) to, or enter into any employment or severance agreement,
with any new employee of the Company or any of its subsidiaries, except for an
agreement entered into in the ordinary course of business and providing for
annual base and bonus compensation not to exceed $150,000, or establish, adopt,
enter into or amend any collective bargaining agreement, Company Employee Plan
(within the meaning of Section 2.11 of this Agreement), trust, fund, policy or
arrangement for the benefit of any current or former directors, officers or
employees or any of their beneficiaries, except, in each case, as may be
required by law or as would not result in a material increase in the cost of
maintaining such collective bargaining agreement, Company Employee Plan, trust,
fund, policy or arrangement;
(g) take any action to change accounting policies or
procedures (including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable), except as required by a change in GAAP or SEC position occurring
after the date hereof;
(h) make any tax election or settle or compromise any United
States federal, state, local or non-United States tax liability;
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(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or otherwise)
in excess of $500,000 in the aggregate, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
statements contained in the Company SEC Reports or incurred in the ordinary
course of business and consistent with past practice; or
(j) take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.01(a) through (i) above, or any action which
would make any of the representations or warranties of the Company contained in
this Agreement untrue or incorrect (subject to the first sentence of Article II)
or prevent the Company from performing or cause the Company not to perform its
covenants hereunder.
SECTION 4.02 NO SOLICITATION. (a) The Company shall not,
directly or indirectly, through any officer, director, employee, representative
or agent of the Company or any of its subsidiaries, solicit or encourage the
initiation of (including by way of furnishing information) any inquiries or
proposals regarding any merger, sale of assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar transactions
involving the Company or any subsidiaries of the Company that if consummated
would constitute an Alternative Transaction (as defined in Section 7.01) (any of
the foregoing inquiries or proposals being referred to herein as an "ACQUISITION
PROPOSAL"). Nothing contained in this Agreement shall prevent the Board of
Directors of the Company from (i) furnishing information to a third person which
has made a BONA FIDE Acquisition Proposal that is a Superior Proposal (as
defined below) not solicited in violation of this Agreement, provided that such
person has executed an agreement with confidentiality provisions substantially
similar to those then in effect between the Company and BYOWC, or (ii) subject
to compliance with the other terms of this Section 4.02, including Sections
4.02(c), considering and negotiating a bona fide Acquisition Proposal that is a
Superior Proposal not solicited in violation of this Agreement; PROVIDED,
HOWEVER, that, as to each of clauses (i) and (ii), (x) such actions occur at a
time prior to the consummation (or, if the Offer is consummated and extended,
the initial consummation) of the Offer and (y) the Board of Directors of the
Company determines (after due consultation with independent counsel, which may
be Jones, Day, Reavis & Pogue) that it is or is reasonably likely to be required
to do so in order to discharge properly its fiduciary duties; PROVIDED, FURTHER,
that if a third person has made an Acquisition Proposal and the Company cannot
determine based upon the information provided by the third person whether the
Acquisition Proposal is a Superior Proposal, it may so indicate to the third
person. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means any proposal
made by a third person to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, all of the equity securities of the
Company entitled to vote generally in the election of directors or all or
substantially all the assets of the Company, on terms which the Board of
Directors of the Company reasonably believes (i) (after consultation with a
financial advisor of nationally recognized reputation) to be more favorable from
a financial point of view to its stockholders than the Offer and the Merger and
the transactions contemplated by this Agreement taking into account at the time
of determination any changes to the financial terms of this Agreement which as
of that time had been proposed by Parent and (ii) to be more favorable to the
Company than the Offer and the Merger and the transactions contemplated by this
Agreement after taking into account all pertinent factors
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deemed by the Board of Directors of the Company required under the laws of the
State of Delaware.
(b) The Company shall notify Parent after receipt of any
Acquisition Proposal, or any modification of or amendment to any Acquisition
Proposal, or any request for nonpublic information relating to the Company or
any of its subsidiaries in connection with an Acquisition Proposal or for access
to the properties, books or records of the Company or any subsidiary by any
person or entity that informs the Board of Directors of the Company or such
subsidiary that it is considering making, or has made, an Acquisition Proposal.
Such notice to Parent shall be made orally and in writing, and shall indicate
the identity of the person making the Acquisition Proposal or intending to make
an Acquisition Proposal or requesting non-public information or access to the
books and records of the Company, the terms of any such Acquisition Proposal or
modification or amendment to an Acquisition Proposal, and whether the Company is
providing or intends to provide the person making the Acquisition Proposal with
access to information concerning the Company as provided in Section 4.02(a). The
Company shall also promptly notify Parent, orally and in writing, if it enters
into negotiations concerning any Acquisition Proposal.
(c) Except to the extent the Board of Directors of the Company
determines in (after due consultation with independent counsel, which may be
Jones, Day, Reavis & Pogue) that it is or is reasonably likely to be required to
do so in order to discharge properly its fiduciary duties, neither the Company
nor the Board of Directors of the Company shall withdraw or modify, or propose
to withdraw or modify, in a manner adverse to Parent or Purchaser, the approval
by such Board of Directors of this Agreement, the Offer or the Merger; PROVIDED,
HOWEVER, that in no event may the Board of Directors withdraw or modify its
recommendation as aforesaid earlier than the second full business day following
Parent's receipt of written notice of the intention of the Board of Directors of
the Company to do so.
(d) The Company and the Board of Directors of the Company
shall not (i) redeem the rights (the "RIGHTS") issued under the Rights
Agreement, dated as of June 17, 1996, between the Company and State Street Bank
and Trust Company NA, as Rights Agent (the "RIGHTS AGREEMENT"), or waive or
amend any provision of the Rights Agreement, in any such case to permit or
facilitate the consummation of any Acquisition Proposal or Alternative
Transaction, or (ii) enter into any agreement with respect to, or otherwise
approve or recommend to stockholders, or publicly propose to approve or
recommend, any Acquisition Proposal or Alternative Transaction, unless this
Agreement has been terminated in accordance with its terms. It is understood and
agreed that a deferral of the distribution of Rights following the commencement
of a tender offer or exchange offer shall not be prohibited hereunder.
(e) Nothing contained in this Section 4.02 shall prohibit the
Company from taking and disclosing to its stockholders a position required by
Rule 14e-2(a) promulgated under the Securities Exchange Act or from making any
disclosure to its stockholders required by applicable law, rule or regulation.
(f) The Company shall immediately cease and cause to be
terminated any existing discussions or negotiations with any persons (other than
Parent) conducted heretofore with respect to any of the foregoing. The Company
agrees not to release any third party from the confidentiality and standstill
provisions of any agreement to which the Company is a party.
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(g) The Company shall ensure that the officers and directors
of the Company and the Company Significant Subsidiaries and any investment
banker or other advisor or representative retained by the Company are aware of
the restrictions described in this Section 4.02. The Company shall be
responsible for any failure of the Company's officers, directors, investment
bankers or other advisors or representatives to comply with such restrictions.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01 APPROVAL OF THE MERGER. As promptly as
practicable after the date on which the Purchaser and, if required, the Company,
complete the purchase of shares in the Offer (the "OFFER COMPLETION DATE") and
to the extent required by applicable law, the Company shall prepare and file
with the SEC preliminary proxy materials or a preliminary information statement
which shall constitute the Proxy Statement. As promptly as practicable after
comments are received from the SEC thereon and after the furnishing by Parent of
all Parent Information required to be contained therein, the Company shall file
with the SEC the definitive Proxy Statement relating to the adoption of this
Agreement and approval of the transactions contemplated hereby by the
stockholders of the Company pursuant to this Agreement. The Proxy Statement
shall contain the recommendation of the Board of Directors of the Company in
favor of approval of this Agreement and the Merger. Thereafter, the Company
shall take all steps necessary so that this Agreement and the Merger will be
presented for the approval of stockholders, either at a stockholders meeting
duly called for such purpose or by the written consent of stockholders in lieu
of a meeting in accordance with the DGCL. BYOWC, Parent and Purchaser will use
their reasonable best efforts to cause such meeting or consent (or the short
form merger described in the next sentence) to occur within six months after the
Offer Completion Date. The Company shall not be required to take any of the
action specified in this Section if Parent or Purchaser may consummate the
Merger without the vote or approval of stockholders in accordance with the short
form merger provisions of Section 253 of the DGCL.
SECTION 5.02 VOTING OF SHARES BY PURCHASER. At any meeting of
the Company's stockholders held for the purpose of voting upon this Agreement
and the Merger, Parent, Purchaser, BYOWC and any of their respective
subsidiaries shall vote all of the Shares then owned by them in favor thereof.
SECTION 5.03 ACCESS TO INFORMATION; CONFIDENTIALITY. (a) The
Company shall (and shall cause its subsidiaries to):
(i) afford to the officers, employees, accountants, counsel,
financing sources and other representatives of Parent, reasonable
access during normal business hours to its properties, books,
contracts, commitments and records;
(ii) furnish to Parent all information concerning its
business, properties and personnel as Parent may reasonably request or
has reasonably requested; and
(iii) make available during normal business hours to the
officers, employees, accountants, counsel, financing sources and other
representatives of Parent the
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appropriate individuals (including management personnel, attorneys,
accountants and other professionals) for discussion of the Company's
business, properties, prospects and personnel as Parent may reasonably
request.
(b) Parent shall keep all information disclosed to it pursuant
to this Section 5.03 confidential in accordance with the terms of the
confidentiality letter, dated November 22, 1999 (the "CONFIDENTIALITY LETTER"),
between BYOWC and the Company.
SECTION 5.04 CONSENTS; APPROVALS. The Company, BYOWC and
Parent shall each use its commercially reasonable efforts (which efforts, to the
extent reasonably practicable, shall be made prior to the consummation of the
Offer) to obtain all consents, waivers, approvals, authorizations or orders
(including, without limitation, all United States and foreign governmental and
regulatory rulings and approvals), and the Company and Parent shall make (or, if
applicable, BYOWC will make) all filings (including, without limitation, all
filings with United States and foreign governmental or regulatory agencies)
required in connection with the authorization, execution and delivery of this
Agreement by the Company and Parent and the consummation by them of the
transactions contemplated hereby. The Company, BYOWC, Purchaser and Parent shall
furnish all information required to be included in the Proxy Statement or for
any application or other filing to be made pursuant to the rules and regulations
of any United States or foreign governmental body in connection with the
transactions contemplated by this Agreement. If a filing under the HSR Act is
required with respect to the Merger, each party hereto shall make an appropriate
filing of a notification and report form pursuant to the HSR Act with respect to
the transactions contemplated hereby within ten business days after the date
hereof, shall promptly supply any additional information and documentary
material that may be requested pursuant to the HSR Act, and shall use
commercially reasonable efforts to obtain early termination of the waiting
period under the HSR Act. In addition, each party hereto shall promptly make any
other filing that may be required under any antitrust law or by any antitrust
authority.
SECTION 5.05 INDEMNIFICATION AND INSURANCE. (a) The
Certificate of Incorporation and Bylaws of the Surviving Corporation shall
contain the provisions with respect to indemnification set forth in the Amended
and Restated Certificate of Incorporation and the Bylaws of the Company, which
provisions shall not be amended, modified or otherwise repealed for a period of
six years from the Effective Time in any manner that would adversely affect the
rights thereunder as of the Effective Time of individuals who at the Effective
Time were directors, officers, employees or agents of the Company, unless such
modification is required after the Effective Time by law.
(b) The Surviving Corporation shall, to the fullest extent
permitted under applicable law or under the Surviving Corporation's Certificate
of Incorporation or Bylaws, indemnify and hold harmless, each present and former
director, officer or employee of the Company or any of its subsidiaries
(collectively, the "INDEMNIFIED PARTIES") against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, (x) arising out of or pertaining to the transactions contemplated
by this Agreement or (y) otherwise with respect to any acts or omissions
occurring at or prior to the Effective Time, to the same extent as provided
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in the Company's Amended and Restated Certificate of Incorporation or Bylaws or
any applicable contract or agreement as in effect on the date hereof, in each
case for a period of six years after the date hereof. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time) and subject to the specific terms of any
indemnification contract, (i) any counsel retained by the Indemnified Parties
for any period after the Effective Time shall be reasonably satisfactory to the
Surviving Corporation (and, for these purposes, Jones, Day, Reavis & Pogue shall
be deemed reasonably satisfactory to the Surviving Corporation), (ii) after the
Effective Time, the Surviving Corporation shall pay the reasonable fees and
expenses of such counsel, promptly after statements therefor are received and
(iii) the Surviving Corporation will cooperate in the defense of any such
matter; PROVIDED, HOWEVER, that the Surviving Corporation shall not be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld or delayed); and PROVIDED, FURTHER, that, in the event
that any claim or claims for indemnification are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim or
claims shall continue until the disposition of any and all such claims. The
Indemnified Parties as a group may retain only one law firm to represent them in
each applicable jurisdiction with respect to any single action unless there is,
under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties,
in which case each Indemnified Person with respect to whom such a conflict
exists (or group of such Indemnified Persons who among them have no such
conflict) may retain one separate law firm in each applicable jurisdiction.
(c) The Surviving Corporation shall honor and fulfill in all
respects the obligations of the Company pursuant to indemnification agreements
and employment agreements (the employee parties under such agreements being
referred to as the "OFFICER EMPLOYEES") with the Company's directors and
officers existing at or before the Effective Time.
(d) In addition, Parent will provide, or cause the Surviving
Corporation to provide, for a period of not less than six years after the
Effective Time, the Company's current directors and officers an insurance and
indemnification policy that provides coverage for events occurring at or prior
to the Effective Time (the "D&O INSURANCE") that is no less favorable than the
existing policy or, if substantially equivalent insurance coverage is
unavailable, the best available coverage; PROVIDED, HOWEVER, that Parent and the
Surviving Corporation shall not be required to pay an annual premium for the D&O
Insurance in excess of 300% of the annual premium currently paid by the Company
for such insurance, but in such case shall purchase as much such coverage as
possible for such amount.
(e) From and after the Effective Time, Parent shall
unconditionally guarantee the timely payment of all funds owing by, and the
timely performance of all other obligations of, the Surviving Corporation under
this Section 5.05.
(f) This Section shall survive the consummation of the Merger
at the Effective Time, is intended to benefit the Company, the Surviving
Corporation, the Indemnified Parties, and the Officer Employees, shall be
binding on all successors and assigns of the Surviving Corporation and shall be
enforceable by the Indemnified Parties. Without limiting the generality or
effect of the foregoing, in the event that the Surviving Corporation or any of
its successors or assigns (i) consolidates with or merges with any other person
and is not the
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continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers or conveys all or substantially all of its properties and assets
to any person, then, and in each such case, Parent shall cause proper provision
to be made so that the continuing or surviving corporation or purchase of such
properties and assets assumes the obligations set forth in this Section 5.05.
SECTION 5.06 NOTIFICATION OF CERTAIN MATTERS. The Company
shall give prompt notice to BYOWC and Parent, and BYOWC and Parent shall give
prompt notice to the Company, of (i) the occurrence or nonoccurrence of any
event the occurrence or nonoccurrence of which is reasonably likely to cause any
representation or warranty of such party contained in this Agreement to be
materially untrue or inaccurate, (ii) any failure of the Company or Parent, as
the case may be, materially to comply with or satisfy, or the occurrence or
nonoccurrence of any event the occurrence or nonoccurrence of which is
reasonably likely to cause the failure by such party materially to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; (iii) the Company obtaining knowledge of a material breach by
Parent, or Parent obtaining knowledge of a material breach by the Company, of
their respective representations, warranties, or covenants hereunder of which
the breaching party has not already given notice pursuant to clauses (i) or
(ii); or (iv) the occurrence of any other event which would be reasonably likely
(A) to have a Material Adverse Effect or (B) to cause any condition set forth in
ANNEX I or ANNEX II hereto to be unsatisfied in any material respect at any time
prior to the consummation of the Offer; PROVIDED, HOWEVER, that the delivery of
any notice pursuant to this Section shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice; and PROVIDED
FURTHER that failure to give such notice shall not be treated as a breach of
covenant for the purposes of Sections 7.01(h) or affect the rights and remedies
of the party obligated to give any notice pursuant to the foregoing clause (iii)
unless the failure to give such notice results in material prejudice to the
other party.
SECTION 5.07 FURTHER ACTION. Upon the terms and subject to the
conditions hereof, each of the parties hereto shall use all reasonable efforts
to take, or cause to be taken, all actions and to do, or cause to be done, all
other things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement, to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and otherwise to satisfy or
cause to be satisfied all conditions precedent to its obligations under this
Agreement. The Company agrees to cooperate reasonably with BYOWC, Purchaser and
Parent in connection with the negotiation and documentation of the Debt
Financing.
SECTION 5.08 PUBLIC ANNOUNCEMENTS. Parent and the Company
shall consult with each other before issuing any press release or making any
written public statement with respect to the Offer or Merger or this Agreement
and shall not issue any such press release or make any such public statement
without the prior consent of the other party, which shall not be unreasonably
withheld; PROVIDED, HOWEVER, that either party may, without the prior consent of
the other, issue such press release or make such public statement as may upon
the advice of counsel be required by law or the rules and regulations of The
Nasdaq Stock Market, in advance of obtaining such prior consent, if it has used
all reasonable efforts to consult with the other party.
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SECTION 5.09 CONVEYANCE TAXES. Parent and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and stamp
taxes, any transfer, recording, registration and other fees, and any similar
taxes which become payable in connection with the transactions contemplated
hereby that are required or permitted to be filed on or before the Effective
Time.
SECTION 5.10 OPTION PLANS AND BENEFITS, ETC. Prior to the
Effective Time, the parties to this Agreement shall take all such actions as
shall be necessary to effectuate the provisions of Section 1.10.
SECTION 5.11 EMPLOYEE MATTERS. (a) Parent shall cause the
Surviving Corporation to (i) satisfy all obligations of the Company under each
existing severance agreement or employment agreement between the Company and any
of its officers or employees, and (ii) for a period of one year beginning on the
Effective Time, provide each individual who, as of the Effective Time, is an
employee of the Company or any subsidiary of the Company (a "Company Employee"),
so long as he or she remains employed by the Surviving Corporation or a
subsidiary thereof during such one-year period, with (x) health and welfare
benefits that are comparable in the aggregate to such benefits as are provided
to Company Employees immediately prior to the Effective Time; (y) severance
benefits pursuant to the Company's Severance Pay Plan in effect immediately
prior to the Effective Time; and (z) 401(k) plan benefits and deferred
compensation benefits as in effect under the Company's 401(k) plan and deferred
compensation plan in effect immediately prior to the Effective Time.
Notwithstanding the foregoing, Parent, the Surviving Corporation, or any
subsidiary thereof may (A) terminate, amend or modify any health and welfare
employee benefit plan, program or arrangement in any respect, (B) terminate the
employment of any employee of, or the service of any independent contractor,
leased employee or other service provider to, the Surviving Corporation or any
subsidiary thereof, and (C) modify the terms and conditions of the employment of
any such employee or the service of any such independent contractor, leased
employee or other service provider.
(b) It is expressly agreed that the provisions of Section
5.11(a) are not intended to be for the benefit of or otherwise enforceable by
any third party, including, without limitation, any Company Employee or any
collective bargaining unit or employee organization.
(c) The Company shall use its reasonable best efforts to
obtain from each holder of a Company Option his or her consent to the provisions
of Section 1.10 prior to the initial expiration date of the Offer; PROVIDED,
HOWEVER, that, in any event, the Company shall obtain such consent from the
holders of 80% of such Company Options within 15 business days from the date
hereof.
SECTION 5.12 COMPLIANCE WITH STATE PROPERTY TRANSFER STATUTES.
The Company agrees that it shall use its reasonable commercial efforts to comply
promptly with all requirements of applicable state property transfer laws as may
be required by the relevant state agency and shall take all action necessary to
cause the transactions contemplated hereby to be effected in compliance with
applicable state property transfer laws. The Company, after consultation with
Parent, shall determine which actions, if any, must be taken prior to or after
the Effective Time to comply with applicable state property transfer laws. The
Company agrees to
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provide Parent with any documents required to be submitted to the relevant state
agency prior to submission, and the Company shall not take any action to comply
with applicable state property transfer laws without Parent's prior consent,
which consent shall not be unreasonably withheld, conditioned or delayed. BYOWC
and Parent shall provide to the Company any assistance reasonably requested by
the Company with respect to such compliance.
SECTION 5.13 FINANCING COVENANTS. (a) Parent covenants and
agrees that it will not, without the prior consent of the Company (which consent
shall not be unreasonably withheld), enter into any material amendment to, or
modification or waiver of, any of the terms of the Equity Investment, the Equity
Financing or the Debt Financing if such amendment, modification or waiver would
(i) reduce the aggregate amount of funds committed under the Equity Investment,
the Equity Financing or the Debt Financing, as the case may be, (ii) add
significant additional conditions to the consummation of the Equity Investment,
the Equity Financing or the Debt Financing or (iii) have a significant adverse
affect on or significantly delay the consummation of the Offer and/or the
Merger. BYOWC and Parent shall enforce, to the fullest extent permitted under
applicable law, the obligations of the respective investment and financing
sources to provide the Equity Investment, the Equity Financing and the Debt
Financing and shall use its reasonable best efforts to consummate the Equity
Investment, Equity Financing and Debt Financing. BYOWC and Parent shall cause
the capitalization and debt of Parent and its subsidiaries (other than the
Company) after giving effect to the transactions contemplated hereby, to be
satisfactory to the lenders under the Debt Financing. If any of the lenders or
investors under the Debt Financing or Equity Financing is provided a solvency
opinion, the Company shall be provided, as an addressee, with substantially the
same opinion.
Parent's obligations under this Section 5.13(a) shall not be
construed in any way as restricting the ability of Parent to modify or otherwise
alter the terms, conditions or relative amounts of any debt or equity financing
(including arranging for substitute providers of such debt or equity financing)
as long as such modification or alteration does not (i) reduce the aggregate
amount of funds under the commitments for the Equity Investment, the Equity
Financing and the Debt Financing entered into on or prior to the date hereof,
(ii) add significant additional conditions to the funding of any of the Equity
Investment, the Equity Financing or the Debt Financing, or (iii) have a
significant adverse affect on or significantly delay the consummation of the
Offer and/or the Merger.
(b) The Company covenants and agrees that:
(i) unless and until the Offer (including for this purpose any
extensions pursuant to Section 1.02(d)) is consummated or this
Agreement is terminated, the Company shall maintain on hand cash, cash
equivalents and/or marketable securities (the "COMPANY OFFER CASH") in
an amount equal to the sum of (x) $200,000,000 and (y) the Option
Exercise Amount;
(ii) the Company shall, simultaneously with Purchaser's first
purchase of the Shares tendered in the Offer, fully and unconditionally
guarantee (the "GUARANTEE") the Debt Financing and shall,
simultaneously with Purchaser's first purchase of Shares tendered in
the Offer, secure such Guarantee by a first priority lien on and
security interest in (together with the lien and security interest
securing the New Company Credit Facility) substantially all of the
assets of the Company (including, to the extent not used
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to purchase Shares in the Company Offer, the Company Offer Cash) on
terms reasonably required by the provider of the Debt Financing, as
approved by the Board of Directors of the Company (as constituted both
before and after Parent has designated Directors pursuant to Section
1.04) provided that the New Company Credit Facility shall at the time
have been substituted for the Company's existing bank credit facility;
and
(iii) simultaneously with Purchaser's first purchase of Shares
tendered in the Offer, the Company shall enter into the New Company
Credit Facility, and shall, simultaneously with Purchaser's first
purchase of Shares tendered in the Offer, secure its obligations under
the New Company Credit Facility by a first priority lien on and
security interest in (together with the lien and security interest
securing the Guarantee) substantially all of the assets of the Company
(including, to the extent not used to purchase Shares in the Company
Offer, the Company Offer Cash), on the terms set forth in Exhibit 3 and
such other customary terms for credit facilities of this nature as
shall reasonably be required by the provider for the New Company Credit
Facility, as approved by the Board of Directors of the Company (as
constituted both before and after Parent has designated Directors
pursuant to Section 1.04).
(c) The obligations contained in this Section 5.13 are not
intended, nor shall they be construed, to benefit or confer any rights upon any
third person.
ARTICLE VI
CONDITIONS TO THE MERGER
The respective obligations of each party to effect the Merger
shall be subject to the fulfillment or waiver at or prior to the Effective Time
of the following conditions:
SECTION 6.01 OFFER. The Offer Completion Date shall have
occurred; PROVIDED that this condition shall be deemed to have been satisfied
with respect to the obligation of Parent and Purchaser to effect the Merger if
Purchaser fails to accept for payment or pay for Shares pursuant to the Offer in
violation of the terms of the Offer or of this Agreement.
SECTION 6.02 STOCKHOLDER APPROVAL. This Agreement shall have
been adopted at or prior to the Effective Time by the requisite vote of the
stockholders of the Company in accordance with the DGCL.
SECTION 6.03 NO INJUNCTION OR ACTION. No order, statute, rule,
regulation, executive order, stay, decree, judgment or injunction shall have
been enacted, entered, promulgated or enforced by any court or other
Governmental Authority which prohibits or prevents the consummation of the
Merger which has not been vacated, dismissed or withdrawn prior to the Effective
Time. The Company and Parent shall use all reasonable best efforts to have any
of the foregoing vacated, dismissed or withdrawn by the Effective Time.
SECTION 6.04 GOVERNMENTAL APPROVALS. All Consents of any
Governmental Authority required for the consummation of the Merger and the
transactions contemplated by this Agreement shall have been obtained, except for
those Consents the failure to obtain which will not have a material adverse
effect on the business, assets, condition (financial or other),
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liabilities or results of operations of the Surviving Corporation and its
subsidiaries taken as a whole.
ARTICLE VII
TERMINATION
SECTION 7.01 TERMINATION. This Agreement may be terminated at
any time prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company:
(a) subject to Section 1.04, by mutual written consent duly
authorized by the Boards of Directors of Parent and the Company; or
(b) by either Parent or the Company if the initial
consummation of the Offer shall not have occurred on or prior to March 31, 2000;
PROVIDED, HOWEVER, that the right to terminate this Agreement under this Section
7.01(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Offer to be consummated on or prior to such date; or
(c) by either Parent or the Company if, as the result of the
failure of the Minimum Condition or any of the other conditions set forth in
Annex I hereto, the Offer shall have terminated or expired in accordance with
its terms without Purchaser having purchased any Shares pursuant to the Offer,
PROVIDED that if the failure to satisfy any conditions set forth in Annex I
shall be a basis for termination of this Agreement under any other clause of
this Section 7.01, a termination pursuant to this clause (c) shall be deemed a
termination under such other clause; or
(d) by either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a nonappealable final order, decree or ruling or taken any
other nonappealable final action having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger; or
(e) by Parent, if, whether or not permitted to do so by this
Agreement, the Board of Directors of the Company or the Company shall (x) (i)
withdraw, modify or change its approval or recommendation of the Offer, this
Agreement or the Merger in a manner adverse to Parent, (ii) approve or recommend
to the stockholders of the Company an Acquisition Proposal or Alternative
Transaction; or (iii) approve or recommend that the stockholders of the Company
tender their shares in any tender or exchange offer that is an Alternative
Transaction or (y) take any public position or make any disclosures to the
Company's stockholders, whether or not permitted pursuant to Section 4.02(e),
which has the effect of any of the foregoing; or
(f) by Parent or the Company, if any representation or
warranty of the Company or Parent, respectively, set forth in this Agreement
shall be untrue when made (without for this purpose giving effect to
qualifications of materiality contained in such representations and warranties),
if such failure to be true and correct, individually or in
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the aggregate, is reasonably likely to have a Material Adverse Effect (a
"TERMINATING MISREPRESENTATION"); PROVIDED that, if such Terminating
Misrepresentation is curable prior to the Initial Expiration Date (or any
extension thereof) by the Company or Parent, as the case may be, through the
exercise of its reasonable best efforts and for so long as the Company or
Parent, as the case may be, continues to exercise such reasonable best efforts,
neither Parent nor the Company, respectively, may terminate this Agreement under
this Section 7.01(f); or
(g) by Parent or the Company, if any representation or
warranty of the Company or Parent, respectively, set forth in this Agreement,
shall have become untrue (without for this purpose giving effect to
qualifications of materiality contained in such representations and warranties)
if such failure to be true and correct, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect (in either case, a
"TERMINATING CHANGE"), in either case other than by reason of a Terminating
Breach (as hereinafter defined); PROVIDED that, if any such Terminating Change
is curable prior to the Initial Expiration Date (or any extension thereof) by
the Company or Parent, as the case may be, through the exercise of its
reasonable best efforts, and for so long as the Company or Parent, as the case
may be, continues to exercise such reasonable best efforts, neither Parent nor
the Company, respectively, may terminate this Agreement under this Section
7.01(g); or
(h) by Parent or the Company, upon a material breach of any
covenant or agreement on the part of the Company or Parent, respectively, set
forth in this Agreement (a "TERMINATING BREACH"); PROVIDED THAT, except for any
breach of the Company's obligations under Section 4.02, if such Terminating
Breach is curable prior to the Initial Expiration Date (or any extension
thereof) by the Company or Parent, as the case may be, through the exercise of
its reasonable best efforts and for so long as the Company or Parent, as the
case may be, continues to exercise such reasonable best efforts, neither Parent
nor the Company, respectively, may terminate this Agreement under this Section
7.01(h); PROVIDED THAT, it is expressly agreed that for the purposes of this
Section 7.01(h) (x) the Company's failure to obtain the consents required by the
proviso of Section 5.11(c) shall be deemed to be material; and (y) a failure by
Parent, Purchaser or BYOWC to comply with Section 5.13 shall be deemed to be
material; or
(i) by the Company, in order to accept a Superior Proposal;
provided that (A) the Offer shall not theretofore have been consummated (or, if
the Offer is consummated and extended, initially consummated); (B) the Board of
Directors of the Company determines (after due consultation with independent
counsel, which may be Jones, Day, Reavis & Pogue) that it is or is reasonably
likely to be required to accept such proposal in order to discharge properly its
fiduciary duties; (C) the Company has given Parent two full business days'
advance notice of the Company's intention to accept such Superior Proposal; (D)
the Company shall in fact thereafter accept such proposal; (E) the Company shall
have paid the Fee and expenses pursuant to Section 7.04(b); and (F) the Company
shall have complied in all respects with the provisions of Section 4.02.
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Notwithstanding the foregoing, the right to terminate this
Agreement pursuant to clauses (e), (f), (g) and (h) above shall not be available
to Parent if Purchaser or any other affiliate of Parent shall have acquired
Shares pursuant to the Offer;
As used herein, "ALTERNATIVE TRANSACTION" means any of (i) a
transaction pursuant to which any person (or group of persons) other than Parent
or its affiliates (a "THIRD PARTY") acquires or would acquire more than 30% of
the outstanding shares of any class of equity securities of the Company, whether
from the Company or pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 30% of the outstanding equity
securities of the Company or the entity surviving such merger or business
combination, (iii) any transaction pursuant to which any Third Party acquires or
would acquire control of assets (including for this purpose the outstanding
equity securities of subsidiaries of the Company and securities of the entity
surviving any merger or business combination including any of the Company's
subsidiaries) of the Company, or any of its subsidiaries having a fair market
value (as determined by the Board of Directors of the Company in good faith)
equal to more than 30% of the fair market value of all the assets of the Company
and its subsidiaries, taken as a whole, immediately prior to such transaction,
or (iv) any other consolidation, business combination, recapitalization or
similar transaction involving the Company or any of the Company Significant
Subsidiaries that are "significant" under Regulation S-X at a level of 30% or
more, other than the transactions contemplated by this Agreement; PROVIDED,
HOWEVER, that the term Alternative Transaction shall not include any acquisition
of securities by a broker dealer in connection with a BONA FIDE public offering
of such securities.
SECTION 7.02 [INTENTIONALLY OMITTED]
SECTION 7.03 EFFECT OF TERMINATION. In the event of the
termination of this Agreement pursuant to Section 7.01, this Agreement shall
forthwith become void and there shall be no liability on the part of any party
hereto or any of its affiliates, directors, officers or stockholders except for
any obligation of Company, BYOWC or Parent set forth in Section 7.04 hereof.
Notwithstanding the foregoing, nothing herein shall relieve the Company, BYOWC
or Parent from liability for any willful breach hereof (it being understood that
(x) the provisions of Section 7.04 do not constitute a sole or exclusive remedy
for such willful breach and (y) the mere existence of a Material Adverse Effect,
by itself, shall not constitute such a willful breach), and nothing shall
relieve BYOWC or the Company or any of their affiliates of their obligations
under the Confidentiality Agreement.
SECTION 7.04 FEES AND EXPENSES. (a) Except as set forth in
this Section 7.04, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses, whether or not the Merger is consummated; PROVIDED,
HOWEVER, that Parent and the Company shall share equally all SEC filing fees and
printing expenses incurred in connection with the printing and filing of the
Proxy Statement (including any preliminary materials related thereto) and any
amendments or supplements thereto.
(b) The Company shall pay Parent a fee of $14,500,000 (the
"FEE") and shall also pay Parent $3,000,000 to reimburse Parent for documented
expenses relating to the
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transactions contemplated by this Agreement (which expenses shall include all
fees and expenses payable to any financing sources) upon the first to occur of
any of the following events:
(i) the termination of this Agreement by Parent or the Company
pursuant to Section 7.01(b) or Section 7.01(c), PROVIDED THAT an
Alternative Transaction shall be publicly announced by the Company or
any third party within nine months following the date of such
termination and such transaction shall at any time thereafter be
consummated on substantially the terms theretofore announced; PROVIDED,
HOWEVER, that for the purpose of this clause (i), all references to
"30%" in the definition of Alternative Transaction shall be deemed to
refer to "40%;"
(ii) the termination of this Agreement by Parent pursuant to
Section 7.01(e); or
(iii) the termination of this Agreement by the Company
pursuant to Section 7.01(i).
(c) Upon a termination of this Agreement by Parent pursuant to
Section 7.01(f) or 7.01(h), the Company shall pay to Parent Parent's actual,
documented and reasonable out-of-pocket expenses relating to the transaction
contemplated by this Agreement (including, but not limited to, fees and expenses
of counsel and accountants), but in no event more than $3,000,000, and shall
also pay to Parent Parent's actual and documented out-of-pocket expenses in the
nature of fees, costs and expenses paid to financing sources.
(d) Parent shall pay the Company's actual, documented and
reasonable out-of-pocket expenses relating to the transactions contemplated by
this Agreement (including, but not limited to, fees and expenses of counsel and
accountants and out-of-pocket expenses of financial advisors), such payment of
Company Expenses not to exceed $3,000,000, upon the termination of this
Agreement by the Company pursuant to Section 7.01(f) or 7.01(h).
(e) The Fee and expenses payable pursuant to Section 7.03(b),
or the expenses payable pursuant to Section 7.03(c), and the expenses payable
pursuant to Section 7.03(d), shall be paid within one business day after a
demand for payment following the first to occur of any of the events described
in Section 7.03(b), Section 7.03(c) or Section 7.03(d), as applicable; PROVIDED
THAT, in no event shall the Company be required to pay the Fee or any expenses
to Parent, nor shall Parent be required to pay any expenses to the Company if,
immediately prior to the termination of this Agreement, the entity entitled to
receive such fee and/or expenses was in material breach of its obligations under
this Agreement.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.01 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. (a) Except as otherwise provided in this Section 8.01, the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any person controlling any
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such party or any of their officers or directors, whether prior to or after the
execution of this Agreement. The representations, warranties and agreements in
this Agreement shall terminate at the Effective Time or upon the termination of
this Agreement pursuant to Section 7.01, as the case may be, except that the
agreements set forth in Article I and Sections 5.05 and any other agreement in
this Agreement which contemplates performance after the Effective Time shall
survive the Effective Time indefinitely and those set forth in Section 7.03
shall survive termination indefinitely. The Confidentiality Letter shall survive
termination of this Agreement.
(b) Any disclosure made with reference to one or more Sections
of the Company Disclosure Schedule shall be deemed disclosed with respect to
each other section therein as to which such disclosure is relevant provided that
such relevance is reasonably apparent. Disclosure of any matter in the Company
Disclosure Schedule shall not be deemed an admission that such matter is
material. No statement contained in any certificate or schedule required to be
furnished by any party pursuant to this Agreement, including the Company
Disclosure Schedule, shall contain any untrue statement of a material fact or
omit to state any material facts necessary under the circumstances, in order to
make the other statements contained therein not misleading.
SECTION 8.02 CERTAIN LIMITATIONS. (a) The representations and
warranties made in this Agreement by the Company shall be deemed for all
purposes to be qualified by the disclosures made in the Company Disclosure
Schedule, regardless of whether in the case of any particular representation or
warranty such representation or warranty refers to the specific section of the
Company Disclosure Schedule in which disclosure is made or to any other portion
thereof, so long as the relevance of a disclosure to the matter in question in
another portion of the Company Disclosure Schedule is reasonably apparent.
(b) The parties hereto expressly acknowledge that regardless
of the facts or circumstances, (i) no financial advisor, attorney, director,
officer, employee, member, manager, stockholder or other representative of any
party (a "REPRESENTATIVE") had, has or will have any duty to any other party in
connection with this Agreement or the transaction contemplated hereby and (ii)
no party will have any right of recovery against a Representative of any other
party by reason of this Agreement or the transactions contemplated hereby on any
theory, whether for alleged breach of contract, negligent misrepresentation,
actual or constructive fraud, federal or state securities or other laws or
otherwise; PROVIDED, HOWEVER, that nothing in this Section shall relieve any
party of liability for the acts or omissions of its Representatives to the
extent such liability attaches under this Agreement or applicable principles of
law.
(c) The parties hereto hereby waive any and all claims or
causes of action that might be asserted in connection with the transactions
contemplated by this Agreement, including under common law (including common law
fraud, constructive fraud, negligent misrepresentation or similar theories) or
federal or state securities law including Rule 10b-5 under the Securities
Exchange Act, trade regulation, environmental or other laws, except for claims
or causes of action brought under and subject to the terms of this Agreement.
(d) Each of the parties is a sophisticated legal entity that
was advised by experienced counsel and, to the extent it deemed necessary, other
advisors in connection with this Agreement, the events giving rise hereto and
the transactions contemplated hereby, including
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the Merger (collectively, the "Transaction"). Accordingly, each of the parties
hereby acknowledges and agrees (on behalf of itself and its affiliates) that:
(i) No party has relied or will rely upon any written or oral
information previously furnished to or discovered by it or its
representatives (including without limitation data room information or
oral or written information previously furnished by or on behalf of the
Company in connection with the Transaction, including without
limitation information furnished by the Company, any affiliate of any
of the Company or any of their respective Representatives, other than
this Agreement (including the Schedules hereto);
(ii) There are no representations or warranties by or on
behalf of any party hereto, the Company, any of their respective
affiliates or any Company Representative in respect of the Transaction
other than those expressly set forth in this Agreement (including the
Schedules hereto); and
(iii) The parties' respective rights, obligations and remedies
with respect to the Transaction will be solely pursuant to this
Agreement.
SECTION 8.03 NOTICES. All notices and other communications
given or made pursuant hereto shall be in writing and shall be deemed to have
been duly given or made if and when delivered personally or by overnight courier
to the parties at the following addresses or sent by electronic transmission,
with confirmation received, to the telecopy numbers specified below (or at such
other address or telecopy number for a party as shall be specified by like
notice):
(a) If to Parent:
BYOWC Partners LLC
9965 Wilshire Blvd.
Beverly Hills, CA 90212
Attn: Alfred D. Boyer
Telecopy: (310) 937-6149
Confirm: (310) 247-2711
With a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attn: Joshua M. Berman, Esq.
Telecopy: (212) 715-8000
Confirm: (212) 715-9100
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(b) If to the Company:
Micro Warehouse, Inc.
535 Connecticut Avenue
Norwalk, CT 06854
Attn: Bruce L. Lev, Esq.
Telecopy: (203) 899-4000
Confirm: (203) 899-4312
With a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attn: Randi L. Strudler, Esq.
Telecopy: (212) 755-7306
Confirm: (212) 326-3939
SECTION 8.04 CERTAIN DEFINITIONS. For purposes of this
Agreement, the term:
(a) "affiliates" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(b) "business day" means any day other than a day on which
banks in New York are required or authorized to be closed, except that for the
purpose of determining any period of time prescribed by the rules and
regulations of the SEC, "business day" shall mean any day other than a day on
which the SEC is officially closed;
(c) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(d) "knowledge of the Company" means the actual knowledge of
the executive officer of the Company and those persons employed by the Company
who have primary responsibility for the matter in question after reasonable
review of the applicable files in such person's possession, without a duty to
conduct any special investigation outside of the ordinary course of business;
(e) "person" means an individual, corporation, partnership,
limited liability company, association, trust, unincorporated organization,
other entity or group (as defined in Section 13(d)(3) of the Securities Exchange
Act); and
(f) "subsidiary" or "subsidiaries" of the Company, the
Surviving Corporation, Parent, BYOWC or any other person means any corporation,
partnership, joint venture or other legal entity of which the Company, the
Surviving Corporation, Parent, BYOWC or
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such other person, as the case may be (either alone or through or together with
any other subsidiary), owns, directly or indirectly, more than 50% of the stock
or other equity 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.
SECTION 8.05 AMENDMENT. This Agreement may be amended by the
parties hereto by action taken by or on behalf of their respective Boards of
Directors at any time prior to the Effective Time; PROVIDED, HOWEVER, that,
after approval of the Merger and this Agreement by the stockholders of the
Company, no amendment may be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 8.06 WAIVER. At any time prior to the Effective Time,
any party hereto may with respect to any other party hereto (a) extend the time
for the performance of any of the obligations or other acts, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, or (c) waive compliance with any of the
agreements or conditions contained herein. Any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
SECTION 8.07 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.
SECTION 8.08 SEVERABILITY. (a) 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 contemplated hereby is not affected in any
manner adverse to any party. Upon a 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.
(b) The Company and Parent agree that the Fee and expense
provisions in Section 7.04 are fair and reasonable in the circumstances. If a
court of competent jurisdiction shall nonetheless, by a final, non-appealable
judgment, determine that the amount of either the Fee or the expenses exceeds
the maximum amount permitted by law, then the amount of such Fee or expenses
shall be reduced to the maximum amount permitted by law in the circumstances, as
determined by such court of competent jurisdiction.
SECTION 8.09 ENTIRE AGREEMENT. This Agreement constitutes the
entire agreement and supersedes all prior agreements and undertakings (other
than the Confidentiality Letter, except to the extent specifically superseded
hereby), both written and oral, among the parties, or any of them, with respect
to the subject matters hereof and thereof, except as otherwise expressly
provided herein or therein.
SECTION 8.10 ASSIGNMENT; MODIFICATION OF STRUCTURE. (a) This
Agreement shall not be assigned by operation of law or otherwise; except that
all or any of the
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rights of Parent and/or Purchaser hereunder may be assigned to
any subsidiary of BYOWC; provided that no such assignment shall relieve the
assigning party of its obligations hereunder.
(b) At the election of Parent, BYOWC, Parent, Purchaser and
the Company shall take all steps necessary such that the merger of Purchaser and
the Company shall be structured as a merger of Purchaser with and into the
Company, with the Company being the Surviving Corporation, in accordance with
the provisions of the DGCL. Except as may be necessary to reflect this change in
transaction structure, the terms of this Agreement and the obligations of the
parties pursuant hereto shall remain unchanged.
SECTION 8.11 PARTIES IN INTEREST. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, including, without limitation, by way of subrogation,
other than Section 5.05 (which is intended to be for the benefit of the
Indemnified Parties and Officer Employees and may be enforced by such
Indemnified Parties and Officer Employees).
SECTION 8.12 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. All rights and remedies
existing under this Agreement are cumulative to, and not exclusive of, any
rights or remedies otherwise available.
SECTION 8.13 ENFORCEMENT; GOVERNING LAW; JURISDICTION. (a)
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware applicable to contracts executed and
fully performed within the State of Delaware, regardless of laws that might
otherwise govern under applicable principles of conflict of laws thereof.
(b) The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law 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 Delaware
state court, this being in addition to any other remedy to which they are
entitled at law or in equity.
(c) Each of the parties hereto (I) (a) consents to submit
itself 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 by this Agreement and (b)
agrees that it will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, and (II) (a) agrees that
any action under this Agreement may also be brought in any Federal or state
court located in the City of New York, Borough of Manhattan and (b) agrees that
it will not by motion or other action contest the
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bringing of any such action in the above mentioned courts rather than in any
other venue or forum.
SECTION 8.14 COUNTERPARTS. This Agreement may be executed in
two or more 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. A
facsimile copy of a signature page shall be deemed and original signature page.
SECTION 8.15 WAIVER OF JURY TRIAL. BYOWC, PARENT AND PURCHASER
AND THE COMPANY HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY
LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.16 OBLIGATIONS OF BYOWC. BYOWC shall be jointly and
severally responsible with Parent and/or Purchaser for each and every obligation
of Parent or Purchaser under this Agreement to be performed at or prior to the
Effective Time.
SECTION 8.17 INTERPRETATION. When a reference is made in this
Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents to this Agreement is for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant thereto unless otherwise defined therein.
The definitions contained in this Agreement are applicable to the singular as
well as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
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IN WITNESS WHEREOF, BYOWC, Parent, Purchaser and the Company
have caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
BYOWC PARTNERS LLC
By: /s/ Alfred D. Boyer
---------------------------------
Name: Alfred D. Boyer
Title: Managing Member
BRIDGEPORT HOLDINGS INC.
By: /s/ Alfred D. Boyer
---------------------------------
Name: Alfred D. Boyer
Title: Vice President
BRIDGEPORT ACQUISITION CORPORATION
By: /s/ Alfred D. Boyer
---------------------------------
Name: Alfred D. Boyer
Title: Vice President
MICRO WAREHOUSE, INC.
By: /s/ Bruce L. Lev
---------------------------------
Name: Bruce L. Lev
Title: Executive Vice President
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ANNEX I
CONDITIONS TO THE OFFER. Notwithstanding any other provision
of the Purchaser Offer, 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) promulgated under the Securities Exchange Act (relating to the
obligation of Purchaser to pay for or return tendered Shares promptly after
termination or withdrawal of the Purchaser Offer), pay for, and (subject to any
such rules or regulations) may delay the acceptance for payment of any tendered
Shares and (except as provided in this Agreement) amend or terminate the
Purchaser Offer if (i) there shall not be validly tendered and not withdrawn
prior to the expiration of the Offer a number of Shares such that, upon
consummation of the Offer and contribution to the Purchaser of the Shares owned
by BYOWC, Purchaser would own at least 51% of the total number of issued and
outstanding Shares on a fully diluted basis, (the "MINIMUM CONDITION") or (ii)
any applicable waiting period under the HSR Act shall not have expired or been
terminated prior to the expiration of the Offer or (iii) at any time after the
date of this Agreement and before the initial time of acceptance of Shares for
payment pursuant to the Offer, any of the following conditions exists,
(a) there shall be in effect an injunction or other order,
decree, judgment or ruling by a Governmental Authority of competent jurisdiction
or a law, rule or regulation shall have been promulgated, or enacted by a
Governmental Authority of competent jurisdiction which in any such case (i)
restrains or prohibits the making or consummation of the Offer or the
consummation of the Merger, or (ii) prohibits or restricts the ownership or
operation by Parent (or any of its affiliates or subsidiaries) of any portion of
the Company's business or assets, which is material to the business of the
Company taken as a whole or which would substantially deprive Parent and/or its
affiliates or subsidiaries of the benefit of ownership of the Company's business
or assets, or compels Parent (or any of its affiliates or subsidiaries) to
dispose of or hold separate any portion of the Company's business or assets, or
its or BYOWC's business or assets, or which would substantially deprive Parent
and/or its affiliates or subsidiaries of the benefit of ownership of the
Company's business or assets, or (iii) imposes material limitations on the
ability of Purchaser effectively to acquire or to hold or to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote Shares purchased by Purchaser pursuant to the Offer or acquired by Parent
in the Merger on all matters properly presented to the stockholders of the
Company, or (iv) imposes any material limitations on the ability of Parent
and/or its affiliates or subsidiaries effectively to control in any material
respect the business and operations of the Company (other than, prior to the
Effective Time, by reason of there being minority stockholder in the Company);
or
(b) there shall have been instituted, pending or threatened
(in writing or by public announcement) an action by a Governmental Authority
seeking (i) to restrain or prohibit the making or consummation of the Offer or
the consummation of the Merger or (ii) to impose any other restriction,
prohibition or limitation referred to in the foregoing paragraph (a); or
(c) this Agreement shall have been terminated by the Company
or Parent in accordance with its terms; or
(d) Parent and the Company shall have agreed in writing that
Purchaser shall amend the Offer to terminate the Offer or postpone the payment
for Shares pursuant thereto; or
-51-
<PAGE>
(e) there shall have occurred (i) any general suspension of,
or limitation on prices for, trading in the Shares on NASDAQ or (ii) a
declaration of a banking moratorium or any general suspension of payments in
respect of banks in the United States; or
(f) all proceeds of the Financing necessary to consummate the
Offer shall not have been received by Purchaser or the New Company Credit
Facility shall not be in effect; PROVIDED that this condition shall not apply if
(x) the failure of Purchaser to receive the proceeds of the Financing or the
failure of the New Company Credit Facility to be in effect shall have been
occasioned by the action or inaction by BYOWC or Parent, which action or
inaction also constitutes a breach of any material covenant, representation or
warranty of BYOWC or Parent under this Agreement or (y) the failure of Purchaser
to receive the proceeds of the Equity Financing shall have been occassioned by
the inability to document such financing in a manner reasonably satisfactory to
Freeman Spogli; or
(g) any of the representations and warranties made by the
Company in this Agreement shall not have been true and correct when made, or
shall thereafter have ceased to be true and correct as if made as of such later
date (other than representations and warranties made as of a specified date) (in
each case without for this purpose giving effect to qualifications of
materiality contained in such representation and warranty), or the Company shall
not have performed each obligation and agreement and complied with each covenant
to be performed and complied with by it under this Agreement, if such failure to
be true and correct or such failure to perform, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect, PROVIDED,
HOWEVER, that such breach or failure to perform is incapable of being cured or
has not been cured the Initial Expiration Date (as it may be extended); or
(h) the Company's Board of Directors shall have modified or
amended its recommendation of the Offer in any manner adverse to Parent or shall
have withdrawn its recommendation of the Offer, or shall have recommended
acceptance of any Acquisition Proposal or shall have resolved to do any of the
foregoing; or
(i) (i) any corporation, entity or "group" (as defined in
Section 13(d)(3) of the Securities Exchange Act) ("PERSON/GROUP"), other than
Parent and Purchaser and any person/group identified in the Company's Proxy
Statement dated June 3, 1999), shall have acquired beneficial ownership of more
than 15% of the outstanding Shares, or shall have been granted any options or
rights, conditional or otherwise, to acquire a total of more than 15% of the
outstanding Shares and which, in each case, does not tender the Shares
beneficially owned by it in the Offer; (ii) any new group shall have been formed
which beneficially owns more than 15% of the outstanding Shares and which does
not tender the Shares beneficially owned by it in the Offer; or (iii) any
person/group (other than Parent or one or more of its affiliates) shall have
entered into an agreement in principle or definitive agreement with the Company
with respect to a tender or exchange offer for any Shares or a merger,
consolidation or other business combination with or involving the Company; or
(j) any change, development, effect or circumstance shall have
occurred or be threatened that is reasonably likely to have a Material Adverse
Effect with respect to the Company; or
(k) the Rights shall have become exercisable; or
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<PAGE>
(l) the Company shall commence a case under any chapter of
Title XI of the United States Code or any similar law or regulation; or a
petition under any chapter of Title XI of the United States Code or any similar
law or regulation is filed against the Company which is not dismissed within 2
business days; or
(m) the Company Offer shall not be consummated at the same
time as the Purchaser Offer (other than by reason of the fact that the number of
Shares tendered in the Offer were not sufficient to require the purchase of
Shares by the Company in the Offer pursuant to Section 1.02).
The foregoing conditions are for the sole benefit of Parent
and Purchaser and may be asserted by Parent and Purchaser regardless of the
circumstances giving rise to any such condition, and may be waived by Parent and
Purchaser, in whole or in part, at any time and from time to time, in the sole
discretion of Parent and Purchaser. The failure by Parent and Purchaser at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
right, the waiver of such right with respect to any particular facts or
circumstances shall not be deemed a waiver with respect to any other facts or
circumstances, and each right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
Should the Purchaser Offer be terminated pursuant to the
foregoing provisions, all tendered Shares not theretofore accepted for payment
pursuant thereto shall forthwith be returned to the tendering stockholders.
-53-
<PAGE>
ANNEX II
CONDITIONS TO THE OFFER. Notwithstanding any other provision
of the Company Offer, the Company shall not be required to accept for payment
or, subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) promulgated under the Securities Exchange Act (relating to the
obligation of the Company to pay for or return tendered Shares promptly after
termination or withdrawal of the Company Offer), pay for, and (subject to any
such rules or regulations) `may delay the acceptance for payment of any tendered
Shares and (except as provided in this Agreement) amend or terminate the Company
Offer for if (i) there shall not be validly tendered and not withdrawn prior to
the expiration of the Offer a number of Shares such that, upon consummation of
the Offer and contribution to the Purchaser of the BYOWC Shares, Purchaser would
own at least 51% of the total number of issued and outstanding Shares on a fully
diluted basis, (the "MINIMUM CONDITION") or (ii) any applicable waiting period
under the HSR Act shall not have expired or been terminated prior to the
expiration of the Offer or (iii) at any time after the date of this Agreement
and before the initial time of acceptance of Shares for payment pursuant to the
Offer, any of the following conditions exists,
(a) there shall be in effect an injunction or other order,
decree, judgment or ruling by a Governmental Authority of competent jurisdiction
or a law, rule or regulation shall have been promulgated, or enacted by a
Governmental Authority of competent jurisdiction which in any such case
restrains or prohibits the making or consummation of the Offer or the
consummation of the Merger; or
(b) there shall have been instituted, pending or threatened
(in writing or by public announcement) an action by a Governmental Authority
seeking to restrain or prohibit the making or consummation of the Offer or the
consummation of the Merger; or
(c) this Agreement shall have been terminated by the Company
or Parent in accordance with its terms, including by the Company pursuant to
Section 7.01(i); or
(d) Parent and the Company shall have agreed that Purchaser
shall amend the Offer to terminate the Offer or postpone the payment for Shares
pursuant thereto; or
(e) there shall have occurred (i) any general suspension of,
or limitation on prices for, trading in the Shares on NASDAQ or (ii) a
declaration of a banking moratorium or any general suspension of payments in
respect of banks in the United States; or
(f) any of the representations and warranties made by Parent
in the Merger Agreement shall not have been true and correct when made, or shall
thereafter have ceased to be true and correct as if made as of such later date
(other than representations and warranties made as of a specified date) (in each
case without for this purpose giving effect to qualifications of materiality
contained in such representation and warranty), or Parent shall not have
performed each obligation and agreement and complied with each covenant to be
performed and complied with by it under this Agreement, if such failure to be
true and correct or such failure to perform, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect, PROVIDED, however, that
such breach or failure to perform is incapable of being cured or has not been
cured the Initial Expiration Date (as it may be extended); or
-54-
<PAGE>
(g) the New Company Credit Facility shall not be in effect,
PROVIDED that this condition shall not apply if the failure of the New Company
Credit Facility to be in effect shall have been occasioned by the action or
inaction of the Company, which action or inaction also constitutes a breach of
any material covenant, representation or warranty of the Company under this
Agreement; or
(h) the Purchaser Offer shall not be consummated at the same
time as the Company Offer.
The foregoing conditions are for the sole benefit of the
Company and may be asserted by the Company regardless of the circumstances
giving rise to any such condition, and may be waived by the Company, in whole or
in part, at any time and from time to time, in the sole discretion of the
Company. The failure by the Company at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any right, the waiver of such right with
respect to any particular facts or circumstances shall not be deemed a waiver
with respect to any other facts or circumstances, and each right shall be deemed
an ongoing right which may be asserted at any time and from time to time.
Should the Company Offer be terminated pursuant to the
foregoing provisions, all tendered Shares not theretofore accepted for payment
pursuant thereto shall forthwith be returned to the tendering stockholders.
-55-
<PAGE>
EXHIBIT 1
TO THE AGREEMENT AND PLAN OF MERGER
BY AND AMONG
BYOWC PARTNERS LLC,
BRIDGEPORT HOLDINGS INC.
BRIDGEPORT ACQUISITION CORPORATION
AND MICRO WAREHOUSE, INC.
SUMMARY OF TERMS OF WARRANT*
ISSUER: Surviving Corporation
SECURITY: Warrant to purchase common stock.
NUMBER OF SHARES: The sum of (i) the number of Shares
purchased by the Company in the Offer; (ii)
the number of shares exchanged for cash
consideration in the Merger; and (iii) the
number of Dissenting Shares.
EXERCISE PRICE: $19 per share in cash.
DATE OF ISSUANCE: The Closing Date of the Merger.
TERM: 10 years from the date of issuance.
ANTI-DILUTION: Subject to customary anti-dilution provisions.
Assumes an initial number of shares of common
stock of the Surviving Corporation equal to
the number of Shares held by BYOWC, Parent,
Purchaser or any direct or indirect wholly
owned subsidiary of BYOWC immediately prior to
the Effective Time.
- --------
* Defined terms have the meanings assigned to them in the Merger Agreement.
-56-
<PAGE>
EXHIBIT 2
December 20, 1999
BYOWC Partners LLC
9965 Wilshire Boulevard
Beverly Hills, California 90212
RE: PROJECT BRIDGEPORT
Gentlemen:
The purpose of this letter is to set forth the undersigned's commitment
to provide preferred and common equity financing for the acquisition, by a new
company ("Acquisition") to be formed by the undersigned and you and your
associates, of all of the common stock of Bridgeport, Inc. in a combined tender
offer, self tender and merger pursuant to an acquisition agreement (the
"Acquisition Agreement") in form and substance satisfactory to the undersigned
and you.
Attached hereto are Summary Term Sheets for (i) a Securities Purchase
Agreement pursuant to which the undersigned would purchase preferred stock (the
"Preferred Shares") of Acquisition's parent ("Holdings") and 50 percent of the
common stock (the "Common Shares") of Holdings (with the other 50 percent of the
Common Shares to be purchased by you and your associates), (ii) warrants to
purchase Common Shares representing 20 percent of the initial primary Common
Shares, which would be acquired by you and your associates, and (iii) a
Securityholders Agreement providing for certain matters relating to, among other
things, the composition of Holding's board of directors and its governance and
certain rights and obligations, including registration rights, relating to exit
transactions.
We are pleased to commit, subject to the conditions set forth herein
and in the attachments hereto, to purchase, at the Closing under the Acquisition
Agreement, (i) the Preferred Shares, for an aggregate of $50 million, and (ii)
50 percent of the Common Shares, for an aggregate of $80 million. This
commitment is subject to the following conditions:
1. The negotiation, execution and delivery of the documentation
referenced herein in form and substance reasonably
satisfactory to us (it being understood that we have reviewed
the Acquisition Agreement and are satisfied with it, provided
that it is not be amended without our consent).
2. The availability of debt financing, including a term loan and
a revolver, in amounts and on terms and conditions consistent
with the form of Commitment Letter attached hereto.
3. The satisfaction of the conditions described in the
attachments hereto.
<PAGE>
FS Equity Partners IV, L.P. is excited about the opportunity to invest
in Bridgeport. We are available to discuss this commitment letter at your
earliest convenience. Please contact Charles Rullman at (310) 444-1833 or Jon
Ralph at (310) 444-1842 with any questions regarding this letter.
Sincerely yours,
FS Equity Partners IV, L.P.
By: FS Capital Partners LLC,
its general partner
By: /s/ Charles P. Rullman
---------------------------------------
Name: Charles P. Rullman
Title: Vice President
AGREED AND ACCEPTED:
BYOWC Partners LLC
By: /s/ Alfred D. Boyer
-------------------------------
Name: Alfred D. Boyer
Title: Managing Member
<PAGE>
PROJECT BRIDGEPORT
SUMMARY OF TERMS
FOR
SECURITIES PURCHASE AGREEMENT
ISSUER: Bridgeport Holdings Inc.
PURCHASER: FS Equity Partners IV, L.P. and its designees (collectively,
"FS Fund") (any reference herein to a right of FS Fund may
be exercised by a majority in interest of the persons
comprising FS Fund).
SECURITIES
PURCHASED: o 50% of the Common Shares issued and outstanding at
closing, as per the attached Schedule 1.
o $50 million liquidation preference of Preferred Shares.
The Preferred Shares will have the terms set forth on
Schedule 2 attached hereto.
REPRESENTATIONS
AND WARRANTIES: Customary representations and warranties as to corporate
housekeeping matters.
CONDITIONS: o The negotiation, execution and delivery of the various
transaction agreements in form and substance satisfactory
to FS Fund (it being understood that FS Fund has reviewed
and is satisfied with the form of Acquisition Agreement,
provided that it is not amended without the consent of FS
Fund).
o The satisfaction (and not, unless FS Fund consents in
writing, the waiver) of each condition to the obligations
of Purchaser to purchase shares in the offer as set forth
in the Acquisition Agreement, including the absence of a
material adverse change.
o The continuing favorable recommendation of the Board of
Directors of Bridgeport of the transactions contemplated
by the Acquisition Agreement.
<PAGE>
o The absence of any legal prohibition on FS Fund
purchasing the Common Shares and Preferred Shares and
executing, delivering and performing under the
transaction documentation.
o The availability of debt financing, including a term loan
and a revolver, as contemplated by the debt financing
commitment letter.
o BYOWC and its designees shall have purchased the Common
Shares to be purchased by them as per Schedule 1.
<PAGE>
SCHEDULE 1
PROJECT BRIDGEPORT
CAPITAL STRUCTURE
The contemplated acquisition of Bridgeport, Inc. (the "Company") will
be accomplished through tender offers for the outstanding shares of the Company
made by Bridgeport Acquisition, Inc. ("Acquisition") and the Company. The
purchase of shares by Acquisition pursuant to the tender offers will be funded
by the equity contributions referred to below and bank financing. Upon
consummation of the tender offers, Acquisition will own at least 51% of the
shares of the Company on a fully diluted basis. Following the tender offers,
Acquisition will be merged with the Company, and Acquisition will be the
surviving corporation.
Acquisition will be wholly owned by Bridgeport Holdings Inc.
("Holdings"). Following the merger, the surviving corporation will be wholly
owned by Holdings. The following describes the capital structure of Holdings,
which will be in effect upon consummation of the tender offers except as noted:
1. FREEMAN SPOGLI. Freeman Spogli and its designees will contribute
$80,000,000 to Holdings and will receive 50% of the common equity of Holdings.
In addition, Freeman Spogli and its designees will contribute
$50,000,000 for the purchase of Preferred Shares of Holdings. Upon consummation
of the merger, such securities may be exchanged for Preferred Shares of the
Company having substantially identical terms.
2. BYOWC. BYOWC, and other investors identified by it, will contribute
$80,000,000 in cash or common stock of the Company and will receive 50% of the
common equity of Holdings.
3. WARRANTS. BYOWC will receive warrants to acquire Common Shares of
Holdings exercisable for a number of shares equal to 20% of the common equity
referred to in (1) and (2) above.
4. MANAGEMENT OPTIONS. Following consummation of the merger, management
may receive options to acquire Common Shares of Holdings equal to up to 10% of
the common equity referred to in (1) and (2) above.
Sch. 1-1
<PAGE>
SCHEDULE 2 - SUMMARY OF TERMS FOR PREFERRED SHARES
ISSUER: Initially Bridgeport Holdings Inc., but may be exchanged for
preferred shares of the Bridgeport (the "Company") on
substantially identical terms following consummation of the
merger contemplated by the Acquisition Agreement (the
"Merger").
PURCHASER: FS Fund.
SECURITY: 14% Preferred Stock with option to capitalize dividend (if
the Preferred Shares are held by any person other than FS
Fund, the option to capitalize dividend shall expire after
five years; PROVIDED, HOWEVER, that payment of cash
dividends is permitted or allowed for under the terms of the
Company's bank financing).
AMOUNT: $50.0 million ($1,000 per share).
DIVIDENDS: At a rate payable or capitalized semi-annually to yield
14.00% per year.
MATURITY: 8 years.
OPTIONAL
REDEMPTION: None.
MANDATORY
REDEMPTION: In the event of a change of control, Issuer must offer to
purchase for cash all outstanding Preferred Shares at a
price of 101% plus accrued dividends. Redeemable in full at
maturity.
LIQUIDATION
PREFERENCE: Holders of Preferred Shares will have a senior liquidation
preference equal to $1,000 per share, plus accrued
dividends.
SYNDICATION RIGHT: FS Fund may sell down any amount of the Preferred Shares at
any time. Any equity necessary to syndicate the Preferred
Shares will be provided by FS Fund. Issuer and FS Fund will
cooperate and coordinate with respect to such syndication
process.
PROTECTIVE
PROVISIONS: Issuer will not issue preferred stock that is senior to or
pari passu with the Preferred Shares, and no subsidiary of
Issuer will issue any preferred stock,
Sch. 2-1
<PAGE>
in each case without the consent of the holders of a
majority of the Preferred Shares.
BOARD RIGHT: If Issuer fails to redeem the Preferred Shares at maturity,
the holders of a majority in interest of the Preferred
Shares will have the right to appoint one director to
Issuer's board of directors.
Sch. 2-2
<PAGE>
PROJECT BRIDGEPORT
SUMMARY OF TERMS
FOR
WARRANTS
ISSUER: Bridgeport Holdings Inc.
PURCHASER: BYOWC.
SECURITY: Warrants to purchase Common Shares.
AMOUNT: Warrants to purchase Common Shares representing 20% of the
Common Shares issued at closing, as provided on Schedule I,
for an aggregate initial exercise price of $32,000,000.
EXERCISE PRICE: The date of issuance of the Warrants and each anniversary of
such date is hereinafter referred to as an "Anniversary
Date". The aggregate exercise price of all of the Warrants
from and after the date of issuance of the Warrants through
the date six months following such date shall be
$32,000,000. On the day following such date, and every six
months thereafter, the exercise price shall be increased by
15% of the exercise price on the most recent Anniversary
Date.
EXERCISE DATE: The Warrants will be exercisable at any time after the third
anniversary of the transactions contemplated by the
Acquisition Agreement or in the event of a change of control
of Issuer. Once exercisable, the Warrants can be exercised
for cash or, following an initial public offering or other
liquidation event, by tendering shares or Warrants. The
right to exercise the Warrants will expire upon the eighth
anniversary of the transactions contemplated by the
Acquisition Agreement.
REGISTRATION
RIGHTS: The Issuer will afford customary resale demand and piggyback
registration rights to the holders of the Warrants and the
Common Shares underlying the Warrants beginning six months
after the Issuer's initial public offering of the Common
Shares. In addition, to the extent permitted under the rules
and
1
<PAGE>
practices of the Securities and Exchange Commission, the
Issuer will register the issuance of the Common Shares
issuable upon exercise of the Warrants to a purchaser in a
registered resale thereof.
OTHER PROVISIONS: Such other provisions as are reasonable and customary,
including anti-dilution protection for stock splits and
stock distribution and the treatment of the Warrants in a
business combination transaction in which the Issuer is not
the surviving public company.
2
<PAGE>
PROJECT BRIDGEPORT
SUMMARY OF TERMS
FOR
SECURITYHOLDERS AGREEMENT
[To be executed by holders of]
Common Shares and Warrants]
BOARD
REPRESENTATION: The securityholders will agree to vote their securities to
cause the election of three nominees of FS Equity Partners
IV, L.P. ("FS Equity Partners") and four nominees of BYOWC
to the board of directors of Issuer.
GOVERNANCE: Issuer will not take any of the following actions without
the affirmative vote of five directors: (i) consummate or
submit to securityholders a merger, sale or change of
control transaction, (ii) purchase or sell material assets,
(iii) enter into any material financing transaction or sell
any securities to the public, (iv) consummate any
transaction with an affiliate of any securityholder, (v)
enter into any line of business other than lines of business
Issuer or its competitors currently conduct, (vi) hire or
terminate Issuer's chief executive officer, (vii) dissolve,
liquidate or wind-up Issuer, (viii) declare voluntary
bankruptcy or (ix) amend Issuer's certificate of
incorporation or bylaws.
INFORMATION RIGHTS: Issuer will furnish the securityholders with (i) quarterly
financial statements no later than 45 days following the end
of each fiscal quarter and (ii) audited annual financial
statements no later than 90 days following the end of each
fiscal year.
RIGHT OF FIRST
OFFER: Securityholders will have the right to purchase their
pro-rata share (based on the number of Common Shares held by
such person) of any Common Shares or warrants proposed to be
transferred by other securityholders to third parties (other
than transfers to permitted transferees, transfers pursuant
to an underwritten public offering or transfers in the
public securities market following the Issuer's initial
public offering).
1
<PAGE>
TAG-ALONG RIGHTS: Securityholders will have the right to tag-along on a
pro-rata basis (based on the number of Common Shares held by
such person) in transfers by other securityholders of Common
Shares aggregating in excess of one percent of the then
outstanding Common Shares (other than transfers to permitted
transferees, transfers pursuant to an underwritten public
offering or transfers in the public securities market
following the Issuer's initial public offering.)
SYNDICATION RIGHTS: Notwithstanding anything to the contrary herein, transfers
of Preferred Shares held immediately after the closing by FS
Fund will not be subject to the rights of first offer or
tag-along rights described above. FS Fund will also be
entitled to transfer such Preferred Shares, together with
such number of Common Shares as FS Fund shall determine, as
an investment unit and the transfer of Common Shares as part
of such investment unit also will not be subject to the
rights of first offer or tag-along rights described above.
The purchasers of such investment unit will, in FS Fund's
discretion, execute either the Securityholders Agreement or
alternative documentation providing that the purchaser will
be subject to all of the obligations (other than obligations
to give tag-along rights) and may succeed to certain of the
rights of FS Fund contained in the Securityholders
Agreement. FS Equity Partners may, in its discretion, assign
to any such purchaser its rights to nominate not more than
one director of Issuer.
PREEMPTIVE RIGHTS: Securityholders will have the right to purchase on a
pro-rata basis (based on the number of Common Shares held by
such person) any equity securities (or securities
convertible into or exchangeable for equity securities)
issued by Issuer. Preemptive rights will not apply to (i)
issuances to employees, officer and directors approved by
the board of directors of Issuer, (ii) issuances as
consideration in mergers and acquisitions, (iii) any
issuance in or following the Issuer's initial public
offering of Common Shares and (iv) other customary
exceptions.
2
<PAGE>
REGISTRATION
RIGHTS: (1) PREFERRED DEMAND RIGHTS:
If at any time after 12 months from the date of the Merger
the holders of at least 25% of the outstanding Preferred
Shares requests that Issuer file a registration statement
for the sale of at least 20% of the Preferred Shares then
outstanding, Issuer will use its best efforts to cause such
Preferred Shares to be registered. Issuer shall not be
obligated to effect more than two demand registration on
behalf of the holders of Preferred Shares.
(2) COMMON DEMAND RIGHTS:
If, at any time after the date six months after the
effective date of Issuer's initial registration statement on
Form S-1 with the U.S. Securities and Exchange Commission, a
securityholder holding at least 15% of the initially
outstanding Common Shares requests that Issuer file a
registration statement for the sale of Common Shares having
an aggregate market value of at least $20,000,000, Issuer
will use its best efforts to cause such Common Shares to be
registered. Issuer shall not be obligated to effect more
than three demand registrations on behalf of FS Fund and
three demand registrations on behalf of BYOWC and its
principals.
(3) PIGGY-BACK RIGHTS:
The securityholders will be entitled to "piggy-back"
registration rights on any registration statement of Issuer
on Issuer's behalf or on the behalf of other
securityholders, subject to certain rights, however, of
Issuer or its underwriters to reduce the number of
securities proposed to be registered in view of market
conditions.
(4) EXPENSES:
Issuer will pay for the fees and expenses associated with
all demand registrations and all "piggy-back" registrations,
exclusive of underwriting discounts and commissions.
(5) TRANSFER OF RIGHTS:
The registration rights may be freely transferred in
connection with transfers of the Preferred Shares or
3
<PAGE>
Common Shares, provided Issuer is given written notice
thereof.
(6) OTHER PROVISIONS:
Such other provisions as are reasonable and customary,
including the terms for Issuer's best efforts to register
the Preferred Shares or Common Shares, the time registration
is required to remain effective, Issuer's ability to delay
filing a demand registration for a period of 60 days, the
information to be provided by the selling securityholders,
the documents to be delivered to the selling
securityholders, the terms of any underwritten offering and
the selection of an underwriter, and indemnification
provisions.
RIGHTS AND
OBLIGATIONS
OF BYOWC: If, following the Merger, BYOWC is dissolved and its Common
Shares distributed to its members, each of the members will
be subject to the obligations of BYOWC under the
Securityholders Agreement, and the rights of BYOWC under the
Securityholders Agreement will be collectively exercisable
by the members as determined by the members in their
discretion.
4
<PAGE>
EXHIBIT 3
CREDIT SUISSE FIRST BOSTON
Eleven Madison Avenue
New York, NY 10010
CIBC INC.
CIBC WORLD MARKETS CORP.
425 Lexington Avenue
New York, NY 10017
December 20, 1999
BYOWC Partners LLC
9965 Wilshire Blvd.
Beverly Hills, CA 90212
Attention of Alfred D. Boyer
Managing Member
FS Equity Partners IV, L.P.
c/o Freeman Spogli & Co. LLC
11100 Santa Monica Blvd. -- Suite 1900
Los Angeles, CA 90025
Attention of Charles P. Rullman
PROJECT BRIDGEPORT
$390,000,000 SENIOR SECURED CREDIT FACILITIES
COMMITMENT LETTER
Ladies and Gentlemen:
You have advised Credit Suisse First Boston ("CSFB"), CIBC Inc. ("CIBC"
and, together with CSFB, the "Initial Lenders") and CIBC World Markets Corp.
("CIBCWM" and, together with CSFB, the "Agents") that you intend to acquire all
the capital stock of a public company previously identified to us and referred
to herein as "Bridgeport" or the "Company" and to consummate the other
Transactions (such term and each other capitalized term used but not defined
herein having the meaning assigned to it in the Summary of Principal Terms and
Conditions attached hereto as Exhibit A (the "Term Sheet")). You have further
advised us that, in connection therewith, (a) Merger Sub will obtain senior
secured credit facilities (the "Term Facilities") described in the Term Sheet,
in an aggregate principal amount of up to $320,000,000, and (b) the Company and
Merger Sub will obtain a senior secured credit facility (the "Revolving
Facility" and, together with the Term Facilities, the "Facilities") described in
the Term Sheet, in an aggregate principal amount of up to $70,000,000.
In connection with the foregoing, you have requested that (a) CSFB
agree to structure, arrange and syndicate the Facilities, commit to provide 60%
of the Facilities and agree to serve as administrative agent, book manager and
lead arranger therefor, (b) CIBC commit to provide 40% of the Facilities and (c)
CIBCWM agree to serve as syndication agent for the Facilities.
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2
CSFB is pleased to advise you (a) that it is willing to act as
exclusive administrative agent, book manager and lead arranger for the
Facilities and (b) of its commitment to provide up to 60% of the Facilities, in
each case upon the terms and subject to the conditions set forth or referred to
in this commitment letter (the "Commitment Letter") and in the Term Sheet.
CIBCWM is pleased to advise you that it is willing to act as exclusive
syndication agent for the Facilities, and CIBC is pleased to advise you of its
commitment to provide up to 40% of the Facilities, in each case upon the terms
and subject to the conditions set forth or referred to in this Commitment Letter
and in the Term Sheet. The commitments of CSFB and CIBC hereunder are several
and not joint and shall be allocated ratably among the Facilities.
It is agreed that (a) CSFB will act as the sole and exclusive
administrative agent (and shall have the right to appoint a collateral agent
(which may be CSFB or one of its affiliates)), book manager and lead arranger
for the Facilities, and (b) CIBCWM will act as the sole and exclusive
syndication agent for the Facilities.
We intend to syndicate the Facilities to a group of financial
institutions (together with the Initial Lenders, the "Lenders") identified by us
in consultation with and reasonably acceptable to you. We intend to commence
syndication efforts promptly upon the execution of this Commitment Letter, and
you agree actively to assist us in completing a syndication satisfactory to us.
Such assistance shall include (a) your using commercially reasonable efforts to
ensure that the syndication efforts benefit materially from your existing
lending relationships, (b) direct contact between senior management,
representatives and advisors of you and the Company, on the one hand, and the
proposed Lenders, on the other hand (including, without limitation, the active
participation of Jerome B. York, in the capacity of an equity investor in BYOWC
and the prospective chairman of the board of directors and prospective acting
chief executive officer of the Company), (c) assistance by you and the Company
in obtaining credit ratings for the Facilities and in the preparation of a
Confidential Information Memorandum for the Facilities and other marketing
materials to be used in connection with the syndication and (d) the hosting,
with the Initial Lenders, of one or more meetings of prospective Lenders (it
being understood that the general Lenders' meeting will occur no later than
January 7, 2000).
The Agents will manage, in consultation with you, all aspects of the
syndication, including decisions as to the selection of institutions to be
approached and when they will be approached, when their commitments will be
accepted, which institutions will participate (such institutions to be
reasonably satisfactory to you), the allocation of the commitments among the
Lenders and the amount and distribution of fees among the Lenders. To assist us
in our syndication efforts, you agree promptly to prepare and provide to us all
information with respect to Holdings, the Company and their respective
subsidiaries, the Transactions and the other transactions contemplated hereby,
including all financial information and projections (the "Projections"), as we
may reasonably request and which you can reasonably obtain, considering that you
will have contractual rights to obtain information from and the cooperation of
the Company but that you will not control the Company until the consummation of
the Tender Offer. You hereby represent and covenant that (a) all information
other than the Projections (the "Information") that has been or will be made
available to the Initial Lenders by you or any of your representatives is or
will be, when furnished, correct in all material respects
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3
and does not or will not, when furnished, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not materially misleading in light of the
circumstances under which such statements are made and (b) the Projections that
have been or will be made available to us by you or any of your representatives
have been or will be prepared in good faith based upon assumptions that are
reasonable at the time made and at the time the related Projections are made
available to us. You agree that if, at any time from and including the date
hereof until the closing of the Facilities, any of the representations in the
preceding sentence would be incorrect if the Information and Projections were
being furnished, and such representations were being made, at such time, then
you will promptly supplement the Information and the Projections so that such
representations will be correct under those circumstances, except that if the
representations are incorrect with respect to Information and Projections
furnished or prepared by the Company, you will supplement such Information and
Projections promptly after you become aware that such representations are
incorrect. In arranging and syndicating the Facilities, we will be entitled to
use and rely primarily on the Information and the Projections without
responsibility for independent verification thereof.
As consideration for the Initial Lenders' commitments hereunder and
agreements to perform the services described herein, you agree to pay (or to
cause the Borrowers to pay) to CSFB, when due, the nonrefundable fees set forth
in the Term Sheet and in the Fee Letter and the Administrative Agent Fee Letter,
each dated the date hereof and delivered herewith with respect to the Facilities
(the "Fee Letters").
The Initial Lenders' commitments hereunder and our agreements to
perform the services described herein are subject to (a) our not having
discovered or otherwise become aware of any information not previously disclosed
to us that we reasonably believe to be inconsistent in a material and adverse
manner with the information provided to us prior to the date hereof, with
respect to the business, assets, operations, condition (financial or otherwise),
or prospects of the Company and its subsidiaries, (b) there not having occurred
since September 30, 1999, any change, effect or circumstance that is or could
reasonably be expected to be materially adverse to the business, assets,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, (c) there not having occurred after the date
hereof a material disruption of or material adverse change in financial, banking
or capital market conditions that, in our reasonable judgment, could reasonably
be expected to materially and adversely affect the syndication of the
Facilities, (d) our satisfaction that, prior to and during the syndication of
the Facilities, there shall be no competing issues of debt securities or
commercial bank or other credit facilities of Holdings, the Company or their
respective subsidiaries being offered, placed or arranged, (e) the negotiation,
execution and delivery of definitive documentation with respect to the
Facilities reasonably satisfactory to us and our counsel, (f) the initial
advance of funds under the Facilities not being made prior to January 28, 2000,
and (g) the other conditions set forth in the Term Sheet.
You agree, jointly and severally, (a) to indemnify and hold harmless
each Initial Lender and Agent and their respective officers, directors,
employees, affiliates, agents and controlling persons from and against any and
all losses, claims, damages, liabilities and expenses, joint or several, to
which any such persons may become subject arising out of or in connection with
this Commitment Letter, the Fee Letters, the Term Sheet, the Transactions, the
Facilities or any related transaction or any claim, litigation,
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4
investigation or proceeding relating to any of the foregoing, regardless of
whether any of such indemnified parties is a party thereto, and to reimburse
each of such indemnified parties upon demand for any reasonable legal or other
expenses incurred in connection with investigating or defending any of the
foregoing, PROVIDED that the foregoing indemnity will not, as to any indemnified
party, apply to losses, claims, damages, liabilities or related expenses to the
extent they are found in a final judgment of a court to have resulted from the
willful misconduct or gross negligence of such indemnified party and (b) (i) if
the Closing Date occurs or (ii) to the extent you otherwise are entitled to
reimbursement of expenses pursuant to the Merger Agreement (but, in the case of
this clause (ii), subject to pro rata reduction to the extent the aggregate
amount of your reimbursable expenses and our reimbursable expenses exceeds the
cap on reimbursement set forth in the Merger Agreement), to reimburse each
Initial Lender and Agent from time to time, upon presentation of a reasonably
satisfactory summary statement, for all reasonable out-of-pocket expenses
(including but not limited to expenses of the Initial Lenders' due diligence
investigation, consultants' fees, syndication expenses, travel expenses and
reasonable fees, disbursements and other charges of counsel), in each case
incurred in connection with the Facilities and the preparation of this
Commitment Letter, the Term Sheet, the Fee Letters, the definitive documentation
for the Facilities and any security arrangements in connection therewith.
Notwithstanding any other provision of this Commitment Letter, no indemnified
person shall be liable for any indirect or consequential damages in connection
with its activities related to the Facilities.
You acknowledge that the Initial Lenders and their respective
affiliates may be providing debt financing, equity capital or other services
(including financial advisory services) to other companies in respect of which
you may have conflicting interests regarding the transactions described herein
and otherwise. We will not use confidential information obtained from you by
virtue of the transactions contemplated by this Commitment Letter or our other
relationships with you in connection with the performance by us of services for
other companies, and we will not furnish any such information to other
companies. You also acknowledge that we have no obligation to use in connection
with the transactions contemplated by this Commitment Letter, or to furnish to
you, confidential information obtained by us from other companies. Without
limiting the foregoing, we acknowledge that non-public information concerning
the Company that you have obtained from the Company is subject to a
confidentiality agreement between you and the Company, a copy of which has been
delivered to us, and we agree to treat such information in accordance with said
confidentiality agreement.
This Commitment Letter and the Initial Lenders' commitments hereunder shall not
be assignable by you without the prior written consent of the Initial Lenders
(and any attempted assignment without such consent shall be null and void), are
intended to be solely for the benefit of the parties hereto (and the indemnified
persons), are not intended to confer any benefits upon, or create any rights in
favor of, any person other than the parties hereto (and the indemnified persons)
and are not intended to create a fiduciary relationship between the parties
hereto. Each Initial Lender may assign its commitment hereunder to any of its
affiliates or any Lender reasonably acceptable to you. Any such assignment to an
affiliate will not relieve the assignor from any of its obligations hereunder
unless and until such affiliate shall have funded the portion of the commitment
so assigned. Any assignment to a Lender shall be by novation and shall release
the assignor from the portion of its commitment hereunder so assigned. This
Commitment Letter may not be amended or any provision hereof waived or modified
except by an
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5
instrument in writing signed by each of the parties hereto. This Commitment
Letter may be executed in any number of counterparts, each of which shall be an
original and all of which, when taken together, shall constitute one agreement.
Delivery of an executed counterpart of a signature page of this Commitment
Letter by facsimile transmission shall be effective as delivery of a manually
executed counterpart hereof. This Commitment Letter and the Fee Letters are the
only agreements that have been entered into between us with respect to the
Facilities and set forth the entire understanding of the parties with respect
thereto. This Commitment Letter shall be governed by, and construed in
accordance with, the laws of the State of New York.
EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF
ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER OR THE PERFORMANCE
OF SERVICES HEREUNDER.
This Commitment Letter is delivered to you on the understanding that
neither this Commitment Letter, the Term Sheet or the Fee Letters nor any of
their terms or substance shall be disclosed, directly or indirectly, to any
other person except (a) to your officers, members, employees, attorneys,
accountants and advisors on a confidential and need-to-know basis or (b) as
required by applicable law or compulsory legal process (in which case you agree
to inform us promptly thereof); PROVIDED that, after your acceptance of this
Commitment Letter and the Fee Letters in the manner provided below, you may
disclose this Commitment Letter, the Term Sheet and the contents hereof and
thereof (but not the Fee Letters or the contents thereof) (i) to the Company and
Holdings and their respective attorneys, accountants and advisors, in each case
in connection with the Acquisition and on a confidential and need-to-know basis
and (ii) in any public filing relating to the Acquisition.
The compensation, reimbursement, indemnification and confidentiality
provisions contained herein and in the Fee Letters shall remain in full force
and effect regardless of whether definitive financing documentation shall be
executed and delivered and notwith standing the termination of this Commitment
Letter or the Initial Lenders' commitments hereunder; PROVIDED that your
obligations under this Commitment Letter, other than those relating to
confidentiality and to your assistance in connection with the syndication of the
Facilities, shall automatically terminate and be superseded by the definitive
documentation relating to the Facilities upon the initial funding thereunder,
and you shall be released from all liability in connection therewith at such
time.
If the foregoing correctly sets forth our agreement, please indicate
your acceptance of the terms hereof and of the Term Sheet and the Fee Letters by
returning to us executed counterparts hereof and of the Fee Letters not later
than 11:59 p.m., New York City time, on December 20, 1999. The Initial Lenders'
commitments hereunder and our agreements contained herein will expire at such
time in the event that we have not received such executed counterparts in
accordance with the immediately preceding sentence. In the event that the
initial borrowing in respect of the Facilities does not occur on or before
February 29, 2000, then this Commitment Letter and the Initial Lenders'
commitments and undertakings hereunder shall automatically terminate unless we
shall, in our discretion, agree to an extension. Before such date, we may
terminate our commitments under this Commitment Letter if any event occurs or
information has
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6
become available that, in our reasonable judgment, results or is likely to
result in the failure to satisfy any condition precedent to borrowing set forth
herein or in the Term Sheet, provided that such failure could not reasonably be
expected to be cured prior to the expiration of the commitment.
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7
We are pleased to have been given the opportunity to assist you in
connection with the financing for the Transactions.
Very truly yours,
CREDIT SUISSE FIRST BOSTON,
by /s/ Richard B. Carry
--------------------------------
Name: Richard B. Carry
Title: Director
by /s/ Christopher G. Cunningham
--------------------------------
Name: Christopher G. Cunningham
Title: Director
CIBC INC.,
by /s/ Matthew Jones
-------------------------------
Name: Matthew Jones
Title: Managing Director
CIBC WORLD MARKETS CORP.,
by /s/ Matthew Jones
-------------------------------
Name: Matthew Jones
Title: Managing Director
Accepted and agreed to as of
the date first above written:
BYOWC PARTNERS LLC,
by /s/ Alfred D. Boyer
-----------------------
Name: Alfred D. Boyer
Title: Managing Member
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by FS EQUITY PARTNERS IV, L.P.
by FS Capital Partners LLC, its General
Partner
by /s/ Charles P. Rullman
---------------------------------
Name: Charles P. Rullman
Title: Vice President
<PAGE>
CONFIDENTIAL
December 20, 1999 EXHIBIT A
PROJECT BRIDGEPORT
$390,000,000 SENIOR SECURED CREDIT FACILITIES
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS
BORROWERS: (A) With respect to the Term Facilities (as
defined below), Merger Sub (as defined
below).
(B) With respect to the Revolving Facility (as
defined below), (i) a Delaware corporation
referred to herein as "Bridgeport" or the
"Company" and (ii) Merger Sub.
(C) Upon consummation of the Merger (as defined
below), the Company shall assume all
obligations of Merger Sub with respect to
the Facilities.
(D) References herein to the "Borrower" or the
"Borrowers" shall refer to Merger Sub,
Bridgeport or the surviving corporation of
the Merger, as the context may require.
TRANSACTIONS:
A Delaware corporation ("Holdings") to be
formed by BYOWC Partners LLC ("BYOWC") and
FS Equity Partners IV, L.P. (the
"Sponsors"), intends to acquire (the
"Acquisition"), through a wholly owned
acquisition subsidiary of Holdings to be
incorporated under the laws of the State of
Delaware ("Merger Sub"), all the capital
stock (the "Shares") of Bridgeport pursuant
to an agreement and plan of merger (the
"Merger Agreement") to be entered into among
Holdings, Merger Sub, BYOWC and the Company.
The Merger Agreement will provide that
Merger Sub and the Company will make a
tender offer (the "Tender Offer") to acquire
up to 100% of the outstanding Shares. As
promptly as practicable following the
acceptance of Shares pursuant to the Tender
Offer (a) the Company will merge (the
"Merger") with and into Merger Sub, with
Merger Sub being the surviving corporation
in the Merger and a wholly owned subsidiary
of Holdings and (b) subject to stockholders'
appraisal rights, each outstanding Share not
acquired in the Tender Offer (the
"Untendered Shares") will be converted into
the right to receive an amount in cash equal
to the price paid in connection with the
Tender Offer.
In connection with the foregoing, (a) the
Sponsors, together with certain other equity
investors, will contribute an aggregate
amount of not less than
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2
$210 million in cash and Shares to Holdings
as common and/or preferred equity, (b)
Holdings will contribute the amount so
received to Merger Sub as common equity in
exchange for the issuance to Holdings of all
the common stock of Merger Sub (the equity
contributions described in clauses (a) and
(b) being referred to herein collectively as
the "Sponsor Equity Contribution"), (c) the
Company will repay all amounts outstanding
under, and terminate, its existing credit
facility (the "Existing Credit Facility"),
(d) the Borrowers will obtain the senior
secured credit facilities described below
under the caption "Facilities" and (e) fees
and expenses incurred in connection with the
foregoing (the "Transaction Costs") will be
paid. The transactions described in this
paragraph and the preceding paragraph,
together with the Acquisition, are
collectively referred to herein as the
"Transactions".
SOURCES AND USES: The sources and uses of the funds necessary
to consummate the Transactions are set forth
on Annex II hereto.
ADMINISTRATIVE AGENT: Credit Suisse First Boston ("CSFB") will act
as sole and exclusive administrative agent
and collateral agent (collectively, the
"Administrative Agent") for a syndicate of
financial institutions (together with CSFB,
the "Lenders"), and will perform the duties
customarily associated with such roles.
BOOK MANAGER AND LEAD
ARRANGER: CSFB.
SYNDICATION AGENT: CIBC World Markets Corp. ("CIBC" and,
together with CSFB, the "Agents").
FACILITIES: (A) Two Senior Secured Term Loan Facilities in
an aggregate principal amount of up to
$320,000,000 (the "Term Facilities"), such
aggregate principal amount to be allocated
between (i) a Tranche A Facility in an
aggregate principal amount of $155,000,000
(the "Tranche A Facility") and (ii) a
Tranche B Term Loan Facility in an aggregate
principal amount of $165,000,000 (the
"Tranche B Facility").
(B) A Senior Secured Revolving Credit Facility
in an aggregate principal amount of up to
$70,000,000 (the "Revolving Facility" and,
together with the
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3
Term Facilities, the "Facilities"), of which
up to an amount to be agreed upon will be
available in the form of letters of credit.
In connection with the Revolving Facility,
CSFB will make available to the Borrower a
swingline facility under which the Borrower
may make short-term borrowings of up to an
amount to be agreed upon. Except for
purposes of calculating the Commitment Fee
described below, any such swingline
borrowings will reduce availability under
the Revolving Facility on a
dollar-for-dollar basis. Each Lender under
the Revolving Facility shall, promptly upon
request by CSFB, fund to CSFB its pro rata
share of any swingline borrowings.
PURPOSE: (A) The proceeds of the Term Facilities will be
used by Merger Sub, (i) on the date of the
initial borrowing under the Facilities (the
"Closing Date"), together with the proceeds
of the Sponsor Equity Contribution, solely
to pay the cash consideration payable in
respect of Shares purchased by Merger Sub in
the Tender Offer, (ii) following the Closing
Date, to purchase Shares tendered and
accepted during any extension of the Tender
Offer pursuant to the Merger Agreement,
(iii) on the date the Merger is consummated,
to pay the cash merger consideration to be
paid to the holders of the Untendered
Shares, if any, in connection with the
Merger, including any amounts to be paid in
connection with the exercise by such holders
of their appraisal rights, and (iv) to pay
related Transaction Costs.
(B) The proceeds of loans under the Revolving
Facility will be used by the Company solely
for general corporate purposes (other than
for the purchase of Shares), including the
refinancing of amounts outstanding under the
Existing Credit Facility on the Closing
Date. In addition, at any time on or prior
to the date the Merger is consummated, up to
$20,000,000 of loans under the Revolving
Facility may be used by Merger Sub solely to
pay interest and commitment fees on the
loans and unused commitments, respectively,
under the Term Facilities.
(C) Letters of credit will be used by the
Borrower solely for general corporate
purposes.
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4
AVAILABILITY: (A) The full amount of the Tranche B Facility
must be drawn in a single drawing on the
Closing Date. Loans under the Tranche A
Facility will be available during the period
beginning on and including the Closing Date
and ending on and including the earlier of
(i) the 180th day after the Closing Date and
(ii) the date the Merger is consummated (the
"Tranche A Cutoff Date"). Any unused
commitments in respect of the Tranche A
Facility shall automatically terminate on
the Tranche A Cutoff Date. Amounts borrowed
under the Term Facilities that are repaid or
prepaid may not be reborrowed.
(B) Loans under the Revolving Facility will be
available on and after the Closing Date and
at any time prior to the final maturity of
the Revolving Facility, in minimum principal
amounts to be agreed upon. Amounts repaid
under the Revolving Facility may be
reborrowed.
INTEREST RATES AND FEES: As set forth on Annex I hereto.
DEFAULT RATE: The applicable interest rate plus 2% per
annum.
LETTERS OF CREDIT: Letters of credit under the Revolving
Facility will be issued by CSFB or one of
its affiliates (the "Issuing Bank"). Each
letter of credit shall expire not later than
the earlier of (a) 12 months after its date
of issuance and (b) the fifth business day
prior to the final maturity of the Revolving
Facility.
Drawings under any letter of credit shall be
reimbursed by the Borrower on the same
business day. To the extent that the
Borrower does not reimburse the Issuing Bank
on the same business day, the Lenders under
the Revolving Facility shall be irrevocably
obligated to reimburse the Issuing Bank pro
rata based upon their respective Revolving
Facility commitments.
The issuance of all letters of credit shall
be subject to the customary procedures of
the Issuing Bank.
FINAL MATURITY
AND AMORTIZATION: (A) TRANCHE A FACILITY
The Tranche A Facility will mature on the
180th day after the Closing Date (the
"Initial Maturity Date"), unless the Merger
shall have been consummated on or prior to
such date, in which
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5
case the Tranche A Facility will mature on
the date that is five years after the
Closing Date, and will amortize in quarterly
installments under a schedule to be agreed
upon.
(B) TRANCHE B FACILITY
The Tranche B Facility will mature on the
Initial Maturity Date, unless the Merger
shall have been consummated on or prior to
such date, in which case the Tranche B
Facility will mature on the date that is
seven years after the Closing Date, and will
amortize in equal quarterly installments in
an annual amount equal to 1% during the
first six years of the Tranche B Facility
and 94% during the seventh year of the
Tranche B Facility.
(C) REVOLVING FACILITY
The Revolving Facility will mature on the
date that is five years after the Closing
Date.
GUARANTEES: All obligations of each Borrower under the
Facilities and under any interest rate
protection or other hedging arrangements
entered into with a Lender (or any affiliate
thereof) will be unconditionally guaranteed
(the "Guarantees") by Holdings, by the other
Borrower and by each existing and
subsequently acquired or organized domestic
and, to the extent no adverse tax
consequences to a Borrower would result
therefrom, foreign subsidiary of Holdings.
Notwithstanding the foregoing, the Company
and its subsidiaries shall not be required
to issue their Guarantees until the Closing
Date.
SECURITY: The Facilities, the Guarantees and any
interest rate protection or other hedging
arrangements entered into with a Lender (or
any affiliate thereof) will be secured by
substantially all the assets of Holdings,
each Borrower and each existing and
subsequently acquired or organized domestic
(and, to the extent no adverse tax
consequences to a Borrower would result
therefrom, foreign) subsidiary of Holdings
(collectively, the "Collateral"), including
but not limited to: (a) a first-priority
pledge of the capital stock of Merger Sub,
(b) a first-priority pledge of all other
capital stock (including the Shares) held by
Holdings, Merger Sub or the Company or any
domestic (or, subject to the foregoing
limitation,
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6
foreign) subsidiary of Holdings (which
pledge, in the case of any foreign
subsidiary, shall be limited to 65% of the
voting stock of such foreign subsidiary to
the extent the pledge of any greater
percentage would result in adverse tax
consequences to Holdings) and (c) perfected
first- priority (subject to customary
exceptions) security interests in, and
mortgages on, substantially all tangible and
intangible assets of Holdings, each Borrower
and each existing or subsequently acquired
or organized domestic (or, subject to the
foregoing limitation, foreign) subsidiary of
Holdings (including but not limited to
accounts receivable, inventory, general
intangibles, investment property,
intellectual property, real property, cash
and proceeds of the foregoing).
All the above-described pledges, security
interests and mortgages shall be created on
terms, and pursuant to documentation,
satisfactory to the Lenders, and none of the
Collateral shall be subject to any other
pledges, security interests or mortgages
(subject to customary exceptions).
MANDATORY PREPAYMENTS: Loans under the Term Facilities shall be
prepaid with (a) a percentage to be agreed
upon of Excess Cash Flow (to be defined),
(b) 100% of the net cash proceeds of all
non-ordinary course asset sales or other
dispositions of property by Holdings and its
subsidiaries (including insurance and
condemnation proceeds), (c) 100% of the net
cash proceeds of issuances of debt
obligations of Holdings and its subsidiaries
and (d) 50% of the net cash proceeds of
issuances of equity securities of Holdings
and its subsidiaries, in each case subject
to exceptions to be agreed upon. In
addition, on the date the Merger is
consummated, Loans under the Term Facilities
shall be prepaid with the amount on deposit
in the Cash Collateral Account (as defined
below).
The above-described mandatory prepayments
shall be allocated between the Term
Facilities pro rata. Within each Term
Facility, mandatory prepayments shall be
applied pro rata to the remaining
amortization payments under each Term
Facility.
VOLUNTARY PREPAYMENTS
AND REDUCTIONS IN
COMMITMENTS: Voluntary reductions of the unutilized
portion of the Facilities commitments and
prepayments of borrowings will be permitted
at any time, in minimum principal amounts to
be agreed upon,
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7
without premium or penalty, subject to
reimbursement of the Lenders' redeployment
costs in the case of a prepayment of
Adjusted LIBOR borrowings other than on the
last day of the relevant interest period.
All voluntary prepayments of the Term
Facilities will be allocated between the
Term Facilities in the discretion of the
Borrower. Within each Term Facility,
voluntary prepayments will be applied first,
to the scheduled installments of principal
due within 12 months of such prepayment and
then, pro rata to the remaining amortization
payments under such Facility.
REPRESENTATIONS AND
WARRANTIES: Usual for facilities and transactions of
this type and others to be reasonably
specified by the Agents, including, without
limitation, accuracy of financial statements
and other information; no material adverse
change; absence of litigation; no violation
of agreements or instruments; compliance
with laws (including ERISA, margin
regulations and environmental laws); payment
of taxes; ownership of properties;
inapplicability of the Investment Company
Act and the Public Utility Holding Company
Act; solvency; effectiveness of governmental
approvals; labor matters; environ mental
matters; Year 2000 matters; and validity,
priority and perfection of security
interests in the Collateral.
CONDITIONS PRECEDENT TO
INITIAL BORROWING: Usual for facilities and transactions of
this type, those specified below and others
to be reasonably specified by the Agents,
including, without limitation, delivery of
satisfactory legal opinions and financial
information; first-priority perfected
security interests in the Collateral (free
and clear of all liens, subject to customary
exceptions); execution of the Guarantees,
which shall be in full force and effect;
accuracy of representations and warranties;
absence of defaults, prepayment events or
creation of liens under debt instruments or
other agreements as a result of the
Transactions; evidence of authority;
compliance with applicable laws and
regulations (including but not limited to
ERISA, margin regulations and environmental
laws); absence of material adverse change;
and payment of fees and expenses.
The Board of Directors of the Company shall
have approved the Merger Agreement and shall
have recommended to the shareholders of the
Company
<PAGE>
8
that such shareholders accept the Tender
Offer, and such approval and recommendation
shall not have been withdrawn. Neither the
Merger Agreement nor the Tender Offer shall
have been amended or modified in any
material respect without the consent of the
Initial Lenders (as defined below). All
conditions to the purchase of Shares in the
Tender Offer shall have been satisfied
without giving effect to any waiver or
amendment thereof not approved by the
Initial Lenders, and Merger Sub shall have
acquired pursuant to the Tender Offer a
number of Shares that, on a fully diluted
basis and when aggregated with all other
Shares owned by Merger Sub, shall be
sufficient to enable Merger Sub, without the
vote of any other stockholder of the
Company, to effect stockholder approval of
the Merger under applicable law and under
the certificate of incorporation and by-laws
of the Company.
Not more than $5,000,000 shall have been
outstanding under the Existing Credit
Facility on the Closing Date; the Existing
Credit Facility shall have been paid in
full, any security therefor released and any
commitments to lend thereunder permanently
terminated, and the Administrative Agent
shall have received reasonably satisfactory
evidence thereof.
The Sponsor Equity Contribution shall have
been made on the terms previously disclosed
to the Initial Lenders.
The Company shall have deposited into a cash
collateral account (the "Cash Collateral
Account") with the Administrative Agent, as
security for its obligations under its
Guarantee, an amount in cash equal to
$193,300,000, less the amount used by the
Company to acquire Shares in the Tender
Offer upon the initial consummation thereof.
After giving effect to the Transactions and
the other transactions contemplated hereby,
Holdings and its subsidiaries shall have
outstanding no indebtedness or preferred
stock other than (a) the loans and other
extensions of credit under the Facilities,
(b) the preferred equity of Holdings issued
as part of the Sponsor Equity Contribution
and (c) other limited indebtedness to be
agreed upon.
<PAGE>
9
The Lenders shall have received an opinion,
in form and substance and from an
independent investment banking or appraisal
firm satisfactory to the Agents, as to the
solvency of the Company and its subsidiaries
on a consolidated basis after giving effect
to the Transactions and the other
transactions contemplated hereby.
No member of management who is also a
stockholder of the Company during the Tender
Offer shall receive any direct or indirect
consideration for accepting the Tender Offer
(including, without limitation, securities
or options to acquire securities in Holdings
or the Company following the consummation of
the Tender Offer) other than (a) payment of
the cash consideration paid to all accepting
stockholders in the Tender Offer and (b)
pursuant to contractual arrangements that
were in place on or prior to October 18,
1999.
All requisite governmental authorities and
third parties shall have approved or
consented to the Transactions and the other
transactions contemplated hereby to the
extent required and to the extent the
failure to obtain the same could reasonably
be expected to result in a material adverse
effect on Holdings, the Company, the
Transactions or the other transactions
contemplated hereby, all applicable appeal
periods shall have expired, and there shall
be no litigation, governmental or judicial
action, actual or threatened, that could
reasonably be expected to (a) restrain or
prevent the Transactions or the other
transactions contemplated hereby or (b)
materially impair (i) the ability of
Holdings or Merger Sub, as the case may be,
to operate the Company following the
consummation of the Tender Offer or (ii) the
financing arrangements contemplated hereby,
in each case specifically excluding,
however, any private litigation based upon
state law fiduciary duty claims based upon
the transactions contemplated by the Merger
Agreement where the only remedy that could
reasonably be expected to be awarded is
monetary damages.
As used herein, the term "Initial Lenders"
means CSFB, CIBC Inc. and each other person
that shall have become a party to the
definitive credit documentation for the
Facilities as a "Lender" thereunder.
<PAGE>
10
AFFIRMATIVE COVENANTS: Usual for facilities and transactions of
this types and others to be reasonably
specified by the Agents and reasonably
acceptable to Holdings and Merger Sub (to be
applicable to Holdings, Merger Sub and its
subsidiaries), including, without
limitation, maintenance of corporate
existence and rights; performance of
obligations; delivery of financial
statements and other financial information;
delivery of notices of default, litigation
and material adverse change; maintenance of
properties in good working order;
maintenance of satisfactory insurance;
compliance with laws; inspection of books
and properties; further assurances; and
payment of taxes.
NEGATIVE COVENANTS: Usual for facilities and transactions of
this type and others to be reasonably
specified by the Agents and reasonably
acceptable to Holdings and Merger Sub (to be
applicable to Holdings, Merger Sub and its
subsidiaries), including, without
limitation, prohibition of dividends on, and
redemptions and repurchases of, capital
stock; limitations on prepayments,
redemptions and repurchases of debt (other
than loans under the Facilities);
limitations on liens and sale-leaseback
transactions; limitations on loans and
investments; limitations on debt and hedging
arrangements; limitations on mergers,
acquisitions and asset sales; limitations on
transactions with affiliates; limitations on
changes in business conducted by Holdings
and its subsidiaries; limitations on
amendments of debt and other material
agreements; and limitations on capital
expenditures.
Notwithstanding, the foregoing, the Company
will be permitted to withdraw cash from the
Cash Collateral Account for the purpose of
(a) paying for Shares tendered and accepted
during the Tender Offer and (b) paying the
cash consideration in the Merger in respect
of Untendered Shares.
SELECTED FINANCIAL
COVENANTS: Usual for facilities and transactions of
this type (with financial definitions and
levels to be agreed upon), including,
without limitation, (a) maximum ratios of
(i) Total Debt to EBITDA and (ii) Senior
Debt to EBITDA, (b) minimum interest
coverage ratios and (c) minimum fixed charge
coverage ratios.
EVENTS OF DEFAULT: Usual for facilities and transactions of
this type and
<PAGE>
11
others to be reasonably specified by the
Agents and reasonably acceptable to Holdings
and Merger Sub, including, without
limitation, nonpayment of principal or
interest, violation of covenants,
incorrectness of representations and
warranties in any material respect, cross
default and cross acceleration, bankruptcy,
material judgments, ERISA, actual or
asserted invalidity of guarantees or
security documents and Change in Control (to
be defined).
VOTING: Amendments and waivers of the definitive
credit documentation will require the
approval of Lenders holding more than 50% of
the aggregate amount of the loans and
commitments under the Facilities, except
that the consent of each Lender adversely
affected thereby shall be required with
respect to, among other things, (a)
increases in the commitment of such Lender,
(b) reductions of principal, interest or
fees, (c) extensions of final maturity or
scheduled amortization and (d) releases of
guarantors or all or any substantial part of
the Collateral (other than in connection
with any sale of Collateral permitted by the
definitive credit documentation).
COST AND YIELD PROTECTION: Usual for facilities and transactions of
this type.
ASSIGNMENTS AND
PARTICIPATIONS: The Lenders will be permitted to assign
loans and commitments to other Lenders (or
their affiliates) without restriction, or to
other financial institutions with the
consent of the Borrower and the
Administrative Agent, in each case not to be
unreasonably withheld. Each assignment
(except to other Lenders or their
affiliates) will be in a minimum amount of
$5,000,000. The Administrative Agent will
receive a processing and recordation fee of
$3,500, payable by the assignor and/or the
assignee, with each assignment. Assignments
will be by novation and will not be required
to be pro rata among the Facilities.
The Lenders will be permitted to participate
loans and commitments without restriction to
other financial institutions. Voting rights
of participants shall be limited to matters
in respect of (a) increases in commitments,
(b) reductions of principal, interest or
fees, (c) extensions of final maturity or
scheduled amortization and (d) releases of
guarantors or all or any substantial part of
the
<PAGE>
12
Collateral (other than in connection with
any sale or collateral permitted by the
definitive credit documentation).
EXPENSES AND
INDEMNIFICATION: All reasonable out-of-pocket expenses
(including, without limitation, expenses
incurred in connection with due diligence)
of CSFB and CIBC associated with the
syndication of the Facilities and with the
preparation, execution and delivery,
administration, waiver or modification and
enforcement of the definitive credit
documentation contemplated hereby (including
the reasonable fees, disbursements and other
charges of counsel) are to be paid by the
Borrowers. In addition, all reasonable
out-of-pocket expenses of the Lenders for
enforcement costs and documentary taxes
associated with the Facilities are to be
paid by the Borrowers.
The Borrowers will indemnify CSFB, CIBC and
the other Lenders and hold them harmless
from and against all costs, expenses
(including reasonable fees, disbursements
and other charges of counsel) and
liabilities of CSFB, CIBC and the other
Lenders arising out of or relating to any
claim or any litigation or other proceeding
(regardless of whether CSFB, CIBC or any
other Lender is a party thereto) that
relates to the Transactions, including the
financing contemplated hereby, the Tender
Offer, the Merger or any transactions
connected therewith, PROVIDED that none of
CSFB, CIBC or any other Lender will be
indemnified for any cost, expense or
liability to the extent determined in the
final judgment of a court of competent
jurisdiction to have resulted from its gross
negligence or willful misconduct.
GOVERNING LAW AND FORUM: New York.
COUNSEL TO CSFB AND CIBC: Cravath, Swaine & Moore.
<PAGE>
ANNEX I
INTEREST RATES: The interest rates under the Facilities will
be as follows:
REVOLVING FACILITY AND TRANCHE A FACILITY
At the Borrower's option, Adjusted LIBOR
plus 3.25% or ABR plus 2.25%.
TRANCHE B FACILITY
At the Borrower's option, Adjusted LIBOR
plus 3.75% or ABR plus 2.75%.
ALL FACILITIES
The Borrower may elect interest periods of
1, 2, 3 or 6 months for Adjusted LIBOR
borrowings.
Calculation of interest shall be on the
basis of the actual days elapsed in a year
of 360 days (or 365 or 366 days, as the case
may be, in the case of ABR loans based on
the Prime Rate) and interest shall be
payable at the end of each interest period
and, in any event, at least every 3 months.
ABR is the Alternate Base Rate, which is the
higher of CSFB's Prime Rate and the Federal
Funds Effective Rate plus 1/2 of 1%.
Adjusted LIBOR will at all times include
statutory reserves.
LETTER OF CREDIT FEE: A per annum fee equal to the spread over
Adjusted LIBOR under the Revolving Facility
will accrue on the aggregate face amount of
outstanding letters of credit under the
Revolving Facility, payable in arrears at
the end of each quarter and upon the
termination of the Revolving Facility, in
each case for the actual number of days
elapsed over a 360- day year. Such fees
shall be distributed to the Lenders
participating in the Revolving Facility pro
rata in accordance with the amount of each
such Lender's Revolving Facility commitment.
In addition, the Borrower shall pay to the
Issuing Bank, for its own account, (a) a
fronting fee equal to a percentage per annum
to be agreed upon of the aggregate face
amount of outstanding letters of credit,
payable in arrears at the end of each
quarter and upon the termination of the
Revolving Facility, calculated based upon
the actual number of days
<PAGE>
2
elapsed over a 360-day year, and (b)
customary issuance and administration fees.
COMMITMENT FEES: A commitment fee equal to (a) 1.00% per
annum on the undrawn portion of the
commitments in respect of the Tranche A
Facility and (b) 0.50% per annum on the
undrawn portion of the commitments in
respect of the other Facilities, will
accrue, commencing upon the execution and
delivery of the Credit Agreement, and be
payable quarterly in arrears thereafter and
upon the termination of the commitments,
calculated based on the number of days
elapsed in a 360-day year.
CHANGES IN INTEREST RATES: The definitive credit documentation for the
Facilities will contain provisions under
which, from and after the date of delivery
of the Borrower's financial statements for
the period ended March 31, 2000, and so long
as no default shall have occurred and be
continuing, the interest rate spreads under
the Facilities will be reduced in increments
to be agreed upon based upon performance
goals to be agreed upon.
<PAGE>
ANNEX II
Sources and Uses of Funds
(in millions of dollars)
(all figures are approximate)
<TABLE>
<CAPTION>
USES OF FUNDS SOURCES OF FUNDS
- ------------- ----------------
<S> <C> <C> <C>
Purchase Shares $697.3 Revolving Facility1/ $ 0.0
Transaction Costs2/ 26.0 Tranche A Facility 155.0
------ Tranche B Facility 165.0
Cash on Hand3/ 193.3
Sponsor Cash Equity
Contribution 210.0
------
TOTAL USES $723.3 TOTAL SOURCES $723.3
====== ======
</TABLE>
- --------------------
1/ Represents amount to be drawn under the $70 million Revolving
Facility on the Closing Date.
2/ Excludes transaction costs and change-in-control payments to be paid
by the Company.
3/ Or additional Sponsor Equity, to the extent cash on hand is less
than $193.3 million.
<PAGE>
<PAGE>
Exhibit 99(c)(4)
STOCKHOLDER'S AGREEMENT
THIS STOCKHOLDER'S AGREEMENT is made and entered into as of this 20th
day of December 1999, among BRIDGEPORT HOLDINGS INC., a Delaware corporation
("PARENT"), BRIDGEPORT ACQUISITION CORPORATION, a Delaware corporation and a
wholly owned subsidiary of Parent ("PURCHASER"), and Peter Godfrey (the
"STOCKHOLDER").
WHEREAS the Stockholder desires that Micro Warehouse, Inc., a Delaware
corporation (the "COMPANY"), Parent and Purchaser enter into an Agreement and
Plan of Merger dated as of the date hereof (as the same may be amended or
supplemented, the "MERGER AGREEMENT") with respect to the merger of Purchaser
with and into the Company (the "MERGER"); and
WHEREAS the Stockholder is executing this Agreement as an inducement to
Parent to enter into and execute, and to cause Purchaser to enter into and
execute, the Merger Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by
Parent and Purchaser of the Merger Agreement and the mutual covenants,
conditions and agreements contained herein and therein, the parties agree as
follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Stockholder represents
and warrants to Parent and Purchaser as follows:
(a) The Stockholder is the record and beneficial owner of the
number of shares of Common Stock of the Company (the "COMPANY COMMON STOCK") set
forth opposite the Stockholder's name in SCHEDULE A hereto (as may be adjusted
from time to time pursuant to Section 5, the Stockholder's "SHARES"). Except for
the Stockholder's Shares and any other shares of Company Common Stock subject
hereto, the Stockholder is not the record or beneficial owner of any shares of
Company Common Stock.
(b) This Agreement has been duly authorized, executed and
delivered by the Stockholder and constitutes the legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally. Neither the execution and delivery
of this Agreement nor the consummation by the Stockholder of the transactions
contemplated hereby will result in a violation of, or a default under, or
conflict with, any contract, trust, commitment, agreement, understanding,
arrangement or restriction of any kind to which the Stockholder is a party or
bound or to which the Stockholder's Shares are subject. To the best of the
Stockholder's knowledge, consummation by the Stockholder of the transactions
contemplated hereby will not violate, or require any consent, approval, or
notice under, any provision of any judgment, order, decree, statute, law, rule
or regulation applicable to the Stockholder or the Stockholder's Shares.
(c) The Stockholder's Shares and the certificates representing
such Shares are now and at all times during the term hereof will be held by the
Stockholder, or by a nominee or custodian for the benefit of the Stockholder,
free and clear of all liens, claims, security interests,
<PAGE>
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
(d) No broker, investment banker, financial adviser or other
person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission from Parent, Purchaser or the Company in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Stockholder in his individual capacity.
(e) The Stockholder understands and acknowledges that Parent
is entering into, and causing Purchaser to enter into, the Merger Agreement in
reliance upon the Stockholder's execution and delivery of this Agreement.
SECTION 2. AGREEMENT TO TENDER OR SELL. The Stockholder hereby agrees
that he shall tender all of his Shares into the Offer (as defined in the Merger
Agreement) and that he shall not withdraw any Shares so tendered.
SECTION 3. COVENANTS. The Stockholder agrees with, and covenants
to, Parent and Purchaser as follows:
(a) The Stockholder shall not, except as contemplated by the
terms of this Agreement, (i) transfer (the term "TRANSFER" shall include,
without limitation, for the purposes of this Agreement, any sale, gift, pledge
or other disposition), or consent to any transfer of, any or all of the
Stockholder's Shares or any interest therein, (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer of any
or all of such Shares or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization or consent in or with respect to such
Shares except with respect to election of directors at the Company's annual
meeting, (iv) deposit such Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares or (v) subject to Section
8, take any other action that would in any way restrict, limit or interfere with
the performance of his obligations hereunder or the transactions contemplated
hereby.
(b) Subject to Section 8, the Stockholder shall not, nor shall
he permit any investment banker, attorney or other adviser or representative of
the Stockholder to, directly or indirectly, (i) solicit, initiate or encourage
the submission of, any Acquisition Proposal or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, 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, attorney or other adviser or representative of the
Stockholder shall be deemed to be a violation of this Section 3(b) by the
Stockholder.
SECTION 4. COMPETING TRANSACTIONS. Subject to Section 8, the
Stockholder hereby agrees to vote against or refrain from giving any consent in
favor of (i) any merger agreement or merger (other than the Merger Agreement and
the Merger), consolidation, combination, sale of substantial assets,
reorganization, joint venture, recapitalization, dissolution, liquidation or
winding up of or by the Company and (ii) any amendment of the Company's
Certificate of Incorporation or By-laws or other proposal or transaction
(including any consent
-2-
<PAGE>
solicitation to remove or elect any directors of the Company) involving the
Company or any of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify, or
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under or with respect to, the Offer,
the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement (each of the foregoing in clause (i) or
(ii) above, a "COMPETING TRANSACTION").
SECTION 5. CERTAIN EVENTS. The Stockholder agrees that this Agreement
and the obligations hereunder shall attach to the 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
without limitation the Stockholder's heirs, guardians, administrators or
successors. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of the
Company affecting the Company Common Stock, or the acquisition of additional
shares of Company Common Stock or other securities or rights of the Company by
any Stockholder, the number of Shares listed on Schedule A beside the name of
the Stockholder shall be adjusted appropriately and this Agreement and the
obligations hereunder shall attach to any additional shares of Company Common
Stock or other securities or rights of the Company issued to or acquired by the
Stockholder.
SECTION 6. STOP TRANSFER. [Intentionally Omitted].
SECTION 7. VOIDABILITY. If prior to the execution hereof, the Board of
Directors of the Company shall not have duly and validly authorized and approved
by all necessary corporate action the acquisition of Company Common Stock by
Parent and Purchaser and the other transactions contemplated by this Agreement
and the Merger Agreement, so that by the execution and delivery hereof Parent or
Purchaser would become, or could reasonably be expected to become, an
"Interested Stockholder" with whom the Company would be prevented for any period
pursuant to Section 203 of the Corporation Law from engaging in any "Affiliated
transaction" (as such terms are defined in Section 203 of the Corporation Law),
then this Agreement shall be void and unenforceable until such time as such
authorization and approval shall have been duly and validly obtained.
SECTION 8. STOCKHOLDER CAPACITY. The Stockholder does not make any
agreement or understanding in his capacity as director or officer of the
Company. The Stockholder signs solely in his capacity as the record holder and
beneficial owner of the Stockholder's Shares and nothing herein shall limit or
affect or be affected by any actions taken by the Stockholder in his capacity as
an officer or director of the Company to the extent specifically permitted by
the Merger Agreement.
SECTION 9. FURTHER ASSURANCES. The Stockholder shall, upon request of
Parent or Purchaser execute and deliver any additional documents and take such
further actions as may reasonably be deemed by Parent or Purchaser to be
necessary or desirable to carry out the provisions hereof.
SECTION 10. TERMINATION. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate upon the earlier of (a) the date upon
which the Merger Agreement is
-3-
<PAGE>
terminated in accordance with its terms or (b) the date that Parent,
Purchaser or the Company shall have purchased and paid for the Shares of the
Stockholder pursuant to Section 2; PROVIDED, HOWEVER, that the termination of
this Agreement shall not relieve any party of liability for breach of this
Agreement prior to termination.
SECTION 11. PUBLIC ANNOUNCEMENTS. The Stockholder will consult with
Parent before issuing, and provide Parent with the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement and the Merger Agreement, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange.
SECTION 12. MISCELLANEOUS.
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice): (i) if to Parent or
Purchaser, to the address set forth in Section 8.03 of the Merger Agreement; and
(ii) if to the Stockholder, to the address set forth on Schedule A hereto, or
such other address as may be specified in writing by the Stockholder.
(c) 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.
(d) This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
Parent, Purchaser and the Stockholder and delivered to Parent, Purchaser and the
Stockholder.
(e) This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(g) 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 by laws of descent. Any assignment in
violation of the foregoing shall be void.
(h) If any term, provision, covenant or restriction herein, or
the application thereof to any circumstance, shall, to any event, be held by a
court of competent jurisdiction to
-4-
<PAGE>
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions herein and the application thereof to any other
circumstances, shall remain in full force and effect, shall not in any way be
affected, impaired or invalidated, and shall be enforced to the fullest
extent permitted by law.
(i) The Stockholder agrees that irreparable damage would occur
and that Parent and Purchaser would not have any adequate remedy at law 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 Parent and Purchaser shall be entitled to an injunction
or injunctions to prevent breaches by the Stockholder of this Agreement and to
enforce specifically the terms and provisions of this Agreement. Each of the
parties hereto (i) consents to submit to the personal jurisdiction of the courts
specified in Section 8.13 of the Merger Agreement, and (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. The prevailing party in any
judicial action shall be entitled to receive from the other party reimbursement
for the prevailing party's reasonable attorneys' fees and disbursements, and
court costs.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing and
signed by such party.
-5-
<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Stockholder have caused
this Agreement to be duly executed and delivered as of the date first written
above.
/S/ PETER GODFREY
----------------------------------
Peter Godfrey
Stockholder
BRIDGEPORT HOLDINGS INC.
By: /S/ ALFRED D. BOYER
----------------------------------
Name: Alfred D. Boyer
Title: Vice President
BRIDGEPORT ACQUISITION CORPORATION
By: /S/ ALFRED D. BOYER
----------------------------------
Name: Alfred D. Boyer
Title: Vice President
-6-
<PAGE>
SCHEDULE A
Peter Godfrey 2,800,962
-7-
<PAGE>
Exhibit 99(c)(5)
STOCKHOLDER'S AGREEMENT
THIS STOCKHOLDER'S AGREEMENT is made and entered into as of this 20th
day of December 1999, among BRIDGEPORT HOLDINGS INC., a Delaware corporation
("PARENT"), BRIDGEPORT ACQUISITION CORPORATION, a Delaware corporation and a
wholly owned subsidiary of Parent ("PURCHASER"), and Felix Dennis (the
"STOCKHOLDER").
WHEREAS the Stockholder desires that Micro Warehouse, Inc., a Delaware
corporation (the "COMPANY"), Parent and Purchaser enter into an Agreement and
Plan of Merger dated as of the date hereof (as the same may be amended or
supplemented, the "MERGER AGREEMENT") with respect to the merger of Purchaser
with and into the Company (the "MERGER"); and
WHEREAS the Stockholder is executing this Agreement as an inducement to
Parent to enter into and execute, and to cause Purchaser to enter into and
execute, the Merger Agreement.
NOW, THEREFORE, in consideration of the execution and delivery by
Parent and Purchaser of the Merger Agreement and the mutual covenants,
conditions and agreements contained herein and therein, the parties agree as
follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES. The Stockholder represents
and warrants to Parent and Purchaser as follows:
(a) The Stockholder is the record and beneficial owner of the
number of shares of Common Stock of the Company (the "COMPANY COMMON STOCK") set
forth opposite the Stockholder's name in SCHEDULE A hereto (as may be adjusted
from time to time pursuant to Section 5, the Stockholder's "SHARES"). Except for
the Stockholder's Shares and any other shares of Company Common Stock subject
hereto, the Stockholder is not the record or beneficial owner of any shares of
Company Common Stock.
(b) This Agreement has been duly authorized, executed and
delivered by the Stockholder and constitutes the legal, valid and binding
obligation of the Stockholder, enforceable against the Stockholder in accordance
with its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
enforcement of creditors' rights generally. Neither the execution and delivery
of this Agreement nor the consummation by the Stockholder of the transactions
contemplated hereby will result in a violation of, or a default under, or
conflict with, any contract, trust, commitment, agreement, understanding,
arrangement or restriction of any kind to which the Stockholder is a party or
bound or to which the Stockholder's Shares are subject. To the best of the
Stockholder's knowledge, consummation by the Stockholder of the transactions
contemplated hereby will not violate, or require any consent, approval, or
notice under, any provision of any judgment, order, decree, statute, law, rule
or regulation applicable to the Stockholder or the Stockholder's Shares.
(c) The Stockholder's Shares and the certificates representing
such Shares are now and at all times during the term hereof will be held by the
Stockholder, or by a nominee or custodian for the benefit of the Stockholder,
free and clear of all liens, claims, security interests,
<PAGE>
proxies, voting trusts or agreements, understandings or arrangements or any
other encumbrances whatsoever, except for any such encumbrances or proxies
arising hereunder.
(d) No broker, investment banker, financial adviser or other
person is entitled to any broker's, finder's, financial adviser's or other
similar fee or commission from Parent, Purchaser or the Company in connection
with the transactions contemplated hereby based upon arrangements made by or on
behalf of the Stockholder in his individual capacity.
(e) The Stockholder understands and acknowledges that Parent
is entering into, and causing Purchaser to enter into, the Merger Agreement in
reliance upon the Stockholder's execution and delivery of this Agreement.
SECTION 2. AGREEMENT TO TENDER OR SELL. The Stockholder hereby agrees
that he shall tender all of his Shares into the Offer (as defined in the Merger
Agreement) and that he shall not withdraw any Shares so tendered.
SECTION 3. COVENANTS. The Stockholder agrees with, and covenants
to, Parent and Purchaser as follows:
(a) The Stockholder shall not, except as contemplated by the
terms of this Agreement, (i) transfer (the term "TRANSFER" shall include,
without limitation, for the purposes of this Agreement, any sale, gift, pledge
or other disposition), or consent to any transfer of, any or all of the
Stockholder's Shares or any interest therein, (ii) enter into any contract,
option or other agreement or understanding with respect to any transfer of any
or all of such Shares or any interest therein, (iii) grant any proxy,
power-of-attorney or other authorization or consent in or with respect to such
Shares except with respect to election of directors at the Company's annual
meeting, (iv) deposit such Shares into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares or (v) subject to Section
8, take any other action that would in any way restrict, limit or interfere with
the performance of his obligations hereunder or the transactions contemplated
hereby.
(b) Subject to Section 8, the Stockholder shall not, nor shall
he permit any investment banker, attorney or other adviser or representative of
the Stockholder to, directly or indirectly, (i) solicit, initiate or encourage
the submission of, any Acquisition Proposal or (ii) participate in any
discussions or negotiations regarding, or furnish to any person any information
with respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, 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, attorney or other adviser or representative of the
Stockholder shall be deemed to be a violation of this Section 3(b) by the
Stockholder.
SECTION 4. COMPETING TRANSACTIONS. Subject to Section 8, the
Stockholder hereby agrees to vote against or refrain from giving any consent in
favor of (i) any merger agreement or merger (other than the Merger Agreement and
the Merger), consolidation, combination, sale of substantial assets,
reorganization, joint venture, recapitalization, dissolution, liquidation or
winding up of or by the Company and (ii) any amendment of the Company's
Certificate of Incorporation or By-laws or other proposal or transaction
(including any consent
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<PAGE>
solicitation to remove or elect any directors of the Company) involving the
Company or any of its subsidiaries which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify, or
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of the Company under or with respect to, the Offer,
the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement (each of the foregoing in clause (i) or
(ii) above, a "COMPETING TRANSACTION").
SECTION 5. CERTAIN EVENTS. The Stockholder agrees that this Agreement
and the obligations hereunder shall attach to the 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
without limitation the Stockholder's heirs, guardians, administrators or
successors. In the event of any stock split, stock dividend, merger,
reorganization, recapitalization or other change in the capital structure of the
Company affecting the Company Common Stock, or the acquisition of additional
shares of Company Common Stock or other securities or rights of the Company by
any Stockholder, the number of Shares listed on Schedule A beside the name of
the Stockholder shall be adjusted appropriately and this Agreement and the
obligations hereunder shall attach to any additional shares of Company Common
Stock or other securities or rights of the Company issued to or acquired by the
Stockholder.
SECTION 6. STOP TRANSFER. [Intentionally Omitted].
SECTION 7. VOIDABILITY. If prior to the execution hereof, the Board of
Directors of the Company shall not have duly and validly authorized and approved
by all necessary corporate action the acquisition of Company Common Stock by
Parent and Purchaser and the other transactions contemplated by this Agreement
and the Merger Agreement, so that by the execution and delivery hereof Parent or
Purchaser would become, or could reasonably be expected to become, an
"Interested Stockholder" with whom the Company would be prevented for any period
pursuant to Section 203 of the Corporation Law from engaging in any "Affiliated
transaction" (as such terms are defined in Section 203 of the Corporation Law),
then this Agreement shall be void and unenforceable until such time as such
authorization and approval shall have been duly and validly obtained.
SECTION 8. STOCKHOLDER CAPACITY. The Stockholder does not make any
agreement or understanding in his capacity as director or officer of the
Company. The Stockholder signs solely in his capacity as the record holder and
beneficial owner of the Stockholder's Shares and nothing herein shall limit or
affect or be affected by any actions taken by the Stockholder in his capacity as
an officer or director of the Company to the extent specifically permitted by
the Merger Agreement.
SECTION 9. FURTHER ASSURANCES. The Stockholder shall, upon request of
Parent or Purchaser execute and deliver any additional documents and take such
further actions as may reasonably be deemed by Parent or Purchaser to be
necessary or desirable to carry out the provisions hereof.
SECTION 10. TERMINATION. This Agreement, and all rights and obligations
of the parties hereunder, shall terminate upon the earlier of (a) the date upon
which the Merger Agreement is
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<PAGE>
terminated in accordance with its terms or (b) the date that Parent, Purchaser
or the Company shall have purchased and paid for the Shares of the Stockholder
pursuant to Section 2; PROVIDED, HOWEVER, that the termination of this Agreement
shall not relieve any party of liability for breach of this Agreement prior to
termination.
SECTION 11. PUBLIC ANNOUNCEMENTS. The Stockholder will consult with
Parent before issuing, and provide Parent with the opportunity to review and
comment upon, any press release or other public statements with respect to the
transactions contemplated by this Agreement and the Merger Agreement, and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange.
SECTION 12. MISCELLANEOUS.
(a) Capitalized terms used and not otherwise defined in this
Agreement shall have the respective meanings assigned to such terms in the
Merger Agreement.
(b) All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice): (i) if to Parent or
Purchaser, to the address set forth in Section 8.03 of the Merger Agreement; and
(ii) if to the Stockholder, to the address set forth on Schedule A hereto, or
such other address as may be specified in writing by the Stockholder.
(c) 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.
(d) This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
Parent, Purchaser and the Stockholder and delivered to Parent, Purchaser and the
Stockholder.
(e) This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
(f) This Agreement shall be governed by, and construed in
accordance with, the laws of the Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
(g) 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 by laws of descent. Any assignment in
violation of the foregoing shall be void.
(h) If any term, provision, covenant or restriction herein, or
the application thereof to any circumstance, shall, to any event, be held by a
court of competent jurisdiction to
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<PAGE>
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions herein and the application thereof to any other
circumstances, shall remain in full force and effect, shall not in any way be
affected, impaired or invalidated, and shall be enforced to the fullest
extent permitted by law.
(i) The Stockholder agrees that irreparable damage would occur
and that Parent and Purchaser would not have any adequate remedy at law 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 Parent and Purchaser shall be entitled to an injunction
or injunctions to prevent breaches by the Stockholder of this Agreement and to
enforce specifically the terms and provisions of this Agreement. Each of the
parties hereto (i) consents to submit to the personal jurisdiction of the courts
specified in Section 8.13 of the Merger Agreement, and (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. The prevailing party in any
judicial action shall be entitled to receive from the other party reimbursement
for the prevailing party's reasonable attorneys' fees and disbursements, and
court costs.
(j) No amendment, modification or waiver in respect of this
Agreement shall be effective against any party unless it shall be in writing and
signed by such party.
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<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Stockholder have caused
this Agreement to be duly executed and delivered as of the date first written
above.
/S/ FELIX DENNIS
----------------------------------
Felix Dennis
Stockholder
BRIDGEPORT HOLDINGS INC.
By: /S/ ALFRED D. BOYER
----------------------------------
Name: Alfred D. Boyer
Title: Vice President
BRIDGEPORT ACQUISITION CORPORATION
By: /S/ ALFRED D. BOYER
----------------------------------
Name: Alfred D. Boyer
Title: Vice President
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<PAGE>
SCHEDULE A
Felix Dennis 1,275,963
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