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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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OVID TECHNOLOGIES, INC.
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(Name of Subject Company)
OVID TECHNOLOGIES, INC.
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(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
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(Title of Class of Securities)
690466 10 7
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(CUSIP Number of Class of Securities)
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MARK L. NELSON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OVID TECHNOLOGIES, INC.
333 SEVENTH AVENUE
NEW YORK, NEW YORK 10001
(212) 563-3006
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(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person(s) Filing Statement)
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WITH A COPY TO:
PAUL JACOBS, ESQ.
FULBRIGHT & JAWORSKI L.L.P.
666 FIFTH AVENUE
NEW YORK, NEW YORK 10103
(212) 318-3000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Ovid Technologies, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive offices
of the Company is 333 Seventh Avenue, New York, New York 10001. The title of the
class of equity securities to which this statement relates is the common stock,
par value $.01 per share (the "Company Common Stock" or the "Shares"), of the
Company.
ITEM 2. TENDER OFFER OF NEWCO.
This statement relates to the tender offer by OTI Acquisition Corp., a
Delaware corporation ("Newco") and an indirect wholly owned subsidiary of
Wolters Kluwer U.S. Corporation, a Delaware corporation ("Parent"), disclosed in
a Tender Offer Statement on Schedule 14D-1, dated October 5, 1998 (the "Schedule
14D-1"), to purchase all of the issued and outstanding Shares, at a price of
$24.59 per Share, net to the seller in cash (the "Offer Price"), upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated October
5, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
together with the Offer to Purchase and all amendments and supplements thereto,
constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 29, 1998 (the "Merger Agreement"), by and among Parent, Newco
and the Company. The Merger Agreement provides, among other things, that as soon
as practicable after the satisfaction or waiver of the conditions set forth in
the Merger Agreement, Newco will be merged with and into the Company (the
"Merger"), and the Company will continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement is filed herewith as
Exhibit 1 and is incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and Newco are c/o Wolters Kluwer United States Inc., 161 North Clark
Street, 48th Floor, Chicago, Illinois 60601.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Except as described in this Item 3(b) and on Schedule I hereto, which
are incorporated herein by reference, as of the date hereof, there are no
material contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest between the Company or its affiliates and (i)
its executive officers, directors or affiliates or (ii) Parent, Newco or their
respective officers, directors or affiliates.
As of September 25, 1998, Mark L. Nelson, President and Chief Executive
Officer of the Company, had an outstanding debt of $769,765.45 owed to the
Company for certain advances and interest charges approved by the Company's
Board of Directors (the "Company Board"). Interest on the outstanding principal
began to accrue May 1, 1998 at a rate of 8% per annum, calculated monthly. Under
Mr. Nelson's agreement with the Company, Mr. Nelson may not borrow in excess of
$2,000,000 in the aggregate. All outstanding balances are payable to the Company
either on demand or on December 31, 1999.
Mr. Nelson has agreed to pay $303,320 of the total transaction fee payable
to Goldman, Sachs & Co. under the terms of an engagement letter between the
Company and Goldman, Sachs & Co. dated April 1, 1998. See "Item 5. Persons
Retained, Employed or to be Compensated."
In addition, the Company Board approved a loan to Mr. Nelson of up to
approximately $2,000,000 to permit Mr. Nelson to repay certain outstanding loans
secured by certain of his Shares. Mr. Nelson has agreed to repay the loan,
together with interest at the market rate, out of the proceeds of his tender of
his Shares in the Offer.
The Company has agreed to pay Jeffrey Hoerle, Chief Financial Officer of
the Company, a contingent fee of $100,000 for performance beyond the normal
scope of his duties upon the closing of a sale of the Company to a third party.
ARRANGEMENTS WITH PARENT, NEWCO OR THEIR AFFILIATES
Confidentiality Agreement
The following is a summary of certain material provisions of the
Confidentiality Agreement, dated May 11, 1998, between the Company and Parent
(the "Confidentiality Agreement"). This summary does not purport to be complete
and is qualified in its entirety by reference to the complete text of the
Confidentiality Agreement, a copy of which is filed as Exhibit 2 hereto and is
incorporated herein by reference. Capitalized terms not otherwise defined below
shall have the meanings set forth in the Confidentiality Agreement.
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The Confidentiality Agreement contains customary provisions pursuant to
which, among other matters, Parent agreed to keep confidential all nonpublic and
confidential information furnished to it by the Company relating to the Company,
subject to certain exceptions (the "Confidential Information"), and to use the
Confidential Information solely for the purpose of evaluating a possible
transaction involving the Company and Parent. Parent has agreed in the
Confidentiality Agreement that for a period of twelve months from the date
thereof, without the prior written consent of the Company, neither it nor any of
its affiliates will, among other things, acquire or assist, advise, participate
with or encourage any other person in acquiring, directly or indirectly, control
of the Company or any securities, businesses or assets of the Company. Parent
has also agreed that for a period of twelve months from the date of the
Confidentiality Agreement not to request the Company or any of its
representatives, directly or indirectly, to amend or waive the provisions of the
foregoing sentence or take any action which might require the Company to make a
public announcement regarding the possibility of a transaction.
The Merger Agreement
The following is a summary of certain material provisions of the Merger
Agreement. This summary does not purport to be complete and is qualified in its
entirety by reference to the complete text of the Merger Agreement, a copy of
which is filed as Exhibit 1 hereto and is incorporated herein by reference.
Capitalized terms not otherwise defined below shall have the meanings set forth
in the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
not later than the fifth business day from the public announcement of the
execution of the Merger Agreement. The Merger Agreement also provides that Newco
cannot amend or waive the Minimum Condition (as defined below) or decrease the
Offer Price or the number of Shares sought, change the form of consideration to
be paid pursuant to the Offer, impose conditions to the Offer in addition to
those set forth in Annex A to the Merger Agreement, amend any other term or
condition of the Offer in any manner adverse to the holders of Shares or extend
the expiration date of the Offer without the prior written consent of the
Company. Notwithstanding the foregoing provisions, (a) Parent has agreed to
cause Newco to extend the Offer at any time prior to the termination of the
Merger Agreement in periods of ten business days for each such extension, if,
and to the extent that, at the initial expiration date of the Offer, or any
extension thereof, all conditions to the Offer have not been satisfied or waived
and (b) the Offer Price may be increased and the Offer may be extended to the
extent required by law in connection with such increase. In addition, Newco may,
without the consent of the Company, extend the Offer for a period of not more
than ten business days beyond the latest expiration date that would otherwise be
permitted under the immediately preceding sentence if there shall not have been
tendered and not withdrawn pursuant to the Offer at least 90% of the outstanding
Shares.
The obligation of Newco to accept for payment and pay for Shares tendered
pursuant to the Offer is subject to the condition that there will be validly
tendered and not withdrawn a number of Shares which, together with any Shares
beneficially owned by Parent or Newco, represent at least a majority of the
Shares outstanding on a fully diluted basis (the "Minimum Condition"). In
addition, Newco is not required to accept for payment or pay for any Shares
tendered pursuant to the Offer, and may terminate the Offer and not accept for
payment any tendered Shares, if (a) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), or the antitrust laws of applicable jurisdictions outside the United
States, has not expired or been terminated prior to the expiration of the Offer;
(b) at any time on or after September 29, 1998, and before the expiration of the
Offer any of the following occur: (i) there shall be any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted, issued or applicable to the Offer or the Merger by any governmental
entity of competent jurisdiction in the United States or other country in which
the Company directly or indirectly has material assets or operations which (A)
prohibits the consummation of the Offer or the Merger, (B) as a result of the
Offer or the Merger, restrains or prohibits or imposes any material limitations
on Parent's or Newco's ownership or operation of all or a material portion of
the businesses or assets of the Company and its Subsidiaries (as defined below),
taken as a whole, or of Parent and its Subsidiaries, taken as a whole, or
compels Parent or any of its Subsidiaries or affiliates to dispose of or hold
separate all or any material portion of the business or assets of the Company
and its Subsidiaries, taken as a whole, or of Parent and its Subsidiaries, taken
as a whole, or requires the Company, Parent or Newco to pay damages that are
material in relation to the Company and its Subsidiaries, taken as a whole, (C)
challenges, prohibits, or makes illegal the acceptance for payment, payment for
or purchase of Shares pursuant to, or consummation of, the Offer or the Merger,
(D) imposes material limitations on the ability of Newco or Parent effectively
to exercise full rights of ownership of the Shares accepted for payment pursuant
to the Offer, including, without limitation, the right to vote the Shares
purchased by it on all matters properly presented to the
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Company's stockholders, or (E) requires divestiture by Parent or any of its
Subsidiaries or affiliates of any Shares, provided that Parent shall have used
all reasonable efforts to cause any such judgment, order or injunction to be
vacated or lifted; (ii) there shall be instituted or pending any action, suit or
proceeding by any governmental entity of competent jurisdiction in the United
States or any other country in which the Company or Parent directly or
indirectly has material assets or operations, that is reasonably likely,
directly or indirectly, to result in any of the consequences referred to in
clauses (A) through (E) above; provided that Parent shall have used all
reasonable efforts to cause any such action, suit or proceeding to be withdrawn
or dismissed; (iii) there has been since September 29, 1998, any event,
occurrence or development or state of circumstances or facts which has had or
would reasonably be expected to have a Company Material Adverse Effect (as
defined below); (iv) the representations and warranties of the Company set forth
in the Merger Agreement shall not be true and accurate as of the date of
consummation of the Offer as though made on or as of such date or the Company
shall have breached or failed in any material respect to perform or comply with
any material obligation, agreement or covenant required by the Merger Agreement
to be performed or complied with by it except, (i) those representations and
warranties that address matters only as of a particular date or only with
respect to a specified period of time which need only be true and accurate as of
such date or with respect to such period or (ii) where the failure of such
representations and warranties to be true and accurate or the breach,
non-performance or non-compliance with such obligations, agreements or
covenants, do not have, individually or in the aggregate, or would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect; (v) the Merger Agreement shall have been terminated in
accordance with its terms; (vi) the Company shall have entered into a definitive
agreement or agreement in principle with any person with respect to an
Alternative Proposal (as defined below); or (vii) the Company Board shall have
withdrawn, modified or changed in a manner adverse to Parent or Newco (including
by amendment of the Schedule 14D-9) its recommendation of the Offer, the Merger
Agreement or the Merger or shall have recommended an Alternative Proposal (as
defined below) or the Company Board shall have adopted a resolution to do any of
the foregoing, which in the sole judgment of Parent or Newco in any such case,
and regardless of the circumstances giving rise to such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment or
payments.
For purposes of the Merger Agreement, "Subsidiary" means, when used with
reference to any entity, any corporation a majority of the outstanding voting
securities of which are owned directly or indirectly by such entity. "Company
Material Adverse Effect" means any adverse change in the assets, liabilities,
financial condition, or results of operations of the Company or any of its
Subsidiaries which is material to the Company and its Subsidiaries taken as a
whole, other than any change or effect arising out of general economic
conditions. "Alternative Proposal" means any proposal or offer for a merger,
asset acquisition or other business combination involving the Company or any
proposal or offer to acquire a significant equity interest in, or a significant
portion of the assets of, the Company other than the transactions contemplated
by the Merger Agreement. "Superior Proposal" means any bona fide proposal to
acquire, directly or indirectly, all of the Shares then outstanding or all or
substantially all the assets of the Company, and otherwise on terms which the
Company Board determines in good faith (after consultation with the Company's
financial advisor) to be more favorable to the Company and its stockholders than
the Offer and the Merger.
The Merger. The Merger Agreement provides that, subject to the terms and
conditions thereof, Newco will be merged with and into the Company, with the
Company continuing as the Surviving Corporation and a wholly owned indirect
subsidiary of Parent, and each issued and outstanding Share (other than Shares
owned by Parent, Newco or any other wholly owned subsidiary of Parent, Shares
owned by the Company as treasury stock and Shares held by stockholders who have
properly exercised appraisal rights under Delaware law, if any) shall be
converted into the right to receive the Offer Price, without interest. Each
issued and outstanding Share of Newco common stock shall be converted into and
become one fully paid and nonassesable share of Common Stock of the Surviving
Corporation. The Merger Agreement also provides that (i) the directors and
officers of Newco immediately prior to the effective time of the Merger (the
"Effective Time") will be the initial directors and officers, respectively of
the Surviving Corporation; (ii) the Certificate of Incorporation of the Company
will be the initial Certificate of Incorporation of the Surviving Corporation;
and (iii) the By-laws of Newco will be the initial By-laws of the Surviving
Corporation.
Treatment of Options. The Merger Agreement provides that as of the
Effective Time, each outstanding option (an "Option," and collectively, the
"Options") to purchase Shares which has been granted under either the Company's
1990 Stock Option Plan or 1993 Stock Option Plan (the "Stock Plans"), whether or
not then vested or exercisable, will be converted into the right to receive from
the Company an amount of cash equal to the product of (A) the number of Shares
subject to such Option and (B) the excess, if any, of the Offer Price over the
per share exercise price (the "Option Consideration"). Prior to the Effective
Time, the Company will take all steps necessary to
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give written notice to each holder of an Option that (i) all Options shall be
canceled effective as of the Effective Time and (ii) upon the execution and
delivery to the Company by such holder of an instrument acknowledging
cancellation of all Options held by such holder effective as of the Effective
Time ("Cancellation Instrument"), the Company will pay such holder, promptly
following the Effective Time, the Option Consideration for all Options held by
such holder. The Company Board and its Compensation Committee will take any and
all action necessary to effectuate the matters described in this provision on or
before the Effective Time. Parent has agreed to provide the Company with
sufficient funds to permit the Company to satisfy its obligations under this
provision.
Directors. The Merger Agreement provides that, promptly upon the purchase
of and payment for Shares by Parent or any of its Subsidiaries which represent
at least a majority of the outstanding Shares (on a fully diluted basis), Parent
will be entitled to designate such number of directors, rounded up to the next
whole number, on the Company Board, subject to compliance with Section 14(f) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule
14f-1 promulgated thereunder, as is equal to the product of the total number of
directors on the Company Board (giving effect to the directors elected pursuant
to this sentence) multiplied by the percentage that the aggregate number of
Shares beneficially owned by Parent, Newco and any of their affiliates bears to
the total number of Shares then outstanding. The Company will take all action
necessary to cause Parent's designees to be elected or appointed to the Company
Board and to secure the resignations of such number of its incumbent directors
as is necessary to cause Parent's designees to be elected or appointed to the
Company Board and to secure the resignations of such number of its incumbent
directors as is necessary to enable Parent's designees to be so elected to the
Company Board and will cause Parent's designees to be so elected. The Company
will take all action necessary to cause individuals designated by Parent to
constitute the same percentage as such individuals represent on the Company
Board of each committee of the Company Board and each board of directors (and
committee thereof) of each of the Company's Subsidiaries. Notwithstanding the
foregoing, until the Effective Time, the Company will have on the Company Board
at least two directors who were directors of the Company on the date of the
Merger Agreement (the "Company Designees"); provided, that, subsequent to the
purchase of and payment for Shares pursuant to the Offer, Parent will always
have its designees represent at least a majority of the entire Company Board.
The Merger Agreement also provides that from and after the time, if any,
that Parent's designees constitute a majority of the Company Board, any
amendment of the Merger Agreement, any termination of the Merger Agreement by
the Company, any extension of time for performance of any of the obligations of
Parent or Newco, any waiver of any condition or any of the Company's rights
thereunder or any actions that would adversely affect the rights of the
stockholders of the Company or the holders of Options with respect to the
transactions contemplated thereby, may be effected only by the action of a
majority of the Company Designees then in office, which action shall be deemed
to constitute the action of the full Company Board; provided, that if the number
of Company Designees shall be reduced below two for any reason whatsoever, any
remaining Company Designee shall be entitled to designate a person to fill such
vacancy who shall be deemed to be a Company Designee for purposes of the Merger
Agreement or, if no Company Designee then remains, the other directors shall
designate two persons to fill such vacancies who shall not be stockholders,
affiliates or associates of Newco or Parent and such persons shall be deemed to
be Company Designees for purposes of the Merger Agreement.
Stockholders' Meeting. Pursuant to the Merger Agreement, the Company, if
required by applicable law in order to consummate the Merger, shall duly call,
give notice of, convene and hold a special meeting of its stockholders as soon
as practicable following the acceptance for payment and purchase of Shares by
Newco pursuant to the Offer for the purpose of considering and taking action
upon the Merger Agreement.
The Merger Agreement also provides that the Company shall, if required by
applicable law in order to consummate the Merger, prepare and file with the
Commission a preliminary proxy or information statement relating to the Merger
and the Merger Agreement and shall (i) obtain and furnish the information
required to be included by the Commission in the Proxy Statement (as hereinafter
defined) and, after consultation with Parent, respond promptly to any comments
made by the Commission with respect to the preliminary proxy or information
statement and cause a definitive proxy or information statement (the "Proxy
Statement") to be mailed to its stockholders and (ii) obtain the necessary
approvals of the Merger and the Merger Agreement by its stockholders. The Merger
Agreement also provides that, subject to the fiduciary obligations of the
Company Board, the Company shall include in the Proxy Statement the
recommendation of the Company Board that stockholders of the Company vote in
favor of the approval of the Merger and the adoption of the Merger Agreement.
The Merger Agreement also provides that, in the event that Parent, Newco or any
other Subsidiary of Parent shall acquire at least 90% of the Shares, pursuant to
the Offer or
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otherwise, the parties thereto shall take all necessary and appropriate action
to cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of the Company's stockholders in accordance with
Section 253 of the Delaware General Corporation Law (the "DGCL").
Representations and Warranties. The Merger Agreement contains
representations and warranties of one or more of the parties with respect to,
among other things, (i) organization, good standing, corporate power and
authority and enforceability, (ii) capitalization, (iii) required consents or
approvals, (iv) no material misstatements in filings made with the Commission or
financial statements, (v) absence of material adverse changes, (vi) no
litigation, (vii) tax returns filed and taxes paid, (viii) no liabilities under
ERISA, (ix) compliance with environmental laws and regulations, (x) ownership of
intellectual property and technology of the Company and no infringement upon the
intellectual property of third parties and no infringement by others upon the
intellectual property owned or used by the Company, (xi) compliance with law,
(xii) real property, (xiii) insurance, (xiv) approvals under the DGCL and the
inapplicability of Delaware antitakeover provisions, (xv) voting requirements,
(xvi) employment of investment bankers and financial advisors, (xvii) receipt of
fairness opinion from financial advisor, (xviii) information supplied in certain
documents distributed to stockholders or filed with the Commission, (xix)
confidentiality agreements signed with other parties, (xx) interim operations of
Newco and (xxi) sufficiency of funds of Newco to consummate the Offer and the
Merger.
Interim Operations. In the Merger Agreement, the Company has covenanted and
agreed that, among other things, between the date of the Merger Agreement and
the Effective Time, unless Parent otherwise agrees in writing and except as
otherwise contemplated by the Merger Agreement, (a) the Company will conduct its
operations according to its ordinary and usual course of business consistent
with past practice and seek to preserve intact its current business
organization, keep available the services of its current officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it to the end that their goodwill and ongoing businesses
shall be unimpaired in any material respect as of the Effective Time, and (b)
neither the Company nor any of its Subsidiaries will (i) (except for the
issuance of Shares upon the exercise of Options outstanding on the date of the
Merger Agreement and in accordance with their current terms), issue, sell,
grant, dispose of, pledge or otherwise encumber, or authorize or propose the
issuance, sale, disposition or pledge or other encumbrance of (A) any additional
shares of capital stock of any class (including the Shares), or any securities
or rights convertible into, exchangeable for, or evidencing the right to
subscribe for any shares of capital stock, or any rights, warrants, options,
calls, commitments or any other agreements of any character to purchase or
acquire any shares of capital stock or any securities or rights convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
capital stock or (B) any other securities in respect of, in lieu of, or in
substitution for, Shares outstanding on the date of the Merger Agreement; (ii)
redeem, purchase or otherwise acquire or propose to redeem, purchase or
otherwise acquire, directly or indirectly, any of its outstanding Shares; (iii)
split, combine, subdivide or reclassify any Shares or declare, set aside for
payment or pay any dividend or make any other actual, constructive or deemed
distribution in respect of any Shares or otherwise make any payments to
stockholders in their capacity as such, other than dividends by a direct or
indirect wholly owned Subsidiary of the Company; (iv) adopt a plan of complete
or partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its direct or
indirect Subsidiaries (other than the Merger); (v) adopt any amendments to its
Certificate of Incorporation or By-Laws or alter through merger, liquidation,
reorganization, restructuring or in any other fashion the corporate structure or
ownership of any direct or indirect Subsidiary of the Company; (vi) make any
acquisition, by means of merger, consolidation or otherwise, or disposition, of
assets or securities (other than the Merger), in each case other than in the
ordinary course of business consistent with past practice; (vii) sell, lease,
license, mortgage or otherwise encumber or subject to any lien or otherwise
dispose of any of its properties or assets, except sales in the ordinary course
of business consistent with past practice and liens existing as of the date of
the Merger Agreement; (viii) incur any indebtedness for borrowed money or
guarantee any such indebtedness or issue any debt securities of the Company or
make any loans or advances, other than in the ordinary course of business
consistent with past practice, or any capital contributions to, or investments
in, any other person other than the Company or any direct or indirect wholly
owned Subsidiary of the Company; (ix) make or agree to make any new capital
expenditure or expenditures which, individually, is in excess of $100,000 or, in
the aggregate, are in excess of $600,000; (x) make any material tax election or
settle or compromise any material income tax liability; (xi) pay, discharge,
settle or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge, settlement or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated
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financial statements (or the notes thereto) included in the Company's filings
with the Commission or incurred in the ordinary course of business consistent
with past practice, or waive any benefits of, or agree to modify in any respect,
any confidentiality, standstill or similar agreements to which the Company, or
any of its Subsidiaries is a party; (xii) except in the ordinary course of
business, modify, amend or terminate any contract or agreement to which the
Company or any of its Subsidiaries is a party, or waive, release or assign any
rights or claims; (xiii) except as required to comply with applicable law, (A)
adopt, enter into, terminate or amend any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of the Company or any of its Subsidiaries
(collectively, "Benefit Plans"), other than arrangements or understandings
adopted, entered into, terminated or amended in the ordinary course of business
consistent with past practice, (B) increase in any manner the compensation or
fringe benefits of, or pay any bonus to, any director, officer or employee
(except for normal increases or bonuses in the ordinary course of business
consistent with past practice), (C) pay any benefit not provided for under any
Benefit Plan, other than in the ordinary course of business consistent with past
practice, (D) except as permitted in clause (B) above, or for options included
in the representations set forth in Section 3.2 of the Merger Agreement, grant
any awards under any bonus, incentive, performance or other compensation plan or
arrangement or Benefit Plan (including the grant of stock options, stock
appreciation rights, stock based or stock related awards, performance units or
restricted stock, or the removal of existing restrictions in any Benefit Plans
or agreement or awards made thereunder) or (E) other than in the ordinary course
of business consistent with past practice, take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Benefit Plan; or (xiv) take, or
agree to take, any action that would make any representation or warranty of the
Company in the Merger Agreement inaccurate at the Effective Time (except for
representations and warranties which speak as of a particular date, which need
be accurate only as of such date) or omit, or agree to commit to omit, to take
any action necessary to prevent any such representation or warranty from being
inaccurate in any material respect at the Effective Time (except for
representations and warranties which speak as of a particular date, which need
be accurate only as of such date), provided however that the Company will be
permitted to take or omit to take such action which can be cured, and in fact is
cured, at or prior to the Effective Time, or take any action that would result
in, or is reasonably likely to result in, any of the conditions of the Merger
set forth in Article VI of the Merger Agreement not being satisfied except that,
with respect to the condition set forth in Section 6.1(a) of the Merger
Agreement, such action shall be permitted if it is consistent with the fiduciary
duties of the Company Board to the Company's stockholders under applicable law;
or (xv) authorize, recommend, propose or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement to
do any of the foregoing.
Alternative Proposals. Pursuant to the Merger Agreement, the Company has
agreed that it (a) will not, and will cause its officers, directors, employees,
representatives and agents not to, initiate, solicit or encourage, directly or
indirectly, any Alternative Proposal or engage in any negotiations or enter into
any agreement or provide any confidential information or data to any person in
connection with or relating to any Alternative Proposal; (b) will immediately
cease any existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any Alternative Proposal; and (c) will
notify Parent as soon as practicable if any such inquiries or proposals are
received by, any such information is requested from, or any such negotiations
and/or discussions are sought to be initiated or continued with, the Company.
Notwithstanding the foregoing, nothing in such provision shall require the
Company Board on behalf of the Company to act, or refrain from acting with
respect to unsolicited Alternative Proposals in any manner which, in the opinion
of the Company Board after consultation with its counsel, could reasonably be
deemed inconsistent with its fiduciary duties to the Company's stockholders
under applicable law, including, without limitation, disclosing to its
stockholders a position required by Rule 14e-2(a) under the Exchange Act.
Directors' and Officers' Insurance and Indemnification. The Merger
Agreement provides that (a) from and after the consummation of the Offer, Parent
will, and will cause the Company (or the Surviving Corporation if after the
Effective Time) to, indemnify, defend and hold harmless any current or former
officer or director of the Company (the "Company Indemnified Party") and its
Subsidiaries against all losses, claims, damages, liabilities, costs and
expenses (including attorney's fees and expenses), judgments, fines, losses, and
amounts paid in settlement in connection with any actual or threatened action,
suit, claim, proceeding or investigation (each a "Claim") to the extent that any
such Claim is based on, or arises out of the fact that such person is or was a
director or officer of the Company or any of its
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Subsidiaries, and to the extent that any such Claim pertains to any matter or
fact arising out of any act or omission prior to or at the Effective Time,
regardless of whether such Claim is asserted or claimed prior to, at or after
the Effective Time, to the full extent permitted under applicable law or the
Company's Certificate of Incorporation, By-laws or indemnification agreements in
effect on the date of the Merger Agreement and disclosed in a schedule thereto
or otherwise as permitted by any such contracts, including provisions relating
to advancement of expenses incurred in the defense of any action or suit.
Without limiting the foregoing, in the event any Company Indemnified Party
becomes involved in any capacity in any Claim, then from and after consummation
of the Offer, Parent shall, or shall cause the Company (or the Surviving
Corporation if after the Effective Time) to, periodically advance to such
Company Indemnified Party its legal and other expenses (including the cost of
any investigation and preparation incurred in connection therewith), subject to
the provision by such Company Indemnified Party of an undertaking to reimburse
the amounts so advanced in the event of a final non-appealable determination by
a court of competent jurisdiction that such Company Indemnified Party is not
entitled thereto; (b) Parent and the Company agree that all rights to
indemnification and all limitations on liability existing in favor of the
Company Indemnified Party as provided in the Company's Certificate of
Incorporation and By-laws as in effect as of the date of the Merger Agreement
shall survive the Merger and shall continue in full force and effect, without
any amendment thereto, for a period of six years from the Effective Time to the
extent such rights are consistent with the DGCL; provided, that, in the event
any claim or claims are asserted or made within such six year period, all rights
to indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims; provided, further, that nothing in such
section shall impair any rights or obligations of any present or former
directors or officers of the Company; (c) Parent shall cause to be maintained in
effect for the Indemnified Parties (as defined below) for not less than six
years after the Effective Time policies of directors' and officers' liability
insurance and fiduciary liability insurance with respect to matters occurring at
or prior to the Effective Time (including, without limitation, the transactions
contemplated by the Merger Agreement) providing substantially the same coverage
and containing terms and conditions which are no less advantageous, in any
material respect, to those currently maintained by the Company for the benefit
of the Company's present or former directors, officers, employees or agents
covered by such insurance policies prior to the Effective Time (the "Indemnified
Parties"); and (d) in the event Parent or Newco or any of their successors or
assigns (i) consolidates with or merges into any other person and shall not be
the 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, to the extent necessary
to effectuate the purposes of such section, proper provision shall be made so
that the successors and assigns of Parent and Newco assume the obligations set
forth above and none of the actions described in clauses (i) or (ii) shall be
taken until such provision is made.
Employees. The Merger Agreement provides that, (a) following the Effective
Time, the Surviving Corporation will provide pension, health and welfare
benefits (other than stock option, stock purchase or similar plans) to employees
of the Company and its Subsidiaries who continue their employment after the
Effective Time (each, a "Continuing Employee") on terms which are generally no
less favorable to such Continuing Employee than the benefits being provided to
such Continuing Employee immediately prior to the Effective Time and (b) if at
any time Parent shall make a determination that any Continuing Employee is
eligible to participate in any of Parent's benefit plans after the Effective
Time, then, for purposes of eligibility and vesting with respect to any such
plans, Parent will cause the Surviving Corporation to recognize the service of
the Continuing Employees through the Effective Time as if such service had been
performed with Parent.
Conditions to the Merger. The Merger Agreement provides that the respective
obligations of each party to effect the Merger shall be subject to the
satisfaction, at or prior to the Effective Time, of the following conditions:
(a) if approval of the Merger by the stockholders is required by applicable law,
the Merger Agreement shall have been approved and adopted by the requisite vote
of the Company's stockholders; provided, that Parent and Purchaser are required
to vote all of their Shares in favor of the Merger; (b) there shall not be in
effect any statute, rule, regulation, executive order, decree, ruling or
injunction or other order of a court or governmental or regulatory agency of
competent jurisdiction directing that the transactions contemplated in the
Merger Agreement not be consummated or otherwise materially limiting or
restricting ownership or the operation of the business of the Surviving
Corporation; provided, however, that, subject to the terms and conditions set
forth in the Merger Agreement, prior to invoking such condition each party shall
use its reasonable efforts to have any such decree, ruling, injunction or order
vacated; (c) subject to the terms and provisions set forth in the Merger
Agreement, all governmental consents, orders and approvals legally required for
the consummation of the Merger and the transactions contemplated thereby shall
have been obtained and be in effect at the Effective Time, other than those
consents, orders or approvals which would not
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reasonably be expected to have a Company Material Adverse Effect or which would
prohibit or materially limit or restrict the consummation of the transactions
contemplated therein or the ownership or operation of the business of the
Surviving Corporation, and the waiting periods under the HSR Act and under
antitrust laws of applicable jurisdictions outside the United States shall have
expired or been terminated.
Termination. The Merger Agreement provides that it may be terminated at any
time prior to the Effective Time: (a) by the mutual consent of Parent, Newco and
the Company; (b) by either the Company or Parent (i) if shares of Company Common
Stock shall not have been purchased pursuant to the Offer on or prior to three
(3) months from the execution of the Merger Agreement; provided, however, that
the passage of the period referred to in the foregoing clause shall be tolled
during (A) the period during which any party shall be subject to a non-final
order, decree, ruling or action restraining, enjoining or otherwise prohibiting
the purchase of shares of Company Common Stock pursuant to the Offer or the
consummation of the Merger, but not later than six (6) months from the execution
of this Agreement, or (B) any additional waiting period under the HSR Act
resulting from a second request; provided, further, however, that the right to
terminate the Merger Agreement under such clause shall not be available to any
party whose failure to fulfill any obligation under the Merger Agreement has
been the cause of, or resulted in, the failure of Parent or Newco, as the case
may be, to purchase shares of Company Common Stock pursuant to the Offer on or
prior to such date; or (ii) if any governmental entity of competent jurisdiction
in the United States or other country in which the Company directly or
indirectly has material assets or operations shall have issued an order, decree
or ruling or taken any other action (which order, decree, ruling or other action
the parties hereto shall use their respective reasonable best efforts to lift),
in each case permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by the Merger Agreement and such order, decree, ruling
or other action shall have become final and non-appealable; (c) by the Company
(i) if prior to the purchase of Shares pursuant to the Offer, (A) the Company
Board shall have entered into or shall have publicly announced its intention to
enter into an agreement or an agreement in principle with respect to any
Alternative Proposal that the Company Board determines, in good faith after
consultation with its financial advisors, is a Superior Proposal; (B) the
Company Board shall have withdrawn, or modified or changed in a manner adverse
to Parent or Newco its approval or recommendation of the Offer, the Merger
Agreement or the Merger or shall have recommended a Superior Proposal or shall
have executed, or shall have announced its intention to enter into, an agreement
in principle or definitive agreement relating to a Superior Proposal with a
person or entity other than Parent, Newco or their affiliates (or the Company
Board resolves to do any of the foregoing); (C) any person or group (as defined
in Section 13(d)(3) of the Exchange Act) (other than Parent, Newco or any
affiliate thereof or Mark L. Nelson) shall have become, after the date of the
Merger Agreement, the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of a majority of the outstanding Shares, or (D) any
representation or warranty made by Parent or Newco in the Merger Agreement shall
not have been true and correct in all material respects when made, or Parent or
Newco shall have failed to observe or perform in any material respect any of its
material obligations under the Merger Agreement; provided that prior to
exercising such right of termination, the Company shall give prompt written
notice to Parent of such misrepresentation or breach of warranty or failure to
observe or perform; provided, further, that the Company shall not have such
right of termination if the condition resulting in such misrepresentation or
breach of warranty or failure to observe or perform is cured (x) in the event
such notice is delivered on or prior to the fourth business day prior to the
then-scheduled expiration date of the Offer, not later than the earlier of (A)
such expiration date and (B) ten business days following delivery of such notice
and (y) in the event such notice is delivered on or after the third business day
prior to such expiration date, not later than three business days following such
delivery (it being agreed that in such event the Offer shall be extended as
necessary at least until the end of such cure period); or (ii) if Parent or
Newco shall have terminated the Offer, or the Offer shall have expired, without
Parent or Newco, as the case may be, purchasing any Shares pursuant thereto;
provided that the Company may not terminate the Merger Agreement pursuant to
such provision if the Company is in material breach of the Merger Agreement; or
(iii) if Parent, Newco or any of their affiliates shall have failed to commence
the Offer on or prior to five business days following the date of the initial
public announcement of the Offer; provided, that the Company may not terminate
the Merger Agreement pursuant to such provision if the Company is in material
breach of the Merger Agreement; or (d) by Parent or Newco (i) if, due to an
occurrence that if occurring after the commencement of the Offer would result in
a failure to satisfy any of the conditions to the Offer, Parent, Newco, or any
of their affiliates shall have failed to commence the Offer on or prior to five
business days following the date of the initial public announcement of the
Offer; provided that Parent may not terminate the Merger Agreement pursuant to
such provision if Parent or Newco is in material breach of the Merger Agreement;
(ii) prior to the purchase of shares of Company Common Stock pursuant to the
Offer, if (A) the Company shall have received any
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Alternative Proposal which the Company Board has determined to designate as a
Superior Proposal; (B) the Company Board shall have withdrawn, or modified or
changed in a manner adverse to Parent or Newco its approval or recommendation of
the Offer, the Merger Agreement or the Merger or shall have recommended an
Alternative Proposal or shall have executed, or shall have announced its
intention to enter into, an agreement in principle or definitive agreement
relating to an Alternative Proposal with a person or entity other than Parent,
Newco or their affiliates (or the Company Board resolves to do any of the
foregoing); (C) any person or group (as defined in Section 13(d)(3) of the
Exchange Act) (other than Parent, Newco or any affiliate thereof or Mark L.
Nelson) shall have become, after the date of the Merger Agreement, the
beneficial owner (as defined in Rule 13d-3 promulgated under the Exchange Act)
of 50% or more of the outstanding Shares, or (D) any representation or warranty
made by the Company in the Merger Agreement shall not have been true and correct
in all material respects when made and shall have resulted in, or is reasonably
likely to result in, a Company Material Adverse Effect, or the Company shall
have failed to observe or perform in any material respect any of its material
obligations under the Merger Agreement; provided that prior to exercising such
right of termination, Parent and Newco shall give prompt written notice to the
Company of such misrepresentation or breach of warranty or failure to observe or
perform; provided, further, that Parent and Newco shall not have such right of
termination if the condition resulting in such misrepresentation or breach of
warranty or failure to observe or perform is cured (i) in the event such notice
is delivered on or prior to the fourth business day prior to the then-scheduled
expiration date of the Offer, not later than the earlier of (A) such expiration
date and (B) ten business days following delivery of such notice and (ii) in the
event such notice is delivered on or after the third business day prior to such
expiration date, not later than three business days following such delivery (it
being agreed that in such event the Offer shall be extended as necessary at
least until the end of such cure period).
Effect of Termination; Termination Fee. The Merger Agreement provides that
if the Company terminates the Merger Agreement pursuant to the provisions
described in clauses (c)(i)(A), (B) and (C) under "Termination" above or if
Parent or Newco terminates the Merger Agreement pursuant to the provisions
described in clauses (d)(ii)(A), (B) and (C) under "Termination" above, then
immediately following such termination, the Company shall pay to Parent
$7,000,000 in full satisfaction of the obligations of the Company under the
Merger Agreement plus Parent's and Newco's reasonable out of pocket fees and
expenses, not to exceed $500,000, incurred in connection with the due diligence
investigation, the Offer, the Merger, the Merger Agreement and the consummation
of the transactions thereunder. Nothing contained in such provision shall
relieve any party from liability for fraud or for willful breach of the Merger
Agreement.
Except as set forth above, whether or not the Merger is consummated, all
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby shall be paid by the party incurring such
expenses.
Amendment. The Merger Agreement provides that after approval of the Merger
Agreement by the stockholders of the Company, no amendment shall be made which
reduces or changes the consideration payable in the Merger or adversely affects
the rights of the Company's stockholders without the approval of such
stockholders.
Stock Option and Tender Agreement
Concurrently with the execution of the Merger Agreement, Parent and Newco
entered into a Stock Option and Tender Agreement (the "Stock Option Agreement")
with Mark L. Nelson, Deborah Hull, Carleen Nelson and Martin Kahn (the
"Stockholders") with respect to Shares owned by such Stockholders. The following
summary of the Stock Option Agreement does not purport to be complete and is
qualified in its entirety by reference to the complete text of the Stock Option
Agreement which is attached as Exhibit 3 hereto and is incorporated by
reference.
Pursuant to the Stock Option Agreement, the Stockholders have agreed to
tender their Shares in the Offer and have granted Parent or Newco, as Parent
shall designate (the "Optionee"), an irrevocable option (the "Stock Option") to
purchase all of the outstanding Shares owned by such holders from time to time
at a purchase price equal to the Offer Price. The Stock Option may be exercised
by Parent or Newco, but only as to all of such Stockholders and as to all of
their Shares, if (i) the Offer is terminated by Parent or Newco because (A) the
Company shall have entered into a definitive agreement or an agreement in
principle for an Alternative Proposal or (B) the Company's Board of Directors
shall have withdrawn, modified or changed in a manner adverse to Parent or Newco
its recommendation of the Offer, the Merger Agreement or the Merger or
recommended an Alternative Proposal or resolved to do any of the foregoing, or
(ii) if the Offer expires without the purchase of Shares thereunder and at the
time of such expiration (x) the Minimum Condition was not satisfied or (y)
circumstances had occurred giving rise to a right of termination for the reasons
set
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forth in subclauses (i)(A) and (B) of this sentence, in each case without any
violation of the Offer or the Merger Agreement by Parent or Newco. Parent may
also exercise the Stock Option if the Company terminates the Merger Agreement
for the reasons described in clauses (c)(i)(A) and (c)(i)(B) under "The Merger
Agreement -- Termination" above. The Stock Option may be exercised during the
period (the "Exercise Period") commencing on the date the Offer is terminated or
expires, as described above, and ending on the date which is three months
following the date which any Superior Proposal expires or is withdrawn or
terminated without the purchase of any Shares.
The closing of the sale of the Shares subject to the Stock Option (the
"Stock Option Closing") is conditioned upon (i) the waiting periods under the
HSR Act expiring or terminating and (ii) there being no order of a court of
competent jurisdiction restricting or prohibiting the exercise of the Stock
Option or the delivery of the Shares thereunder.
Notwithstanding anything in the Stock Option Agreement to the contrary, and
notwithstanding that the Stock Option has otherwise become exercisable, if at
any time during the Exercise Period a tender offer pursuant to any Superior
Proposal (the "Superior Offer") is commenced, then, subject to the terms and
conditions of this provision, on the last day of the offer period of the
Superior Offer, such Stockholders will tender their Shares in the Superior
Offer. Concurrent therewith, if Optionee's tender offer is continuing at such
time, the Stockholders' Shares will be released from Optionee's tender offer.
Except in certain circumstances, Optionee's right to exercise the Stock Option
will be suspended for so long as the Superior Offer shall not have expired or
been terminated or withdrawn and, subject to the terms of this provision, such
right will terminate simultaneously with the consummation of the Superior Offer
and receipt by the Stockholders of the consideration therefor. Notwithstanding
the foregoing, Optionee may elect, by written notice to the Stockholders at any
time prior to the tender of such Shares into the Superior Offer by the
Stockholders, to require the Stockholders, on a pro rata basis, to retain Shares
in an amount, as determined by Optionee, up to 25% of the then outstanding
shares of Common Stock on a fully diluted basis (the "Minority Percentage"),
whereupon the Stockholders will not tender such amount of Shares in the Superior
Offer and Optionee's right to exercise the Stock Option as to such Shares will
continue without limitation.
The Stock Option Agreement also provides that in the event that the
Superior Offer is consummated, as to Shares tendered by the Stockholders in
accordance with the foregoing paragraph, each Stockholder will deliver to the
Optionee that portion of the consideration received by such Stockholder which is
equal to the Incremental Value (as defined below) multiplied by the number of
Shares tendered by such Stockholder in connection with such Superior Proposal.
The Incremental Value will be determined as follows: if the consideration
payable pursuant to the Superior Offer is all cash, the Incremental Value will
equal the amount by which the offer price in such Superior Proposal exceeds the
Offer Price. If the consideration payable consists of cash and securities or
only securities, the Incremental Value will equal the amount by which (x) the
sum of the cash, if any, plus the value of the securities received in the
Superior Proposal (the amount of such cash and the value of such securities
being determined on a per share basis) exceeds (y) the Offer Price. The value of
any publicly-traded securities issued to the Stockholders upon consummation of
the Superior Proposal will be determined by reference to the closing price of
such securities on the date of consummation of the Superior Proposal. The value
of any securities which have not previously been publicly traded ("Newly
Registered Securities") will be determined by reference to the average closing
price of such securities over the twenty (20) trading days following
consummation of the Superior Proposal. Each Stockholder will deliver to the
Optionee the Incremental Value for each Share held by such Stockholder
immediately upon receipt if the consideration is cash or cash and
publicly-traded securities or, if the consideration includes Newly Registered
Securities, upon the later of receipt of the consideration or the date on which
the value of the securities is determined. The Incremental Value will be payable
to Optionee in cash and securities in the same proportion as the cash and
securities payable to the Stockholders. If Optionee has required the
Stockholders to retain the Minority Percentage, the Optionee will exercise the
Stock Option with respect to the Minority Percentage promptly upon the
consummation of the Superior Offer.
The Stock Option Agreement provides that in the event that the Superior
Proposal is structured as a merger which is not preceded by a tender offer, the
Stockholders will be permitted to vote such Stockholders' Shares in favor of
such merger; provided, however, that Optionee may elect to require the
Stockholders to abstain from voting in favor of the merger with respect to the
Minority Percentage. Except in certain circumstances, Optionee's right to
exercise the Stock Option will be suspended so long as the Superior Proposal
described in this provision shall not have expired or been terminated or
withdrawn and, subject to the terms of this provision, such right will terminate
simultaneously with the consummation of such Superior Proposal and receipt by
the Stockholders of the consideration therefor. In the event that such Superior
Offer is consummated, each Stockholder will pay to Optionee, at the time
determined in
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accordance with the similar provisions described above, the Incremental Value
received by such Stockholder for each of such Stockholder's Shares.
The Stock Option Agreement provides that, in the event that (pursuant to
the Stock Option) Optionee purchases an amount of the Stockholders' Shares
greater than the Minority Percentage, then as promptly as practicable (and in
any event within five (5) business days thereafter), Newco will, and Parent will
cause Newco to, make a tender offer to the stockholders of the Company for the
remaining shares of Company Common Stock (the consummation of which will be
subject only to the conditions that no court, arbitrator or governmental body,
agency or official shall have issued any order, decree or ruling and there shall
not be any statute, rule or regulation, enjoining or prohibiting the
consummation of such tender offer) pursuant to which the stockholders of the
Company (other than the Company, any direct or indirect subsidiary of the
Company or Parent or Newco) will be entitled to receive an amount of cash
consideration per share of Common Stock equal to the Offer Price, and will take
such actions as may be necessary or appropriate to effectuate, and purchase
shares of Common Stock pursuant to, such tender offer at the earliest
practicable time.
The Stock Option Agreement will terminate and be of no further force and
effect if, as a result of the failure of any conditions to such Stock Option
Closing to be satisfied, the Stock Option Closing shall not have occurred within
one (1) year following delivery of an exercise notice, subject to a 30-day
extension under certain circumstances.
Pursuant to the Stock Option Agreement, the Stockholders have agreed to
vote all Shares held by such Stockholders (i) in favor of the Merger, the Merger
Agreement and the transactions contemplated thereby and (ii) against any action
or agreement that would result in a material breach of a covenant,
representation or warranty or other obligation of the Company under the Merger
Agreement and (iii) against any action or agreement that would materially
impede, interfere with or attempt to discourage the Offer or the Merger.
Pursuant to the Stock Option Agreement, each Stockholder has also agreed
that if the Merger Agreement is terminated by the Company prior to the purchase
of Shares in the Offer because the Company Board has (i) entered into or shall
have publicly announced its intention to enter into an Alternative Proposal that
it determines is a Superior Proposal or (ii) withdrawn, modified or changed in a
manner adverse to Parent or Newco its approval of the Offer, the Merger
Agreement or the Merger, then such Stockholder will, (A) participate in all
meetings of stockholders, (B) not vote any such Shares in favor of actions
requiring stockholder approval described in Section 5 of the Merger Agreement
and (C) use its reasonable efforts as a stockholder to prevent actions
prohibited by Section 5 of the Merger Agreement.
Each of the Stockholders has agreed that during the Exercise Period in the
event that such Stockholder has breached the voting agreements described above,
such Stockholder will be deemed to have granted Parent proxies to vote his or
her Shares, except that Parent will not have the right to vote to reduce the
Offer Price or the Merger Consideration or to amend or modify the Merger
Agreement or reduce the rights or benefits of the Company or any stockholders of
the Company under the Offer or the Merger Agreement or reduce the obligations of
Parent or Newco thereunder. The Stock Option Agreement provides that such
proxies terminate if (x) the Offer expires or terminates without any Shares
being purchased thereunder in violation of the Offer or the Merger Agreement or
(y) Parent or Newco is in violation of the Stock Option Agreement.
The Stock Option Agreement contains the agreement of Mark L. Nelson to
indemnify Parent, Newco and their affiliates against losses or damages
("Damages") incurred by Parent, Newco or their affiliates arising out of any
breach of any representation or warranty of the Company, or nonfulfillment of
any covenant or agreement by the Company, in each case contained in or made
pursuant to the Merger Agreement. Mr. Nelson is not required to indemnify any
indemnified party until Damages equal or exceed $5,000,000. Thereafter, Mr.
Nelson's indemnification obligations will apply to the next $5,000,000 of
Damages, and 50% of the next $20,000,000 of Damages, up to a maximum
indemnification obligation of $15,000,000. Notice of any claim for
indemnification must be delivered by an indemnified party on or prior to the
18-month anniversary of the consummation of the Offer or the Stock Option
closing, as the case may be.
The Stock Option Agreement provides that except for the Stock Option and
the indemnification provisions contained therein, the Stock Option Agreement
terminates on the date the Merger Agreement terminates.
The Stock Option Agreement contains certain representations of the
Stockholders and Parent and Offeror. In addition, the Stock Option Agreement
contains the agreements of the Stockholders not to sell any of their Shares
during the term of the Stock Option Agreement, except as contemplated therein.
The Stock Option Agreement also provides that the Stockholders will not directly
or indirectly solicit or initiate any takeover proposal from any person,
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or engage in discussions or negotiations relating thereto, except as provided in
the Merger Agreement. The Stock Option Agreement provides that none of these
provisions will limit or restrict in any manner whatsoever any Stockholder's
actions or conduct as a director or representative of the Company.
Wolters Kluwer Guarantee
In connection with and pursuant to the Merger Agreement, Wolters Kluwer nv,
a corporation organized under the laws of The Netherlands ("Wolters Kluwer") and
the ultimate parent of Parent and Newco, has agreed to unconditionally guarantee
the payment obligations of Parent and Newco under the Merger Agreement pursuant
to a letter agreement between Wolters Kluwer and the Company dated September 29,
1998, a copy of which is filed herewith as Exhibit 4.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE COMPANY BOARD
The Company Board has unanimously approved the Merger Agreement, the Offer
and the Merger, and has determined that the Offer and the Merger are fair to and
in the best interests of the Company's stockholders, and unanimously recommends
that the Company's stockholders accept the Offer and tender their Shares in the
Offer.
A letter to the Company's stockholders communicating the Company Board's
recommendation and a press release announcing the execution of the Merger
Agreement are filed herewith as Exhibits 5 and 6, respectively, and are
incorporated herein by reference.
(b) BACKGROUND; REASONS FOR THE COMPANY BOARD'S RECOMMENDATION
Over the past decade, the scientific, technical and medical publishing
("STM") market (the market in which the Company operates) has been marked by
continuing consolidation, increasing Internet-based distribution by publishing
companies who license their materials to the Company, continuing constraints on
customer subscription budgets and increasing pressure by information suppliers
on licensees' (including the Company) operating margins. Given the state of the
market, the Company, from time to time, considered possible business
collaborations, joint ventures and other possible arrangements with publishing
companies in the STM market. The Company also attempted (unsuccessfully) to
acquire or make significant investments in companies in its markets in an effort
to expand its customer base and improve its geographic coverage, including an
attempt in 1997 to make what would have been a significant acquisition.
As a result of developments relating to the STM markets, the Company's
management evaluated a number of strategic options. On March 26, 1998, the
Company's management reviewed its strategic assessment of the Company with the
Company Board. The Company Board instructed management to negotiate with
investment banking firms that might be helpful to the Company in defining and
pursuing its goals. The Company's management reviewed a range of strategic
options to enhance stockholder value at several meetings with Goldman, Sachs &
Co. ("Goldman Sachs") in March 1998. The result of this review was the decision
by management to recommend that the Company initiate a process to explore the
sale of the entire equity interest in the Company through a controlled auction
process (the "Auction Process"). On April 1, 1998, the Company retained Goldman
Sachs to assist the Company as its financial advisor in connection with the
possible sale of all or a portion of the Company. Shortly thereafter, Goldman
Sachs (in collaboration with Company management) identified a list of leading
candidates that might be expected to have an interest in potentially purchasing
the Company. With management's consent, Goldman Sachs then began making calls to
the approved list of potential candidates.
On April 23, 1998, Goldman Sachs made a presentation to the Company Board.
Goldman Sachs identified and reviewed a list of leading candidates, as approved
by management, that might be expected to have an interest in potentially
purchasing the Company, updated the Company Board as to what calls had already
been initiated by Goldman Sachs (with management's approval), outlined a
description of the Auction Process and presented a preliminary timetable for a
potential transaction. The Company Board approved the Auction Process at its
April 23, 1998 meeting.
Throughout April and May 1998, the Company, through Goldman Sachs and the
Company's legal counsel, negotiated and executed confidentiality agreements with
parties that expressed an interest in participating in the Auction Process. The
Company entered into confidentiality agreements with five parties, including
with Parent on May 11, 1998.
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After a potential purchaser executed a confidentiality agreement, it was
provided with a "Confidential Information Memorandum" prepared by Goldman Sachs
for use in evaluating a possible transaction with the Company. The Confidential
Information Memorandum included information concerning the history of the
Company, a business overview and financial information. Parties receiving the
Confidential Information Memorandum were instructed to submit a preliminary
indication of interest to Goldman Sachs by June 30, 1998. The preliminary
indication of interest was to include, among other things, a non-binding
indication of the amount and form of consideration the submitting party would be
prepared to pay for the entire common equity of the Company, and the source of
financing of the potential transaction and any contingencies thereto.
At various times throughout early June 1998, each of the five parties
receiving a Confidential Information Memorandum on the Company was invited to
presentations by the management of the Company. Three of these five parties
accepted and met with management of the Company during the period of June 11,
1998 through June 16, 1998.
On June 30, 1998, Goldman Sachs received, in writing, one preliminary
indication of interest. A second indication of interest, for a minority
strategic investment in the Company, was expressed to Goldman Sachs orally and
subsequently made in writing on July 8, 1998. After consulting with Goldman
Sachs, the Company's management agreed to continue in the Auction Process with
the two parties submitting preliminary acquisition proposals.
On July 8, 1998, Goldman Sachs sent to the parties selected to continue in
the Auction Process a letter inviting a final proposal and outlining the
guidelines and further procedures for the Auction Process. The parties were also
provided a form of a proposed purchase agreement. The parties were invited to
submit a firm written offer to acquire the Company (a "Proposal") by July 22,
1998. The July 8, 1998 letter identified the factors the Company would use in
evaluating Proposals and instructed the parties to include in the Proposal the
specific amount of consideration offered per share. Each party was asked to mark
changes in the Company's proposed form of purchase agreement and to include in
the Proposal a statement that such party would be prepared to execute the
agreement (with any proposed modifications) in the form submitted. Pursuant to
this letter, submission of a Proposal constituted an agreement to be bound by
the terms set forth therein. The parties were invited to conduct a due diligence
review of the Company, which included follow-up discussions with the management
of the Company and a detailed review of Company documents.
On July 10, 1998, the Company, Parent and their respective financial
advisors met to discuss a possible minority investment in the Company. On July
21, 1998, the Company was informed by another potential purchaser that it would
not be submitting a Proposal. On July 22, 1998, Parent submitted a non-binding
proposal to acquire a minority position in the Company. On July 23, 1998, the
Company, Goldman Sachs and the Company's legal counsel had several discussions
to evaluate the responses received from the potential purchasers, including the
Proposal submitted by Parent on July 22, 1998 for making a minority strategic
investment in the Company together with an option for the balance of the
Company. After lengthy discussions on July 23, 1998, the Company concluded that
Parent's Proposal required further clarification. A meeting between the parties
was held on July 24, 1998 to review the offer and strategic opportunities
relating to a minority investment transaction. The Company concluded that
Parent's Proposal could potentially be favorable to the Company and its
stockholders, both as to price and other terms, and authorized Goldman Sachs to
begin tentative negotiations with Parent and its financial advisor. On July 28,
1998, the Company Board authorized Goldman Sachs to continue discussions with
Parent with respect to a minority investment in the Company.
During the period beginning in late July and continuing through the second
week in August, the Company and Parent exchanged a series of term sheets
containing various proposals for a minority investment in the Company by Parent.
Representatives of the Company and Parent met on August 12, 1998, and held
several telephone conversations regarding a possible transaction with Parent.
During this period, the Company, Goldman Sachs and the Company's legal counsel
discussed the merits of Parent's minority investment proposals and the results
of various negotiations with Parent and its financial advisor. Parent's Proposal
consisted of (i) the acquisition of 2,250,000 newly issued Shares of the Company
at $25 per Share, provided that (x) the Company would agree to use at least 90%
of the proceeds from the sale of such Shares to fund a self tender at a price of
no more than $25 per Share (designed to cause Parent's stake in the Company to
equal 25% of the Shares (on a fully diluted basis)) and (y) the Stockholders
would guarantee this result by agreeing to tender sufficient Shares to make up
any shortfall in tenders by the public, (ii) the receipt of an option to acquire
the remaining shares and options owned by each of Mark L. Nelson, Deborah Hull,
Carleen Nelson and Martin Kahn for a number of years and (iii) the imposition of
certain restrictions on the Company's ability to undertake certain actions
without the consent of Parent. The Company ultimately concluded that Parent's
Proposal was not in the best interests of the Company and its stockholders, and
13
<PAGE>
notified Parent on August 20, 1998 that it no longer desired to pursue a
transaction similar to the one proposed by Parent. In addition to the proposal
for a minority investment, Parent had proposed to the Company on August 20, 1998
the possibility of a "going private" transaction. On August 25, 1998, the
Company submitted a proposal outlining the terms of a possible "going private"
transaction, and over the next two weeks the Company and Parent exchanged term
sheets with respect to a "going private" transaction. On September 11, 1998,
during a telephone meeting of the Company Board, the Company Board authorized
management to continue discussions with Parent and agreed to establish a Special
Committee of independent directors of the Company Board to evaluate the fairness
to the public of the proposed "going private" transaction.
On September 15 and 16, 1998, Company management met with members of
Parent's Executive Board and senior management regarding certain matters related
to the proposed transaction. On the afternoon of September 16, 1998, Parent made
a new proposal pursuant to which it would purchase all of the issued and
outstanding shares of the Company Common Stock. On September 17, 1998, a
telephone meeting of the Company Board was held authorizing the Company and its
advisors to continue negotiations and asking Goldman Sachs to advise the Board
on the fairness of the transaction with Parent. At the request of Parent, and
after a number of telephone conference calls between advisors to the Company and
Parent, the Company determined to enter into exclusive negotiations with Parent
through their respective financial and legal advisors. On September 18, 1998,
Company Board members were polled by telephone and agreed to the terms for
exclusive negotiations with Parent. One director was unavailable and he
subsequently advised the Company Board that he approved the exclusivity
agreement. An agreement in this regard was signed on September 22, 1998, a copy
of which is filed herewith as Exhibit 8.
From September 23, 1998 through the evening of September 28, 1998, the
Company's legal counsel and legal counsel for Parent held negotiations
concerning the Merger Agreement and the Stock Option Agreement. In connection
with Parent's proposal to acquire all of the Company Common Stock, Parent
required that Mr. Nelson agree to personally indemnify Parent and its affiliates
against breaches of representations and agreements made in the Merger Agreement
by the Company in favor of Parent. After a significant amount of negotiation,
Mr. Nelson agreed to provide the indemnification described under "Item 3.
Identity and Background--Arrangement with Parent, Newco or Their
Affiliates--Stock Option and Tender Agreement" above. In addition, following
negotiations, Parent agreed to the Company's request that the grant of the Stock
Option under the Stock Option Agreement be subject to a "fiduciary out"
provision tied to the "fiduciary out" provision for a Superior Proposal in the
Merger Agreement. As consideration for this provision, the Stockholders agreed
to pay to Parent any incremental amount above the Offer Price payable to them in
respect of a transaction arising out of a Superior Proposal.
On September 29, 1998, the Company Board met to consider the Merger
Agreement and transact other business. Goldman Sachs made a presentation to the
Company Board outlining the results of the Auction Process and reviewing the
details of the Parent Proposal. Counsel to the Company reviewed the terms of the
Offer, Merger Agreement and Stock Option Agreement. A lengthy discussion
followed each of the presentations. Thereafter, the Company Board unanimously
approved the Offer, the Merger, the Merger Agreement and the other transactions
contemplated thereby.
In approving the Offer, the Merger, the Merger Agreement and the other
transactions contemplated thereby and recommending that all holders of Shares
accept the Offer and tender their Shares pursuant to the Offer, the Company
Board considered a number of factors including:
1. The presentations and views expressed by management of the Company
(at the meeting of the Company Board held on September 29, 1998, and at
previous meetings of the Company Board) regarding, among other things: (a)
the business, operating results, financial condition, financing capacity,
strategic objectives, and prospects of the Company, as well as the risks
involved in achieving those prospects and objectives in current industry,
economic and market conditions; (b) the possible alternatives to the Merger
available to the Company including raising additional capital and possible
acquisitions; (c) the fact that in view of the discussions held with
various parties, as well as the Auction Process, the management of the
Company believed it was unlikely that any other party would propose an
acquisition or strategic business combination that would be more favorable
to the Company and its stockholders than the Offer and the Merger; and (d)
the recommendation of the Offer and the Merger by the management of the
Company.
2. The presentation of Goldman Sachs at the meeting of the Company
Board held on September 29, 1998, and the opinion of Goldman Sachs,
expressed orally at the September 29, 1998 meeting (and subsequently
confirmed in writing), to the effect that, as of September 29, 1998, the
$24.59 in cash to be received by the Company's stockholders in the Offer
and the Merger is fair from a financial point of view to the Company's
14
<PAGE>
stockholders. The full text of the written opinion of Goldman Sachs, dated
September 29, 1998, which sets forth assumptions made, matters considered
and limitations on the review undertaken in connection with the opinion, is
attached hereto as Annex A and is incorporated herein by reference. The
opinion of Goldman Sachs referred to herein does not constitute a
recommendation as to whether or not any holder of Shares should tender such
Shares in connection with the Offer. All stockholders are urged to, and
should, read the opinion of Goldman Sachs carefully in its entirety.
3. The historical market prices and the recent limited trading
activity of the Shares, including the fact that the Offer Price represents
a premium of approximately 49% over the closing price of the Shares on the
Nasdaq National Market at April 1, 1998, the time when the Company began
exploring possible transactions.
4. The arms-length negotiations between the Company and Parent leading
to the belief of the Company Board that $24.59 per Share represented the
highest price per Share that could be negotiated with Parent.
5. That the Offer and the Merger provide for a prompt cash tender
offer for all Shares to be followed by a merger for the same consideration,
thereby enabling the Company's stockholders to obtain the benefits of the
transaction in exchange for their Shares at the earliest possible time.
6. The business reputation and capabilities of Parent and its
management, and Parent's financial strength, including its ability to fund
the Offer.
7. The terms, conditions and possible consequences to the Company of
the Stock Option Agreement, including the grant of the Stock Option and the
possible adverse impact of the Option on the willingness of others to make
alternative proposals to acquire the Company prior to the closing of the
Offer.
The foregoing discussion of information and factors considered and given
weight by the Company Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation of the Offer and
the Merger, the Company Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determinations and recommendations. In addition, individual
members of the Company Board may have given different weights to different
factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to the terms of a letter agreement dated April 1, 1998 (the
"Engagement Letter"), the Company retained Goldman Sachs to act as its financial
advisor in connection with the possible sale of all or a portion of the Company,
and to render a fairness opinion to the Company in connection with the sale of
more than 50% of the Company Common Stock. Pursuant to the terms of the
Engagement Letter, the Company has agreed to pay Goldman Sachs upon consummation
of the tender offer a transaction fee. Based upon the aggregate consideration to
be received by the Company's stockholders and option holders in the Offer and
the Merger (approximately $192 million), the fee payable and expenses
reimbursable to Goldman Sachs total approximately $4.6 million, of which Mark L.
Nelson has agreed to pay $303,320. The Company has agreed to reimburse Goldman
Sachs for its reasonable out-of-pocket expenses, including attorney's fees, and
to indemnify Goldman Sachs and certain related persons against certain
liabilities, including certain liabilities under the federal securities laws.
Except as disclosed herein, neither the Company nor any person acting on
its behalf has employed, retained or compensated any person to make
solicitations or recommendations to the Company's stockholders with respect to
the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except for the Stock Option described in the Stock Option Agreement, no
transactions in the Shares have been effected during the past 60 days by the
Company or, to the best of the Company's knowledge, by any executive officer,
director, affiliate or subsidiary of the Company.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them (other than
Shares issuable upon exercise of stock options).
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
15
<PAGE>
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Company intends to file with the Commission and furnish to stockholders
an Information Statement pursuant to Section 14(f) of the Exchange Act and Rule
14f-1 promulgated thereunder in connection with the possible designation by
Parent, pursuant to the Merger Agreement, of certain persons to be appointed to
the Company Board other than at a meeting of the Company's stockholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 1. Agreement and Plan of Merger dated as September 29, 1998, by and
among the Company, Parent and Newco.
Exhibit 2. Confidentiality Agreement dated May 11, 1998 between the Company and
Parent.
Exhibit 3. Stock Option and Tender Agreement, dated as of September 29, 1998, by
and among Parent, Newco and the Stockholders identified therein.
Exhibit 4. Letter Agreement between Wolters Kluwer nv and the Company dated
September 29, 1998.
Exhibit 5. Letter to Stockholders of the Company, dated October 5, 1998.*
Exhibit 6. Joint Press Release, issued by the Company and Parent on September
29, 1998.
Exhibit 7. Opinion of Goldman, Sachs & Co. dated September 29, 1998 (attached
hereto as Annex A).*
Exhibit 8. Exclusivity Agreement, effective as of September 22, 1998, between
Parent and the Company.
- ----------
* Included in copies of the Schedule 14D-9 mailed to stockholders.
16
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 5, 1998
OVID TECHNOLOGIES, INC.
By: /s/ MARK L. NELSON
--------------------------------
Name: Mark L. Nelson
Title: President and Chief Executive
Officer
17
<PAGE>
SCHEDULE I
EXECUTIVE COMPENSATION
The following table sets forth information concerning all cash and non-cash
compensation awarded to, earned by or paid to the Company's chief executive
officer and to each other executive officer of the Company whose total annual
salary exceeded $100,000 for the fiscal year ended December 31, 1997.
Information is given for each of the Company's last three completed fiscal
years.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
---------------------------- ------------
COMMON STOCK
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) COMPENSATION ($)
- ------------------------- ---- ---------- --------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Mark L. Nelson ................ 1997 $172,000 -- 4,000 --
President and Chief 1996 159,000 -- 7,000 --
Executive Officer 1995 150,000 -- -- --
Deborah M. Hull ............... 1997 $172,000 $7,000 5,000 --
Chief Operating Officer 1996 159,000 8,000(2) 14,000 --
1995 150,000 -- (3) -- --
Carleen E. Nelson ............. 1997 $106,000 $4,000 -- --
Vice President, Worldwide 1996 95,000 2,000 8,500 --
Sales and Marketing 1995 85,000 -- -- --
</TABLE>
- ------------
(1) Amounts reflected do not include perquisites and other personal benefits
received by any named executive, which, in all instances, were less than
the lesser of $50,000 or 10% of the total of annual salary and bonus
reported for the named executive.
(2) Bonus reflected for 1996 was earned in 1996 and paid in 1997.
(3) Bonus in the amount of $50,000 was earned in 1994 and paid in 1995.
The following table provides information related to options granted to the
named executive officers during the fiscal year ended December31, 1997.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(1)
- ---------------------------------------------------------------------------------------------------- ------------------------
% OF TOTAL
OPTIONS
GRANTED TO
EMPLOYEES IN EXERCISE OR
OPTIONS FISCAL BASE PRICE EXPIRATION
NAME GRANTED (#)(2) YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ---- -------------- ------------ ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Mark L. Nelson ........................ 4,000 1.3% $9.00 2/11/2007 $22,640 $57,375
Deborah M. Hull ....................... 5,000 1.6 7.00 4/23/2007 22,011 55,781
Carleen E. Nelson ..................... -- -- -- -- -- --
</TABLE>
- ----------
(1) The potential realizable value portion of the foregoing table illustrates
value that might be received upon exercise of the options immediately prior
to the expiration of their terms, assuming the specified compounded rates
of appreciation on the Company's Common Stock over the term of the options.
These numbers do not take into account provisions of certain options
providing for termination of the options following termination of
employment.
(2) Options to acquire shares of Common Stock.
18
<PAGE>
The following table sets forth information with respect to (i) stock
options exercised in the fiscal year ended December31, 1997 by the persons named
in the Summary Compensation Table and (ii) unexercised stock options held by
such individuals at December 31, 1997.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT FISCAL IN-THE-MONEY OPTIONS
YEAR END (#) AT FISCAL YEAR END ($) (1)
---------------------- --------------------------
SHARES
ACQUIRED ON VALUE
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Mark L. Nelson ................... 0 -- 2,333 8,667 $ 12,831.50(2) $35,668.50
Deborah M. Hull .................. 17,500 $147,200 139,166 14,334 1,571,068.00(2) 73,837.00(2)
Carleen E. Nelson ................ 0 -- 529,833 5,667 6,070,811.50 31,168.50
</TABLE>
- ----------
(1) Computed based upon the difference between the last sale price per share of
the Company's Common Stock of $11.50 on December31, 1997 and the exercise
price.
(2) Computed assuming an exercise price of $.01 per share. Ms. Hull has agreed
to pay the Company $.01 per share acquired upon the exercise of stock
options notwithstanding the option exercise price of $.0003 per share.
COMPENSATION OF DIRECTORS
During the year ended December31, 1997, Martin Kahn was paid consulting
fees of approximately $3,125 per month. In 1998, Mr. Kahn accepted Stock Options
in lieu of cash for consulting services. Directors of the Company, other than
Mark L. Nelson, Martin Kahn and Deborah Hull, currently receive $1,500 for each
meeting of the Board attended and $500 for each meeting of each Committee of the
Board attended, plus reimbursement of reasonable out-of-pocket expenses incurred
in connection with attendance at Board of Directors' meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1997, the Compensation Committee
consisted of Mark L. Nelson, Harry Diakoff and John Hanley. During the year
ended December 31, 1997, the Company paid consulting fees aggregating
approximately $117,610 to Harry Diakoff, a director of the Company. Mr. Diakoff
did not participate in deliberations and decisions of the Compensation Committee
with regard to his own compensation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Tax Indemnification Agreement. The Company has entered into a tax
indemnification agreement with Mark L. Nelson which provides for: (i) an
indemnification of Mr. Nelson by the Company for any losses or liabilities with
respect to additional taxes (including interest, penalties and legal fees)
resulting from the Company's operations during the period in which it was an S
Corporation (prior to the initial public offering of the Company's Common Stock
in June 1994) and (ii) an indemnification of the Company by Mr. Nelson for
certain tax liabilities that result from any final determination of an
adjustment to Mr. Nelson's taxable income resulting in a decrease in Mr.
Nelson's taxable income during the period in which the Company was an S
Corporation, and a corresponding increase in the income tax liability payable by
the Company for any taxable year of the Company in which it was a C Corporation.
During the year ended December 31, 1997, the Company paid consulting fees
aggregating approximately $51,360 to Martin Kahn, a portion of which was related
to services rendered during 1996. In 1998, Mr. Kahn also received stock options
for consulting services.
During the year ended December 31, 1997, the Company paid consulting fees
aggregating approximately $117,610 to Harry Diakoff, a director of the Company,
a portion of which was related to services rendered during 1996.
During the year ended December 31, 1997, Carl Fisher, a director of the
Company, rendered certain consulting services to the Company for which the
Company paid him approximately $7,100 in early 1998. Mr. Fisher also received
stock options for consulting services. In March 1998, the Company entered into
an agreement with Mr. Fisher, which terminates in January 1999, pursuant to
which Mr. Fisher will receive a total of $200,000 in return for consulting
services.
19
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
GOLDMAN, SACHS & CO. | 85 BROAD STREET | NEW YORK, NEW YORK 10004
TEL: 212-9902-1000
GOLDMAN
SACHS
[LOGO]
PERSONAL AND CONFIDENTIAL
- -------------------------
September 29, 1998
Board of Directors
Ovid Technologies, Inc.
333 Seventh Avenue
New York, NY 10001
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $.01
per share (the "Shares"), of Ovid Technologies, Inc. (the "Company") of the
$24.59 per Share in cash proposed to be paid by Purchaser (as defined below) in
the Tender Offer and the Merger (each as defined below) pursuant to the
Agreement and Plan of Merger, dated as of September 29, 1998, among Wolters
Kluwer U.S. Corporation ("Buyer"), OTI Acquisition Corp., a wholly-owned
subsidiary of Buyer ("Purchaser"), and the Company (the "Agreement"). The
Agreement provides for a tender offer for all of the Shares (the "Tender Offer")
pursuant to which Purchaser will pay $24.59 per Share in cash for each Share
accepted. The Agreement further provides that following completion of the Tender
Offer, Purchaser will be merged with and into the Company (the "Merger") and
each outstanding Share (other than Shares that are owned by the Company as
treasury stock and Shares already owned by Buyer, Purchaser or any other
wholly-owned subsidiary of Buyer) will be converted into the right to receive
$24.59 in cash. In addition to the Agreement, Buyer, Purchaser and certain
stockholders of the Company (the "Stockholders") have entered into a Stock
Option and Tender Agreement, dated as of September 29, 1998 (the "Stock Option
and Tender Agreement"), whereby each Stockholder has agreed, among other things,
(i) to tender in the Tender Offer all of the Shares legally and/or beneficially
owned by such Stockholder (the "Stockholder's Shares") as of the date of the
Stock Option and Tender Agreement or which may thereafter be acquired by such
Stockholder, (ii) to grant to Buyer or Purchaser, as Buyer shall designate, the
option to purchase the Stockholder's Shares in certain circumstances, (iii) to
appoint Buyer as such Stockholder's attorney-in-fact and proxy under certain
circumstances to vote the Stockholder's Shares in accordance with the terms and
conditions of the Stock Option and Tender Agreement, (iv) with respect to
certain questions put to stockholders of the Company for a vote, to vote the
Stockholder's Shares, in each case, in accordance with the terms and conditions
of the Stock Option and Tender Agreement, and (v) to restrict the transfers or
exercises of Company Options (as defined in the Stock Option and Tender
Agreement), if any, held by such Stockholder except as provided therein.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement. Goldman, Sachs & Co. provides a full range of financial advisory and
securities services and, in the course of its normal trading activities, may
from time to time effect transactions and hold securities, including derivative
securities, of the Company or the Buyer or any affiliate of the Buyer for its
own account and for the accounts of customers.
20
<PAGE>
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Stock Option and Tender Agreement; Annual Reports to Stockholders
and Annual Reports on Form 10-K of the Company for the three years ended
December 31, 1997; certain interim reports to stockholders and Quarterly Reports
on Form 10-Q of the Company; certain other communications from the Company to
its stockholders; and certain internal financial analyses and pro forma
financial projections of the Company prepared by its management. We have also
held discussions with members of the senior management of the Company regarding
the past and current business operations, financial condition and future
prospects of the Company. In addition, we have reviewed the reported price and
trading activity for the Shares, compared certain financial and stock market
information for the Company with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations in the electronic information providers
industry specifically and in other industries generally and performed such other
studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information reviewed by us and have assumed such accuracy and
completeness for purposes of rendering this opinion. In addition, we have not
made an independent evaluation or appraisal of the assets and liabilities of the
Company or any of its subsidiaries and we have not been furnished with any such
evaluation or appraisal. Our advisory services and the opinion expressed herein
are provided for the information and assistance of the Board of Directors of the
Company in connection with its consideration of the Tender Offer and the Merger
and such opinion does not constitute a recommendation as to whether or not any
holder of Shares should tender such Shares in connection with the Tender Offer.
We have reviewed the provision in the Stock Option and Tender Agreement
regarding Mark L. Nelson's agreement to indemnify and hold harmless Buyer,
Purchaser and their affiliates from and against all assessments, losses,
damages, liabilities, costs and expenses as set forth in Article 9 of the Stock
Option and Tender Agreement. We have disregarded, with your consent, any effect
that such agreement to indemnify may have on the per Share price to be received
by him pursuant to the Agreement.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the $24.59
in cash to be received by the holders of Shares in the Tender Offer and the
Merger is fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
- --------------------------------
GOLDMAN, SACHS & CO.
21
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WOLTERS KLUWER U.S. CORPORATION,
OTI ACQUISITION CORP.,
AND
OVID TECHNOLOGIES, INC.
September 29, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE OFFER AND MERGER...........................................................1
1.1 The Offer.............................................................1
1.2 Company Actions.......................................................3
1.3 Directors.............................................................4
1.4 The Merger............................................................5
1.5 Effective Time........................................................6
1.6 Closing...............................................................6
1.7 Certificate of Incorporation of the Surviving Corporation.............6
1.8 By-Laws of the Surviving Corporation..................................6
1.9 Directors and Officers of the Surviving Corporation...................6
1.10 Stockholders' Meeting.................................................6
1.11 Merger Without Meeting of Stockholders................................7
ARTICLE II
CONVERSION OF SECURITIES.......................................................7
2.1 Conversion of Capital Stock...........................................7
2.2 Dissenting Shares.....................................................8
2.3 Exchange of Certificates..............................................9
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................10
3.1 Corporate Organization and Qualification.............................10
3.2 Capitalization.......................................................11
3.3 Authority Relative to This Agreement.................................11
3.4 Consents and Approvals; No Violation.................................12
3.5 SEC Reports; Financial Statements....................................12
3.6 Absence of Certain Changes or Events.................................13
3.7 Litigation...........................................................13
3.8 Taxes................................................................13
3.9 Employee Benefit Plans; Labor Matters................................14
3.10 Environmental Laws and Regulations...................................15
3.11 Intellectual Property; Technology....................................16
3.12 Real Property........................................................19
3.13 Compliance with Applicable Laws......................................19
3.14 Insurance............................................................19
3.15 Approvals; Antitakeover Provisions...................................19
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3.16 Voting Requirements..................................................20
3.17 Brokers and Finders..................................................20
3.18 Opinion of Financial Advisors........................................20
3.19 Information Supplied.................................................20
3.20 Confidentiality Agreements...........................................20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER........................21
4.1 Corporate Organization and Qualification.............................21
4.2 Authority Relative to This Agreement.................................21
4.3 Consents and Approvals; No Violation.................................21
4.4 Interim Operations of Purchaser......................................22
4.5 Sufficient Funds.....................................................22
4.6 Share Ownership......................................................22
4.7 Information in Proxy Statement and Schedule 14D-9....................22
4.8 Brokers and Finders..................................................22
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS...........................................23
5.1 Interim Operations of the Company....................................23
5.2 Alternative Proposals................................................25
5.3 Certain Filings......................................................26
5.4 Satisfaction of Conditions; Receipt of Necessary Approvals...........26
5.5 Access to Information................................................27
5.6 Publicity............................................................27
5.7 Directors' and Officers' Insurance and Indemnification...............27
5.8 Employees; Continuation of Benefits..................................28
ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER......................................29
6.1 Conditions to Each Party's Obligation to Effect Merger...............29
ARTICLE VII
TERMINATION...................................................................30
7.1 Termination..........................................................30
7.2 Effect of Termination................................................32
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ARTICLE VIII
MISCELLANEOUS AND GENERAL.....................................................33
8.1 Payment of Expenses and Other Payments...............................33
8.2 Survival of Representations and Warranties; Survival of
Confidentiality Agreement..........................................33
8.3 Modification or Amendment............................................33
8.4 Waiver of Conditions.................................................33
8.5 Counterparts.........................................................33
8.6 Governing Law........................................................33
8.7 Notices..............................................................33
8.8 Entire Agreement; Assignment.........................................34
8.9 Parties in Interest..................................................35
8.10 Certain Definitions..................................................35
8.11 Obligation of Parent.................................................35
8.12 Joint and Several Liability..........................................36
8.13 Validity.............................................................36
8.14 Interpretations......................................................36
8.15 Captions.............................................................36
8.16 Specifc Performance .................................................36
8.17 Schedules............................................................36
ANNEX A; CONDITIONS TO THE OFFER A-1
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September 29,
1998, by and among Wolters Kluwer U.S. Corporation, a Delaware corporation
("Parent"), OTI Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Purchaser"), and Ovid Technologies, Inc., a Delaware
corporation (the "Company").
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Purchaser and the
Company have, subject to the conditions of this Agreement, determined that the
Merger (as defined below) is in the best interests of their respective
stockholders and approved this Agreement and the transactions contemplated
hereby; and
WHEREAS, Parent, Purchaser and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, and in
consideration of the execution and delivery by Parent, Purchaser and the
Stockholders named therein of a stock option and tender agreement (the "Stock
Option and Tender Agreement"), Parent, Purchaser and the Company hereby agree as
follows:
ARTICLE I
THE OFFER AND MERGER
1.1 The Offer.
(a) As promptly as practicable (but in no event later than five
business days after the public announcement of the execution hereof), Purchaser
shall commence (within the meaning of Rule 14d-2 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) an offer (the "Offer") to purchase
for cash all shares of the issued and outstanding Common Stock, par value $.01
per share (referred to herein as either the "Shares" or "Company Common Stock"),
of the Company, at a price per Share, based upon the representations set forth
in Section 3.2 hereof, of $24.59 net to the seller in cash (such price per
Share, or such higher price per Share as may be paid in the Offer, being
referred to herein as the "Offer Price"), subject to there being validly
tendered and not withdrawn prior to the expiration of the Offer, that number of
Shares which, together with the Shares beneficially owned by Parent or
Purchaser, represent at least a majority of the Shares outstanding on a fully
diluted basis (the "Minimum Condition") and to the other conditions set forth in
Annex A hereto. Purchaser shall, on the terms and subject to the prior
satisfaction or waiver (except that the Minimum Condition may not be waived) of
the conditions of the Offer, accept for payment and pay for Shares tendered as
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soon as it is legally permitted to do so under applicable law. The obligations
of Purchaser to commence the Offer and to accept for payment and to pay for any
Shares validly tendered on or prior to the expiration of the Offer and not
withdrawn shall be subject only to the Minimum Condition and the other
conditions set forth in Annex A hereto. The Offer shall be made by means of an
offer to purchase (the "Offer to Purchase") containing the terms set forth in
this Agreement, the Minimum Condition and the other conditions set forth in
Annex A hereto. Purchaser expressly reserves the right to amend any of the terms
and conditions of the Offer; provided that Purchaser shall not amend or waive
the Minimum Condition, decrease the Offer Price or decrease the number of Shares
sought, change the form of consideration to be paid pursuant to the Offer,
impose conditions to the Offer in addition to those set forth in Annex A hereto,
or amend any other term or condition of the Offer in any manner adverse to the
holders of the Shares or extend the expiration date of the Offer without the
prior written consent of the Company (such consent to be authorized by the Board
of Directors of the Company or a duly authorized committee thereof).
Notwithstanding the foregoing, Purchaser shall, and Parent agrees to cause
Purchaser to, extend the Offer for a period of ten (10) business days following
the initial expiration date of the Offer, if any conditions to the Offer have
not been satisfied or waived at such date. In addition, following such first
extension of the Offer as provided in the preceding sentence, (i) Purchaser
shall, and Parent agrees to cause Purchaser to, extend the Offer, at any time
prior to the termination of this Agreement, for one or more periods of not more
than ten business days, if at the expiration date of the Offer, as extended, all
conditions to the Offer have not been satisfied or waived, and (ii) the Offer
Price may be increased and the Offer may be extended to the extent required by
law in connection with such increase, in each case without the consent of the
Company. In addition, Purchaser may, without the consent of the Company, extend
the Offer for a period of not more than ten (10) business days beyond the latest
expiration date that would otherwise be permitted under clause (i) or (ii) of
the immediately preceding sentence if there shall not have been tendered and not
withdrawn pursuant to the Offer at least 90% of the outstanding Shares.
(b) As soon as practicable on the date the Offer is commenced, Parent
and Purchaser shall file with the United States Securities and Exchange
Commission (the "SEC") a Tender Offer Statement on Schedule l4D-l with respect
to the Offer (together with all amendments and supplements thereto and including
the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-l will include, as
exhibits, the Offer to Purchase and a form of letter of transmittal and summary
advertisement (collectively, together with any amendments and supplements
thereto, the "Offer Documents"). Parent and Purchaser represent that the Offer
Documents will comply in all material respects with the provisions of applicable
federal securities laws and, on the date filed with the SEC and on the date
first published, sent or given to the Company's stockholders, shall not 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 is made by Parent or Purchaser with
respect to information supplied by the Company in writing for inclusion in the
Offer Documents. Each of Parent and Purchaser further agrees to take all steps
necessary to cause the Offer Documents to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of Parent and Purchaser, on the one
hand, and the
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Company, on the other hand, agrees promptly to correct any information provided
by it for use in the Offer Documents if and to the extent that it shall have
become false and misleading in any material respect and each of Parent and
Purchaser further agrees to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. The Company and its counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-l and the Offer Documents
before they are filed with the SEC. In addition, Parent and Purchaser agree to
provide the Company and its counsel in writing with any comments or other
communications that Parent, Purchaser or their counsel may receive from time to
time from the SEC or its staff with respect to the Offer Documents promptly
after the receipt of such comments or other communications, and shall provide
the Company and its counsel a reasonable opportunity to comment on the proposed
response of Parent and Purchaser to such comments.
1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and
represents that the Board of Directors of the Company, at a meeting duly called
and held, has (i) unanimously approved this Agreement and the transactions
contemplated hereby, including the Offer and the Merger (collectively, the
"Transactions"), (ii) unanimously determined that as of the date hereof the
Transactions are fair to and in the best interests of the Company's stockholders
and (iii) unanimously resolved to recommend that the stockholders of the Company
accept the Offer, tender their Shares thereunder to Purchaser and approve and
adopt this Agreement and the Merger; provided, however, that such recommendation
may be withdrawn, modified or amended if, in the opinion of the Board of
Directors of the Company, after consultation with its legal counsel, such
recommendation would be inconsistent with its fiduciary duties to the Company's
stockholders under applicable law. The Company consents to the inclusion of such
recommendation and approval in the Offer Documents. The Company has been advised
that all of its directors and executive officers intend either to tender their
Shares pursuant to the Offer or to vote their Shares in favor of the Merger.
(b) As promptly as practicable following the commencement of the
Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement Schedule 14D-9 (together with all amendments and supplements thereto
and including the exhibits thereto, the "Schedule 14D-9") which shall, subject
to the fiduciary duties of the Company's directors under applicable law and to
the provisions of this Agreement, contain the recommendations referred to in
Section 1.2(a) hereof. The Company represents that the Schedule 14D-9 will
comply in all material respects with the provisions of applicable federal
securities laws and, on the date filed with the SEC and on the date first
published, sent or
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given to the Company's stockholders, shall not 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 is made by the Company with respect to information supplied by
Parent or Purchaser for inclusion in the Schedule 14D-9. The information
supplied by Parent or Purchaser for inclusion in the Schedule 14D-9 shall not,
on the date filed with the SEC and on the date 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 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. The Company further agrees to take all steps
necessary to cause the Schedule 14D-9 to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws. Each of the Company, on the one hand, and
Parent and Purchaser, on the other hand, agrees promptly to correct any
information provided by it for use in the Schedule 14D-9 if and to the extent
that it shall have become false and misleading in any material respect and the
Company further agrees to take all steps necessary to cause the Schedule 14D-9
as so corrected to be filed with the SEC and to be disseminated to holders of
the Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given a reasonable opportunity
to review and comment on the initial Schedule 14D-9 before it is filed with the
SEC. In addition, the Company agrees to provide Parent, Purchaser and their
counsel in writing with any comments, or other communications that the Company
or its counsel may receive from time to time from the SEC or its staff with
respect to the Schedule 14D-9 promptly after the receipt of such comments or
other communications, and shall provide Parent, Purchaser and their counsel a
reasonable opportunity to comment on the proposed response of the Company to
such comments.
(c) In connection with the Offer, the Company will promptly furnish or
cause to be furnished to Parent and Purchaser mailing labels, security position
listings and any available listing or computer file(s) containing the names and
addresses of the record holders of the Shares as of a recent date, and shall
furnish Parent with such information and assistance as Parent or its agents may
reasonably request in communicating the Offer to the stockholders of the
Company. Except for such steps as are necessary to disseminate the Offer
Documents, Parent and Purchaser shall hold in confidence the information
contained in any of such labels and lists and the additional information
referred to in the preceding sentence, will use such information only in
connection with the Offer, and, if this Agreement is terminated, will upon
request of the Company deliver or cause to be delivered to the Company all
copies of such information then in its possession or the possession of its
agents or representatives.
1.3 Directors.
(a) Promptly upon the purchase of and payment for Shares by Parent or
any of its Subsidiaries (as defined in Section 8.10) which represent at least a
majority of the outstanding shares of Company Common Stock (on a fully diluted
basis), 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 is
equal to the product of the total number of directors on such Board (giving
effect to the directors designated by Parent pursuant to this sentence)
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Purchaser, Parent and any of their affiliates bears to the total number
of shares of Company Common Stock then outstanding. The Company shall take all
action necessary to cause Parent's designees to be elected or appointed to the
Company's Board of Directors and to secure the resignations of such number of
its incumbent directors as is necessary to enable Parent's designees to be so
elected to the Company's Board, and shall cause Parent's designees to be so
elected. At such times, the Company will take all
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action necessary to cause individuals designated by Parent to constitute the
same percentage as such individuals represent on the Company's Board or
Directors of (A) each committee of the Board and (B) each board of directors
(and committee thereof) of each Subsidiary in each case to the extent permitted
by the National Association of Securities Dealers (the "NASD") rules.
Notwithstanding the foregoing, until the Effective Time (as defined in Section
1.5 hereof), the Company shall retain as members of its Board of Directors at
least two (2) directors that are directors of the Company on the date hereof
(the "Company Designees"), and Parent and Purchaser shall not vote their Shares
of Company Common Stock or take any other action inconsistent with this
provision; provided, that subsequent to the purchase of and payment for Shares
pursuant to the Offer, Parent shall always have its designees represent at least
a majority of the entire Board of Directors.
(b) The Company's obligations under Section 1.3(a) shall be subject to
Section 14(f) of the Exchange Act and Rule 14f-l promulgated thereunder. The
Company shall promptly take all actions required pursuant to such Section 14(f)
and Rule 14f-l in order to fulfill its obligations under Section 1.3(a),
including mailing to stockholders the information required by such Section 14(f)
and Rule 14f-l as is necessary to enable Parent's designees to be elected to the
Company's Board of Directors. Parent or Purchaser will supply the Company any
information with respect to either of them and their nominees, officers,
directors and affiliates required by such Section 14(f) and Rule 14f-l.
(c) From and after the time, if any, that Parent's designees constitute a
majority of the Company's Board of Directors and prior to the Effective Time,
any amendment of this Agreement, any termination of this Agreement by the
Company, any extension of time for performance of any of the obligations of
Parent or Purchaser hereunder, any waiver of any condition or any of the
Company's rights hereunder, any other action by the Company hereunder or any
action that would adversely affect the rights of the stockholders of the Company
or the holders of Options (as defined in Section 2.1(d)) with respect to the
transactions contemplated hereby may be effected only by the action of a
majority of the Company Designees then in office, which action shall be deemed
to constitute the action of the full Board of Directors; provided, that if the
number of Company Designees shall be reduced below two for any reason
whatsoever, any remaining Company Designee shall be entitled to designate a
person to fill such vacancy who shall be deemed to be a Company Designee for
purposes of this Agreement or, if no Company Designee then remains, the other
directors shall designate two persons to fill such vacancies who shall not be
stockholders, affiliates or associates of Purchaser or Parent and such persons
shall be deemed to be Company Designees for purposes of this Agreement.
1.4 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time, the Company and Purchaser shall consummate a merger (the
"Merger") pursuant to which (a) Purchaser shall be merged with and into the
Company and the separate corporate existence of Purchaser shall thereupon cease,
(b) the Company shall be the successor or surviving corporation in the Merger
and shall continue to be governed by the laws of the State of Delaware and (c)
the separate corporate existence of the Company with all its rights, privileges,
immunities, powers and franchises shall continue immediately after the Merger.
The corporation surviving the Merger is sometimes hereinafter referred to as the
"Surviving Corporation." The
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Merger shall have the effects set forth in the General Corporation Law of the
State of Delaware (the "DGCL").
1.5 Effective Time. Parent, Purchaser and the Company will cause a
Certificate of Merger, or if applicable, a Certificate of Ownership and Merger
(each, the "Certificate of Merger"), to be executed and filed on the date of the
Closing (as defined in Section 1.6) (or on such other date as Parent and the
Company may agree) with the Secretary of State of the State of Delaware as
provided in the DGCL. The Merger shall become effective at the time at which the
Certificate of Merger has been duly filed with the Secretary of State of the
State of Delaware or at such time as is agreed upon by the parties and specified
in the Certificate of Merger, and such time is hereinafter referred to as the
"Effective Time."
1.6 Closing. The closing of the Merger (the "Closing") shall take place (a)
at the offices of Fulbright & Jaworski L.L.P., 666 Fifth Avenue, New York, New
York 10103 as soon as practicable following the satisfaction or waiver of all of
the conditions set forth in Article VI hereof or (b) at such other place, time
and date as Parent and the Company may agree.
1.7 Certificate of Incorporation of the Surviving Corporation. The
Certificate of Incorporation of the Company, 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 law and such Certificate of
Incorporation.
1.8 By-Laws of the Surviving Corporation. The By-Laws of Purchaser, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such By-Laws.
1.9 Directors and Officers of the Surviving Corporation. The directors and
officers of Purchaser at the Effective Time shall, from and after the Effective
Time, be the initial directors and officers, respectively, of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and By-Laws.
1.10 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger,
the Company, acting through its Board of Directors, shall, in accordance with
applicable law;
(i) duly call, give notice of, convene and hold a special meeting
of its stockholders (the "Special Meeting") as soon as practicable
following the acceptance for payment and purchase of Shares by
Purchaser pursuant to the Offer for the purpose of considering and
taking action upon this Agreement;
(ii) prepare and file with the SEC a preliminary proxy or
information statement relating to the Merger and this Agreement and
shall (x) obtain and furnish the
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information required to be included by the SEC in the Proxy Statement
(as hereinafter defined) and, after consultation with Parent, to
respond promptly to any comments made by the SEC with respect to the
preliminary proxy or information statement and cause a definitive
proxy or information statement (the "Proxy Statement") to be mailed to
its stockholders and (y) obtain the necessary approvals of the Merger
and this Agreement by its stockholders; and
(iii) subject to the fiduciary obligations of the Board under
applicable law as determined by the Board after consultation with its
legal counsel, include in the Proxy Statement the recommendation of
the board that the stockholders of the Company vote in favor of the
approval of the Merger and the adoption of this Agreement.
(b) Parent agrees that it will provide the Company with the
information concerning Parent and Purchaser required to be included in the Proxy
Statement and will vote, or cause to be voted, all of the Shares then owned by
it, Purchaser or any of its other Subsidiaries and affiliates in favor of the
approval of the Merger and the adoption of this Agreement.
(c) If at any time prior to the Effective Time any event with respect
to the Company or any of its Subsidiaries should occur which is required to be
described in a supplement to the Proxy Statement, such event shall be so
described, and such supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. With respect
to the information relating to the Company, the Proxy Statement will comply as
to form and substance in all material respects with the requirements of the
Exchange Act.
1.11 Merger Without Meeting of Stockholders. Notwithstanding Section 1.10
hereof, in the event that Parent, Purchaser or any other Subsidiary of Parent
shall acquire at least 90% of the Shares, pursuant to the Offer or otherwise,
the parties hereto agree to take all necessary and appropriate action to cause
the Merger to become effective as soon as practicable after such acquisition,
without a meeting of stockholders of the Company, in accordance with Section 253
of the DGCL.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holders of any shares of
Company Common Stock or common stock, par value $.01 per share, of Purchaser
("Purchaser Common Stock"):
(a) Purchaser Common Stock. Each issued and outstanding share of
Purchaser Common Stock shall be converted into and become one fully paid and
nonassessable share of common stock of the Surviving Corporation with the same
rights, powers and privileges
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as the shares so converted and shall constitute the only outstanding shares of
capital stock of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All shares
of Company Common Stock that are owned by the Company as treasury stock and any
shares of Company Common Stock owned by Parent, Purchaser or any other wholly
owned Subsidiary of Parent shall be cancelled and retired and shall cease to
exist and no consideration shall be delivered in exchange therefor.
(c) Exchange of Shares. Each share of Company Common Stock issued and
outstanding (other than Shares to be cancelled in accordance with Section 2.1(b)
hereof and other than Dissenting Shares (as defined in Section 2.2 below)),
shall be converted into the right to receive, in the manner provided in Section
2.3, the Offer Price, payable to the holder thereof, without interest (the
"Merger Consideration"). All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be cancelled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration therefor upon the
surrender of such certificate in accordance with Section 2.3.
(d) Stock Options. As of the Effective Time, each outstanding stock
option (an "Option" and, collectively, the "Options") granted under the Ovid
Technologies, Inc. Stock Plan, effective July 1, 1990, and the Ovid
Technologies, Inc. 1993 Stock Plan, effective October 4, 1993 (collectively, the
"Option Plans"), whether or not then vested or exercisable, shall be converted
into the right to receive from the Company an amount of cash equal to the
product of (i) the number of shares of Company Common Stock subject to the
Option and (ii) the excess, if any, of the Merger Consideration over the
exercise price per share of Company Common Stock of such option (the "Option
Consideration"). Prior to the Effective Time, the Company shall take all steps
necessary to give written notice to each holder of an Option that (i) all
Options shall be canceled effective as of the Effective Time and (ii) upon the
execution and delivery to the Company by such holder of an instrument
acknowledging cancellation of all Options held by such holder effective as of
the Effective Time ("Cancellation Instrument"), the Company shall pay such
holder, promptly following the Effective Time, the Option Consideration for all
Options held by such holder. The Board or any committee thereof responsible for
the administration of the Option Plans shall take any and all action necessary
to effectuate the matters described in this Section 2.1(d) on or before the
Effective Time. Section 3.2 sets forth the number of shares of Company Common
Stock reserved for issuance upon exercise of outstanding Options. Any amounts
payable pursuant to this Section 2.1(d) shall be subject to any required
withholding of taxes and shall be paid without interest. Parent agrees to
provide the Company with sufficient funds to permit the Company to satisfy its
obligations under this Section 2.1(d).
2.2 Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, Shares outstanding immediately prior to the Effective Time and held by
a holder who has not voted in favor of the Merger or consented thereto in
writing and who has demanded appraisal for such Shares in accordance with
Section 262 of the DGCL, if such Section 262 provides for
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appraisal rights for such Shares in the Merger ("Dissenting Shares"), shall not
be converted into the right to receive the Merger Consideration as provided in
Section 2.1(c), unless and until such holder fails to perfect or withdraws or
otherwise loses his right to appraisal and payment under the DGCL. If, after the
Effective Time, any such holder fails to perfect or withdraws or loses his right
to appraisal, such Dissenting Shares shall thereupon be treated as if they had
been converted as of the Effective Time into the right to receive the Merger
Consideration, if any, to which such holder is entitled, without interest or
dividends thereon. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of Shares and, prior to the Effective
Time, Parent shall have the right to participate in all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands.
2.3 Exchange of Certificates.
(a) Paying Agent. Parent shall designate a bank or trust company
reasonably acceptable to the Company to act as agent for the holders of shares
of Company Common Stock in connection with the Merger (the "Paying Agent") to
receive the funds to which holders of shares of Company Common Stock shall
become entitled pursuant to Section 2.1(c) hereof. Parent shall take all steps
necessary to deposit or cause to be deposited with the Paying Agent such funds
as needed for timely payment hereunder in accordance with this Article II. Such
funds shall be invested by the Paying Agent as directed by Parent or the
Surviving Corporation. Parent shall pay all charges and expenses of the Paying
Agent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time but in no event more than three (3) business days thereafter, the
Paying Agent shall mail to each holder of record of a certificate or
certificates, which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates"), whose shares
were converted pursuant to Section 2.1 hereof into the right to receive the
Merger Consideration (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Paying Agent and shall be in
such form and have such other provisions as Parent and the Company may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for payment of the Merger Consideration. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such other
agent or agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, the Paying Agent shall promptly pay the person
entitled thereto the Merger Consideration for each share of Company Common Stock
formerly represented by such Certificate and the Certificate so surrendered
shall forthwith be cancelled. If payment of the Merger Consideration is to be
made to a person other than the person in whose name the surrendered Certificate
is registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or shall be otherwise in proper form for
transfer and that the person requesting such payment shall have paid any
transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such tax either has been paid or is not applicable. Until
surrendered
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as contemplated by this Section 2.3, each Certificate shall be deemed at any
time after the Effective Time to represent only the right to receive the Merger
Consideration in cash as contemplated by this Section 2.3.
(c) Transfer Books; No Further Ownership Rights in Company Common
Stock. At the Effective Time, the stock transfer books of the Company shall be
closed and thereafter there shall be no further registration of transfers of
shares of Company Common Stock on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership of shares of
Company Common Stock 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. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be cancelled and exchanged as provided in this Article II.
(d) Termination of Fund Liability. At any time following one (1) year
after the Effective Time, the Surviving Corporation shall be entitled to require
the Paying Agent to deliver to it any funds (including any interest received
with respect thereto) which had been made available to the Paying Agent and
which have not been disbursed to holders of Certificates, and thereafter such
holders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as general creditors
thereof with respect to the Merger Consideration payable upon due surrender of
their Certificates, without any interest thereon. Notwithstanding the foregoing,
neither the Surviving Corporation nor the Paying Agent shall be liable to any
holder of a Certificate for Merger Consideration delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(e) Lost or Stolen Certificates. If any Certificate shall have been
lost, stolen, mislaid or destroyed then upon receipt of (i) an affidavit of that
fact from the holder claiming such Certificate to be lost, mislaid, stolen or
destroyed, (ii) such bond, security or indemnity, as Parent or the Paying Agent
may reasonably require, and (iii) any other documentation to evidence and effect
the bona fide exchange thereof, the Merger Consideration with respect to the
shares of Company Common Stock represented by such Certificate may be paid. Each
such lost, stolen, mislaid or destroyed Certificate with respect to which any
Merger Consideration shall be paid in accordance with the provisions of this
Section 2.3(e) shall forthwith be deemed surrendered and cancelled.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Parent and Purchaser that:
3.1 Corporate Organization and Qualification. Each of the Company and its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and is
qualified and in good standing as a foreign
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corporation in each jurisdiction where the properties owned, leased or operated,
or the business conducted, by it require such qualification, except where the
failure to so qualify or be in good standing would not have a Company Material
Adverse Effect (as defined in Section 8.10). Each of the Company and its
Subsidiaries has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being
conducted, except where the failure to have such power and authority would not
have a Company Material Adverse Effect. The Company has heretofore made
available to Parent complete and correct copies of its Certificate of
Incorporation and By-Laws, and the certificate of incorporation and by-laws (or
comparable governing instruments) of each of its Subsidiaries, each as in effect
as of the date hereof.
3.2 Capitalization. The authorized capital stock of the Company consists
of: (i) 10,000,000 Shares, of which, as of the date hereof 6,183,512 Shares were
issued and outstanding and 1,950,779 Shares are reserved for issuance pursuant
to outstanding Options, and (ii) 1,000,000 shares of preferred stock, par value
$.01 per share, none of which, as of the date hereof, were issued and
outstanding. All of the outstanding Shares have been duly authorized and validly
issued and are fully paid and nonassessable. Schedule 3.2 lists each Subsidiary
of the Company. Except as set forth on Schedule 3.2, as of the date hereof all
outstanding shares of capital stock of the Company's Subsidiaries are owned by
the Company or a direct or indirect wholly owned subsidiary of the Company, free
and clear of all liens, charges, encumbrances, claims and options of any nature.
Except as set forth on Schedule 3.2, there are not as of the date hereof any
outstanding or authorized options, warrants, calls, rights (including preemptive
rights), commitments or any other agreements of any character which the Company
or any of its Subsidiaries is a party to, or may be bound by, requiring it to
issue, transfer, sell, purchase, redeem or acquire any shares of capital stock
or any securities or rights convertible into, exchangeable for, or evidencing
the right to subscribe for, any shares of capital stock of the Company or any of
its Subsidiaries. Except for the capital stock of its Subsidiaries and except as
otherwise set forth on Schedule 3.2, the Company does not own, directly or
indirectly, any capital stock or other ownership interest in any corporation,
partnership, joint venture or other entity.
3.3 Authority Relative to This Agreement. The Company has the requisite
corporate power and authority to execute and deliver this Agreement and, subject
to approval of this Agreement by the holders of a majority of the outstanding
Shares in accordance with the DGCL, to consummate the transactions contemplated
hereby. This Agreement and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby (other than, with respect to the Merger, the
approval of this Agreement by the holders of a majority of the outstanding
Shares in accordance with the DGCL). This Agreement has been duly and validly
executed and delivered by the Company and, assuming this Agreement constitutes
the valid and binding agreement of Parent and Purchaser, constitutes the valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement hereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now
or hereafter in effect relating to creditors'
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rights generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
3.4 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by the Company nor the consummation by the Company of
the transactions contemplated hereby will (a) conflict with or result in any
breach of any provision of the respective certificate of incorporation,
respective By-Laws or comparable governing instruments of the Company or any of
its Subsidiaries, (b) except as set forth on Schedule 3.4(b), require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, except (i) in connection with the
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), (ii) pursuant to the applicable requirements
of the Exchange Act, (iii) the filing of the Certificate of Merger pursuant to
the DGCL and appropriate documents with the relevant authorities of other states
in which the Company or any of its Subsidiaries is authorized to do business,
all of which states are set forth on Schedule 3.4(b)(iii), (iv) as may be
required by any applicable state corporation, securities or "blue sky" laws or
state takeover laws or (v) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would not
have a Company Material Adverse Effect, (c) except as set forth on Schedule
3.4(c), result in a violation or breach of, or constitute (with or without due
notice or lapse or time or both) a default (or give rise to any right of
termination, cancellation or acceleration or lien or other charge or
encumbrance) under any of the terms, conditions or provisions of any note,
license, agreement or other instrument or obligation to which the Company or any
of its Subsidiaries is a party or by which any of them or any of their
respective assets may be bound, except for such violations, breaches and
defaults (or rights of termination, cancellation or acceleration or liens or
other charges or encumbrances) as to which requisite waivers or consents have
been obtained or which would not have a Company Material Adverse Effect, or (d)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in this Section 3.4 are duly and timely obtained or
made and the approval of this Agreement by the Company's stockholders has been
obtained, violate any order, writ, injunction, decree, statute, rule or
regulation in effect as of the date of this Agreement and applicable to the
Company or any of its Subsidiaries or any of their respective assets, except for
violations which would not have a Company Material Adverse Effect.
3.5 SEC Reports; Financial Statements.
(a) The Company has filed all reports required to be filed by it with
the SEC since January 1, 1997 pursuant to the federal securities laws and the
SEC rules and regulations thereunder, all of which as of their respective dates
complied in all material respects with applicable requirements of the Exchange
Act (collectively, the "Company SEC Reports"). None of the Company SEC Reports,
including, without limitation, any financial statements or schedules included
therein, as of their respective dates contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
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(b) The consolidated balance sheets and the related consolidated
statements of operations, stockholders' equity and cash flows (including the
related notes thereto) of the Company included in the Company SEC Reports comply
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in conformity with generally accepted accounting principles ("GAAP")
applied on a basis consistent with prior periods (except as otherwise noted
therein), and present fairly the financial position of the Company as of their
respective dates, and the consolidated results of its operations and its cash
flows for the periods presented therein (subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments).
(c) Except as set forth in the Company SEC Reports, and except for
liabilities and obligations incurred in the ordinary course of business
consistent with past practice, neither the Company nor any of its Subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by GAAP to be set forth on a consolidated
balance sheet of the Company and its Subsidiaries or in the notes thereto which,
individually or in the aggregate, could reasonably be expected to have a Company
Material Adverse Effect.
3.6 Absence of Certain Changes or Events. As of the date of this Agreement,
except as set forth on Schedule 3.6 or as a consequence of, or as contemplated
by, this Agreement, since December 31, 1997, (a) the business of the Company has
been carried on only in the ordinary and usual course, and other than in the
ordinary course of business, there has not occurred any change (other than a
change affecting the Company's industry generally) which has resulted or is
reasonably likely to result in a Company Material Adverse Effect and (b) except
as specifically set forth in the Company SEC Reports or otherwise specifically
disclosed in this Agreement or the Schedules hereto, neither the Company nor any
of its Subsidiaries has taken or omitted to take any action, nor has any event
occurred, which (if taken, omitted or occurring after the date hereof) would
constitute a breach of any of clause (i) through (xiii) of Section 5.1of this
Agreement.
3.7 Litigation. As of the date of this Agreement, except as set forth on
Schedule 3.7, there is no action, claim, suit, proceeding or governmental
investigation pending or, to the knowledge of the Company, threatened against
the Company or its Subsidiaries by or before any court, governmental or
regulatory authority or by any third party.
3.8 Taxes.
(a) The Company and its Subsidiaries have filed (or have obtained
extensions to file) all Tax Returns (as defined below) required to be filed by
the Company and its Subsidiaries for taxable periods ending on or prior to the
date of this Agreement, other than those Tax Returns the failure of which to
file would not have a Company Material Adverse Effect. Such Tax Returns are
true, correct and complete in all material respects.
(b) All Taxes (as defined below) shown as due on such Tax Returns have
been paid in full or adequate provision has been made to reflect such items on
the Company's or its Subsidiaries' balance sheet (in accordance with GAAP).
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(c) There are no material liens for Taxes upon the assets of either
the Company or its Subsidiaries except for statutory liens for current Taxes not
yet due.
(d) Except as described on Schedule 3.8(d), as of the date of this
Agreement, there are no ongoing Audits (as defined below) of the Company or any
of its Subsidiaries, and neither the Company nor any of its Subsidiaries has
been notified in writing by any Tax Authority (as defined below) that any such
Audit is contemplated, threatened or pending.
(e) Except as described on Schedule 3.8(d), as of the date of this
Agreement, there are no claims, investigations (to the knowledge of the
Company), actions or proceedings pending or, to the knowledge of the Company,
threatened, against the Company or any of its Subsidiaries by any Tax Authority
for any past due Taxes with respect to which the Company or such Subsidiary
would be liable. There has been no waiver of any applicable statute of
limitations nor any consent for the extension of the time for the assessment of
any Tax against the Company or any of its Subsidiaries.
(f) For the purpose of this Agreement, (i) "Audit" shall mean any
audit, assessment of Taxes, any other examination or claim by any Tax Authority,
judicial, administrative or other proceeding or litigation (including any appeal
of any such judicial, administrative or other proceeding or litigation) relating
to Taxes and/or Tax Returns, (ii) "Taxes" shall mean all taxes, charges, fees,
levies, penalties or other assessments imposed by any United States federal,
state, local, or foreign taxing authority, including, but not limited to income,
excise, property, sales, transfer, franchise, payroll, withholding, social
security or other taxes, including any interest, penalties or additions
attributable thereto, (iii) "Tax Authority" shall mean the Internal Revenue
Service and any other domestic or foreign authority responsible for the
administration of any Taxes, and (iv) "Tax Return" shall mean any return,
declaration, report, information return or other document (including any related
or supporting information) with respect to Taxes.
3.9 Employee Benefit Plans; Labor Matters.
(a) Schedule 3.9 sets forth a true and complete list of all collective
bargaining agreements, employment, consulting, severance, deferred compensation
and non-competition agreements, executive compensation plans, stock purchase,
stock award and stock option plans and agreements, restricted stock awards,
bonus and incentive plans, directors fee arrangements, both tax qualified and
non-qualified and statutory and non-statutory employee pension plans, employee
profit sharing plans, 401(k) savings plans, multiemployer plans, employee
welfare plans, group life insurance, hospitalization insurance and other similar
plans or arrangements (either written or oral but only to the extent an oral
plan provides material benefits) providing for benefits to any employees,
consultants or directors of the Company or any Subsidiaries or affiliates of the
Company. With respect to the employee benefit plans, stock option plans,
restricted stock award programs and other programs and arrangements maintained
or contributed to by the Company or any of its Subsidiaries (the "Company
Plans"), except as specifically set forth on Schedule 3.9: (i) each Company Plan
intended to be qualified under Section 401(a) of
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the Internal Revenue Code of 1986, as amended (the "Code"), has received a
favorable determination letter from the Internal Revenue Service (the "IRS")
that it is so qualified and nothing has occurred since the date of such letter
that could reasonably be expected to affect the qualified status of such Company
Plan, (ii) each Company Plan has been operated in all material respects in
accordance with its terms and the requirements of applicable law; (iii) neither
the Company nor any of its Subsidiaries has incurred any direct or indirect
liability under, arising out of or by operation of Title IV of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), in connection with
the termination of, or withdrawal from, any Company Plan or other retirement
plan or arrangement, and no fact or event exists that could reasonably be
expected to give rise to any liability. No benefit plan that is a group health
plan provides or is required to provide post employment or post retirement
medical or health benefits to any current or former employee of the Company or
any of its Subsidiaries other than medical continuation requirements mandated by
the Code.
(b) The Company is not subject to any collective bargaining or other
labor union contracts applicable to persons employed by the Company or its
Subsidiaries as of the date of this Agreement. As of the date of this Agreement,
there is no pending or threatened in writing labor dispute, strike or work
stoppage against the Company or any of its Subsidiaries which may interfere with
the respective business activities of the Company or its Subsidiaries
(c) As of the date of this Agreement, there are no more than 1,950,779
Options issued and outstanding under the Company's stock option plans. No
Options have been issued to employees or directors of the Company or its
Subsidiaries since the date of the Board of Directors meeting on July 28, 1998.
There are no restricted stock awards which have been issued by the Company that
are currently outstanding.
(d) Except as disclosed on Schedules 3.6 and 3.9, the consummation of
the transactions contemplated by this Agreement will not give rise to an
obligation on behalf of the Company to make severance or change of control
payments to any individuals, except such as may arise from actions of the
Company taken at the direction of Parent following the Effective Time.
(e) Except as described on Schedule 3.9(e), no payments made to any
individual by the Company or any Subsidiary as a result of the consummation of
the transactions contemplated by this Agreement would be non-deductible under
either Section 162(m) of the Code or Section 280G of the Code.
(f) Neither the Company nor any Subsidiary has taken any action or
failed to take any action which would result in the imposition of a material
excise tax on the Company pursuant to Sections 4975, 4980B and 4999 of the Code.
3.10 Environmental Laws and Regulations. As of the date of this Agreement,
except as set forth on Schedule 3.10, (i) the Company and each of its
Subsidiaries is in compliance with all applicable federal, state and local laws
and regulations relating to pollution or protection of human health or the
environment including, without limitation, ambient air, surface water,
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ground water, land surface or subsurface strata) (collectively, "Environmental
Laws"), except for non-compliance that would not have a Company Material Adverse
Effect; (ii) neither the Company nor any of its Subsidiaries (a) has received
written notice of any action, cause of action, claim, investigation, demand or
notice by any person or entity alleging liability under or non-compliance with
any Environmental Law (an "Environmental Claim") or (b) to the knowledge of the
Company is subject to any Environmental Claim which is reasonably likely to have
a Company Material Adverse Effect; (iii) there has not been a Release of
Hazardous Materials by the Company or any of its Subsidiaries or any predecessor
in interest, or to the knowledge of the Company, by any other person at any
property currently operated by the Company, any of its Subsidiaries or
predecessor in interest except where such Release would not have a Company
Material Adverse Effect; (iv) to the knowledge of the Company there has not been
a Release of Hazardous Materials at any disposal or treatment facility that
received Hazardous Materials generated by the Company, its Subsidiaries or a
predecessor in interest. For purposes of this Section, "Hazardous Materials"
means (a) any element, compound, or chemical that is defined, listed or
otherwise classified as a contaminant, pollutant, toxic pollutant, toxic or
hazardous substance, extremely hazardous substance or chemical, hazardous waste,
special waste, or solid waste under Environmental Laws; (b) petroleum,
petroleum-based or petroleum-derived products; (c) polychlorinated biphenyls;
(d) any substance exhibiting a hazardous waste characteristic including but not
limited to corrosivity, ignitability, toxicity or reactivity as well as any
radioactive or explosive materials; and (e) any asbestos-containing materials.
The term "Release" means any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, migrating, dumping or disposing of
Hazardous Materials (including the abandonment or discarding of barrels,
containers or other closed receptacles containing Hazardous Materials) into the
environment.
3.11 Intellectual Property; Technology. (a) Schedule 3.11(a) contains a
true, correct and complete list of all Intellectual Property (as defined below),
which constitute applications and registrations by the Company and each
Subsidiary with or in any governmental agency, foreign or domestic, having
jurisdiction over such subject matter. All such applications and registrations
have been duly filed, and those registrations which have issued are validly
existing and in full force and effect. With respect to all U.S. registered
service and trademarks, Section 8 and 15 declarations, where applicable, have
been timely filed and accepted. Except as set forth on Schedule 3.11(a), no
service or trademarks listed on Schedule 3.11(a) have been abandoned.
(b) Except for proprietary material of persons other than the Company
which is licensed to the Company and which is generally commercially available
on a non-exclusive basis, material which is publicly available without
restriction, or material held under licenses referred to in Section 3.11(c)
without regard to the $100,000 limitation (collectively, the "Non-Owned
Intellectual Property"), the Company has good and marketable title to all
Intellectual Property and Technology, free and clear of all liens, claims,
security interests, restrictions and encumbrances and without payment of any
royalties, license fees or other amounts.
(c) The Company has provided Purchaser with a true and complete list
of all licenses, agreements, obligations or other commitments by which the
Company or any of its Subsidiaries may be bound with third parties under which
the Company or such Subsidiary uses,
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has the right to use or exercises any rights with respect to any Intellectual
Property or Technology (as defined below) and pursuant to which the Company has
paid or is obligated to pay at least $100,000 per year.
(d) Neither the Company nor any of its Subsidiaries has received (nor
does the Company have any knowledge of) any notice, claim or allegation from any
other party challenging the right of the Company or any of its Subsidiaries to
use, possess, transfer, convey or otherwise dispose of any Intellectual Property
or Technology. There is no interference, opposition, cancellation, reexamination
or other contest proceeding, action, claim, dispute or claim of infringement,
misappropriation or other violation of any intellectual property or other
proprietary rights of any other party. The Company's use of the Intellectual
Property and Technology, past and present, other than the Non-Owned Intellectual
Property, has not and does not, to the Company's knowledge, violate or infringe
upon the rights of any other party nor does such use constitute a breach of any
agreement, obligation, promise or commitment by which the Company or any of its
Subsidiaries may be bound or constitute a violation of any laws, regulations,
ordinances codes or statutes in any jurisdiction.
(e) Except for standard customer license agreements, copies of the
forms of which have previously been provided to Purchaser, or as set forth on
Schedule 3.11(e), no licenses or other rights have been granted by the Company
or any of its Subsidiaries and neither the Company nor any of its Subsidiaries
has any obligation to grant licenses with respect to any Intellectual Property
or Technology. No claims have been made by or against the Company or any of its
Subsidiaries of any violation or infringement by others of any rights with
respect to any Intellectual Property or Technology. Neither the Company nor any
of its Subsidiaries is aware of any such claim which the Company or any of its
Subsidiaries may have the right or a reasonable basis to make or assert.
(f) Except as set forth on Schedule 3.11(f), (i) the Intellectual
Property and Technology includes all rights and interests necessary to conduct
the business of the Company and its Subsidiaries as it is currently conducted
and as proposed to be conducted and (ii) such rights will not be adversely
affected by the Company or any of its Subsidiaries or any other party claiming
under or through the Company or any of its Subsidiaries or otherwise in
connection with or arising from the execution and delivery of this Agreement,
the Closing or the consummation of any of the transactions contemplated hereby.
(g) All statements and representations made by the Company or any of
its Subsidiaries in any pending Intellectual Property applications, filings and
registrations were true in all material respects as of the time they were made.
(h) As to the Intellectual Property and Technology to which the
Company has good and marketable title (the "Owned Intellectual Property"), the
documentation, source code with its embedded commentary, descriptions and
indicated authorships, Core Class specifications and other informational
materials which describe the operation, functions and technical characteristics
applicable to the Owned Intellectual Property are complete in all material
respects, have been faithfully and accurately compiled in accordance with
standards generally practiced by
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companies whose principal business is software development and which are listed
on the New York Stock Exchange or the NASDAQ National Market and are sufficient
to permit the Company to support and maintain its products and services. The
Company has taken all actions which a reasonably prudent person in the Company's
business would take to maintain its source code as confidential and proprietary
and to protect against the loss, theft or unauthorized use of such source code.
(i) The Company has taken all actions which a reasonably prudent
person in the Company's business would take to protect against the existence of
(I) any protections, encryption, security or lock-out devices, whether triggered
by the passage of time, the use or operation of the Intellectual Property and
Technology, remotely or otherwise which might in any way interrupt, discontinue
or otherwise adversely affect the Intellectual Property and Technology or
Purchaser's use thereof; and (II) any so-called computer viruses, worms, trap or
back doors, Trojan horses or any other instructions, codes, programs, data or
materials which could improperly, wrongfully and/or without the authorization of
Purchaser, interfere with the operation or use of the Intellectual Property and
Technology.
(j) The Company has delivered to Purchaser a description of the
Company's "Year 2000 Project." Since January 1, 1998, the Company has used
reasonable efforts to implement the Year 2000 Project. The anticipated cost to
the Company of implementing the Year 2000 Project is $530,000.
(k) For purposes hereof, "Intellectual Property" shall mean all
intellectual property rights, common law, statutory or otherwise, domestic and
foreign, including, without limitation, patents (including all reissues,
divisions, continuations and extensions), service marks, trademarks, tradenames,
brand, product and service names, and all logos and distinctive identifications
of the Company and its Subsidiaries, their products and services, copyrights as
well as all applications for any and all of the foregoing, licenses and other
contractual rights and other such property and intangible rights owned, used or
held for use by the Company and its Subsidiaries, together with the goodwill of
the business of the Company and its Subsidiaries in connection with all of the
foregoing.
(l) For purposes hereof, "Technology" shall mean all formulae,
algorithms, processes, procedures, designs, ideas, strategic and other business
plans, research records, inventions and all records of the foregoing, test,
engineering and technical data, know-how, proprietary information and
methodologies, trade secrets, technology, communications and associated
peripheral devices and resources, computer software, programs and code, both
object and source, in whatever form and media, all databases, specifications and
other information processing tangible and intangible items, owned, used or held
for use by the Company and its Subsidiaries with respect to the business of the
Company and its Subsidiaries.
3.12 Real Property. Neither the Company nor any of its Subsidiaries owns
any real property. Each of the leases for real property to which the Company or
any of its Subsidiaries is a party (the "Leases") and all amendments,
modifications and/or extensions thereto are listed on Schedule 3.12 hereto.
Schedule 3.12 hereto also lists, with respect to each Lease, the name of the
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tenant(s), landlord(s), whether the Lease is a lease or a sublease, the current
expiration dates and remaining options to extend the Leases, and the minimum
monthly rent and additional rent under the Leases. With respect to the Leases,
(i) the Leases are in full force and effect, are unmodified (other than as
listed on Schedule 3.12 hereto) and are binding and enforceable in accordance
with their terms; (ii) all rental and other charges payable pursuant to the
terms and conditions of the Leases have been paid and no rent has been paid in
advance more than 30 days; (iii) there are no charges, offsets or defenses
against the enforcement by the lessors thereunder of any agreement, covenant or
condition on the part of the Company or any of its Subsidiaries, as the case may
be, to be performed or observed pursuant to the terms of the Leases; (iv) there
are no defaults by the Company or any of its Subsidiaries, as the case may be,
of any agreement, covenant or condition on the part of the Company or such
Subsidiary, as the case may be, to be performed or observed pursuant to the
terms of the Leases which with the giving of notice or the lapse of time would
give rise to the termination of any such Leases; (v) there are no actions or
proceedings pending or to the best of the Company's knowledge, threatened, by
any lessor under the Leases; (vi) the consummation of the Offer and the Merger
will not constitute a prohibited transfer or assignment under any of the Leases;
and (vii) to the knowledge of the Company, there are no material defaults by any
of the respective lessors of any agreement, covenant or condition on the part of
the lessor to be performed or observed pursuant to the terms of the Leases.
3.13 Compliance with Applicable Laws. Except as set forth on Schedule 3.13,
since January 1, 1996 neither the Company nor any of its Subsidiaries has
violated or failed to comply with any statute, law, regulation, rule, judgment,
decree or order of any governmental entity applicable to its business or
operations, except for violations and failures to comply that would not,
individually or in the aggregate, reasonably be expected to result in a Company
Material Adverse Effect The conduct of the business of the Company and its
Subsidiaries is in conformity with all federal, state and local governmental and
regulatory requirements applicable to its business and operations, except where
such nonconformities would not, in the aggregate, reasonably be expected to
result in a Company Material Adverse Effect. The Company and its Subsidiaries
have all permits, licenses and franchises from governmental agencies required to
conduct their businesses as now being conducted, except for such permits,
licenses and franchises the absence of which would not, in the aggregate,
reasonably be expected to result in a Company Material Adverse Effect.
3.14 Insurance. Schedule 3.14 identifies all insurance policies maintained
by the Company and its Subsidiaries. The Company and its Subsidiaries have
obtained and maintained in full force and effect insurance with such insurance
companies or associations in such amounts, on such terms and covering such
risks, including fire and other risks insured against by extended coverage, as
is reasonably prudent, and each has maintained in full force and effect public
liability insurance, insurance against claims for personal injury or death or
property damage occurring in connection with the activities of the Company or
its Subsidiaries or any properties owned, occupied or controlled by the Company
or its Subsidiaries, in such amount as reasonably deemed necessary by the
Company or its Subsidiaries.
3.15 Approvals; Antitakeover Provisions. The Board of Directors of the
Company has approved this Agreement for all purposes under Section 203 of the
DGCL and the Company has
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heretofore furnished to Parent a true and correct copy of resolutions duly
adopted by the unanimous vote of such board on September 29, 1998 and such
resolutions are in full force and effect on the date hereof. Such action is the
only action necessary so that the restrictions on business combinations
contained in Section 203 of the DGCL will not apply with respect to or as a
result of the Merger Agreement or any of the transactions contemplated hereby.
3.16 Voting Requirements. The affirmative vote of the holders of a majority
of the outstanding shares of Company Common Stock is the only vote of the
holders of any class of the Company's capital stock necessary to approve this
Agreement and the transactions contemplated by this Agreement.
3.17 Brokers and Finders. Other than Goldman, Sachs & Co., which has been
retained by the Company's Board of Directors, the Company has not employed any
investment banker, broker, finder, advisor, consultant or intermediary in
connection with the transactions contemplated by this Agreement which would be
entitled to any investment banking, brokerage, finder's, advisory or similar fee
or commission in connection with this Agreement or the transactions contemplated
hereby.
3.18 Opinion of Financial Advisors. The Board of Directors has received the
opinion of Goldman, Sachs & Co., dated as of the date of this Agreement, to the
effect that, as of the date of such opinion, the $24.59 in cash per Share to be
received by the holders of Shares in the Offer and the Merger is fair from a
financial point of view to such holders.
3.19 Information Supplied. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in (i) the
Offer Documents, (ii) the Schedule 14D-9 or (iii) the information to be filed by
the Company in connection with the Offer pursuant to Rule 14f-1 promulgated
under the Exchange Act (the "Information Statement") will, at the respective
times the Offer Documents, the Schedule 14D-9 and the Information Statement 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 required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. If at any time prior to the Effective Time any event with
respect to the Company or its Subsidiaries should occur which is required to be
described in a supplement to (i) the Offer Documents, (ii) the Schedule 14D-9 or
(iii) the Information Statement such event shall be so described, and such
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company and to Parent. The Schedule
14D-9 and the Information Statement will comply in all material respects with
the requirements of the Exchange Act and the rules and regulations thereunder.
3.20 Confidentiality Agreements. Except as set forth on Schedule 3.20, the
confidentiality agreements entered into with any other potential purchasers are
in substantially the same form as the Confidentiality Agreement (as defined in
Section 5.5) and all benefits under such agreements shall inure to the Company
as of the Effective Time.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND PURCHASER
Each of Parent and Purchaser represents and warrants jointly and severally
to the Company that:
4.1 Corporate Organization and Qualification. Each of Parent and Purchaser
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Each of Parent and Purchaser is qualified and in
good standing as a foreign corporation in each jurisdiction where the properties
owned, leased or operated, or the business conducted, by it require such
qualification, except where the failure to so qualify or be in good standing
would not have a Parent Material Adverse Effect.
4.2 Authority Relative to This Agreement. Each of Parent and Purchaser has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and the consummation by Parent and Purchaser of the transactions contemplated
hereby have been duly and validly authorized by the respective Boards of
Directors of Parent and Purchaser and by Parent as the sole stockholder of
Purchaser, and no other corporate proceedings on the part of Parent and
Purchaser are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by each of Parent and Purchaser and, assuming this
Agreement constitutes the valid and binding agreement of the Company,
constitutes the valid and binding agreement of each of Parent and Purchaser,
enforceable against each of them in accordance with its terms, except that the
enforcement hereof may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
4.3 Consents and Approvals; No Violation. Neither the execution and
delivery of this Agreement by Parent or Purchaser nor the consummation by Parent
or Purchaser of the transactions contemplated hereby will (a) conflict with or
result in any breach of any provision of the Certificate of Incorporation or the
By-laws, respectively, of Parent or Purchaser; (b) require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, except (i) in connection with the
applicable requirements of the HSR Act, (ii) pursuant to the applicable
requirements of the Exchange Act, (iii) the filing of the Certificate of Merger
pursuant to the DGCL and appropriate documents with the relevant authorities of
other states in which Parent or Purchaser is authorized to do business, (iv) as
may be required by any applicable state corporation, securities or "blue sky"
laws or state takeover laws, (v) informational filings with the Bureau of
Economic Analysis of the United States Department of Commerce or (vi) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications would not have a Parent Material Adverse
Effect; (c) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or
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acceleration or liens or other charges or encumbrances) under any of the terms,
conditions or provisions of any note, license, agreement or other instrument or
obligation to which Parent or any of its Subsidiaries is a party or by which any
of them or any of their respective assets may be bound, except for such
violations, breaches and defaults (or rights of termination, cancellation or
acceleration or lien or other charge or encumbrance) as to which requisite
waivers or consents have been obtained or which would not have a Parent Material
Adverse Effect; or (d) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in this Section 4.3 are duly
and timely obtained or made, violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Parent or any of its Subsidiaries or
to any of their respective assets, except for violations which would not have a
Parent Material Adverse Effect.
4.4 Interim Operations of Purchaser. Purchaser was formed solely for the
purpose of engaging in the transactions contemplated hereby and has not engaged
in any business activities or conducted any operations other than in connection
with the transactions contemplated hereby.
4.5 Sufficient Funds. Either Parent or Purchaser has sufficient funds
available (through existing credit arrangements or otherwise) to purchase, in
accordance with the terms hereof, all of the Shares outstanding on a fully
diluted basis and to pay all fees, expenses and payments related to the
Transactions.
4.6 Share Ownership. None of Parent and Purchaser nor any of their
respective "affiliates" or Associates (as such terms are defined in Rule 12b-2
under the Exchange Act) beneficially own any Shares.
4.7 Information in Proxy Statement and Schedule 14D-9. None of the
information supplied by Parent or Purchaser for inclusion or incorporation by
reference in the Proxy Statement or the Schedule 14D-9 will, at the date mailed
to stockholders and at the time of the Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. If at any time
prior to the Effective Time any event with respect to Parent or any of its
Subsidiaries should occur which is required to be described in a supplement to
the Proxy Statement or the Schedule l4D-9, such event shall be so described, and
such supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Company and Parent. With respect to
information relating to Parent or Purchaser, the Proxy Statement will comply in
all material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
4.8 Brokers and Finders. Other than Credit Suisse First Boston Corporation,
whose fees will be paid by Parent, Parent and Purchaser have not employed any
investment banker, broker, finder, advisor, consultant or intermediary in
connection with the transactions contemplated by this Agreement which would be
entitled to any investment banking, brokerage, finder's, advisory or similar fee
or commission in connection with this Agreement or the transactions contemplated
hereby.
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ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Interim Operations of the Company. Except as set forth on Schedule 5.1,
during the period from the date of this Agreement to the Effective Time (unless
Parent shall otherwise agree in writing and except as otherwise contemplated by
this Agreement), the Company will conduct its operations according to its
ordinary and usual course of business consistent with past practice and seek to
preserve intact its current business organization, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
their goodwill and ongoing businesses shall be unimpaired in any material
respect at the Effective Time. Without limiting the generality of the foregoing,
and except as otherwise contemplated by this Agreement or as set forth on
Schedule 5.1, the Company will not, and will not permit any of its Subsidiaries
to, prior to the Effective Time, without the prior written consent of Parent:
(i) except for the issuance of Shares upon the exercise of Options
outstanding on the date of this Agreement and in accordance with their
present terms, issue, sell, grant, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or pledge
or other encumbrance of (A) any additional shares of capital stock of any
class (including the Shares), or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for any shares of
capital stock, or any rights, warrants, options, calls, commitments or any
other agreements of any character to purchase or acquire any shares of
capital stock or any securities or rights convertible into, exchangeable
for, or evidencing the right to subscribe for, any shares of capital stock
or (B) any other securities in respect of, in lieu of, or in substitution
for, Shares outstanding on the date hereof;
(ii) redeem, purchase or otherwise acquire, or propose to redeem,
purchase or otherwise acquire, any of its outstanding Shares;
(iii) split, combine, subdivide or reclassify any Shares or declare,
set aside for payment or pay any dividend, or make any other actual,
constructive or deemed distribution in respect of any Shares or otherwise
make any payments to stockholders in their capacity as such, other than
dividends by a direct or indirect wholly owned Subsidiary of the Company,
(iv) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its direct or indirect Subsidiaries
(other than the Merger),
(v) adopt any amendments to its Certificate of Incorporation or
By-laws or alter through merger, liquidation, reorganization, restructuring
or in any other fashion the corporate structure or ownership of any direct
or indirect Subsidiary of the Company;
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(vi) make any acquisition, by means of merger, consolidation or
otherwise, or disposition, of assets or securities (other than the Merger),
in each case other than in the ordinary course of business consistent with
past practice;
(vii) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of any of its properties or assets, except
sales in the ordinary course of business consistent with past practice and
Liens existing as of the date of this Agreement;
(viii) (A) incur any indebtedness for borrowed money or guarantee any
such indebtedness of another person, or issue or sell any debt securities
or warrants or other rights to acquire any debt securities of the Company
or any of its Subsidiaries, or (B) make any loans or advances, other than
in the ordinary course of business consistent with past practice, or any
capital contributions to, or investments in, any other person, other than
the Company or any direct or indirect wholly owned Subsidiary of the
Company;
(ix) make or agree to make any new capital expenditure or expenditures
which, individually, is in excess of $100,000 or, in the aggregate, are in
excess of $600,000;
(x) make any material tax election or settle or compromise any
material income tax liability;
(xi) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction,
in the ordinary course of business consistent with past practice or in
accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements
(or the notes thereto) included in the Company SEC Reports or incurred in
the ordinary course of business consistent with past practice, or waive any
benefits of, or agree to modify in any respect, any confidentiality,
standstill or similar agreements to which the Company, or any of its
Subsidiaries is a party;
(xii) except in the ordinary course of business, modify, amend or
terminate any contract or agreement to which the Company or any of its
Subsidiaries is a party, or waive, release or assign any rights or claims;
(xiii) except as required to comply with applicable law, (A) adopt,
enter into, terminate or amend any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability,
death benefit, hospitalization, medical or other plan, arrangement or
understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of the Company or any of
its
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Subsidiaries (collectively, "Benefit Plans"), other than arrangements or
understandings adopted, entered into, terminated or amended in the ordinary
course of business consistent with past practice, (B) increase in any
manner the compensation or fringe benefits of, or pay any bonus to, any
director, officer or employee (except for normal increases or bonuses in
the ordinary course of business consistent with past practice), (C) pay any
benefit not provided for under any Benefit Plan, other than in the ordinary
course of business consistent with past practice, (D) except as permitted
in clause (B) above, or for options included in the representation set
forth in Section 3.2, grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Benefit Plan
(including the grant of stock options, stock appreciation rights, stock
based or stock related awards, performance units or restricted stock, or
the removal of existing restrictions in any Benefit Plans or agreement or
awards made thereunder) or (E) other than in the ordinary course of
business consistent with past practice, take any action to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or Benefit Plan; or
(xiv) (A) take, or agree or commit to take, any action that would make
any representation or warranty of the Company hereunder inaccurate at the
Effective Time (except for representations and warranties which speak as of
a particular date, which need be accurate only as of such date), (B) omit,
or agree or commit to omit, to take any action necessary to prevent any
such representation or warranty from being inaccurate in any material
respect at the Effective Time (except for representations and warranties
which speak as of a particular date, which need be accurate only as of such
date), provided however that the Company shall be permitted to take or omit
to take such action which can be cured, and in fact is cured, at or prior
to the Effective Time or (C) take, or agree or commit to take, any action
that would result in, or is reasonably likely to result in, any of the
conditions of the Merger set forth in Article VI not being satisfied except
that, with respect to the condition set forth in Section 6.1(a), such
action shall be permitted if it is consistent with the fiduciary duties of
the Company's Board of Directors to the Company's stockholders under
applicable law; or
(xv) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
5.2 Alternative Proposals. Subject to the last sentence of this Section
5.2, from and after the date hereof and prior to the Effective Time, the Company
(a) will not, nor shall it authorize or permit its officers, directors,
employees, representatives and agents to, initiate, solicit or encourage,
directly or indirectly, any Alternative Proposal (as defined in Section 8.10) or
engage in any negotiations or enter into any agreement or provide any
confidential information or data to any person in connection with or relating to
any Alternative Proposal; (b) will immediately cease any existing discussions or
negotiations, if any, with any parties conducted heretofore with respect to any
Alternative Proposal; and (c) will notify Parent as soon as practicable if any
such inquiries or proposals are received by, any such information is requested
from, or any such negotiations and/or discussions are sought to be initiated or
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continued with, the Company. Notwithstanding the foregoing, nothing in this
Section 5.2 shall require the Board of Directors of the Company on behalf of the
Company to act, or refrain from acting with respect to unsolicited Alternative
Proposals, in any manner which, in the opinion of the Board of Directors of the
Company after consultation with its counsel, could reasonably be deemed
inconsistent with its fiduciary duties to the Company's stockholders under
applicable law, including without limitation disclosing to its stockholders a
position required by Rule 14e-2(a) under the Exchange Act.
5.3 Certain Filings. The Company and Purchaser shall reasonably cooperate
with one another (a) in connection with the preparation of the Proxy Statement
and the Schedule 14D-9, and (b) in determining whether any action by or in
respect of, or filing with, any governmental body, agency or official, or
authority is required, or any actions, consents, approvals or waivers are
required to be obtained from parties to any material contracts, in connection
with the consummation of the transactions contemplated by this Agreement and (c)
in seeking any such actions, consents, approvals, or waivers or making any such
filings, furnishing information required in connection therewith or with the
Proxy Statement and the Schedule 14D-9 and seeking timely to obtain any such
actions, consents, approvals or waivers.
5.4 Satisfaction of Conditions; Receipt of Necessary Approvals.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to (i) promptly effect all necessary registrations,
submissions and filings, including, but not limited to, filings under the HSR
Act and submissions of information requested by governmental authorities, which
may be necessary or required in connection with the consummation of the
transactions contemplated by this Agreement, (ii) use all reasonable efforts to
secure federal antitrust clearance (including taking steps to avoid or set aside
any preliminary or permanent injunction or other order of any federal or state
court of competent jurisdiction or other governmental authority), (iii) use all
reasonable efforts to take all other action and to do all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement and (iv) use all
reasonable efforts to obtain all other necessary or appropriate waivers,
consents and approvals (including but not limited to such filings, consents,
approvals, orders, registrations and declarations as may be required under the
laws of any foreign country in which the Company or any of its Subsidiaries or
Parent or any of its Subsidiaries conducts any business or owns any assets) and
to lift any injunction or other legal bar to the Merger (and, in such case, to
proceed with the Merger as expeditiously as possible), subject, however, to the
requisite vote of the stockholders of the Company. Parent represents and
warrants to the Company that Parent's affiliates have full power and authority
to effect the transactions contemplated by this Section 5.4.
(b) Notwithstanding the foregoing, the Company shall not be obligated
to use all reasonable efforts or take any action pursuant to this Section 5.4 if
in the opinion of the Board of Directors after consultation with its counsel
such actions could reasonably be deemed inconsistent with its fiduciary duties
to the Company's stockholders under applicable law.
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5.5 Access to Information. To the extent permitted by applicable law, upon
reasonable notice, the Company shall (and shall cause each of its Subsidiaries
to) afford to the officers, employees, accountants, counsel, financing sources
and other representatives of Parent, access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records and, during such period, the Company shall (and shall
cause each of its Subsidiaries to) furnish promptly to the Parent (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. Parent will hold any
such information which is nonpublic in confidence in accordance with the
provisions of the Confidentiality Agreement between the Company and Parent,
dated as of May 11, 1998 (the "Confidentiality Agreement").
5.6 Publicity. The initial press release with respect to the execution of
this Agreement shall be a joint press release acceptable to Parent and the
Company. Thereafter, so long as this Agreement is in effect, neither the
Company, Parent nor any of their respective affiliates shall issue or cause the
publication of any press release or other announcement with respect to the
Merger, this Agreement or the other transactions contemplated hereby without
prior consultation with the other party, except as may be required by law, the
rules and regulations of any national securities exchange or over the counter
market or by any listing agreement with a national securities exchange.
5.7 Directors' and Officers' Insurance and Indemnification.
(a) From and after the consummation of the Offer, Parent shall, and
shall cause the Company (or, if after the Effective Time, the Surviving
Corporation) to, indemnify, defend and hold harmless any person who is now, or
has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, an officer or director (the "Company Indemnified Party") of the
Company and its Subsidiaries against all losses, claims, damages, liabilities,
costs and expenses (including attorney's fees and expenses), judgments, fines,
losses, and amounts paid in settlement in connection with any actual or
threatened action, suit, claim, proceeding or investigation (each a "Claim") to
the extent that any such Claim is based on, or arises out of, the fact that such
person is or was a director or officer of the Company or any of its
Subsidiaries, and to the extent that any such Claim pertains to any matter or
fact arising out of any act or omission prior to or at the Effective Time,
regardless of whether such Claim is asserted or claimed prior to, at or after
the Effective Time, to the full extent permitted under applicable law or the
Company's Articles of Incorporation, By-laws or indemnification agreements in
effect at the date hereof identified on Schedule 5.7, or otherwise as permitted
by contracts identified on Schedule 5.7, including provisions relating to
advancement of expenses incurred in the defense of any action or suit. Without
limiting the foregoing, in the event any Company Indemnified Party becomes
involved in any capacity in any Claim, then from and after consummation of the
Offer Parent shall, or shall cause the Company (or the Surviving Corporation if
after the Effective Time) to, periodically advance to such Company Indemnified
Party its legal and other expenses (including the cost of any investigation and
preparation incurred in connection therewith), subject to the provision by such
Company Indemnified Party
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of an undertaking to reimburse the amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
Company Indemnified Party is not entitled thereto.
(b) Parent and the Company agree that all rights to indemnification
and all limitations on liability existing in favor of a Company Indemnified
Party as provided in the Company's Certificate of Incorporation and By-laws as
in effect as of the date hereof shall survive the Merger and shall continue in
full force and effect, without any amendment thereto, for a period of six years
from the Effective Time to the extent such rights are consistent with the DGCL;
provided, that in the event any claim or claims are asserted or made within such
six year period, all rights to indemnification in respect of any such claim or
claims shall continue until disposition of any and all such claims; provided
further, that nothing in this Section 5.7 shall impair any rights or obligations
of any present or former directors or officers of the Company.
(c) Parent shall cause to be maintained in effect for the Indemnified
Parties (as defined below) for not less than six years after the Effective Time
policies of directors' and officers' liability insurance and fiduciary liability
insurance with respect to matters occurring at or prior to the Effective Time
(including without limitation, the transaction, contemplated by this Agreement)
providing substantially the same coverage and containing terms and conditions
which are no less advantageous, in any material respect, to those currently
maintained by the Company for the benefit of the Company's present or former
directors, officers, employees or agents covered by such insurance policies
prior to the Effective Time (the "Indemnified Parties").
(d) In the event Parent or Purchaser or any of their successors or
assigns (i) consolidates with or merges into any other person and shall not be
the 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, to the extent necessary
to effectuate the purposes of this Section 5.7, proper provision shall be made
so that the successors and assigns of Parent and Purchaser assume the
obligations set forth in this Section 5.7 and none of the actions described in
clauses (i) or (ii) shall be taken until such provision is made.
5.8 Employees; Continuation of Benefits. (a) Following the Effective Time,
the Surviving Corporation will provide pension, health and welfare benefits
(other than stock option, stock purchase or similar plans) to employees of the
Company and its Subsidiaries who continue their employment after the Effective
Time (each, a "Continuing Employee") on terms which are generally no less
favorable to such Continuing Employee than the benefits being provided to such
Continuing Employee immediately prior to the Effective Time.
(b) If at any time Parent shall make a determination that any
Continuing Employee is eligible to participate in any of Parent's benefit plans
after the Effective Time, then, for purposes of eligibility and vesting with
respect to any such plans, Parent will cause the Surviving Corporation to
recognize the service of the Continuing Employees through the Effective Time as
if such service had been performed with Parent.
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ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to Each Party's Obligation to Effect Merger. The respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. If approval of the Merger by the
stockholders of the Company is required by applicable law, this Agreement shall
have been duly approved by the stockholders of the Company entitled to vote with
respect thereto in accordance with applicable law and the Certificate of
Incorporation and By-laws of the Company; provided, that Parent and Purchaser
shall vote (or cause to be voted, if applicable) all shares of Company Common
Stock then owned or controlled by them, directly or indirectly, in favor of the
Merger.
(b) Injunction. There shall not be in effect any statute, rule,
regulation, executive order, decree, ruling or injunction or other order or a
court or governmental or regulatory agency of competent jurisdiction directing
that the transactions contemplated herein not be consummated or otherwise
materially limiting or restricting ownership or the operation of the business of
the Surviving Corporation; provided, however, that, subject to the terms and
provisions herein provided (including but not limited to Section 5.4 of this
Agreement), prior to invoking this condition each party shall use its reasonable
efforts to have any such decree, ruling, injunction or order vacated.
(c) Governmental Filings and Consents. Subject to the terms and
provisions herein provided (including but not limited to Section 5.4 hereof),
all governmental consents, orders and approvals legally required for the
consummation of the Merger and the transactions contemplated hereby shall have
been obtained and be in effect at the Effective Time, other than those consents,
orders or approvals which would not reasonably be expected to have a Company
Material Adverse Effect or which would prohibit or materially limit or restrict
the consummation of the transactions contemplated herein or the ownership or
operation of the business of the Surviving Corporation, and the waiting periods
under the HSR Act and under antitrust laws of applicable jurisdictions outside
the United States shall have expired or been terminated.
ARTICLE VII
TERMINATION
7.1 Termination. This Agreement may be terminated and the Merger
contemplated herein may be abandoned at any time prior to the Effective Time,
whether before or after stockholder approval thereof:
(a) By the mutual consent of Parent, Purchaser and the Company.
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(b) By either the Company or Parent:
(i) if shares of Company Common Stock shall not have been
purchased pursuant to the Offer on or prior to three (3) months from
the execution of this Agreement; provided, however, that the passage
of the period referred to in the foregoing clause shall be tolled
during (A) the period during which any party shall be subject to a
non-final order, decree, ruling or action restraining, enjoining or
otherwise prohibiting the purchase of shares of Company Common Stock
pursuant to the Offer or the consummation of the Merger, but not later
than six (6) months from the execution of this Agreement, or (B) any
additional waiting period under the HSR Act resulting from a second
request; provided, further, however, that the right to terminate this
Agreement under this Section 7.1(b) (i) 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 Parent or Purchaser,
as the case may be, to purchase shares of Company Common Stock
pursuant to the Offer on or prior to such date; or
(ii) if any governmental entity of competent jurisdiction in the
United States or other country in which the Company directly or
indirectly has material assets or operations shall have issued an
order, decree or ruling or taken any other action (which order,
decree, ruling or other action the parties hereto shall use their
respective reasonable efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement and such order, decree, ruling or other
action shall have become final and non-appealable.
(c) By the Board of Directors of the Company:
(i) if, prior to the purchase of shares of Company Common Stock
pursuant to the Offer, (a) the Board of Directors of the Company shall
have entered into or shall have publicly announced its intention to
enter into an agreement or an agreement in principle with respect to
any Alternative Proposal that the Board of Directors determines, in
good faith after consultation with its financial advisors, is a
Superior Proposal (as defined in Section 8.10); (b) the Board of
Directors of the Company shall have withdrawn, or modified or changed
in a manner adverse to Parent or Purchaser its approval or
recommendation of the Offer, this Agreement or the Merger or shall
have recommended a Superior Proposal or shall have executed, or shall
have announced its intention to enter into, an agreement in principle
or definitive agreement relating to a Superior Proposal with a person
or entity other than Parent, Purchaser or their affiliates (or the
Board of Directors of the Company resolves to do any of the
foregoing); (c) any person or group (as defined in Section 13(d) (3)
of the Exchange Act) (other than Parent, Purchaser or any affiliate
thereof or Mark L. Nelson) shall have become, after the date of this
Agreement, the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of a majority of the outstanding Shares, or
(d) any representation or warranty made by Parent or Purchaser in this
Agreement shall not have been true and correct in all material
respects when made, or Parent or Purchaser shall have failed to
30
<PAGE>
observe or perform in any material respect any of its material
obligations under this Agreement, provided that prior to exercising
such right of termination, the Company shall give prompt written
notice to Parent of such misrepresentation or breach of warranty or
failure to observe or perform; provided, further, that the Company
shall not have such right of termination if the condition resulting in
such misrepresentation or breach of warranty or failure to observe or
perform is cured (i) in the event such notice is delivered on or prior
to the fourth business day prior to the then-scheduled expiration date
of the Offer, not later than the earlier of (A) such expiration date
and (B) ten business days following delivery of such notice and (ii)
in the event such notice is delivered on or after the third business
day prior to such expiration date, not later than three business days
following such delivery (it being agreed that in such event the Offer
shall be extended as necessary at least until the end of such cure
period); or
(ii) if Parent or Purchaser shall have terminated the Offer, or
the Offer shall have expired, without Parent or Purchaser, as the case
may be, purchasing any shares of Company Common Stock pursuant
thereto; provided that the Company may not terminate this Agreement
pursuant to this Section 7.1(c)(ii) if the Company is in material
breach of this Agreement; or
(iii) if Parent, Purchaser or any of their affiliates shall have
failed to commence the Offer on or prior to five business days
following the date of the initial public announcement of the Offer or
shall have failed to pay for the Shares in accordance with the terms
of the Offer; provided, that the Company may not terminate this
Agreement pursuant to this Section 7.1(c)(iii) if the Company is in
material breach of this Agreement.
(d) By Parent or Purchaser:
(i) if, due to an occurrence that if occurring after the
commencement of the Offer would result in a failure to satisfy any of
the conditions set forth in Annex A hereto, Parent, Purchaser, or any
of their affiliates shall have failed to commence the Offer on or
prior to five business days following the date of the initial public
announcement of the Offer; provided that Parent may not terminate this
Agreement pursuant to this Section 7.1(d)(i) if Parent or Purchaser is
in material breach of this Agreement; or
(ii) prior to the purchase of shares of Company Common Stock
pursuant to the Offer, if (a) the Company shall have received any
Alternative Proposal which the Board of Directors of the Company has
determined to designate as a Superior Proposal; (b) the Board of
Directors of the Company shall have withdrawn, or modified or changed
in a manner adverse to Parent or Purchaser its approval or
recommendation of the Offer, this Agreement or the Merger or shall
have recommended an Alternative Proposal or shall have executed, or
shall have announced its intention to enter into, an agreement in
principle or definitive agreement relating to an Alternative Proposal
with a person or entity other than Parent, Purchaser or their
affiliates (or the Board of Directors
31
<PAGE>
of the Company resolves to do any of the foregoing); (c) any person or
group (as defined in Section 13(d) (3) of the Exchange Act) (other
than Parent, Purchaser or any affiliate thereof or Mark L. Nelson)
shall have become, after the date of this Agreement, the beneficial
owner (as defined in Rule 13d-3 promulgated under the Exchange Act) of
50% or more of the outstanding Shares, or (d) any representation or
warranty made by the Company in this Agreement shall not have been
true and correct in all material respects when made and shall have
resulted in, or is reasonably likely to result in, a Company Material
Adverse Effect, or the Company shall have failed to observe or perform
in any material respect any of its material obligations under this
Agreement; provided that prior to exercising such right of
termination, Parent and Purchaser shall give prompt written notice to
the Company of such misrepresentation or breach of warranty or failure
to observe or perform; provided, further, that Parent and Purchaser
shall not have such right of termination if the condition resulting in
such misrepresentation or breach of warranty or failure to observe or
perform is cured (i) in the event such notice is delivered on or prior
to the fourth business day prior to the then-scheduled expiration date
of the Offer, not later than the earlier of (A) such expiration date
and (B) ten business days following delivery of such notice and (ii)
in the event such notice is delivered on or after the third business
day prior to such expiration date, not later than three business days
following such delivery (it being agreed that in such event the Offer
shall be extended as necessary at least until the end of such cure
period).
7.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 7.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void, and there shall be no liability on the part of Parent, Purchaser or
the Company or their respective directors, officers, employees, representatives,
agents, advisors or stockholders other than the obligations pursuant to this
Section 7.2, except that the agreements contained in Sections 8.1, 8.2, 8.3,
8.4, 8.6, 8,7, 8.8, 8.9, 8.16 and the last sentence of Section 5.5 shall survive
the termination hereof, provided, however, that if this Agreement is terminated
by the Board of Directors of the Company pursuant to Section 7.1(c)(i)(a), (b)
or (c) hereof or by Parent or Purchaser pursuant to Section 7.1(d)(ii)(a), (b)
or (c) hereof, then immediately following such termination the Company shall pay
to Parent in full satisfaction of the obligations of the Company under this
Agreement a termination fee of $7,000,000, plus Parent's and Purchaser's
reasonable out-of-pocket fees and expenses, not to exceed $500,000, incurred in
connection with the due diligence investigation, the Offer, the Merger, this
Agreement and the consummation (or proposed consummation) of the transactions
contemplated hereby. Nothing contained in this Section 7.2 shall relieve any
party from liability for fraud or for willful breach of this Agreement.
32
<PAGE>
ARTICLE VIII
MISCELLANEOUS AND GENERAL
8.1 Payment of Expenses and Other Payments. Whether or not the Merger shall
be consummated, each party hereto shall pay its own expenses incident to
preparing for, entering into and carrying out this Agreement and the
consummation of the transactions contemplated hereby.
8.2 Survival of Representations and Warranties; Survival of Confidentiality
Agreement. The representations and warranties made herein shall not survive
beyond the earlier of termination of this Agreement or the Effective Time. This
Section 8.2 shall not limit any covenant or agreement of the parties hereto
which by its terms contemplates performance after the Effective Time. The
Confidentiality Agreement shall survive any termination of this Agreement, and
the provisions of such Confidentiality Agreement shall apply to all information
and material delivered by any party hereunder.
8.3 Modification or Amendment. Subject to the applicable provisions of the
DGCL, at any time prior to the Effective Time, the parties hereto may modify or
amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after
approval of this Agreement by the stockholders of the Company, no amendment
shall be made which reduces or changes the consideration payable in the Merger
or adversely affects the rights of the Company's stockholders hereunder without
the approval of such stockholders.
8.4 Waiver of Conditions. Except as otherwise provided in this Agreement,
any failure of any of the parties to comply with any obligation, covenant
agreement or condition herein may be waived by the party or parties entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, covenant, agreement or condition shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
8.5 Counterparts. 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 two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.6 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
8.7 Notices. Any notice request, instruction or other document to be given
hereunder by any party to the other parties shall be in writing and delivered
personally or sent by overnight courier, registered or certified mail, postage
prepaid, or by facsimile transmission (with a confirming copy sent by overnight
courier), as follows:
33
<PAGE>
(a) If to the Company, to
Mark L. Nelson, President
Ovid Technologies, Inc.
333 Seventh Avenue
New York, New York 10001
(212) 563-3006 (telephone)
(212) 563-3784 (telecopier)
with a copy to:
Paul Jacobs, Esq.
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103
(212) 318-3000 (telephone)
(212) 752-5958 (telecopier)
(b) if to Parent or Purchaser, to
Bruce C. Lenz, Executive Vice President
Wolters Kluwer United States Inc.
161 North Clark Street
48th Floor
Chicago, Illinois 60601
(312) 425-7020 (telephone)
(312) 425-0233 (telecopier)
with a copy to:
Arnold J. Schaab, Esq.
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
(212) 326-0168 (telephone)
(212) 326-0806 (telecopier)
or to such other persons or addresses as may be designated in writing (by like
notice) by the party to receive such notice.
8.8 Entire Agreement; Assignment. This Agreement and the Confidentiality
Agreement (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and (b) shall not be
34
<PAGE>
assigned by operation of law or otherwise without the prior written consent of
the other parties. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective permitted successors and assigns.
8.9 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto and their respective successors and
assigns. Nothing in this Agreement, express or implied, other than the right to
receive the consideration payable in the Merger pursuant to Article II hereof,
is intended to or shall confer upon any other person any rights, benefits or
remedies of any nature whatsoever under or by reason of this Agreement;
provided, however, that the provisions of Sections 5.7 shall inure to the
benefit of the Company Indemnified Parties and the Indemnified Parties and shall
be binding on all successors and assigns of Parent, Purchaser, the Company and
the Surviving Corporation and shall be enforceable by the Company Indemnified
Parties and the Indemnified Parties, as the case may be, after the Effective
Time.
8.10 Certain Definitions. As used herein:
(a) "Alternative Proposal" shall mean any proposal or offer for a
merger, asset acquisition or other business combination involving the Company or
any proposal or offer to acquire a significant equity interest in, or a
significant portion of the assets of, the Company other than the transactions
contemplated by this Agreement.
(b) "Company Material Adverse Effect" shall mean any adverse change in
the assets, liabilities, financial condition, or results of operations of the
Company or any of its Subsidiaries which is material to the Company and its
Subsidiaries taken as a whole, other than any change or effect arising out of
general economic conditions.
(c) "Parent Material Adverse Effect" shall mean any material adverse
change in the assets, liabilities, financial condition, or results of operations
of Parent or any of its Subsidiaries which is material to Parent and its
Subsidiaries taken as a whole other than any change or effect arising out or
general economic conditions.
(d) "Subsidiary" shall mean, when used with reference to any entity,
any corporation a majority of the outstanding voting securities of which are
owned directly or indirectly by such entity.
(e) "Superior Proposal" means any bona fide proposal to acquire,
directly or indirectly, all of the Shares then outstanding or all or
substantially all the assets of the Company, and otherwise on terms which the
Board of Directors of the Company determines in good faith (after consultation
with the Company's financial advisor) to be more favorable to the Company and
its stockholders than the Offer and the Merger.
8.11 Obligation of Parent. Whenever this Agreement requires Purchaser to
take any action, such requirement shall be deemed to include an undertaking on
the part of Parent to cause Purchaser to take such action.
35
<PAGE>
8.12 Joint and Several Liability. Parent and Purchaser hereby agree that
they will be jointly and severally liable for all covenants, agreements,
obligations and representations and warranties made by either of them in this
Agreement.
8.13 Validity. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated so long as the economic or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party.
8.14 Interpretation. The words "hereof", "herein", and "herewith" and words
of similar import shall, unless otherwise stated, be construed to refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified. 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 describing the singular number shall include the plural
and vice versa, and words denoting any gender shall include all genders and
words denoting natural persons shall include corporations and partnerships and
vice versa. The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. As used in this Agreement, the
term "affiliate(s)" shall have the meaning set forth in Rule 12b-2 of the
Exchange Act. No presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
8.15 Captions. The Article, Section and paragraph captions herein are for
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
8.16 Specific Performance. Each of the parties hereto acknowledges and
agrees that in the event of any breach of this Agreement, each non-breaching
party would be irreparably and immediately harmed and could not be made whole by
monetary damages. It is accordingly agreed that the parties hereto (a) will
waive, in any action for specific performance, the defense of adequacy of a
remedy at law and (b) shall be entitled in addition to any other remedy to which
they may be entitled at law or in equity, to compel specific performance of this
Agreement in any action instituted in a court of competent jurisdiction.
8.17 Schedules. The Schedules to this Agreement shall be construed with and
as an integral part of this Agreement to the same extent as if the same had been
set forth verbatim herein. No such disclosure shall be deemed to be an admission
or representation as to the materiality of the item so disclosed.
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
OVID TECHNOLOGIES, INC.
By: /s/ MARK L. NELSON
--------------------
Name: Mark L. Nelson
Title: President
WOLTERS KLUWER U.S. CORPORATION
By: /s/ PETER W. VAN WEL
----------------------
Name: Peter W. van Wel
Title: President
OTI ACQUISITION CORP.
By: /s/ BRUCE C. LENZ
----------------------
Name: Bruce C. Lenz
Title: President
37
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
The capitalized terms used in this Annex A shall have the meanings ascribed
to them in the Agreement and Plan of Merger to which it is attached, except that
the term "Merger Agreement" shall be deemed to refer to such Agreement and Plan
of Merger.
Notwithstanding any other provisions of the Offer, and in addition to (and
not in limitation of) Purchaser's rights to extend and amend the Offer at any
time in its sole discretion (subject to the provisions of the Merger Agreement),
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-l(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
Shares promptly after termination or withdrawal of the Offer), pay for, and may
delay the acceptance for payment of or, subject to the restriction referred to
above, the payment for, any tendered Shares, and may terminate the Offer if (i)
any applicable waiting period under the HSR Act or the antitrust laws of
applicable jurisdictions outside the United States has not expired or terminated
prior to the expiration of the Offer, (ii) the Minimum Condition has not been
satisfied, or (iii) at any time on or after the date hereof, and before the
expiration of the Offer any of the following conditions exist:
(a) there shall be any statute, rule, regulation, judgment, order or
injunction promulgated, entered, enforced, enacted, issued or applicable to the
Offer or the Merger by any governmental entity of competent jurisdiction in the
United States or other country in which the Company directly or indirectly has
material assets or operations which (1) prohibits the consummation of the Offer
or the Merger, (2) as a result of the Offer or the Merger, restrains or
prohibits, or imposes any material limitations on, Parent's or Purchaser's
ownership or operation of all or a material portion of the businesses or assets
of the Company and its Subsidiaries, taken as a whole, or of Parent and its
Subsidiaries, taken as a whole, or compels Parent or any of its Subsidiaries or
affiliates to dispose of or hold separate all or any material portion of the
business or assets of the Company and its Subsidiaries, taken as a whole, or of
Parent and its Subsidiaries, taken as a whole, or requires the Company, Parent
or Purchaser to pay damages that are material in relation to the Company and its
Subsidiaries, taken as a whole, (3) challenges, prohibits, or makes illegal the
acceptance for payment, payment for or purchase of Shares pursuant to, or
consummation of, the Offer or the Merger, (4) imposes material limitations on
the ability of Purchaser or Parent effectively to exercise full rights of
ownership of the Shares accepted for payment pursuant to the Offer, including,
without limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's stockholders, or (5) requires divestiture by
Parent or any of its Subsidiaries or affiliates of any Shares, provided that
Parent shall have used all reasonable efforts to cause any such judgment, order
or injunction to be vacated or lifted;
(b) there shall be instituted or pending any action, suit, or
proceeding by any governmental entity of competent jurisdiction in the United
States, or any other country in which
A-1
<PAGE>
the Company directly or indirectly has material assets or operations, that is
reasonably likely, directly or indirectly, to result in any of the consequences
referred to in clauses (1) through (5) of paragraph (a) above; provided, that
Parent shall have used all reasonable efforts to cause any such action, suit or
proceeding to be withdrawn or dismissed;
(c) there has been since the date hereof any event, occurrence or
development or state of circumstances or facts which has had or would reasonably
be expected to have a Company Material Adverse Effect;
(d) the representations and warranties of the Company set forth in the
Merger Agreement shall not be true and accurate as of the date of consummation
of the Offer as though made on or as of such date or the Company shall have
breached or failed in any material respect to perform or comply with any
material obligation, agreement or covenant required by the Merger Agreement to
be performed or complied with by it except, (i) those representations and
warranties that address matters only as of a particular date or only with
respect to a specified period of time which need only be true and accurate as of
such date or with respect to such period or (ii) where the failure of such
representations and warranties to be true and accurate, or the breach,
non-performance or non-compliance with such obligations, agreements or
covenants, do not have, individually or in the aggregate, or would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect;
(e) the Merger Agreement shall have been terminated in accordance with
its terms;
(f) the Company shall have entered into a definitive agreement or
agreement in principle with any person with respect to an Alternative Proposal;
or
(g) the Company's Board of Directors shall have withdrawn, or modified
or changed in a manner adverse to Parent or Purchaser (including by amendment of
the Schedule 14D-9) its recommendation of the Offer, the Merger Agreement, or
the Merger, or recommended an Alternative Proposal, or shall have resolved to do
any of the foregoing;
which in the sole judgment of Parent or Purchaser, in any such case, and
regardless of the circumstances giving rise to such condition, makes it
inadvisable to proceed with the Offer and/or with such acceptance for payment or
payments.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be waived by Parent or Purchaser, in whole or in part at any time and
from time to time in the sole discretion of Parent or Purchaser.
A-2
Exhibit 2
PERSONAL AND CONFIDENTIAL
May 11, 1998
Wolters Kluwer PLC
Avenue House
131-133 Holland Park Avenue
London, W11 4UT
United Kingdom
Attention: Mr. Peter van Wel
President, Wolters Kluwer U.S. Corporation
Dear Mr. van Wel:
In connection with your consideration of a possible transaction with Ovid
Technologies, Inc. (the "Company"), you have requested information concerning
the Company. As a condition to your being furnished such information, you agree
to treat any information (whether written, electronically recorded or oral)
concerning the Company (whether prepared by the Company, its advisors or
otherwise) which is furnished to you by or on behalf of the Company (herein
collectively referred to as the "Evaluation Material") in accordance with the
provisions of this letter and to take or abstain from taking certain other
actions herein set forth. The term "Evaluation Material" shall also be deemed to
include all notes, analyses, compilations, studies, interpretations or other
documents prepared by you or any of your directors, officers, employees, agents
or advisors (including without limitation attorneys, accountants, consultants,
bankers and financial advisors) (collectively, "Representatives"). The term
"Evaluation Material" does not include information which (i) can be shown by
written evidentiary materials already in your possession, provided that such
information is not known by you, after due inquiry, to be subject to another
confidentiality agreement with or other obligation of secrecy to the Company or
another party, (ii) becomes generally available to the public other than as a
result of a disclosure by you or any of your Representatives, or (iii) becomes
available to you on a non-confidential basis from a source other than the
Company or its advisors, provided that such source is not known by you, after
due inquiry, to be bound by a confidentiality agreement with or other obligation
of secrecy to the Company or another party.
You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating a possible transaction between the Company and you, and
that such information will be kept confidential by you and your Representatives;
provided, however, that (i) any of such information may be disclosed to your
Representatives who need to know such information for the purpose of evaluating
any such possible
<PAGE>
Wolters Kluwer PLC
May 11, 1998
Page Two
transaction between the Company and you (it being understood that such
Representatives shall be informed by you of the confidential nature of such
information, shall be directed by you to treat such information confidentially,
and who shall agree to be bound by the terms and conditions of this Agreement),
and (ii) any disclosure of such information may be made to which the Company
consents in writing. You hereby agree to be responsible for any breach of this
Agreement by any of your Representatives (including any of your representatives
who, subsequent to the first date of disclosure of Evaluation Material
hereunder, become former Representatives) and shall take all necessary measures
to restrain your Representatives (or former Representatives) from unauthorized
disclosure or use of Evaluation Material.
You hereby acknowledge that you are aware, and that you will advise such of your
Representatives who are informed as to the matters which are the subject of this
letter, that the United States securities laws prohibit any person who has
received from an issuer material, non-public information concerning the matters
which are the subject of this letter from purchasing or selling securities of
such issuer or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities.
In addition, without the prior written consent of the Company, you will not, and
will direct your Representatives not to, disclose to any person either the fact
that discussions or negotiations are taking place concerning a possible
transaction between the Company and you or any of the terms, conditions or other
facts with respect to any such possible transaction, including the status
thereof.
You hereby acknowledge that the Evaluation Material is being furnished to you in
consideration of your agreement that you will not propose to the Company or any
other person any transaction between you and the Company and/or its security
holders or involving any of its securities or security holders unless the
Company shall have requested in writing that you make such a proposal, and that
you will not acquire, or assist, advise, participate with or encourage any other
persons in acquiring, directly or indirectly, control of the Company or any of
the Company's securities, businesses or assets for a period of twelve months
from the date of this letter unless the Company shall have consented in advance
in writing to such acquisition. You further agree, during such twelve-month
period, not to request the Company or any of its Representatives, directly or
indirectly, to amend or waive any provision of this paragraph (including this
sentence) or take any action which might require the Company to make a public
announcement regarding the possibility of a transaction. You also agree that the
Company shall be entitled to equitable relief, including injunction, in the
event of any breach of the provisions of this paragraph and that you shall not
oppose the granting of such relief.
<PAGE>
Wolters Kluwer PLC
May 11, 1998
Page Three
Such remedy shall not be deemed to be the exclusive remedy, but shall be in
addition to all other remedies available at law or equity to the Company.
Although the Company has endeavored to include in the Evaluation Material
information known to it which it believes to be relevant for the purpose of your
investigation, you understand that neither the Company nor any of its
Representatives have made or make any representation or warranty as to the
accuracy or completeness of the Evaluation Material. You agree that neither the
Company nor its Representatives shall have any liability to you or any of your
Representatives resulting from the use of the Evaluation Material.
In the event that the Company so requests or you do not proceed with the
transaction which is the subject of this Agreement within a reasonable time, you
shall promptly redeliver to the Company all written Evaluation Material and any
other material containing or reflecting any Evaluation Material (whether
prepared by the Company or its advisors, you or your Representatives, or
otherwise in whatever form, together with all computer files, summaries,
extracts, abstracts, other documents or storage media which contain Evaluation
Material information in any form) and will not retain any copies, extracts or
other reproductions in whole or in part of such material. All documents,
memoranda, notes and other writings whatsoever prepared by you or your advisors
based on the information in the Evaluation Material shall be destroyed, and such
destruction shall be certified in writing to the Company by an authorized
officer supervising such destruction. Notwithstanding the return or destruction
of the Evaluation Material, you and your Representatives shall continue to be
bound by your respective obligations hereunder.
You agree that unless and until a definitive agreement between the Company and
you with respect to any transaction referred to in the first paragraph of this
Agreement has been executed and delivered, neither the Company nor you will be
under any legal obligation of any kind whatsoever with respect to such a
transaction by virtue of this or any written or oral expression with respect to
such a transaction by any of its directors, officers, employees, agents or any
other representatives or its advisors or representatives thereof except, in the
case of this Agreement, for the matters specifically agreed to herein. This
Agreement may be modified or waived only by a separate writing by the Company
and you expressly so modifying or waiving this Agreement.
<PAGE>
Wolters Kluwer PLC
May 11, 1998
Page Four
This Agreement shall be governed by, and construed in accordance with, the laws
of the State of New York.
Very truly yours,
OVID TECHNOLOGIES, INC.
By: /s/ GOLDMAN, SACHS & CO.
--------------------------
Goldman, Sachs & Co.
on behalf of Ovid Technologies, Inc.
Confirmed and Agreed to:
Peter van Wel
By: /s/ PETER W. VAN WEL
- -------------------------
Date: 5/18/98
STOCK OPTION AND TENDER AGREEMENT
Stock Option and Tender Agreement (this "Agreement"), dated September 29,
1998, by and among Wolters Kluwer U.S. Corporation, a Delaware corporation
("Parent"), OTI Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("Sub"), and the stockholders set forth in Schedule I
hereto (each, a "Stockholder" and collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, Parent, Sub, and Ovid Technologies, Inc., a Delaware corporation
(the "Company") are entering into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which Sub has agreed to make a tender offer (the
"Offer") for all outstanding shares of Common Stock, par value $.01 per share
(the "Common Stock"), of the Company at a price per share of Common Stock, based
upon the representations set forth in Section 3.2 of the Merger Agreement, of
$24.59 net to the seller in cash (such price, or such higher price per share of
Common Stock as may be paid in the Offer, being referred to herein as the "Offer
Price"), to be followed by a merger (the "Merger") of Sub with and into the
Company.
WHEREAS, as a condition to the willingness of Parent and Sub to enter into
the Merger Agreement, each of Parent and Sub has required that each Stockholder
agree, and in order to induce Parent and Sub to enter into the Merger Agreement,
each Stockholder has agreed, among other things, subject to the provisions
contained herein, (i) to tender in the Offer all of the shares of Common Stock
now owned or which may hereafter be acquired by such Stockholder (the "Shares"),
(ii) to grant to Parent or Sub, as Parent shall designate (the "Optionee") the
option to purchase the Shares in certain circumstances, (iii) to appoint Parent
as such Stockholder's proxy under certain circumstances to vote the Shares in
connection with the Merger Agreement, (iv) with respect to certain questions put
to stockholders of the Company for a vote, to vote the Shares, in each case, in
accordance with the terms and conditions of this Agreement, and (v) to restrict
transfers or exercises of Company Options (as defined in Section 8 below), if
any, held by such Stockholder except as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Tender of Shares. Each Stockholder severally (and not jointly) agrees to
tender and sell to Parent and/or Sub pursuant to the Offer all of the Shares
legally and/or beneficially owned by such Stockholder (as set forth on Schedule
I hereto) and that once tendered, each Stockholder agrees, subject to the
provisions of Section 2, that such Shares will not be withdrawn from the Offer
unless the Offer is terminated by Parent or Sub without any shares of Common
Stock being purchased thereunder. Each Stockholder severally (and not jointly)
agrees that such Stockholder shall deliver to the depositary for the Offer,
promptly, but not later than five (5)
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days, following the commencement of the Offer, either a letter of transmittal
together with the certificates for the Shares, if available, or a "Notice of
Guaranteed Delivery", if the Shares are not available. Nothing contained in this
Agreement shall be deemed to require any Stockholder to exercise any Company
Option (as defined in Section 8).
2. Stock Option.
2.1 Grant of Stock Option. Each Stockholder hereby grants to Optionee
an irrevocable option (the "Stock Option") on the terms and conditions set forth
in this Section 2, to purchase all of the Shares legally and/or beneficially
owned by such Stockholder (as set forth on Schedule I hereto) (including Shares
subject to Company Options), at such time as Optionee may exercise the Stock
Option during the Exercise Period (as defined below), at a purchase price equal
to the Offer Price.
2.2 Exercise of Stock Option. (a) Each Stock Option may be exercised
by Optionee, in whole and for all of such Stockholder's Shares but not in part
or for less than all of such Stockholder's Shares, and only simultaneously as to
all Stockholders (i) if the Offer has been terminated by Parent or Sub for the
reasons set forth in (f) or (g) of the Conditions to the Offer (as set forth in
Annex A to the Merger Agreement) or (ii) if the Offer has expired without the
purchase of Shares thereunder and at the time of such expiration (x) the Minimum
Condition (as defined in the Merger Agreement) has not been satisfied or (y)
circumstances had occurred giving rise to a right of termination by Parent or
Sub for the reasons set forth in (f) or (g) of said Conditions of the Offer, in
each case without any violation of the Offer or the Merger Agreement by Parent
or Sub. Notice of exercise may be given at any time during the period (the
"Exercise Period") commencing after the Stock Option becomes exercisable (under
the circumstances provided in this Section 2.2) and ending on the date which is
three months following the date on which any Superior Proposal (as defined in
the Merger Agreement) expires or is withdrawn or terminated without the purchase
of any Shares. In addition, Optionee may also exercise the Stock Option if the
Merger Agreement shall terminate by reason of the Company's exercise of its
termination rights pursuant to Section 7.1(c)(i)(a) or (b) of the Merger
Agreement, whereupon the Exercise Period shall commence on the date such
termination rights are exercised and end on the date which is three months
following the date on which any Superior Proposal expires or is withdrawn or
terminated without the purchase of any Shares.
(b) In the event Optionee wishes to exercise the Stock Option,
Optionee shall send a written notice (an "Exercise Notice") during the Exercise
Period to each Stockholder specifying that Optionee shall purchase the total
number of Shares held by such Stockholder and a date, which shall be a business
day, and a place, which shall be in New York City, New York, for the closing of
such purchase (the "Stock Option Closing"). The Stock Option Closing shall be
delayed during such time as (I) any party shall be subject to a non-final order,
decree, ruling or action restraining, enjoining or otherwise prohibiting the
purchase of the Shares pursuant to the Stock Option or (II) the waiting period,
if any, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, shall not have expired or been terminated.
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(c) Upon receipt of the Exercise Notice, each Stockholder shall
be obligated to deliver to Optionee, and Optionee shall be obligated to purchase
(and Parent shall cause Optionee to purchase), a certificate or certificates
representing the number of Shares held by such Stockholder (or to direct the
depositary for the Offer to so deliver such certificate or certificates), in
accordance with the terms of this Agreement, on the later of the date specified
in such Exercise Notice or the first business day on which the conditions
specified in Section 2.3 shall be satisfied. The date specified in such Exercise
Notice may be as early as one business day after the date of such Exercise
Notice but shall not be later than five (5) business days after the later of (i)
the date of such Exercise Notice, or (ii) the date all conditions under Section
2.3 are satisfied.
2.3 Conditions to Delivery of the Shares. The obligation of the
Stockholders to deliver, and of the Optionee to pay for, the Shares upon
exercise of the Stock Option is subject to the following conditions:
(a) All waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, applicable to the exercise of the Stock
Option and the delivery of the Shares shall have expired or been terminated; and
(b) There shall be no permanent injunction or other order by any
court of competent jurisdiction restricting, preventing or prohibiting the
exercise of the Stock Option or the delivery of the Shares in respect of such
exercise.
2.4 Stock Option Closing. At the Stock Option Closing, each
Stockholder will deliver to Optionee a certificate or certificates evidencing
the number of Shares owned by such Stockholder, each such certificate being duly
endorsed in blank and accompanied by such stock powers and such other documents
as may be necessary in Optionee's judgment to transfer record ownership of the
Shares into Optionee's name on the stock transfer books of the Company, and
Optionee will purchase the delivered Shares at the Offer Price. All payments
made by Optionee to the Stockholders pursuant to this Section 2.4 shall be made
by wire transfer of immediately available funds or by certified bank check
payable to the Stockholders, in an amount for each Stockholder equal to the
product of (a) the Offer Price and (b) the number of Shares delivered by such
Stockholder in respect of the Stock Option Closing.
2.5 Adjustments Upon Changes in Capitalization. In the event of any
change in the number of issued and outstanding shares of Common Stock by reason
of any stock dividend, subdivision, merger, recapitalization, combination,
conversion or exchange of shares, or any other change in the corporate or
capital structure of the Company (including, without limitation, the declaration
or payment of an extraordinary dividend of cash or securities) which would have
the effect of diluting or otherwise adversely affecting Optionee's rights and
privileges under this Agreement, the number and kind of the shares and the
consideration payable in respect of the Shares shall be appropriately and
equitably adjusted to restore to Optionee its rights and privileges under this
Agreement. Without limiting the scope of the foregoing, in any such event, at
the option of Optionee, the Stock Option shall represent the right to purchase,
in addition to the number and kind of Shares which Optionee would be entitled to
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purchase pursuant to the immediately preceding sentence, whatever securities,
cash or other property the Shares subject to the Stock Option shall have been
converted into or otherwise exchanged for, together with any securities, cash or
other property which shall have been distributed with respect to such Shares.
2.6 Tender of Shares by Stockholders in Connection with Tender Offer
Superior Proposal.
(a) Notwithstanding anything herein to the contrary, and
notwithstanding that the Stock Option has become exercisable pursuant to Section
2.2 hereof, if at any time during the Exercise Period a tender offer pursuant to
any Superior Proposal (the "Superior Offer") is commenced, then, subject to the
terms and conditions of this Section 2.6, on the last day of the offer period of
the Superior Offer such Stockholders shall tender their Shares in the Superior
Offer. Concurrent therewith, if Optionee's tender offer is continuing at such
time, the Stockholders' Shares shall be released from Optionee's tender offer.
Subject to the provisions of Section 2.6(d), Optionee's right to exercise the
Stock Option shall be suspended for so long as the Superior Offer shall not have
expired or been terminated or withdrawn and, subject to the terms of this
Section 2.6, such right shall terminate simultaneously with the consummation of
the Superior Offer and receipt by the Stockholders of the consideration
therefor. Notwithstanding the foregoing, Optionee may elect, by written notice
to the Stockholders at any time prior to the tender of such Shares into the
Superior Offer by the Stockholders, to require the Stockholders, on a pro rata
basis, to retain Shares in an amount, as determined by Optionee, up to 25% of
the then outstanding shares of Common Stock on a fully diluted basis (the
"Minority Percentage"), whereupon the Stockholders shall not tender such amount
of Shares in the Superior Offer and Optionee's right to exercise the Stock
Option as to such Shares shall continue without limitation.
(b) In the event that the Superior Offer is consummated, as to
Shares tendered by the Stockholders in accordance with paragraph (a) of this
Section 2.6, each Stockholder shall deliver to the Optionee that portion of the
consideration received by such Stockholder which is equal to the Incremental
Value (as defined below) multiplied by the number of Shares tendered by such
Stockholder in connection with such Superior Proposal. The Incremental Value
shall be determined as follows: If the consideration payable pursuant to the
Superior Offer is all cash, the Incremental Value shall equal the amount by
which the offer price in such Superior Proposal exceeds the Offer Price. If the
consideration payable consists of cash and securities or only securities, the
Incremental Value shall equal the amount by which (x) the sum of the cash, if
any, plus the value of the securities received in the Superior Proposal (the
amount of such cash and the value of such securities being determined on a per
share basis) exceeds (y) the Offer Price. The value of any publicly-traded
securities issued to the Stockholders upon consummation of the Superior Proposal
shall be determined by reference to the closing price of such securities on the
date of consummation of the Superior Proposal. The value of any securities which
have not previously been publicly traded ("Newly Registered Securities") shall
be determined by reference to the average closing price of such securities over
the twenty (20) trading days following consummation of the Superior Proposal.
Each Stockholder shall deliver to the Optionee the Incremental Value for each
Share held by such Stockholder immediately upon receipt if the consideration is
cash or cash and publicly-traded
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securities or, if the consideration includes Newly Registered Securities, upon
the later of receipt of the consideration or the date on which the value of the
securities is determined. The Incremental Value shall be payable to Optionee in
cash and securities in the same proportion as the cash and securities payable to
the Stockholders.
(c) If Optionee has required the Stockholders to retain the
Minority Percentage, the Optionee will exercise the Stock Option with respect to
the Minority Percentage promptly upon the consummation of the Superior Offer.
(d) In the event that the Superior Offer expires or is terminated
or withdrawn without purchase of the Shares tendered by the Stockholders, or if
the Stockholders breach their obligation to tender their Shares in the Superior
Offer or withdraw the tender of such Shares in such Superior Offer, Optionee's
right to exercise the Stock Option with respect to such Shares shall,
simultaneously with such expiration, termination, withdrawal or breach, be
restored.
2.7 Voting of Shares in Connection with Merger Superior Proposal.
(a) Notwithstanding the provisions of Section 5.1(a) and Section
7, in the event that the Superior Proposal is structured as a merger which is
not preceded by a tender offer, the Stockholders shall be permitted to vote such
Stockholders' Shares in favor of such merger; provided, however, that Optionee
may elect, by written notice to the Stockholders, to require the Stockholders to
abstain from voting in favor of the merger with respect to the Minority
Percentage. Subject to the provisions of Section 2.7(c), Optionee's right to
exercise the Stock Option shall be suspended so long as the Superior Proposal
described in this Section 2.7 shall not have expired or been terminated or
withdrawn and, subject to the terms of this Section 2.7, such right shall
terminate simultaneously with the consummation of the Superior Proposal
described in this Section 2.7 and receipt by the Stockholders of the
consideration therefor.
(b) In the event that a Superior Offer described in this Section
2.7 is consummated, each Stockholder shall pay to Optionee, at the time
determined in accordance with Section 2.6(b), the Incremental Value (as
determined in accordance with Section 2.6(b)) received by such Stockholder for
each of such Stockholder's Shares.
(c) In the event that the Superior Offer described in this
Section 2.7 expires or is terminated or withdrawn without purchase of the
Shares, or if the Stockholders fail to vote their Shares (other than the
Minority Percentage if so directed by Optionee) in favor of such Superior Offer,
Optionee's right to exercise the Stock Option with respect to such Shares, and
the restrictions on voting set forth in Section 5.1(a) and Section 7, shall,
simultaneously with such expiration, termination, withdrawal or breach, be
restored.
2.8 Tender Offer Upon Exercise of Stock Option. Parent and Sub hereby
agree that, in the event that (pursuant to the Stock Option) Optionee purchases
an amount of the Stockholders' Shares greater than the Minority Percentage, then
as promptly as practicable (and in any event within five (5) business days
thereafter), Sub will, and Parent will cause Sub to, make a tender offer to the
stockholders of the Company for the remaining shares of Common
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Stock (the consummation of which shall be subject only to the conditions that no
court, arbitrator or governmental body, agency or official shall have issued any
order, decree or ruling and there shall not be any statute, rule or regulation,
enjoining or prohibiting the consummation of such tender offer) pursuant to
which the stockholders of the Company (other than the Company, any direct or
indirect subsidiary of the Company or Parent or Sub) will be entitled to receive
an amount of cash consideration per share of Common Stock equal to the Offer
Price, and will take such actions as may be necessary or appropriate to
effectuate, and purchase shares of Common Stock pursuant to, such tender offer
at the earliest practicable time.
2.9 Termination. This Agreement will terminate and be of no further
force and effect if, as a result of the failure of any conditions to such Stock
Option Closing to be satisfied, the Stock Option Closing shall not have occurred
within one (1) year following delivery of the Exercise Notice; provided,
however, that Optionee shall have the right, by delivery of written notice to
the Stockholders, to extend this Agreement for thirty (30) days if Optionee
reasonably believes that any conditions to the Stock Option Closing which remain
unsatisfied may be satisfied during such thirty (30) day period.
3. Representations and Warranties of Stockholders.
Each Stockholder severally (and not jointly), represents and warrants to
Parent and Sub that:
3.1 Power and Authority. Such Stockholder has all necessary power and
authority to enter into this Agreement and to sell, assign, transfer and deliver
to Parent and/or Sub, pursuant to the terms and conditions of this Agreement and
the Merger Agreement, the Shares legally and/or beneficially owned by such
Stockholder (as set forth on Schedule I hereto).
3.2 No Other Rights. Except for this Agreement, there are no
outstanding options, warrants or rights to purchase or acquire such Shares of
such Stockholder.
3.3 Only Shares. Such Shares of such Stockholder subject to this
Agreement are the only shares of Common Stock owned of record, or owned
beneficially with the power to sell, by such Stockholder.
3.4 Title. Except as specifically disclosed on Schedule 5.1 to the
Merger Agreement, such Stockholder has, and upon the closing of the Offer, Sub
shall receive good and marketable title to such Shares of such Stockholder, free
and clear of all liens, claims, encumbrances and security interests of any
nature whatsoever.
3.5 Validity. This Agreement is the legal, valid and binding agreement
of such Stockholder enforceable against such Stockholder in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
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3.6 Non-Contravention. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both) by
Stockholder under, or give rise to a right of termination, cancellation or
acceleration of any obligation under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
such Stockholder under, any provision of (i) the charter or organizational
documents of such Stockholder, if any (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to such Stockholder or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to such Stockholder or any of its properties or assets, other than, in the case
of clauses (ii) and (iii), any such conflicts, violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not materially impair the ability of such Stockholder to
perform its obligations hereunder or prevent, limit or restrict the consummation
of any of the transactions contemplated hereby.
4. Representations and Warranties of Parent and Sub. Parent and Sub hereby
represent and warrant to each Stockholder as follows:
4.1 Power and Authority. Each of Parent and Sub has all necessary
power and authority to enter into the Agreement and to purchase the Shares
pursuant to the terms and conditions of this Agreement and the Merger Agreement.
4.2 Sufficient Funds. Parent and/or Sub has, or prior to the date of
the Stock Option Closing will have, all of the funds necessary to consummate the
transactions contemplated hereby on a timely basis and to pay any and all of its
related fees and expenses.
4.3 Validity. This Agreement is the legal, valid and binding agreement
of Parent and Sub enforceable against them in accordance with its terms, except
as enforcement may be limited by bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought.
4.4 Non-Contravention. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Parent, Sub or any
of Parent's other subsidiaries which are both owned directly or indirectly by
Parent and which directly or indirectly owns Sub ("Owning Subs") under, any
provision of (i) the Charter or Bylaws of Parent (or any comparable
organizational documents) or any provision of the comparable charter or
organizational documents of Sub or any Owning Sub, (ii) any loan or credit
agreement, note,
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bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise or license applicable to Parent, Sub or any Owning Sub or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent, Sub or any Owning Sub or any of their respective
properties or assets, other than, in the case of clauses (ii) or (iii), any such
conflicts, violations, defaults, rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate would not have a Parent
Material Adverse Effect (as defined in the Merger Agreement), materially impair
the ability of Parent or Sub to perform its obligations hereunder or prevent,
limit or restrict the consummation of any of the transactions contemplated
hereby.
5. Covenants of Stockholders.
5.1 No Disposition or Encumbrance of Shares; No Acquisition of Shares.
(a) Each Stockholder severally (and not jointly) covenants and agrees that,
except as contemplated by this Agreement, no Stockholder shall, and no
Stockholder shall offer or agree to, sell, transfer, tender, assign, hypothecate
or otherwise dispose of, or create any security interest, lien, claim, pledge,
option, right of first refusal, agreement, limitation on such Stockholder's
voting rights, charge or other encumbrance of any nature whatsoever with respect
to the Shares now legally and/or beneficially owned by, or that may hereafter be
acquired by, such Stockholder. Each Stockholder severally (and not jointly)
agrees that such Stockholder shall not grant any proxy or power of attorney with
respect to the voting of Shares (each a "Voting Proxy") to any person except to
vote in favor of any of the transactions contemplated by this Agreement or the
Merger Agreement. Each Stockholder hereby represents and warrants that such
Stockholder has granted no Voting Proxy which is currently (or which will
hereafter become) effective with respect to Shares owned by such Stockholder
except Voting Proxies, if any, granted to another Stockholder, and if such
Stockholder has granted a Voting Proxy to any person other than a Stockholder,
such Voting Proxy is hereby revoked. No Voting Proxy shall be given or written
consent executed by such Stockholder after the date hereof with respect to such
Stockholder's Shares (and if given or executed, shall not be effective) so long
as this Agreement remains in effect; provided, however, that such Stockholder
may hereafter grant Voting Proxies in furtherance of such Stockholder's
obligations under Section 7.1 hereof.
(b) Each Stockholder hereby severally (and not jointly) covenants
and agrees that it shall not, and shall not offer to agree to, acquire any
additional shares of Common Stock, or options, warrants or other rights to
acquire shares of Common Stock (except upon exercise of stock options presently
held by such Stockholder), without the prior written consent of Parent or Sub.
5.2 No Solicitation of Transactions. Each Stockholder shall
immediately cease any existing discussions or negotiations, if any, with any
parties conducted heretofore with respect to any acquisition or exchange of all
or any material portion of the assets of, or any equity interest in, the Company
or any of its subsidiaries or any business combination with the Company or any
of its subsidiaries. From and after the date hereof, no Stockholder shall,
directly or indirectly, solicit or initiate any takeover proposal or offer from
any person, or (except to the extent permitted by the last sentence of Section
5.2 of the Merger Agreement) engage in discussions or negotiations relating
thereto (including by way of furnishing information). Each
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Stockholder shall promptly advise Parent of the receipt of any Alternative
Proposal (as defined in the Merger Agreement). Notwithstanding anything to the
contrary contained herein, the provisions of this Section 5.2 shall not limit or
restrict in any manner whatsoever any Stockholder's actions or conduct as a
director or representative of the Company.
5.3 Stockholders' Representative. Each Stockholder hereby appoints
Mark L. Nelson as Stockholders' Representative to act as Stockholders'
Representative for purposes of giving and receiving notices under this
Agreement.
6. Covenants of Parent and Sub.
6.1 No Sale. Neither Parent nor Sub will sell, offer to sell or
otherwise dispose of the Shares in violation of the Securities Act of 1933, as
amended.
6.2 Performance. Parent and Sub shall perform in all material respects
all of their respective obligations under the Merger Agreement.
7. Voting Agreement: Proxy of Stockholder.
7.1 Voting Agreement. (a) Each Stockholder hereby severally (and not
jointly) agrees that, during the time this Agreement is in effect, at any
meeting of the stockholders of the Company, however called, and in any action by
written consent of the stockholders of the Company, such Stockholder shall (i)
vote all of the Shares legally and/or beneficially owned by such Stockholder in
favor of the Merger, the Merger Agreement (as amended from time to time) and any
of the transactions contemplated by the Merger Agreement; (ii) vote such Shares
against any action or agreement that would result in a breach in any material
respect of any covenant, representation or warranty or any other obligation of
the Company under the Merger Agreement; and (iii) vote the Shares against any
action or agreement that would materially impede, interfere with or attempt to
discourage the Offer or the Merger.
(b) Each Stockholder hereby severally (and not jointly) further
agrees that, if the Merger Agreement shall terminate solely by reason of the
Company's exercise of its termination rights pursuant to Section 7.1(c)(i)(a) or
(b) of the Merger Agreement and for as long as the Exercise Period has not
ended, such Stockholder (i) shall attend or otherwise participate in all duly
called stockholder meetings and in all actions by written consent of
stockholders, (ii) shall not, without the prior written consent of Parent or
Sub, vote any of such Shares in favor of any actions requiring stockholder
approval which are described in Section 5 of the Merger Agreement and (iii)
shall otherwise vote such Shares, and use its reasonable efforts in its capacity
as stockholder of the Company, to prevent the actions prohibited by Section 5 of
the Merger Agreement.
7.2 Irrevocable Proxy. In the event that any Stockholder shall breach
its covenant set forth in Section 7.1, such Stockholder (without any further
action on such Stockholder's part) shall be deemed to have hereby irrevocably
appointed Parent as the attorney-in-fact and proxy of such Stockholder, with
full power of substitution, to vote, and otherwise act
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(by written consent or otherwise) with respect to all shares of Common Stock
(including the Shares) that such Stockholder is entitled to vote at any meeting
of stockholders of the Company (whether annual or special and whether or not an
adjourned or postponed meeting) or consent in lieu of any such meeting or
otherwise to vote such shares as set forth in Section 7.1 above; provided that
in any such vote or other action pursuant to such proxy, Parent shall not have
the right (and such proxy shall not confer the right) to vote to reduce the
Offer Price or the Merger Consideration (as defined in the Merger Agreement) or
to otherwise modify or amend the Merger Agreement to reduce the rights or
benefits of the Company or any stockholders of the Company (including the
Stockholders) under the Offer or the Merger Agreement or to reduce the
obligations of Parent and/or Sub thereunder; and provided further, that this
proxy shall irrevocably cease to be in effect at any time that (x) the Offer
shall have expired or terminated without any shares of Common Stock being
purchased thereunder, in violation of the terms of the Offer or the Merger
Agreement or (y) Parent or Sub shall be in violation of the terms of this
Agreement. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND COUPLED WITH AN
INTEREST AND IS EXECUTED AND INTENDED TO BE IRREVOCABLE IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 212(e) OF THE DELAWARE GENERAL CORPORATION LAW. Each
Stockholder shall execute and deliver to Parent any proxy cards that such
Stockholder receives to vote in favor of the consummation of the Merger. Parent
shall deliver to the Secretary of the Company any such proxy cards received by
it at any meeting called to approve the consummation of the Merger.
8. Transfer of Options. Each of the Stockholders identified on Schedule I
hereto as holding options to purchase shares of Common Stock of the Company
(each a "Company Option") severally (and not jointly) agrees that so long as
this Agreement shall remain in effect, such Stockholder (for purposes of this
Section 8, an "Optionholder") will not transfer any Company Options held by such
Optionholder; provided, however, that at the Effective Time, (as defined in the
Merger Agreement) each Optionholder agrees to accept an amount in respect of
such Company Options equal to the product of (A) the excess, if any, of the
Offer Price over the per share exercise price of each such Company Option and
(B) the number of Shares subject thereto (such payment to be net of applicable
withholding taxes) and each such Company Option shall thereafter be canceled.
9. Indemnification
9.1 Agreement to Indemnify. Notwithstanding the provisions of Section
8.2 of the Merger Agreement regarding the non-survival of the Company's
representations and warranties contained in the Merger Agreement, Mark L. Nelson
(the "Indemnitor") agrees as follows:
(a) To indemnify, defend and hold harmless Parent and Sub (each,
an "Indemnified Party") and their affiliates (including any officer, director,
stockholder, partner, member, employee, agent or representative of any thereof)
(each a "Parent Affiliate") to the extent provided in Section 9.5 from and
against all assessments, losses, damages, liabilities, costs and expenses,
including without limitation interest, penalties and reasonable fees and
expenses of legal counsel chosen by Parent, Sub or Parent Affiliate
(collectively, "Damages"), imposed upon
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or incurred by Parent, Sub or any Parent Affiliate arising out of or in
connection with or resulting from any breach of any representation or warranty
of the Company, or nonfulfillment, at any time prior to the consummation of the
Offer, of any covenant or agreement by the Company, in each case contained in or
made pursuant to the Merger Agreement or any Schedule thereto, or any
certificate furnished or to be furnished to Parent or Sub thereunder.
(b) The Indemnitor shall reimburse an Indemnified Party promptly
after delivery of an Indemnification Notice certifying that the Indemnified
Party has incurred Damages after compliance with the terms of this Section 9,
provided, however, that the Indemnitor shall have the right to contest any such
Damages in good faith.
(c) Notwithstanding anything herein to the contrary, Indemnitor
shall have no indemnification obligations hereunder unless Parent and Sub have
consummated the Offer or have purchased the Shares pursuant to the Stock Option.
9.2 Notice of Damages. An Indemnified Party will give the Indemnitor
prompt notice (hereinafter, the "Indemnification Notice") of any demands,
claims, actions or causes of action (collectively, "Claims") asserted against
the Indemnified Party. Failure to give such notice shall not relieve the
Indemnitor of any obligations which the Indemnitor may have to the Indemnified
Party under this Section 9, except to the extent that such failure has
materially adversely prejudiced the Indemnitor under the provisions for
indemnification contained in this Agreement.
9.3 Conditions of Indemnification of Third Party Claims. The
obligations and liabilities of Indemnitor under Section 9.1 hereof with respect
to Damages resulting from Claims by persons not party to the Merger Agreement
shall be subject to the following terms and conditions:
(a) The Indemnified Party will have the right (upon further
notice to the Indemnitor) to undertake the defense, compromise or settlement of
such Claim for the account of the Indemnitor, subject to the right of the
Indemnitor to participate in the defense of such Claim pursuant to the terms of
paragraph (b) of this Section 9.3 at any time prior to settlement, compromise or
final determination thereof.
(b) After delivery of an Indemnification Notice in respect of a
Claim and subject to paragraph (c) of this Section 9.3, the Indemnitor may
elect, by written notice to the Indemnified Party, to participate in the defense
thereof with counsel reasonably satisfactory to the Indemnified Party. If the
Indemnitor chooses to participate in the defense of any claim, the Indemnified
Party shall cooperate with all reasonable requests of the Indemnitor and shall
make available to the Indemnitor any books, records or other documents within
its control that are necessary or appropriate for such defense.
(c) The Indemnitor shall not, without written consent of all
Indemnified Parties, settle or compromise any Claim or consent to entry of any
judgment which does not include as an unconditional term thereof the release by
the claimant or the plaintiff of all
11
<PAGE>
Indemnified Parties from all liability arising from events which allegedly give
rise to such Claim.
(d) Until such time as the amount of Damages incurred by the
Indemnified Party exceeds $5,000,000, all fees and expenses of counsel selected
by Indemnitor incurred in participating in the defense of such Claim shall be
borne solely by Indemnitor. From and after such time as the amount of Damages
incurred by the Indemnified Party exceeds $5,000,000, subject to paragraph (e)
of this Section 9.3, the reasonable fees and expenses of counsel to Indemnitor
thereafter incurred, together with the reasonable fees and expenses of counsel
to Indemnitor incurred by Indemnitor prior to such time as the Damages of the
Indemnified Party exceed $5,000,000, shall be considered additional Damages for
purposes of this Section 9.
(e) If the Indemnified Party desires not to defend any Claim or
to settle or compromise any Claim or consent to entry of any judgment with
respect to such Claim, the Indemnified Party shall provide written notice (the
"Proposed Settlement Notice") to the Indemnitor of such desire, which Proposed
Settlement Notice shall state the amount of Damages which the Indemnified Party
is prepared to incur as a result of such settlement, compromise or entry of
judgment (the "Proposed Damage Limit"). Indemnitor shall have the right, by
written notice to the Indemnified Party within ten (10) days after receipt of
the Proposed Settlement Notice, to assume the defense of such Claim and to
employ its own counsel in the defense of such Claim; provided, however, that
upon the final determination of Damages with respect to such Claim, any Damages
(including counsel fees and expenses) in excess of the Proposed Damage Limit
shall be borne solely by Indemnitor and shall not be considered Damages for
purposes of making any determinations pursuant to Section 9.5 as to the amount
for which Indemnitor may be responsible.
9.4 Limitation on Indemnification. Notwithstanding anything to the
contrary provided elsewhere in the Merger Agreement, the obligations of any
Indemnitor under this Agreement to indemnify any Indemnified Party with respect
to any Claim pursuant to Section 9.2 shall be of no force and forever barred
unless the Indemnified Party has given the Indemnitor notice of such claim prior
to such date which is eighteen (18) months after the consummation of the Offer
or the Stock Option Closing, as the case may be. In any event, the parties shall
fully cooperate with each other and their respective counsel in accordance with
Section 9.3 in connection with any such litigation, defense, settlement or other
attempted resolution.
9.5 Limitation upon Indemnification Obligations. Indemnitor shall not
be required to indemnify any Indemnified Party until such time as the Damages in
the aggregate equal or exceed five million dollars ($5,000,000.00). Thereafter,
Indemnitor's indemnification obligations hereunder shall apply to 100% of the
next $5,000,000 of Damages, and 50% of the next $20,000,000 of Damages. No
indemnification shall be required by Indemnitor for any Damages in the aggregate
in excess of $30,000,000 (i.e., Indemnitor's maximum liability for Damages under
this Section 9 shall not exceed $15,000,000).
10. Effectiveness: Termination: No Survival. This Agreement shall become
effective as to each Stockholder upon its execution by such Stockholder, Parent
and Sub hereto and upon
12
<PAGE>
the execution of the Merger Agreement. This Agreement may be terminated as to
each Stockholder at any time by mutual written consent of such Stockholder,
Parent and Sub. Other than the Stock Option, which shall be governed by Section
2, and the indemnification provisions which shall be governed by Section 9, this
Agreement shall terminate (including without limitation the provisions of
Section 1), without any action by the parties hereto, on the date on which the
Merger Agreement terminates in accordance with its terms. No such termination
shall relieve any party from liability for any breach of this Agreement. The
representations and warranties of the parties set forth in Sections 3 and 4
hereof shall not survive the termination of this Agreement (except that if the
Stock Option is duly exercised, Sections 3.1, 3.2, 3.4 and 3.5 shall survive the
exercise of the Stock Option and the purchase of the Shares pursuant thereto,
regardless of any investigation made by Parent or Sub).
11. Miscellaneous.
11.1 Notices. Any notice request, instruction or other document to be
given hereunder by any party to the other parties shall be in writing and
delivered personally or sent by overnight courier, registered or certified mail,
postage prepaid, or by facsimile transmission (with a confirming copy sent by
overnight courier), as follows:
If to Parent or Sub, to:
Wolters Kluwer United States Inc.
161 North Clark Street
48th Floor
Chicago, Illinois 60601
Attention: Mr. Bruce C. Lenz,
Executive Vice President
(312) 425-7020 (telephone)
(312) 425-0233 (telecopier)
with a copy to:
Pryor Cashman Sherman & Flynn LLP
410 Park Avenue
New York, New York 10022
Attention: Arnold J. Schaab, Esq.
(212) 326-0168 (telephone)
(212) 326-0806 (telecopier)
If to the Stockholders, to the Stockholders' Representative at:
Mr. Mark L. Nelson
Ovid Technologies, Inc.
333 Seventh Avenue
New York, New York 10001
13
<PAGE>
(212) 536-3006 (telephone)
(212) 563-3784 (telecopier)
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, New York 10103-3198
Attention: Paul Jacobs, Esq.
(212) 318-3000 (telephone)
(212) 752-5958 (telecopier)
11.2 Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party which is entitled to the benefits thereof and
this Agreement may be amended or supplemented at any time. No such waiver,
amendment or supplement shall be effective unless in writing and signed by the
party sought to be bound thereby.
11.3 No Prior Agreements. This Agreement and the Merger Agreement
contain the entire agreement, and supersede all other prior agreements and
understandings, both written and oral, among the parties hereto with respect to
the subject matter hereof. This Agreement is not intended to confer upon any
other person any rights or remedies hereunder.
11.4 Successors and Assigns. This Agreement shall not be assignable,
except that Parent or Sub may assign its rights under this Agreement to another
direct or indirect wholly-owned subsidiary of Parent, but such assignment shall
not relieve Parent or Sub of their respective obligations hereunder. This
Agreement shall be binding upon, inure to the benefit of and be enforceable by
and against the parties hereto and their successors (including heirs,
administrators and executors of individuals) and permitted assigns.
11.5 Remedies. Parent and Sub, on the one hand, and the Stockholders,
on the other hand, each acknowledge and agree that the other would be
irreparably damaged in the event any of the provisions of this Agreement were
not performed by the other in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that each party shall be entitled
to an injunction or injunctions to redress the breaches of this Agreement and to
specifically enforce the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction, in
addition to any other remedy to which such party may be entitled at law or in
equity.
11.6 Expenses. Each of the parties shall pay its own expenses in
connection with the negotiation, execution and performance of the Agreement.
11.7 Counterparts. This Agreement and any amendments hereto may be
executed in two or more counterparts, each of which shall be considered to be an
original, both of which together shall constitute the same instrument.
14
<PAGE>
11.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the state of Delaware, without regard to the
principles of conflicts of laws.
11.9 Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
12. Effect of Headings. The section headings herein are for convenience
only and shall not affect the meaning or interpretation of this Agreement.
15
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to take effect
as of the date set forth above.
WOLTERS KLUWER U.S. CORPORATION
By: /s/ PETER W. VAN WEL
-----------------------------
Name: Peter W. Van Wel
Title: President
OTI ACQUISITION CORP.
By: /s/ BRUCE C. LENZ
----------------------------
Name: Bruce C. Lenz
Title: President
STOCKHOLDERS
/s/ MARK L. NELSON
------------------------------------------
Mr. Mark L. Nelson
/s/ CARLEEN NELSON
------------------------------------------
Ms. Carleen Nelson
/s/ DEBORAH HULL
------------------------------------------
Ms. Deborah Hull
/s/ MARTIN KAHN
------------------------------------------
Mr. Martin Kahn
16
<PAGE>
STOCKHOLDERS
NAME NUMBER OF SHARES HELD NUMBER OF OPTIONS HELD
- ---- --------------------- ----------------------
Mr. Mark L. Nelson 4,060,000 46,000
Ms. Carleen Nelson 10,630 545,500
Ms. Deborah Hull 0 163,500
Mr. Martin Kahn 0 295,500
17
Exhibit 4
WOLTERS KLUWER nv
Box 818
1000 AV Amsterdam THE NETHERLANDS
September 29, 1998
Ovid Technologies, Inc.
333 Seventh Avenue
New York, New York 10001
In connection with and pursuant to your entering into the Agreement and
Plan of Merger dated as of September 29, 1998 with OTI Acquisition Corp. and
Wolters Kluwer U.S. Corporation, we hereby unconditionally guarantee the payment
obligations of OTI Acquisition Corp. and Wolters Kluwer U.S. Corporation under
that Agreement.
Sincerely,
WOLTERS KLUWER nv
By: /s/ PETER W. VAN WEL
--------------------------
Peter W. van Wel
Member, Executive Board
Agreed and Accepted:
OVID TECHNOLOGIES, INC.
By: /s/ MARK L. NELSON
-----------------------
Name: Mark L. Nelson
Its: President
EXHIBIT 5
[Ovid Letterhead]
October 5, 1998
To the Stockholders of
Ovid Technologies, Inc.:
We are pleased to inform you that on September 29, 1998, Ovid Technologies,
Inc. ("Ovid" or the "Company") entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Wolters Kluwer U.S. Corporation ("Parent") and
OTI Acquisition Corp. ("OTI Acquisition"), an indirect wholly owned subsidiary
of Parent, pursuant to which OTI Acquisition has today commenced a tender offer
(the "Offer") to purchase all of the outstanding shares of common stock, $.01
par value per share (the "Shares"), of the Company, for $24.59 per Share in
cash. Under the terms of the Merger Agreement, following the successful
completion of the Offer, OTI Acquisition will be merged (the "Merger") with
and into the Company and all Shares not purchased in the Offer (other than
Shares held by Parent, OTI Acquisition or any other wholly owned subsidiary of
Parent, Shares owned by the Company as treasury stock, and Shares held by
stockholders who have properly exercised appraisal rights under Delaware law, if
any) will be converted into the right to receive $24.59 per Share in cash.
In addition, following consummation of the Merger, all outstanding stock
options of the Company, whether or not then vested, will be converted into the
right to receive from the Company an amount of cash equal to the product of (i)
the number of Shares subject to such options and (ii) the excess of $24.59 over
the exercise price of such option.
Your Board of Directors has unanimously approved the Merger Agreement, the
Offer and the Merger and has determined that the Offer and the Merger are fair
to and in the best interests of Ovid's stockholders. The Board unanimously
recommends that the Company's stockholders accept the Offer and tender their
Shares in the Offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors described in the attached Schedule 14D-9
that is being filed today with the Securities and Exchange Commission including,
among other things, the opinion of Goldman, Sachs & Co., the Company's financial
advisor, to the effect that, as of September 29, 1998, the $24.59 in cash to be
received by the Company's stockholders in the Offer and the Merger is fair from
a financial point of view to the Company's stockholders. The full text of the
written opinion of Goldman, Sachs & Co., dated September 29, 1998, which sets
forth the assumptions made, matters considered and limitations on the review
undertaken in connection with the opinion, is attached to the Schedule 14D-9 as
Annex A. All stockholders are urged to, and should, read the opinion of Goldman,
Sachs & Co. carefully in its entirety
In addition to the attached Schedule 14D-9 relating to the Offer, also
enclosed is the Offer to Purchase, dated October 5, 1998, of OTI Acquisition,
together with related materials, including a Letter of Transmittal to be used
for tendering your Shares. These documents set forth the terms and conditions of
the Offer and the Merger and provide instructions as to how to tender your
Shares. We urge you to read the enclosed materials carefully.
Sincerely,
/s/ Mark L. Nelson
----------------------------------
Mark L. Nelson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
EXHIBIT 6
NEWS FOR IMMEDIATE RELEASE
--------------------------
Contact: Deborah Hull Mary Dale Walters
Ovid Technologies Wolters Kluwer U.S.
212-563-3006 312-425-7014
WOLTERS KLUWER WILL ACQUIRE OVID TECHNOLOGIES
FOR APPROXIMATELY $200 MILLION
- --------------------------------------------------------------------------------
NEW YORK, NY, and CHICAGO SEPTEMBER 29, 1998--Wolters Kluwer U.S. Corporation,
a wholly-owned subsidiary of Wolters Kluwer N.V., and Ovid Technologies, Inc.
[NASDAQ: OVID] today announced that they have entered into a definitive
agreement pursuant to which Wolters Kluwer will acquire all outstanding shares
of Ovid on a fully diluted basis for $24.59 per share, or approximately U.S.
$200 million, in cash.
Pursuant to the terms of the definitive merger agreement, Wolters Kluwer shall
commence a cash tender offer for Ovid's common stock no later than October 5,
1998. As part of the transaction, Mark Nelson, President and Chief Executive
Officer of Ovid, and certain other shareholders, who currently beneficially own
an aggregate of approximately 5.1 million shares of Ovid, or approximately 63%
of the outstanding shares (on a fully diluted basis), have agreed to tender
their outstanding shares and have granted to Wolters Kluwer an option, under
certain circumstances, to buy all their shares for $24.59 per share.
The tender offer is conditioned upon the tendering of shares representing a
majority of Ovid's outstanding common stock (on a fully diluted basis),
satisfaction of applicable regulatory requirements and certain other customary
conditions. Any shares not purchased in the tender offer will be acquired in a
second-step merger for $24.59 per share in cash. Holders of employee stock
options will receive cash in an amount equal to the difference between the offer
price and their option exercise price.
The agreement obligates Ovid to pay to Wolters Kluwer a fee of $7 million and up
to $500,000 of expense reimbursement, if the transaction is not consummated
under certain circumstances.
Ovid is a leading provider of subscription based electronic information services
primarily to medical and scientific markets. Ovid develops sophisticated search
for research-intensive institutions and bundles this technology with full text
journals and bibliographic databases. This information is licensed from many
renowned publishers, societies and database providers and is channeled to
customers through CD-ROM products and online services. Ovid's products are used
by thousands of prominent institutions around the world, including private and
public universities, library consortia, pharmaceutical firms and governmental
organizations.
Ovid's information solutions aim to help users find answers to research and
clinical questions. The Company has developed advanced and value adding search
and linking tools, which provide links between and within documents. This allows
users for example to search for articles that share references, and easily jump
from one publication to another. The user may also seamlessly link from content
of one publisher to content of another publisher.
Through acquisitions and autonomous growth Wolters Kluwer has become a world
leader in medical/scientific markets, owning an extremely rich content base.
The acquisition of Ovid will provide Wolters Kluwer with an opportunity to
substantially accelerate its electronic publishing strategies in the medical and
scientific marketplace.
<PAGE>
Through Ovid, the content of more than 900 journals of Wolters Kluwer's
medical/scientific publishing companies can -over time- be made fully searchable
and navigable linked to bibliographic databases and to journals of other
prominent publishers and societies in the field. Ovid can make these electronic
journals immediately accessible via the World Wide Web to thousands of customers
worldwide.
Ovid will remain a standalone company, maintaining existing management, within
the Wolters Kluwer International Healthcare Division and will continue to
partner with other information providers in medical/scientific markets.
Ovid's annual sales in 1997 on a reported pro forma basis amounted to US $37.4
million. In the first half of 1998 revenues increased (on the same basis) 21.3%
to US $21.8 million. Operating income improved in the first six months of 1998
(on a pro forma basis) 38% to US $3.2 million. The company has almost 200 full
time employees.
Wolters Kluwer is a multidomestic publishing company active in 26 countries.
Core activities are legal and tax publishing, business publishing,
medical/scientific publishing and educational publishing/professional training.
Wolters Kluwer has a sales level considerably over Dfl. 5 billion and has almost
15,000 employees. The corporate web site of Wolters Kluwer on the Internet can
be accessed at: http://www.wolters-kluwer.com.
WOLTERS KLUWER U.S. CORPORATION
161 North Clark Street
Chicago, Illinois 60601-3221
Ovid Technologies, Inc.
333 Seventh Avenue
New York, New York 10001
Attention: Mark Nelson, President
Mr. Mark L. Nelson
c/o Ovid Technologies, Inc.
333 Seventh Avenue
New York, New York 10001
Ladies and Gentlemen:
In order to induce Wolters Kluwer U.S. Corporation ("WKUS") to commit the
resources, forego other potential opportunities, and incur the legal,
accounting, and incidental expenses necessary to properly evaluate acquiring
100% of the equity of Ovid Technologies, Inc. (the "Company") and to negotiate
the terms of definitive documentation with respect thereto, the Company and Mark
Nelson ("Nelson") agree that
(a) WKUS will have exclusive negotiating rights which will expire on the earlier
of (i) Monday, September 28, 1998 at 5:00 p.m. or (ii) the time at which the
discussions and negotiations with respect to the possible acquisition of the
equity have been finally terminated by WKUS) (the "Expiration Time"). That is,
from and after the date hereof and prior to the Expiration Time, (i) the Company
will not (and will cause its officers, directors, employees, representatives and
agents not to) and Nelson will not, (A) initiate, solicit or encourage, directly
or indirectly, or conduct negotiations with respect to any proposal or offer for
a merger, asset acquisition or other business combination involving the Company
or any proposal or offer to acquire a significant equity interest in, or a
significant portion of the assets of, the Company (collectively, an "Acquisition
Proposal") with any person, or otherwise contact any prospective buyer, other
than WKUS or (B) enter into any agreement or provide any confidential
information or data to any person in connection with or relating to any such
Acquisition Proposal; (ii) each of such persons will immediately cease (and will
cause its representatives to cease) any existing discussions or negotiations, if
any, with any parties conducted heretofore with respect to any such Acquisition
Proposal; and (iii) each of such persons will notify (and will cause its
representatives to notify) WKUS as soon as practicable if any such inquiries or
proposals are received by, any such information is requested from, or any such
negotiations and/or discussions are sought to be initiated or continued with,
the Company or Nelson.
(b) The Company will continue to allow the representatives of WKUS to meet
with the management of the Company (at reasonable times so as not to interfere
with the operation of the Company) to examine (but not retain) the Company's
financial, accounting, and business records, assets and liabilities, and all of
its contracts and other legal documents, and generally to conduct a commercial,
accounting, and legal investigation of the business and affairs of the Company.
Such investigation, and any information obtained by WKUS as a result thereof,
will be maintained by WKUS in confidence in accordance with our previously
signed confidentiality agreement and will not be used or disclosed by WKUS if
for any reason the transaction contemplated hereby is not consummated except to
the extent
<PAGE>
permitted by such agreement. The results of such due diligence reviews must
continue to be satisfactory to WKUS. The due diligence review will be completed
by the execution of definitive documentation.
(c) None of the Company, Nelson nor WKUS (subject to requirements of law)
will make any announcement regarding this letter or any transaction which
results from the contemplated negotiations without the prior approval of both
the Company and WKUS, having regard for the fact that timely announcements may
be required by law to be made to the financial and general press in the United
States and the Netherlands. Accordingly, the Company and WKUS agree not to
withhold or delay approval of such announcements unreasonably.
(d) The Company and WKUS shall each pay their respective expenses incident
to the negotiations, due diligence and the preparation of definitive
documentation.
If you are in agreement with the terms and conditions of this letter,
please so indicate by executing a copy of this letter in the space provided
below.
Sincerely,
WOLTERS KLUWER U.S. CORPORATION
By: /s/ BRUCE C. LENZ
----------------------------
Bruce C. Lenz,
Executive Vice President
Accepted and Agreed to this
22nd day of September, 1998
OVID TECHNOLOGIES, INC.
By: /s/ MARK L. NELSON
-------------------------
Mark L. Nelson, President
/s/ MARK L. NELSON
-----------------------------
Mark L. Nelson
