SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
APRIL 19, 1996
IDEON GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-11465 59-3293212
(State or other jurisdiction (Commission File (IRS Employer
of incorporation or organization) Number) Identification No.)
7596 CENTURION PARKWAY, JACKSONVILLE, FLORIDA 32256
(Address of principal executive offices)
Registrant's telephone number, including area code:
(904) 218-1800
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
ITEM 5. OTHER EVENTS.
On April 19, 1996, Ideon Group, Inc. (the "Registrant")
entered into an Agreement and Plan of Merger (the "Merger
Agreement") with CUC International Inc. ("CUC") and IG
Acquisition Corp., a wholly-owned subsidiary of CUC ("Sub"),
which provides for the merger of Sub with and into the Registrant
(the "Merger").
Pursuant to the Merger Agreement, at the effective time of
the Merger, each share of the Registrant's common stock, par
value $0.01 per share (the "Shares") will be converted into the
right to receive that number of shares of CUC's common stock, par
value $0.01 per share ("CUC Common Stock"), equal to the quotient
obtained by dividing $13.50 by the average closing price per
share of CUC Common Stock on the New York Stock Exchange ("NYSE")
on the NYSE Composite Tape during the fifteen consecutive trading
day period ending on the second calendar day immediately
preceding the Registrant's stockholder meeting to approve the
Merger; provided, however, that CUC will not issue less than
0.3750 nor more than 0.6136 shares of CUC Common Stock for each
Share. A copy of the Merger Agreement is filed as Exhibit 2
hereto and is incorporated herein by reference.
On April 22, 1996, the Registrant and CUC issued a joint
press release announcing the execution of the Merger Agreement.
The terms of the transaction described in the press release are
qualified in their entirety by the Merger Agreement. A copy of
such press release is filed as Exhibit 20 hereto and is
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) Financial Statements of the Businesses Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(c) Exhibits:
Ex. No. Description
2. Agreement and Plan of Merger, dated as of April 19,
1996, by and among Ideon Group, Inc., CUC
International Inc. and IG Acquisition Corp.
20. Text of joint press release issued by the Registrant
and CUC on April 22, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
IDEON GROUP, INC.
Date: April 23, 1996 By: /s/ G. Thomas Frankland
Name: G. Thomas Frankland
Title: Vice Chairman and
Chief Financial Officer
EXHIBIT INDEX
Ex. No. Description
2. Agreement and Plan of Merger, dated as of April 19,
1996, by and among Ideon Group, Inc., CUC
International Inc. and IG Acquisition Corp.
20. Text of joint press release issued by the Registrant
and CUC on April 22, 1996.
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
IDEON GROUP, INC.,
CUC INTERNATIONAL INC.
AND
IG ACQUISITION CORP.
DATED
AS OF
APRIL 19, 1996
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . 2
SECTION 1.1 The Merger . . . . . . . . . . . . 2
SECTION 1.2 Effect on Shares . . . . . . . . . 3
SECTION 1.3 Exchange of Certificates . . . . . 4
SECTION 1.4 Dividends; Transfer Taxes . . . . . 5
SECTION 1.5 No Fractional Shares . . . . . . . 6
SECTION 1.6 Return of Exchange Fund . . . . . . 7
SECTION 1.7 Adjustment of Conversion Number . . 7
SECTION 1.8 No Further Ownership Rights in
Shares . . . . . . . . . . . . . . 7
SECTION 1.9 Closing of Company Transfer Books . 8
SECTION 1.10 Stock Options . . . . . . . . . . . 8
SECTION 1.11 Restricted Stock . . . . . . . . . 9
ARTICLE II CLOSING . . . . . . . . . . . . . . . . . 9
SECTION 2.1 Closing . . . . . . . . . . . . . . 9
ARTICLE III THE SURVIVING CORPORATION . . . . . . . . 10
SECTION 3.1 Certificate of Incorporation . . . 10
SECTION 3.2 Bylaws . . . . . . . . . . . . . . 10
SECTION 3.3 Directors and Officers . . . . . . 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
COMPANY . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.1 Corporate Existence and Power . . . 10
SECTION 4.2 Corporate Authorization . . . . . . 11
SECTION 4.3 Governmental Authorization . . . . 12
SECTION 4.4 Non-Contravention . . . . . . . . . 12
SECTION 4.5 Capitalization . . . . . . . . . . 13
SECTION 4.6 Subsidiaries. . . . . . . . . . . . 14
SECTION 4.7 SEC Documents . . . . . . . . . . . 15
SECTION 4.8 Financial Statements; No
Undisclosed Liabilities . . . . . . 16
SECTION 4.9 Form S-4 Registration Statement
and Company Proxy Statement/
Prospectus . . . . . . . . . . . . 16
SECTION 4.10 Absence of Certain Changes . . . . 17
SECTION 4.11 Litigation . . . . . . . . . . . . 19
SECTION 4.12 Taxes . . . . . . . . . . . . . . 20
SECTION 4.13 Employee Matters . . . . . . . . . 21
SECTION 4.14 Labor Matters . . . . . . . . . . 23
SECTION 4.15 Compliance with Laws . . . . . . . 23
SECTION 4.16 Finders' Fees . . . . . . . . . . 24
SECTION 4.17 Environmental Matters . . . . . . 24
SECTION 4.18 Property . . . . . . . . . . . . . 25
SECTION 4.19 Intangible Property . . . . . . . 25
SECTION 4.20 Material Contracts . . . . . . . . 26
SECTION 4.21 Accounting Matters . . . . . . . . 27
SECTION 4.22 Vote Required . . . . . . . . . . 27
SECTION 4.23 Fairness Opinion . . . . . . . . . 27
SECTION 4.24 Disclosure . . . . . . . . . . . . 28
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER
AND MERGER SUBSIDIARY . . . . . . . . . . . . . . . . 28
SECTION 5.1 Corporate Existence and Power . . . 28
SECTION 5.2 Corporate Authorization . . . . . . 29
SECTION 5.3 Governmental Authorization . . . . 29
SECTION 5.4 Non-Contravention . . . . . . . . . 29
SECTION 5.5 Form S-4 Registration Statement
and Company Proxy Statement/
Prospectus . . . . . . . . . . . . 30
SECTION 5.6 Finders' Fees . . . . . . . . . . . 31
SECTION 5.7 No Vote Required . . . . . . . . . 31
SECTION 5.8 Share Ownership . . . . . . . . . . 31
SECTION 5.9 Capitalization . . . . . . . . . . 31
SECTION 5.10 Accounting Matters . . . . . . . . 32
SECTION 5.11 Ownership of Merger Subsidiary; No
Prior Activities; Assets of Merger
Subsidiary . . . . . . . . . . . . 32
SECTION 5.12 SEC Documents . . . . . . . . . . . 33
SECTION 5.13 Financial Statements . . . . . . . 33
SECTION 5.14 Absence of Certain Changes or
Events . . . . . . . . . . . . . . 34
SECTION 5.15 Litigation . . . . . . . . . . . . 34
SECTION 5.16 Authorization for Buyer Common
Stock . . . . . . . . . . . . . . 34
SECTION 5.17 Taxes . . . . . . . . . . . . . . . 35
SECTION 5.18 Disclosure . . . . . . . . . . . . 35
ARTICLE VI COVENANTS OF THE COMPANY . . . . . . . . . 36
SECTION 6.1 Conduct of the Company . . . . . . 36
SECTION 6.2 Stockholder Meeting; Proxy
Material . . . . . . . . . . . . . 39
SECTION 6.3 Access to Information;
Confidential Agreement . . . . . . 41
SECTION 6.4 No Solicitation . . . . . . . . . . 41
SECTION 6.5 Conveyance Taxes . . . . . . . . . 44
ARTICLE VII COVENANTS OF BUYER . . . . . . . . . . . 44
SECTION 7.1 Obligations of Merger Subsidiary . 44
SECTION 7.2 Voting of Shares . . . . . . . . . 44
SECTION 7.3 Director and Officer Liability . . 45
ARTICLE VIII COVENANTS OF BUYER, MERGER SUBSIDIARY
AND THE COMPANY . . . . . . . . . . . . . . . . 48
SECTION 8.1 Reasonable Best Efforts . . . . . . 49
SECTION 8.2 Certain Filings . . . . . . . . . . 49
SECTION 8.3 Public Announcements . . . . . . . 49
SECTION 8.4 Conveyance Taxes . . . . . . . . . 49
SECTION 8.5 Further Assurances . . . . . . . . 50
SECTION 8.6 Employee Matters. . . . . . . . . . 50
SECTION 8.7 Company Proxy Statement and
Registration Statement . . . . . . 51
SECTION 8.8 Tax-Free Reorganization Treatment . 51
SECTION 8.9 Notification of Certain Matters . . 52
SECTION 8.10 Blue Sky Permits . . . . . . . . . 52
SECTION 8.11 NYSE Listing . . . . . . . . . . . 52
SECTION 8.12 Pooling Letter . . . . . . . . . . 52
SECTION 8.13 Pooling . . . . . . . . . . . . . . 53
SECTION 8.14 SEC Filings . . . . . . . . . . . . 53
SECTION 8.16 Affiliates . . . . . . . . . . . . 54
ARTICLE IX CONDITIONS TO THE MERGER . . . . . . . . . 54
SECTION 9.1 Conditions to the Obligations of
Each Party . . . . . . . . . . . . 54
SECTION 9.2 Conditions to the Obligations of
the Company . . . . . . . . . . . . 55
SECTION 9.3 Conditions to the Obligations of
Buyer and Merger Subsidiary . . . . 57
ARTICLE X TERMINATION . . . . . . . . . . . . . . . . 58
SECTION 10.1 Termination . . . . . . . . . . . 58
SECTION 10.2 Effect of Termination . . . . . . 60
ARTICLE XI DEFINED TERMS . . . . . . . . . . . . . . 60
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . 66
SECTION 12.1 Notices . . . . . . . . . . . . . 66
SECTION 12.2 Survival of Representations and
Warranties . . . . . . . . . . . 67
SECTION 12.3 Amendments; No Waivers . . . . . . 68
SECTION 12.4 Expenses . . . . . . . . . . . . . 68
SECTION 12.5 Successors and Assigns . . . . . . 70
SECTION 12.6 Governing Law . . . . . . . . . . 70
SECTION 12.7 Severability . . . . . . . . . . . 70
SECTION 12.8 Third Party Beneficiaries . . . . 71
SECTION 12.9 Entire Agreement . . . . . . . . . 71
SECTION 12.10 Counterparts; Effectiveness . . . 71
COMPANY DISCLOSURE SCHEDULE
SCHEDULE 4.1 Corporate Existence and Power
SCHEDULE 4.3 Governmental Authorization
SCHEDULE 4.4 Non-Contravention
SCHEDULE 4.5 Capitalization
SCHEDULE 4.6 Subsidiaries
SCHEDULE 4.8 Financial Statements
SCHEDULE 4.10 Absence of Certain Changes
SCHEDULE 4.11 Litigation
SCHEDULE 4.12 Taxes
SCHEDULE 4.13(a) Employee Matters
SCHEDULE 4.14 Labor Matters
SCHEDULE 4.15 Compliance With Laws
SCHEDULE 4.17 Environmental Matters
SCHEDULE 4.19 Intangible Property
SCHEDULE 4.20 Material Contracts
SCHEDULE 6.1 Conduct of the Company
SCHEDULE 6.1(p) Conduct of the Company
SCHEDULE 7.3 Directors and Officers' Liability
SCHEDULE 8.6 Employee Matters
EXHIBIT 1 Form of Affiliate Letter
EXHIBIT 2 Buyer Tax Certificate
EXHIBIT 3 Company Tax Certificate
BUYER DISCLOSURE SCHEDULE
SCHEDULE 5.1 Corporate Existence and Power
SCHEDULE 5.9 Capitalization
SCHEDULE 5.14 Absence of Certain Changes or Events
SCHEDULE 5.15 Litigation
SCHEDULE 5.17 Taxes
SCHEDULE 6.2 Buyer Transactions
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of April
19, 1996 (this "Agreement"), by and among Ideon Group,
Inc., a Delaware corporation (the "Company"), CUC
International Inc., a Delaware corporation ("Buyer"), and
IG Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of Buyer ("Merger Subsidiary").
WHEREAS, the respective Boards of Directors of
Buyer, Merger Subsidiary and the Company have determined
that it is fair to, and in the best interests of their
respective stockholders to consummate the acquisition of
the Company by Buyer upon the terms and subject to the
conditions set forth herein; and
WHEREAS, the respective Boards of Directors of
the Company, Buyer and Merger Subsidiary have approved
and declared advisable this Agreement and the merger of
Merger Subsidiary with and into the Company, upon terms
and subject to the conditions set forth herein, whereby
each issued and outstanding share of common stock, par
value $.01 per share, of the Company (the "Shares"), not
owned directly or indirectly by Buyer or Merger
Subsidiary, will be converted into the number of shares
of common stock, par value $.01 per share of Buyer
("Buyer Common Stock"), determined pursuant to Section
1.2(a) hereof; and
WHEREAS, it is intended that the Merger (as
defined herein) shall be recorded for accounting purposes
as a pooling-of-interests; and
WHEREAS, for federal income tax purposes, it is
intended that the Merger shall qualify as a
reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the
"Code");
WHEREAS, the Company has delivered to Buyer a
letter (the "Company Affiliate Letter") identifying all
persons (each, a "Company Affiliate") who are at the date
hereof, "affiliates" of the Company for purposes of Rule
145 under the Securities Act of 1933, as amended (the
"Securities Act"), and each Company Affiliate has
delivered to Buyer a letter substantially in the form
attached hereto as Exhibit 1 (each, an "Affiliate
Letter") relating to (i) the transfer prior to the
Effective Time (as defined in Section 1.1(b)), of the
Shares beneficially owned by such Company Affiliate on
the date hereof, and (ii) the transfer of the shares of
Buyer Common Stock to be received by such Company
Affiliate in the Merger (as defined in Section 1.1(a));
and
WHEREAS, Buyer, Merger Subsidiary and the
Company desire to make certain representations,
warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to
the Merger.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. (a) Subject to the terms and conditions
of this Agreement, and in accordance with the Delaware General Corporation
Law (the "DGCL"), at the Effective Time, Merger Subsidiary shall be merged
(the "Merger") with and into the Company, whereupon the separate existence
of Merger Subsidiary shall cease, and the Company shall be the surviving
corporation (the "Surviving Corporation") and shall continue to be governed
by the laws of the State of Delaware.
(b) The Company, Buyer and Merger Subsidiary will cause a
certificate of merger (the "Certificate of Merger") with respect to the
Merger to be executed and filed with the Secretary of State of the State of
Delaware (the "Secretary of State") as provided in the DGCL.
The Merger shall become effective on the date the Certificate of Merger
has been duly filed with the Secretary of State or at such date as is
agreed between the parties and specified in the Certificate of Merger, and
such time is hereinafter referred to as the "Effective Time."
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises
and be subject to all of the restrictions, disabilities, liabilities and
duties of the Company and Merger Subsidiary.
SECTION 1.2 Effect on Shares. At the Effective Time:
(a) Conversion of Shares; Merger Consideration. Subject to the
provisions of Section 1.5 and Section 1.7 hereof, each Share issued and
outstanding immediately prior to the Effective Time (other than Shares held
by the Company as treasury stock or by any Subsidiary of the Company or
owned by Buyer, Merger Subsidiary or any other Subsidiary of Buyer) shall,
by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive that number of duly
authorized, validly issued, fully paid and nonassessable shares of Buyer
Common Stock (the "Merger Consideration")(such applicable number being
hereinafter referred to as the "Conversion Number"), equal to the quotient
obtained by dividing (x) $13.50 by (y) the Average Stock Price (as
hereinafter defined); provided, however, that if the Average Stock Price is
$22 or less the Conversion Number shall be 0.6136 and if the Average Stock
Price is $36 or more the Conversion Number shall be 0.3750. The "Average
Stock Price" shall mean the average closing price per share of Buyer Common
Stock on the New York Stock Exchange (the "NYSE") as reported on the NYSE
Composite Tape during the fifteen consecutive trading day period (the
"Measurement Period") ending on the second calendar day immediately
preceding the Company Stockholder Meeting (as defined herein); provided,
however, that if such second calendar day is not a trading day, the
Measurement Period shall end on the next calendar day immediately preceding
such second calendar day that is a trading day.
(b) Cancellation of Shares. Each Share held by the Company as
treasury stock or owned by Buyer, Merger Subsidiary or any other Subsidiary
of Buyer immediately prior to the Effective Time shall automatically be
canceled and retired and cease to exist, and no payment shall be made with
respect thereto. All Shares to be converted into Buyer Common Stock
pursuant to this Section 1.2 shall, by virtue of the Merger and without any
action on the part of the holders thereof, cease to be outstanding, be
canceled and retired and cease to exist; and each holder of a certificate
representing prior to the Effective Time any such Shares shall thereafter
cease to have any rights with respect to such Shares, except the right to
receive (i) certificates representing shares of Buyer Common Stock into
which such Shares have been converted, (ii) any dividends and other
distributions in accordance with Section 1.4 hereof and (iii) any cash,
without interest, to be paid in lieu of any fractional share of Buyer
Common Stock in accordance with Section 1.5 hereof.
(c) Capital Stock of Merger Subsidiary. Each share of common
stock of Merger Subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted into and become one share of common
stock, par value $0.01, of the Surviving Corporation with the same rights,
powers and privileges as the shares so converted and shall constitute the
only outstanding shares of capital stock of the Surviving Corporation.
SECTION 1.3 Exchange of Certificates. (a) Prior to the
Effective Time, Buyer shall appoint a commercial bank having capital of not
less than $500,000,000 (or such other Person or Persons as shall be
acceptable to Buyer and the Company) to act as exchange agent hereunder
(the "Exchange Agent"). At the Effective Time, Buyer shall deposit with the
Exchange Agent, certificates (the "Buyer Certificates") representing Buyer
Common Stock which immediately prior to the Effective Time represent a
number of shares of Buyer Common Stock required to be issued pursuant to
Section 1.2(a) in exchange for the outstanding Shares (together with cash
as required to (i) pay any dividends or distributions with respect thereto
in accordance with Section 1.4 hereof and (ii) make payments in lieu of
fractional Shares pursuant to Section 1.5 hereof, being hereinafter
referred to as the "Exchange Fund"). The Exchange Fund shall not be used
for any other purpose except as provided for in this Agreement.
(b) Promptly after the Effective Time, the Exchange Agent shall
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Shares (the
"Share Certificates") (i) a form of a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Share Certificates shall pass, only upon actual delivery thereof to the
Exchange Agent) and (ii) instructions for use in effecting the surrender of
the Share Certificates in exchange for the property described in the next
sentence. Upon surrender for cancellation to the Exchange Agent of Share
Certificate(s) held by any record holder of a Share Certificate, together
with such letter of transmittal duly executed, such holder shall be
entitled to receive in exchange therefor (x) a Buyer Certificate
representing the number of whole shares of Buyer Common Stock into which
the Shares represented by the surrendered Share Certificate(s) shall have
been converted at the Effective Time pursuant to this Article I, (y) cash
in lieu of any fractional share of Buyer Common Stock in accordance with
Section 1.5 hereof and (z) certain dividends and other distributions in
accordance with Section 1.4 hereof; and the Share Certificate(s) so
surrendered shall forthwith be cancelled.
(c) Subject to the provisions of Section 1.4 and Section 1.5
hereof, each Share Certificate which immediately prior to the Effective
Time represented Shares to be converted in the Merger shall, from and after
the Effective Time until surrendered in exchange for Buyer Certificate(s)
in accordance with this Section 1.3, be deemed for all purposes to
represent the number of shares of Buyer Common Stock into which such Shares
shall have been so converted.
SECTION 1.4 Dividends; Transfer Taxes. No dividends or other
distributions that are declared on or after the Effective Time on Buyer
Common Stock, or are payable to the holders of record thereof who became
such on or after the Effective Time, shall be paid to any Person entitled
by reason of the Merger to receive Buyer Certificates representing Buyer
Common Stock, and no cash payment in lieu of any fractional share of Buyer
Common Stock shall be paid to any such person pursuant to Section 1.5
hereof, until such Person shall have surrendered its Share Certificate(s)
as provided in Section 1.3 hereof. Subject to applicable law, there shall
be paid to each Person receiving a Buyer Certificate representing such
shares of Buyer Common Stock: (i) at the time of such surrender or as
promptly as practicable thereafter, the amount of any dividends or other
distributions theretofore paid with respect to the shares of Buyer Common
Stock represented by such Buyer Certificate and having a record date on or
after the Effective Time and a payment date prior to such surrender, and
(ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of Buyer Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on
or subsequent to such surrender. In no event shall the Person entitled to
receive such dividends or other distributions be entitled to receive
interest on such dividends or other distributions. Buyer shall make
available to the Exchange Agent the cash necessary for this purpose. If any
cash or Buyer Certificate representing shares of Buyer Common Stock is to
be paid to or issued in a name other than that in which the Share
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the Share Certificate so surrendered shall
be properly endorsed and otherwise in proper form for transfer and that the
person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of such Buyer
Certificate and the distribution of such cash payment in a name other than
that of the registered holder of the Share Certificate so surrendered, or
shall establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not applicable. "Person" means an individual, a
corporation, limited liability company, a partnership, an association, a
trust or any other entity or organization, including a government or
political subdivision or any agency or instrumentality thereof.
SECTION 1.5 No Fractional Shares. No certificates or scrip
representing fractional shares of Buyer Common Stock shall be issued upon
the surrender for exchange of Share Certificates pursuant to this Article
I; no dividend or other distribution by Buyer and no stock split,
combination or reclassification shall relate to any such fractional share;
and no such fractional share shall entitle the record or beneficial owner
thereof to vote or to any other rights of a stockholder of Buyer. In lieu
of any such fractional share, each holder of Shares who would otherwise
have been entitled thereto upon the surrender of Share Certificate(s) for
exchange pursuant to this Article I will be paid an amount in cash (without
interest) rounded to the nearest whole cent, determined by multiplying (i)
the per share closing price on the NYSE of Buyer Common Stock (as reported
on the NYSE Composite Tape) on the date on which the Effective Time shall
occur (or, if Buyer Common Stock shall not trade on the NYSE on such date,
the first day of trading in Buyer Common Stock on the NYSE, thereafter) by
(ii) the fractional share to which such holder would otherwise be entitled.
Buyer shall make available to the Exchange Agent the cash necessary for
this purpose.
SECTION 1.6 Return of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the former holders of the
Shares for one year after the Effective Time shall be delivered to Buyer,
upon its request, and any such former holders who have not theretofore
surrendered to the Exchange Agent their Share Certificate(s) in compliance
with this Article I shall thereafter look only to Buyer for payment of
their claim for shares of Buyer Common Stock, any cash in lieu of
fractional shares of Buyer Common Stock and any dividends or distributions
with respect to such shares of Buyer Common Stock. Neither Buyer nor the
Company shall be liable to any former holder of Shares for any such shares
of Buyer Common Stock held in the Exchange Fund (and any cash, dividends
and distributions payable in respect thereof) which is delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
SECTION 1.7 Adjustment of Conversion Number. In the event of
any stock split, combination, reclassification or stock dividend with
respect to Buyer Common Stock, any change or conversion of Buyer Common
Stock into other securities or any other dividend or distribution with
respect to Buyer Common Stock (other than quarterly cash dividends issued
in the ordinary course consistent with past practice) and any distribution
by Buyer of shares of capital stock of any of its affiliates, or if a
record date with respect to any of the foregoing should occur, prior to the
Effective Time, appropriate and proportionate adjustments shall be made to
the Conversion Number, and thereafter all references in this Agreement to
the Conversion Number shall be deemed to be the Conversion Number as so
adjusted.
SECTION 1.8 No Further Ownership Rights in Shares. All
certificates representing shares of Buyer Common Stock delivered upon the
surrender for exchange of any Share Certificate in accordance with the
terms hereof (including any cash paid pursuant to Section 1.4 or Section
1.5 hereof) shall be deemed to have been delivered (and paid) in full
satisfaction of all rights pertaining to the Shares previously represented
by such Share Certificate.
SECTION 1.9 Closing of Company Transfer Books. At the Effective
Time, the stock transfer books of the Company shall be closed, and no
transfer of Shares shall thereafter be made. Subject to the last sentence
of Section 1.6 hereof, if after the Effective Time, Share Certificates are
presented to the Surviving Corporation, they shall be cancelled and
exchanged as provided in this Article I.
SECTION 1.10 Stock Options. (a) Not later than the Effective
Time, each outstanding employee or director stock option (an "Option") to
purchase Shares granted under any employee or director stock option or
compensation plan or arrangement of the Company (other than any "stock
purchase plan" within the meaning of Section 423 of the Code) immediately
prior to the Effective Time in effect on the date hereof ("Company Stock
Plans") whether or not then vested or exercisable, shall become and
represent an option to purchase the number of shares of Buyer Common Stock
(a "Substitute Option"), rounded up to the nearest whole share, determined
by multiplying (i) the number of Shares subject to such Option immediately
prior to the Effective Time by (ii) the Conversion Number, at an exercise
price per share of Buyer Common Stock (increased to the nearest whole cent)
equal to the exercise price per Share immediately prior to the Effective
Time divided by the Conversion Number; provided, however, that in the case
of any Option to which Section 421 of the Code applies by reason of its
qualification as an incentive stock option under Section 422 of the Code,
the conversion formula shall be adjusted if necessary to comply with
Section 424(a) of the Code.
After the Effective Time, except as provided above in this Section 1.10,
each Substitute Option shall be exercisable upon the same terms and
conditions as were applicable to the related Option immediately prior to
the Effective Time. Buyer shall register under the Securities Act on Form
S-8 or another appropriate form (and use its best efforts to maintain the
effectiveness thereof and maintain the current status of the prospectuses
contained therein) all Substitute Options and all shares of Buyer Common
Stock issuable pursuant to all Substitute Options. At or prior to the
Effective Time, Buyer shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Buyer Common Stock for
delivery in connection with the Substitute Options.
(b) Notwithstanding the foregoing, each Option held by any
director of the Company at the Effective Time, shall be converted at the
Effective Time into the right to receive that number of duly authorized,
validly issued, fully paid and nonassessable shares of Buyer Common Stock
determined by multiplying (i) the number of Shares such holder could have
purchased had such holder exercised such Option in full immediately prior
to the Effective Time by (ii) a fraction, the numerator of which shall be
the excess, if any, of (A) the Conversion Number multiplied by the Average
Stock Price over (B) the applicable exercise price of such Option and the
denominator of which shall be the Average Stock Price.
SECTION 1.11 Restricted Stock. Any unvested shares of
restricted stock of the Company, however granted, shall to the extent
required in the plan, agreement or instrument pursuant to which such
restricted stock was granted, vest and become free of all restrictions
immediately prior to the Effective Time and shall be convertible into
Buyer Common Stock pursuant to Section 1.2 hereof.
ARTICLE II
CLOSING
SECTION 2.1 Closing. The closing of the Merger (the "Closing")
will take place at 10:00 a.m., New York City time, on a date to be
specified by the parties, which shall be no later than the third business
day after satisfaction or waiver of all of the conditions set forth in
Article IX hereof (the "Closing Date"), at the offices of Weil, Gotshal &
Manges LLP, 767 Fifth Avenue, New York, New York 10153 unless another time,
date or place is agreed to in writing by the parties hereto.
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1 Certificate of Incorporation. The certificate of
incorporation of the Company (the "Company Certificate of Incorporation")
in effect at the Effective Time shall be the certificate of incorporation
of the Surviving Corporation until amended in accordance with applicable
law.
SECTION 3.2 Bylaws. The by-laws of the Company (the "Company
By-laws") in effect at the Effective Time shall be the by-laws of the
Surviving Corporation until amended in accordance with applicable law.
SECTION 3.3 Directors and Officers. From and after the
Effective Time, until successors are duly elected or appointed and
qualified in accordance with applicable law, the directors of Merger
Subsidiary at the Effective Time shall be the initial directors of the Sur-
viving Corporation and the officers of the Company at the Effective Time
shall be the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected and appointed or
qualified.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Buyer and Merger
Subsidiary that:
SECTION 4.1 Corporate Existence and Power. The Company is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and except as set forth on Schedule 4.1
of the disclosure schedule delivered by the Company in connection herewith
(the "Company Disclosure Schedule"), has all corporate powers and all
governmental licenses, authorizations, consents and approvals
(collectively, "Licenses") required to carry on its business as now
conducted except where the failure to have any such License would not have
a Material Adverse Effect (as defined below). The Company is duly qualified
to do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not have a
Material Adverse Effect. As used herein, the term "Material Adverse Effect"
means a material adverse effect on the condition (financial or otherwise),
business, assets or results of operations of the Company and its
Subsidiaries (as defined in Section 4.6 hereof), or Buyer and Merger
Subsidiary, as the case may be, in each case taken as a whole, that is not
a result of general changes in the economy or the industries in which such
entities operate. The Company has heretofore delivered or made available to
Buyer true and complete copies of the Company Certificate of Incorporation
and Company Bylaws as currently in effect.
SECTION 4.2 Corporate Authorization. The execution, delivery
and performance by the Company of this Agreement and the consummation by
the Company of the transactions contemplated hereby are within the
Company's corporate powers and, except for any required approval by the
Company's stockholders in connection with the consummation of the Merger,
have been duly authorized by all necessary corporate action. This
Agreement, assuming due and valid authorization, execution and delivery by
the parties hereto, constitutes a valid and binding agreement of the
Company enforceable against the Company in accordance with its terms,
except that (i) enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought. To the extent
permitted under any Option or option plan, restricted stock plan, agreement
or instrument or any employment, executive, severance or similar
agreement to which the Company or any of its Subsidiaries is a party, such
that none of the execution, delivery and performance by the Company of this
Agreement or the consummation of the transactions contemplated hereby
(including, without limitation, the election of the members of the Board of
Directors of Merger Subsidiary as the initial directors of the Surviving
Corporation at the Effective Time pursuant to Section 3.3) will
constitute a "change of control" or "change in control" thereunder or
result in an alteration of the benefits and burdens (including, without
limitation, by means of acceleration) thereunder, the necessary majority of
members of the Board of Directors has approved the execution, delivery and
performance by the Company of this Agreement, and the consummation by the
Company of the transactions contemplated hereby.
SECTION 4.3 Governmental Authorization. Except as set forth in
Schedule 4.3 of the Company Disclosure Schedule, the execution, delivery
and performance by the Company of this Agreement and the consummation by
the Company of the transactions contemplated hereby require no action by or
in respect of, or filing with, any governmental body, agency, official or
authority (each, a "Governmental Entity") other than: (i) the filing of a
certificate of merger in accordance with the DGCL; (ii) compliance with any
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "HSR Act"); (iii) compliance with any applicable
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); (iv) compliance with the applicable requirements of
state blue sky laws; (v) compliance with the applicable requirements of any
applicable takeover laws; and (vi) such other actions by or in respect of,
or filings with, any Governmental Entity the failure of which to obtain or
make would not have a Material Adverse Effect and which would not
materially impair or materially delay the ability of the Company to
consummate the transactions contemplated hereby.
SECTION 4.4 Non-Contravention. The execution, delivery and
performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby do not and will not (i)
contravene or conflict with the Company Certificate of Incorporation or
Company By-laws, (ii) except as set forth in Schedule 4.4 of the Company
Disclosure Schedule and assuming compliance with the matters referred to
in Section 4.3 hereof, contravene or conflict with or constitute a
violation of any provision of any law, regulation, judgment, injunction,
order or decree binding upon or applicable to the Company or any Subsidiary
of the Company, (iii) except as set forth in Schedule 4.4 of the Company
Disclosure Schedule, with or without the giving of notice or passage of
time or both, constitute a default under or give rise to a right of
termination, cancellation or acceleration of any right or obligation of the
Company or any Subsidiary of the Company or to a loss of any benefit to
which the Company or any Subsidiary of the Company is entitled under any
provision of any agreement, contract or other instrument binding upon the
Company or any Subsidiary of the Company or any license, franchise, permit
or other similar authorization held by the Company or any Subsidiary of
the Company, or (iv) result in the creation or imposition of any Lien (as
defined below) on any asset of the Company or any Subsidiary of the
Company, excluding from the foregoing clauses (ii), (iii) or (iv), such
violations, breaches, defaults or Liens which would not have a Material
Adverse Effect, and which will not materially impair or materially delay
the ability of the Company to consummate the transactions contemplated
hereby. For purposes of this Agreement, "Lien" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset.
SECTION 4.5 Capitalization. The authorized capital stock of the
Company consists of 90,000,000 Shares and 10,000,000 shares of preferred
stock (the "Preferred Stock"). As of March 31, 1996, there were (i)
27,981,831 Shares issued and outstanding; (ii) 6,964,169 Shares held in the
Company's treasury; and (iii) no shares of Preferred Stock issued and
outstanding. As of March 31, 1996, there were (i) 1,713,900 outstanding
Options pursuant to the 1994 Long Term Stock-Based Incentive Plan with an
exercise price range of a minimum exercise price of $7.625 and a maximum
exercise price of $20.75; (ii) 108,700 outstanding Options pursuant to the
Employees Stock Option Plan with a minimum exercise price of $9.875 and a
maximum exercise price of $19.125; (iii) 300,000 outstanding Options
granted to outside directors with an exercise price range of a minimum
exercise price of $9.00 and a maximum exercise price of $13.00; (iv) 8,333
outstanding Options pursuant to the 1991 Employee Stock Option Plan with an
exercise price of $9.00; (v) 10,000 outstanding Options pursuant to the
1992 Employee Stock Option Plan with an exercise price of $8.875 and (vi)
30,000 outstanding Options pursuant to the Directors Stock Plan with an
exercise price of $15.875. Schedule 4.5 of the Company Disclosure Schedule
accurately sets forth information regarding the exercise price, date of
grant and number of granted Options for each holder of Options as of March
31, 1996. All outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth in this Section 4.5, and except for changes since
March 31, 1996 resulting from the exercise of employee Options outstanding
on such date, there are outstanding (i) no shares of capital stock or other
voting securities of the Company, (ii) no securities of the Company or of
any Subsidiary of the Company convertible into or exchangeable for shares
of capital stock or voting securities of the Company, and (iii) except as
set forth on Schedule 4.5 of the Company Disclosure Schedule, no options
or other rights to acquire from the Company, and no obligation of the
Company to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities
of the Company (the items in clauses (i), (ii) and (iii) being referred to
collectively as the "Company Securities"). There are no outstanding
obligations of the Company or any Subsidiary of the Company to repurchase,
redeem or otherwise acquire any Company Securities. Except as set forth on
Schedule 4.5 of the Company Disclosure Schedule, there are no stockholder
agreements, voting trusts or understandings to which the Company is a
party or by which it is bound relating to the voting or registration of
any shares of capital stock of the Company. Except as otherwise provided
in Section 1.11 of this Agreement, the Company has not taken any action
that would result in any Options or shares of restricted stock that are
unvested becoming vested in connection with or as a result of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby. No Subsidiary of the Company owns any capital stock
of the Company.
SECTION 4.6 Subsidiaries. (a) Each Subsidiary of the Company
that is actively engaged in any business or owns any material assets (an
"Active Subsidiary") (i) is a corporation duly incorporated, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, (ii) except as set forth in Schedule 4.6 of the Company
Disclosure Schedule, has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted and (iii) is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its
activities makes such qualification necessary, except with respect to (ii)
and (iii) above to the extent the failure of this representation and
warranty to be true would not have a Material Adverse Effect. For purposes
of this Agreement, "Subsidiary" means with respect to any Person, any
corporation or other legal entity of which such Person owns, directly or
indirectly, more than 50% of the outstanding stock or other equity
interests, the holders of which are entitled to vote for the election of
the board of directors or other governing body of such corporation or other
legal entity. All Active Subsidiaries, their respective jurisdictions of
incorporation and the ownership interest of the Company and its
Subsidiaries in such Active Subsidiaries are identified on Schedule 4.6 of
the Company Disclosure Schedule.
(b) Each outstanding share of capital stock of each Subsidiary
of the Company has been duly and validly authorized and issued, is fully
paid and nonassessable and is owned by the Company and/or one or more of
its Subsidiaries free and clear of any Liens. There are no subscriptions,
options, warrants, calls, rights, convertible securities or other
agreements or commitments of any character relating to the issuance,
transfer, sale, delivery, voting or redemption (including any rights of
conversion or exchange under any outstanding security or other instrument)
for, any of the capital stock or other equity interests of any of such
Subsidiaries. There are no agreements requiring the Company or any of its
Subsidiaries to make contributions to the capital of, or lend or advance
funds to, any of the Subsidiaries of the Company.
SECTION 4.7 SEC Documents. The Company has filed all required
reports, proxy statements, forms and other documents with the SEC since
January 1, 1994 ("Company SEC Documents"). As of their respective dates,
(i) the Company SEC Documents complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may
be, and the rules and regulations of the Securities and Exchange Commission
(the "SEC") promulgated thereunder applicable to such Company SEC
Documents, and (ii) none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state any material fact required
to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
SECTION 4.8 Financial Statements; No Undisclosed Liabilities.
The consolidated financial statements of the Company included in the
Company SEC Documents (i) comply as to form in all material respects with
all applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) have been prepared in
conformity with generally accepted accounting principles ("GAAP"), applied
on a consistent basis (except in the case of unaudited statements, as
permitted by Form 10-Q of the SEC) during the periods involved (except as
may be indicated in the related notes and schedules thereto) and (iii)
fairly present in all material respects the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates thereof
and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). Except as set forth in Schedule 4.8 of the
Company Disclosure Schedule and except as set forth in the Company SEC
Documents filed and publicly available prior to the date of this Agreement,
and except for liabilities and obligations incurred in the ordinary course
of business since the date of the most recent consolidated balance sheet
included in the Company SEC Documents filed and publicly available prior to
the date of this Agreement, 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 consolidated Subsidiaries
or in the notes thereto.
SECTION 4.9 Form S-4 Registration Statement and Company Proxy
Statement/Prospectus. None of the information to be supplied by the Company
for inclusion or incorporation by reference in the Form S-4 Registration
Statement (as hereinafter defined) or the Company Proxy Statement (as
hereinafter defined) will (i) in the case of the Form S-4 Registration
Statement, at the time it becomes effective, at the Effective Time or at
the Company Stockholder Meeting (as hereinafter defined), 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 not misleading, or (ii) in the case of the Company Proxy Statement,
at the time of the mailing of the Company Proxy Statement and at the time
of the Company Stockholder 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 not
misleading. If at any time prior to the Effective Time any event with
respect to the Company, its officers and directors or any of its
Subsidiaries should occur which is required to be described in an amendment
of, or a supplement to, the Company Proxy Statement or the Form S-4
Registration Statement, such event shall be so described, and such
amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. The
Company Proxy Statement will (with respect to information relating to the
Company) comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations promulgated thereunder.
SECTION 4.10 Absence of Certain Changes. Except as disclosed in
the Company SEC Documents filed by the Company or as set forth in Schedule
4.10 of the Company Disclosure Schedule, the Company and its Subsidiaries
have conducted their business in the ordinary course of business and there
has not been since January 1, 1996:
(a) any event, occurrence or facts which has
had or reasonably could be expected to have a Material
Adverse Effect;
(b) any declaration, setting aside or payment of any dividend
(other than regular quarterly dividends) or other distribution with
respect to any shares of capital stock of the Company, or any
repurchase, redemption or other acquisition by the Company or any
Subsidiary of the Company of any outstanding shares of capital stock
or other securities of, or other ownership interests in, the Company
or any Subsidiary of the Company;
(c) any amendment of any term of any outstanding security
of the Company or any Subsidiary of the Company;
(d) any incurrence, assumption or guarantee by the Company or
any Subsidiary of the Company of any indebtedness for borrowed money
other than in the ordinary course of business;
(e) any creation or assumption by the Company or any Subsidiary
of the Company of any Lien on any asset other than in the ordinary
course of business and other than Liens which do not have and could
not reasonably be expected to have a Material Adverse Effect;
(f) any making of any loan, advance or capital contributions to
or investment in any Person other than advances to employees in the
ordinary course of business and loans, advances or capital
contributions to or investments in wholly-owned Subsidiaries of the
Company made in the ordinary course of business;
(g) any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of the
Company or any Subsidiary of the Company which has had or could
reasonably be expected to have a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company or any Subsidiary of the
Company relating to its assets or business (including the acquisition
or disposition of any assets) or any relinquishment by the Company or
any Subsidiary of the Company of any contract or other right, in
either case, that have had or could reasonably be expected to have a
Material Adverse Effect, other than transactions and commitments in
the ordinary course of business and those contemplated by this
Agreement;
(i) any change, or any application or request to the SEC for
any change, in any method of accounting or accounting practice by the
Company or any Subsidiary of the Company, except for any such change
required by reason of a concurrent change in generally accepted
accounting principles;
(j) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any Subsidiary of the
Company, (ii) employment, consulting, indemnification, severance,
termination, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer
or employee of the Company or any Subsidiary of the Company entered
into, (iii) increase in benefits payable under any existing severance
or termination pay policies or employment agreements or (iv) increase
in compensation, bonus or other benefits payable to directors,
officers or employees of the Company or any Subsidiary of the
Company, in each case, other than in the ordinary course of business;
or
(k) any authorization of any of, or commitment or agreement to
take any of, the foregoing actions except as otherwise expressly
permitted by this Agreement.
SECTION 4.11 Litigation. Except as set forth in either the
Company SEC Documents or in Schedule 4.11 of the Company Disclosure
Schedule, there is no action, suit, investigation or proceeding pending
against, or to the knowledge of the Company threatened against, the
Company, any Subsidiary of the Company or any of their respective
properties before any court or arbitrator or any Governmental Entity,
which, (a) if determined or resolved adversely to the Company or any
Subsidiary of the Company in accordance with the plaintiff's demands, could
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect or (b) as of the date hereof, questions the
validity of this Agreement or any action to be taken by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. Except as set forth in the Company SEC Documents, as of the
date of this Agreement, none of the Company or its Subsidiaries is subject
to any outstanding order, writ, injunction or decree which, insofar as can
be reasonably foreseen, could reasonably be expected to have a Material
Adverse Effect or would prevent or materially delay the consummation of
the transactions contemplated hereby. Except as set forth in the Company
SEC Documents, Schedule 4.11 of the Company Disclosure Schedule sets
forth a complete list of (x) all actions, suits, investigations or
proceedings pending against, or to the knowledge of the Company, threatened
against any former or current director or officer of the Company or any
Subsidiary of the Company and (y) to the knowledge of the Company, all
material actions, suits, investigations, or proceedings pending or
threatened against any former or current employee of the Company or any
Subsidiary of the Company, in the case of each of (x) and (y), based on, or
arising out of the fact that, such person is or was a director, officer or
employee, as the case may be, of the Company or any Subsidiary of the
Company, as well as such matters as have been completed and in respect of
which the Company has any remaining indemnification or other monetary
obligations.
SECTION 4.12 Taxes. (a) Except as set forth on Schedule 4.12 of
the Company Disclosure Schedule: (i) the Company and each of its
Subsidiaries has filed or has had filed on its behalf in a timely manner
(within any applicable extension periods) with the appropriate Gov-
ernmental Entity all income and other material Tax Returns (as defined
herein) with respect to Taxes (as defined herein) of the Company and each
of its Subsidiaries; (ii) all material Taxes with respect to the Company
and its Subsidiaries have been paid in full or have been provided for in
accordance with GAAP on the Company's most recent balance sheet which is
part of the Company SEC Documents; (iii) there are no outstanding
agreements or waivers extending the statutory period of limitations
applicable to any federal, state, local or foreign income or other material
Tax Returns required to be filed by or with respect to the Company and its
Subsidiaries; (iv) none of the Tax Returns of or with respect to the
Company or any of its Subsidiaries is currently being audited or examined
by any Governmental Entity; and (v) no deficiency for any income or other
material Taxes has been assessed with respect to the Company or any of its
Subsidiaries which has not been abated or paid in full.
(b) For purposes of this Agreement, (i) "Taxes" shall mean all
taxes, charges, fees, levies or other assessments, including, without
limitation, income, gross receipts, sales, use, ad valorem, goods and
services, capital, transfer, franchise, profits, license, withholding,
payroll, employment, employer health, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts imposed by any taxing
authority and (ii) "Tax Return" shall mean any report, return, documents,
declaration or other information or filing required to be supplied to any
taxing authority or jurisdiction with respect to Taxes.
SECTION 4.13 Employee Matters. (a) Schedule 4.13(a) contains a
true and complete list of each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay,
hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement, and each other employee benefit plan,
program, agreement or arrangement, sponsored, maintained or contributed to
or required to be contributed to by the Company or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that together
with the Company would be deemed a "single employer" within the meaning of
Section 4001(b)(1) of the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder ("ERISA"),
for the benefit of any employee or former employee of the Company, whether
formal or informal and whether legally binding or not (the "Plans").
Schedule 4.13(a) identifies each of the Plans that is an "employee welfare
benefit plan," or "employee pension benefit plan" as such terms are defined
in Sections 3(1) and 3(2) of ERISA (such plans being hereinafter referred
to collectively as the "ERISA Plans").
(b) With respect to each of the Plans, the Company has
heretofore delivered or made available to Buyer true and complete copies of
each of the following documents:
(i) a copy of the Plan or a description
of all material terms thereof (including all amend-
ments thereto);
(ii) a copy of the annual report, if required under
ERISA, with respect to each such Plan for the last three years;
(iii) a copy of the actuarial report, if required under
ERISA, with respect to each such Plan for the last three years; and
(iv) the most recent determination letter received from
the Internal Revenue Service with respect to each Plan that is
intended to be qualified under Section 401 of the Code.
(c) No material liability under Title IV of ERISA has been
incurred by the Company or any ERISA Affiliate since the effective date of
ERISA that has not been satisfied in full, and no condition exists that
presents a material risk to the Company or an ERISA Affiliate of incurring
a material liability under such Title, other than liability for premiums
due the Pension Benefit Guaranty Corporation ("PBGC"), which payments have
been or will be made when due.
(d) With respect to each of the ERISA Plans that is subject to
Title IV of ERISA, the present value of accrued benefits under such Plan,
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such Plan's actuary with respect to
such Plan, did not, as of its latest valuation date, exceed the then
current value of the assets of such Plan allocable to such accrued
benefits.
(e) Neither the Company, any ERISA Affiliate, any of the ERISA
Plans, any trust created thereunder nor any trustee or administrator
thereof has engaged in a transaction or has taken or failed to take any
action in connection with which the Company, any ERISA Affiliate, any of
the ERISA Plans, any such trust, any trustee or administrator thereof, or
any party dealing with the ERISA Plans or any such trust could be subject
to either a material civil penalty assessed pursuant to Section 409 or
Section 502(i) of ERISA or a material tax imposed pursuant to Section 4975,
Section 4976 or Section 4980B of the Code.
(f) Full payment has been made, or will be made in accordance
with Section 404(a)(6) of the Code, of all amounts which the Company or any
ERISA Affiliate is required to pay under the terms of each of the ERISA
Plans and Section 412 of the Code.
(g) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including but not
limited to ERISA and the Code.
(h) The Company has not taken any action that would result in
the acceleration of any benefits under any Plan in connection with or as a
result of the execution, delivery and performance by the Company of this
Agreement or the consummation by the Company of the transactions
contemplated hereby.
SECTION 4.14 Labor Matters. Except to the extent set forth in
Schedule 4.14 of the Disclosure Schedule (i) there is no labor strike,
dispute, slowdown, stoppage or lockout actually pending or threatened, to
the knowledge of the Company, against the Company and during the past three
years there has not been any such action; (ii) to the knowledge of the
Company, there is no current union organizing activities among the
Company's employees nor does any question concerning representation exist
concerning such employees; (iii) there is no unfair labor practice charge
or complaint against the Company pending or, to the knowledge of the
Company, threatened before the National Labor Relations Board or any
similar state or foreign agency; (iv) there is no grievance pending
relating to any collective bargaining agreement or other grievance
procedure; (v) to the knowledge of the Company, no charges with respect to
or relating to the Company are pending before the Equal Employment Oppor-
tunity Commission or any other agency responsible for the prevention of
unlawful employment practices; (vi) the Company and its Subsidiaries have
complied with the Worker Adjustment and Retraining Notification Act (the
"WARN Act"), and other state or local laws substantially similar in effect
to the WARN Act, where the failure to be in compliance with such state or
local laws would have a Material Adverse Effect; and (vii) there are no
collective bargaining agreements, employment contracts or severance
agreements with any union or any employees of the Company.
SECTION 4.15 Compliance with Laws. Except as set forth in
Schedule 4.11 (as applicable) and Schedule 4.15 of the Company Disclosure
Schedule, the Company and its Subsidiaries, and their respective
businesses, are in compliance with all Licenses, laws, statutes, ordinances
or regulations, including, but not limited to, Environmental Laws (as
defined in Section 4.17 below), except where such violations would not have
a Material Adverse Effect.
SECTION 4.16 Finders' Fees. Except for Lazard Freres & Co.,
L.L.C., there is no investment banker, broker, finder or other intermediary
which has been retained by or is authorized to act on behalf, of the
Company or any Subsidiary of the Company who would be entitled to any fee
or commission from the Company, any Subsidiary of the Company, Buyer or any
of Buyer's affiliates upon consummation of the transactions contemplated by
this Agreement. An executed, true and complete copy of such engagement
letter has been delivered to Buyer.
SECTION 4.17 Environmental Matters. (a) Except as set forth in
the Company SEC Documents or in Schedule 4.17 of the Company Disclosure
Schedule:
(i) since January 1, 1995, the Company has not received
any written communication from any person or entity (including any
Governmental Entity) stating that it or its Subsidiaries may be a
potentially responsible party under Environmental Law (as defined in
Section 4.17(c) hereof) with respect to any actual or alleged
environmental contamination; neither the Company nor its Subsidiaries
nor, to the Company's knowledge, any Governmental Entity is
conducting or has conducted any environmental remediation or
environmental investigation which could reasonably be expected to
result in liability for the Company or its Subsidiaries under
Environmental Law; and the Company and its Subsidiaries have not
received any request for information under Environmental Law from any
Governmental Entity with respect to any actual or alleged
environmental contamination, except, in each case, for
communications, environmental remediation and investigations and
requests for information which would not, individually or in the
aggregate, have a Material Adverse Effect; and
(ii) since January 1, 1995, the Company and its
Subsidiaries have not received any written communication from any
person or entity (including any Governmental Entity) stating or
alleging that the Company or its Subsidiaries may have violated any
Environmental Law, or that the Company or its Subsidiaries has caused
or contributed to any environmental contamination that has caused any
property damage or personal injury under Environmental Law, except,
in each case, for statements and allegations of violations and
statements and allegations of responsibility for property damage
and personal injury which would not, individually or in the
aggregate, have a Material Adverse Effect.
(b) (i) The Company has made available to Buyer each material
environmental investigation, study, audit, test, review and other analysis
in the possession of the Company or its Subsidiaries prepared in the last
five years conducted in relation to the business of the Company or any
property or facility now or previously owned, operated or leased by the
Company or any Subsidiary of the Company; and (ii) the Company has made
available to Buyer each consent decree, consent order or similar document
currently in force and to which it is a party relating to any property
currently owned, leased or operated by the Company or its Subsidiaries.
(c) For purposes of this Section 4.17, "Environmental Law"
means all applicable state, federal and local laws, regulations and rules,
including common law, judgments, decrees and orders relating to pollution,
the preservation of the environment, and the release of material into the
environment.
SECTION 4.18 Property. The Company and its Subsidiaries, as the
case may be, have good and valid title to, or in the case of leased
property, have valid leasehold interests in all properties and assets
necessary to conduct the business of the Company as currently conducted,
except to the extent the failure of this representation and warranty to be
true would not have a Material Adverse Effect. There are no developments
affecting any of such properties or assets pending or, to the knowledge of
the Company threatened, which, could reasonably be expected to have a
Material Adverse Effect.
SECTION 4.19 Intangible Property. (a) The Company and its
Subsidiaries own or possess adequate licenses or other valid rights to use
all trademarks, trademark rights, trade names, trade name rights,
copyrights, service marks, trade secrets and applications for trademarks
and for service marks, which are material to the Company's business and
operations (collectively, "Intangible Property") used or held for use in
connection with the business of the Company and the Subsidiaries of the
Company as currently conducted. All material trademarks are validly
registered or registrations have been applied for.
(b) The Company, except as set forth in Schedule 4.19(b) of the
Company Disclosure Schedule, is unaware of any assertion or claim
challenging the validity of any Intangible Property. Except as set forth in
Schedule 4.19(b) of the Company Disclosure Schedule, the conduct of the
business of the Company and its Subsidiaries as currently conducted does
not conflict with any trademark, trademark right, trade name or trade name
right of any third party in a manner that could reasonably be expected to
have a Material Adverse Effect. To the knowledge of the Company, there are
no material infringements of any Intangible Property.
SECTION 4.20 Material Contracts. Except as set forth on
Schedule 4.13(a), Schedule 4.20 or Schedule 7.3 of the Company Disclosure
Schedule, the Company SEC Documents list all Material Contracts (as defined
below) of the Company (and all material amendments thereto) and all
agreements or commitments to enter into a Material Contract, and except as
set forth on Schedule 4.20 of the Company Disclosure Schedule or in the
Company SEC Documents, to the knowledge of the Company, each Material
Contract is valid, binding and enforceable and in full force and effect,
except where such failure to be valid, binding and enforceable and in full
force and effect would not have a Material Adverse Effect, and there are no
defaults thereunder, except those defaults that would not have a Material
Adverse Effect. For purposes of this Agreement, "Material Contracts" shall
mean (i) all contracts, agreements or understandings with customers of the
Company and its Subsidiaries in the last fiscal year where each customers'
contracts, agreements or understandings in the aggregate account for more
than $5 million of (x) SafeCard Services, Incorporated's ("SafeCard") net
annual billings or (y) each Subsidiaries' of the Company, other than
SafeCard's, annual revenues; (ii) all the acquisition, merger, asset
purchase or sale agreements entered into by the Company in the last two
fiscal years with a transaction value in excess of $10 million; (iii) all
indemnification, termination, severance, or "golden parachute" agreements;
and (iv) any other agreement within the meaning set forth in Item
601(b)(10) Regulation S-K of Title 17, Part 229 of the Code of Federal
Regulations. Except as set forth on Schedule 4.20 of the Company Disclosure
Schedule, no party to any such Material Contract has (i) given written
notice to the Company or any Subsidiary of the Company of or made a claim
in writing against the Company or any Subsidiary of the Company with
respect to any breach or default thereunder, in any such case in which such
breach or default could reasonably be expected to have a Material Adverse
Effect on the Company or (ii) given written or, to the knowledge of the
senior executive officers of the Company, oral notice to the Company or
any Subsidiary of the Company that it does not intend to renew or it
intends to terminate any of its business relationships with the Company
or any Subsidiary of the Company.
SECTION 4.21 Accounting Matters. Neither the Company nor, to
the best of the Company's knowledge, any of its affiliates has taken or
agreed to take any action that would prevent Buyer from accounting for the
transactions to be effected pursuant to this Agreement as a pooling of
interests in accordance with GAAP and applicable SEC regulations. The
Company has not knowingly and willfully failed to bring to the attention of
Buyer any actions, or agreements or understandings, whether written or
oral, to act that would be reasonably likely to prevent Buyer from
accounting for the Merger as a pooling of interests. The representations
and warranties of the Company in the Company Affiliate Letter are true and
correct.
SECTION 4.22 Vote Required. The affirmative vote of the holders
of a majority of the outstanding Shares is the only vote of the holders of
any class or series of the Company's capital stock necessary or required
under this Agreement or under applicable law to approve the Merger, this
Agreement and the transactions contemplated hereby.
SECTION 4.23 Fairness Opinion. The Board of Directors of the
Company has received the written opinion of Lazard Freres & Co. L.L.C., to
the effect that, as of such date, the consideration to be received by
holders of Shares pursuant to the Merger is fair from a financial point of
view to such holders. An executed, true and complete copy of such opinion
has been delivered to Buyer and, as of the date hereof, such opinion has
not been modified in any material respect or withdrawn.
SECTION 4.24 Disclosure. No representation or warranty by the
Company contained in this Agreement and no statement contained in any
certificate delivered by the Company to Buyer or Merger Subsidiary pursuant
to this Agreement contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein
and therein not misleading when taken together in light of the
circumstances in which they were made.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF BUYER AND MERGER SUBSIDIARY
Buyer and Merger Subsidiary represent and warrant to the
Company that:
SECTION 5.1 Corporate Existence and Power. Each of Buyer and
Merger Subsidiary is a corporation duly incorporated, validly existing and
in good standing under the laws of its jurisdiction of incorporation, and
except as set forth on Schedule 5.1 of the disclosure schedule delivered by
Buyer and Merger Subsidiary in connection herewith (the "Buyer Disclosure
Schedule"), has all corporate powers and all Licenses required to carry on
its business as now conducted except where the failure to have any such
License would not, individually or in the aggregate, have a Material
Adverse Effect. Each of Buyer and Merger Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or
the nature of its activities makes such qualification necessary, except for
those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. Each of
Buyer and Merger Subsidiary has heretofore delivered or made available to
the Company true and complete copies of Buyer's and Merger Subsidiary's
Certificate of Incorporation and By-laws as currently in effect.
SECTION 5.2 Corporate Authorization. The execution, delivery
and performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions
contemplated hereby are within the corporate powers of Buyer and Merger
Subsidiary and have been duly authorized by all necessary corporate action.
This Agreement, assuming due and valid authorization, execution and
delivery by the other parties hereto, constitutes a valid and binding
agreement of each of Buyer and Merger Subsidiary enforceable against Buyer
and Merger Subsidiary in accordance with its terms, except that (i)
enforcement may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
SECTION 5.3 Governmental Authorization. The execution, delivery
and performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions
contemplated hereby require no action by or in respect of, or filing with,
any Governmental Entity other than: (i) the filing of a certificate of
merger in accordance with the DGCL; (ii) compliance with any applicable
requirements of the HSR Act; (iii) compliance with any applicable
requirements of the Securities Act and Exchange Act; (iv) compliance with
the applicable requirements of any applicable takeover laws; and (v) such
other actions by or in respect of, or filings with, any Governmental Entity
the failure of which to obtain or make would not have a Material Adverse
Effect and which would not materially impair or delay the ability of Buyer
or Merger Subsidiary to consummate the transactions contemplated hereby.
SECTION 5.4 Non-Contravention. The execution, delivery and
performance by Buyer and Merger Subsidiary of this Agreement and the
consummation by Buyer and Merger Subsidiary of the transactions
contemplated hereby do not and will not (i) contravene or conflict with the
Certificate of Incorporation or By-laws of Merger Subsidiary or Buyer, (ii)
assuming compliance with the matters referred to in Section 5.3 hereof,
contravene or conflict with or constitute a violation of any provision of
law, regulation, judgment, injunction, order or decree binding upon or
applicable to Buyer or Merger Subsidiary, (iii) with or without the giving
of notice or passage of time or both, constitute a default under or give
rise to a right of termination, cancellation or acceleration of any right
or obligation of Buyer or Merger Subsidiary or to a loss of any benefit to
which Buyer or Merger Subsidiary is entitled under any provision of any
agreement, contract or other instrument binding upon Buyer or Merger
Subsidiary or any license, franchise, permit or other similar authorization
held by Buyer or Merger Subsidiary, or (iv) result in the creation or
imposition of any Lien on any asset of Buyer or Merger Subsidiary excluding
from the foregoing clauses (ii), (iii) or (iv) such violations, breaches,
defaults or Liens which would not have a Material Adverse Effect, and which
will not materially impair or materially delay the ability of Buyer and
Merger Subsidiary to consummate the transactions contemplated hereby.
SECTION 5.5 Form S-4 Registration Statement and Company Proxy
Statement/Prospectus. None of the information to be supplied by Buyer and
Merger Subsidiary for inclusion or incorporation by reference in the Form
S-4 Registration Statement will (i) in the case of the Form S-4
Registration Statement at the time it becomes effective, at the Effective
Time or at the Company Stockholder 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 not
misleading, or (ii) in the case of the Company Proxy Statement, at the time
of the mailing of the Company Proxy Statement and at the time of the
Company Stockholder Meeting or at the Effective Time, 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 not
misleading. If at any time prior to the Effective Time any event with
respect to Buyer and Merger Subsidiary, their respective officers and
directors or any of Buyer's Subsidiaries should occur which is required to
be described in an amendment of, or a supplement to, the Form S-4
Registration Statement or the Company Proxy Statement, such event shall be
so described, and such amendment or supplement shall be promptly filed with
the SEC and, as required by law, disseminated to the stockholders of the
Company. The S-4 Registration Statement will (with respect to information
relating to Buyer and Merger Subsidiary) comply as to form in all material
respects with the requirements of the Securities Act and the rules and
regulations promulgated thereunder.
SECTION 5.6 Finders' Fees. Except for Goldman, Sachs & Co.,
whose fees will be paid by Buyer, there is no investment banker, broker,
finder or other intermediary who might be entitled to any fee or commission
in connection with or upon consummation of the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Buyer or
Merger Subsidiary.
SECTION 5.7 No Vote Required. No vote or special meeting of the
stockholders of Buyer or Merger Subsidiary is necessary or required by this
Agreement or under applicable law to approve the Merger, this Agreement or
the transactions contemplated hereby.
SECTION 5.8 Share Ownership. As of the date hereof, Buyer and
Merger Subsidiary do not own any Shares.
SECTION 5.9 Capitalization. The authorized capital stock of
Buyer consists of 400,000,000 shares of Buyer Common Stock, and 1,000,000
shares of preferred stock, par value $.01 par value per share (the "Buyer
Preferred Stock"). As of March 29, 1996, there were issued and outstanding
(i) 190,460,240 shares of Buyer Common Stock; (ii) no shares of Buyer
Preferred Stock; and (iii) options to purchase an aggregate of 21,056,064
shares of Buyer Common Stock with exercise prices ranging from $.36 to
$35.75. All of the outstanding shares of capital stock of Buyer have been
duly authorized and validly issued and are fully paid and nonassessable.
Schedule 5.9 of the Buyer Disclosure Schedule accurately sets forth, as of
the date of this Agreement, certain information regarding the outstanding
options, and such information is true and correct. Except as set forth in
this Section 5.9 or as disclosed on Schedule 5.9 of the Buyer Disclosure
Schedule or in the Buyer SEC Documents, and except for changes since March
29, 1996 resulting from the exercise of employee stock options outstanding
on such date, as of the date of this Agreement, there are outstanding (i)
no shares of capital stock or other voting securities of Buyer, (ii) no
securities of Buyer or of any Subsidiary of Buyer convertible into or
exchangeable for shares of capital stock or voting securities of Buyer, and
(iii) no options or other rights to acquire from Buyer, and no obligation
of Buyer to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of
the Company (the items in clauses (i), (ii) and (iii) being referred to
collectively as the "Buyer Securities"). There are no outstanding
obligations of Buyer or of any Subsidiary of Buyer to repurchase, redeem or
otherwise acquire any Buyer Securities. There are no stockholder
agreements, voting trusts or understandings to which Buyer is a party or to
which it is bound relating to the voting of any shares of capital stock
of Buyer.
SECTION 5.10 Accounting Matters. Neither Buyer, nor Merger
Subsidiary, nor, to the best of Buyer's or Merger Subsidiary's knowledge,
any of its affiliates has taken or agreed to take any action that would
prevent Buyer or Merger Subsidiary from accounting for the transactions
to be effected pursuant to this Agreement as a pooling of interests in
accordance with GAAP and applicable SEC regulations. Buyer has not
knowingly and willfully failed to bring to the attention of the Company any
actions, or agreements or understandings, whether written or oral, to act
that would be reasonably likely to prevent Buyer from accounting for the
Merger as a pooling of interests.
SECTION 5.11 Ownership of Merger Subsidiary; No Prior
Activities; Assets of Merger Subsidiary. (a) Merger Subsidiary was formed
solely for the purpose of the Merger and engaging in the transactions
contemplated hereby.
(b) As of the date hereof and the Effective Time, the capital
stock of Merger Subsidiary is and will be directly owned 100% by Buyer.
Further, there are not as of the date hereof and there will not be at the
Effective Time any outstanding or authorized options, warrants, calls,
rights, commitments or any other agreements of any character which Merger
Subsidiary 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 or acquire, any shares of capital stock of
Merger Subsidiary.
(c) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated hereby, Merger Subsidiary
has not and will not have incurred, directly or indirectly through any
Subsidiary or affiliate, any obligations or liabilities or engaged in any
business or activities of any type or kind whatsoever or entered into any
agreements or arrangements with any Person or entity.
SECTION 5.12 SEC Documents. Buyer has filed all required
reports, proxy statements, forms and other documents with the SEC since
January 1, 1994 ("Buyer SEC Documents"). As of their respective dates (i)
the Buyer SEC Documents complied in all material respects with the
requirements of the Securities Act, or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Buyer SEC Documents, and (ii) none of the Buyer SEC
Documents contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order
to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 5.13 Financial Statements. The consolidated financial
statements of Buyer included in the Buyer SEC Documents (i) comply as to
form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto, (ii)
have been prepared in conformity with GAAP applied on a consistent basis
(except in the case of unaudited statements, as permitted by Form 10-Q of
the SEC) during the periods involved (except as may be indicated in the
related notes and schedules thereto) and (iii) fairly present in all
material respects the consolidated financial position of Buyer and its
consolidated subsidiaries as of the dates thereof, and the results of its
operations and its cash flows for the periods then ended (subject, in the
case of the unaudited statements, to normal year-end audit adjustments and
except that, in the case of financial statements included therein which
were later restated to account for one or more business combinations
accounted for as poolings-of-interest, such original financial statements
do not reflect such restatements).
SECTION 5.14 Absence of Certain Changes or Events. Except as
disclosed in the Buyer SEC Documents filed by Buyer and as set forth in
Schedule 5.14 of the Buyer Disclosure Schedule, since the date of the most
recent consolidated balance sheet included in the Buyer SEC Documents filed
and publicly available prior to date of this Agreement, the business of
Buyer has been carried on only in the ordinary and usual course and there
has not been any adverse change in its business, properties, operations or
financial condition and no event has occurred and no fact or set of
circumstances has arisen which has resulted in or could reasonably be
expected to result in a Material Adverse Effect.
SECTION 5.15 Litigation. Except as set forth in either Buyer
SEC Documents or in Schedule 5.15 of the Buyer Disclosure Schedule, there
is no action, suit, investigation or proceeding pending against, or to the
knowledge of Buyer or Merger Subsidiary threatened against, Buyer or Merger
Subsidiary or any of their respective properties before any court or
arbitrator or any Governmental Entity, which, (a) if determined or resolved
adversely to Buyer or Merger Subsidiary in accordance with the plaintiff's
demands, could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect or (b) as of the date of this
Agreement, questions the validity of this Agreement or any action to be
taken by Buyer or Merger Subsidiary in connection with the consummation of
the transactions contemplated by this Agreement. Except as publicly
disclosed by Buyer, as of the date of this Agreement, none of Buyer or its
Subsidiaries is subject to any outstanding order, writ, injunction or
decree which, insofar as can be reasonably foreseen in the future, could
reasonably be expected to have a Material Adverse Effect on Buyer or would
prevent or materially delay the consummation of the transactions
contemplated hereby.
SECTION 5.16 Authorization for Buyer Common Stock. Buyer has
taken all necessary action to permit it to issue the number of shares of
Buyer Common Stock required to be issued pursuant to this Agreement. Shares
of Buyer Common Stock issued pursuant to Agreement will, when issued, be
validly issued, fully paid and nonassessable and no person will have any
preemptive right of subscription or purchase in respect thereof. Shares of
Buyer Common Stock will, when issued, be registered under the Securities
Act and the Exchange Act and registered or exempt from registration under
any applicable state securities laws and will, when issued, be listed on
the NYSE, subject to official notice of issuance.
SECTION 5.17 Taxes. Except as set forth on Schedule 5.17 of the
Buyer Disclosure Schedule: (i) Buyer and each of its Subsidiaries has filed
or has had filed on its behalf in a timely manner (within any applicable
extension periods) with the appropriate Governmental Entity all income and
other material Tax Returns with respect to Taxes of Buyer and each of its
Subsidiaries; (ii) all material Taxes with respect to Buyer and its
Subsidiaries have been paid in full or have been provided for in accordance
with GAAP on the Buyer's most recent balance sheet which is part of the
Buyer SEC Documents; (iii) there are no outstanding agreements or waivers
extending the statutory period of limitations applicable to any federal,
state, local or foreign income or other material Tax Returns required to be
filed by or with respect to Buyer and its Subsidiaries; (iv) none of the
Tax Returns of or with respect to Buyer or any of its Subsidiaries is
currently being audited or examined by any Governmental Entity; and (v) no
deficiency for any income or other material Taxes has been assessed with
respect to Buyer or any of its Subsidiaries which has not been abated or
paid in full.
SECTION 5.18 Disclosure. No representation or warranty by Buyer
or Merger Subsidiary contained in this Agreement and no statement contained
in any certificate delivered by Buyer or Merger Subsidiary to the Company
pursuant to this Agreement contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements
contained herein and therein not misleading when taken together in light of
the circumstances in which they were made.
ARTICLE VI
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 6.1 Conduct of the Company. From the date hereof until
the Effective Time, the Company and its Subsidiaries shall conduct their
business in the ordinary course and shall use their reasonable efforts to
preserve intact their business organizations and relationships with third
parties and to keep available the services of their present officers and
employees. Without limiting the generality of the foregoing other than as
set forth on Schedule 6.1 of the Company Disclosure Schedule, as
specifically contemplated by this Agreement or with the written consent of
Buyer or Merger Subsidiary (which consent shall not be unreasonably
withheld or delayed), from the date hereof until the Effective Time, the
Company will not (and will not cause or permit any Subsidiary to):
(a) split, combine or reclassify any shares of capital stock,
declare, set aside or pay any dividend (other than regular quarterly
dividends and any dividend of a wholly-owned Subsidiary of the
Company to the Company or another wholly-owned Subsidiary of the
Company) or other distribution (whether in cash, stock or property or
any combination thereof) with respect to any shares of capital stock
of the Company, or any repurchase, redemption or other acqui-
sition by the Company or any Subsidiary of the Company of any
outstanding shares of capital stock or other securities of, or other
ownership interests in, the Company or any Subsidiary of the Company;
(b) amend any term of any outstanding security of the
Company or any Subsidiary of the Company;
(c) except for working capital purposes pursuant to the
Revolving Credit Agreement, dated as of February 8, 1996, by and
among the First National Bank of Boston, Fleet Bank of Maine, Key
Bank of Maine, Bank of Scotland and Wright Express Corporation, and,
except in the ordinary course of business consistent with past
practice pursuant to the Equipment Financing Agreement, dated as of
February 7, 1996, by and between The First National Bank of Boston
and Wright Express Corporation, incur, assume or guarantee any
indebtedness for borrowed money of (x) except in the ordinary course
of business in an amount not to exceed $500,000 in the aggregate at
any one time outstanding, the Company or any Subsidiary of the
Company or (y) any other Person;
(d) create, assume or suffer to exist any Lien on any
material asset, other than in the ordinary course of business;
(e) make any loan, advance or capital contribution to
or invest in any Person, other than in the ordinary course of business;
(f) cause any damage, destruction or other casualty loss
(whether or not covered by insurance) affecting the business or
assets of the Company or any Subsidiary of the Company which has had
or could reasonably be expected to have a Material Adverse Effect;
(g) (x) other than in the ordinary course of business
consistent with past practice, (i) enter into any transaction,
commitment, contract or agreement by the Company or any Subsidiary of
the Company relating to their assets or business (excluding the
acquisition or disposition of any assets) or (ii) relinquish any
contract or other right, that (with respect to (ii)) has had or could
reasonably be expected to have a Material Adverse Effect, other than
(with respect to each of (i) and (ii)) those expressly permitted by
this Agreement or (y) enter into any transaction, commitment,
contract or agreement to acquire or dispose of any assets of the
Company or any Subsidiary of the Company in excess of $150,000 in any
individual transaction or $750,000 in the aggregate;
(h) change, or apply to the SEC for, or request from the SEC
any change of, any method of accounting or accounting practice by the
Company or any Subsidiary of the Company, except for any such change
required by reason of a concurrent change in GAAP;
(i) (A) grant any severance or termination pay to any current
or former director or executive officer, or, other than in the
ordinary course of business, to any officer or any other employee of
the Company or any Subsidiary of the Company, (B) enter into any
employment, consulting, indemnification, severance, termination,
deferred compensation or other similar agreement (or any amendment to
any such existing agreement) with any current or former director or
executive officer, or other than in the ordinary course of business,
with any officer or any other employee of the Company or any
Subsidiary of the Company, (C) other than in the ordinary course of
business, increase the benefits payable under any existing severance
or termination pay policies or employment agreements or (D) increase
the compensation, bonus or other benefits payable to any current or
former director or executive officer, or other than in the ordinary
course of business, to any officer or any other employee of the
Company or any Subsidiary of the Company;
(j) amend its certificate of incorporation or bylaws (or
other similar governing instrument);
(k) authorize for issuance, sell, deliver or agree to issue,
sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, any stock options or
stock appreciation rights) of the Company, except for the issuance of
stock upon the exercise of Options outstanding on the date of this
Agreement;
(l) except as may be required pursuant to GAAP, revalue in any
material respect any of its assets, including, without limitation,
writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business;
(m) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization
or other reorganization of the Company or any of its Subsidiaries
(other than the Merger);
(n) make or revoke any tax election or settle or compromise any
tax liability, in each case, material to the Company and its
Subsidiaries taken as a whole or change (or make a request to any
taxing authority to change) any material aspect of its method of
accounting for tax purposes;
(o) subject to Section 6.1(q) below, pay, discharge or satisfy
any liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of
liabilities or obligations reflected or reserved against in, or
contemplated by, the consolidated financial statements (or notes
thereof) of the Company and its Subsidiaries or incurred in the
ordinary course of business consistent with past practice;
(p) except as otherwise permitted by paragraph (i) or as set
forth on Schedule 6.1(p) of the Company Disclosure Schedule, settle
or compromise any pending or threatened suit, action, or proceeding;
(q) enter into any agreement or understanding, whether oral
or written, with any Halmos Entity or Halmos Assign (as each such
term is defined in Section 7.3(c)); except for agreements or
understandings in the ordinary course necessary for the continued
defense or prosecution of any such pending litigation matters set
forth in Schedule 4.11 of the Company Disclosure Schedule or as
disclosed in the Company SEC Documents; or
(r) take, authorize any of, or commit or agree to take any of,
the foregoing actions except as otherwise expressly permitted by this
Agreement.
SECTION 6.2 Stockholder Meeting; Proxy Material. The Company
shall cause a meeting of its stockholders (including any postponements or
adjournments thereto, the "Company Stockholder Meeting") to be duly called
and held as soon as reasonably practicable for the purpose of voting on the
approval and adoption of this Agreement and the Merger. The Board of
Directors of the Company shall recommend approval and adoption of this
Agreement and the Merger by the Company's stockholders; provided that the
Company's Board of Directors may withdraw, modify or change such
recommendation if it has determined, based upon the advice of outside legal
counsel to the Company, that such recommendation would be reasonably likely
to be inconsistent with the Board of Directors' fiduciary duties under
applicable law. The Company will (i) as promptly as practicable following
the date of this Agreement, prepare and file with the SEC, will use its
reasonable efforts to have cleared by the SEC and thereafter mail to its
stockholders as promptly as practicable, a proxy statement that will be the
same proxy statement/prospectus contained in the Form S-4 Registration
Statement (as hereinafter defined) and a form of proxy, in connection with
the vote of the Company's stockholders with respect to the Merger (such
proxy statement/prospectus, together with any amendments thereof or
supplements thereto, in each case in the form or forms mailed to the
Company's stockholders, is herein called the "Company Proxy Statement"),
(ii) use its reasonable efforts to obtain the necessary approvals by its
stockholders of this Agreement and the transactions contemplated hereby
and (iii) otherwise comply in all material respects with all legal
requirements applicable to such meeting. The Company may, if it withdraws,
modifies or changes its recommendation in accordance with this Section
6.2, delay the filing or mailing, as the case may be, of the Company Proxy
Statement or the holding of the Company Stockholder Meeting, in each case
only to the extent necessary to revise the Company Proxy Statement to
reflect such withdrawal, modification or change and, in the case of the
Company Stockholder Meeting, to provide the minimum notice thereof required
under applicable law, the Company Certificate of Incorporation or the
Company By-laws. In addition, the Company will upon reasonable advance
notice provide Buyer with all financial and other data regarding the
Company as may be reasonably requested by Buyer in connection with the
proxy statements and registration statements on Form S-4 relating to the
transactions described in Schedule 6.2 of the Buyer Disclosure Schedule.
The Company acknowledges that such proxy statements and registration
statements may be required to include such data concerning the Company, and
that the Company Proxy Statement may be required to contain certain
financial and other data concerning the other parties to such transactions.
SECTION 6.3 Access to Information; Confidential Agreement. (a)
From the date hereof until the Effective Time, the Company will give Buyer,
its counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to the
offices, properties, books and records of the Company and the
Subsidiaries of the Company, will furnish to Buyer, its counsel, financial
advisors, auditors and other authorized representatives such financial and
operating data and other information as such Persons may reasonably request
and will instruct the Company's employees, counsel and financial advisors
to cooperate with Buyer in its investigation of the business of the Company
and the Subsidiaries of the Company; provided that all requests for
information, to visit plants or facilities or to interview the Company's
employees or agents should be directed to and coordinated with an executive
officer of the Company; and provided further that no investigation
pursuant to this Section 6.3 shall affect any representation or warranty
given by the Company to Buyer hereunder and any information received by
Buyer or its representatives shall remain subject to the Confidentiality
Agreement dated February 13, 1996 between Buyer and the Company (the
"Confidentiality Agreement").
(b) The parties hereto agree that the Confidentiality Agreement
shall be hereby amended to provide that any provision therein which in any
manner limits, restricts or prohibits the voting or acquisition of Shares
by Buyer or any of its affiliates or the representation of Buyer's
designees on the Company's Board of Directors or which in any manner would
be inconsistent with this Agreement or the transactions contemplated hereby
shall be amended as of the date hereof to permit the acquisition of Shares
pursuant to the Merger, the voting of Shares at the Company Stockholder
Meeting or to otherwise effect the transactions contemplated hereby. The
Confidentiality Agreement shall otherwise remain in full force and effect.
SECTION 6.4 No Solicitation. (a) From the date of this
Agreement until the termination of this Agreement in accordance with its
terms, the Company and its Subsidiaries will not, and the Company will use
its reasonable best efforts to ensure that the respective officers,
directors and employees of the Company and its Subsidiaries, and any
investment banker, financial advisor, attorney, accountant or other
representative or agent retained by it or any of its Subsidiaries, will not
(i) solicit, initiate or encourage (including by way of furnishing
information) any Acquisition Proposal (as defined below) or (ii)
participate or engage in negotiations or discussions, or disclose any
nonpublic information relating to the Company or any Subsidiary of the
Company or afford access to the properties, books or records of the Company
or any Subsidiary of the Company, regarding any Acquisition Proposal;
provided that, if the Company's Board of Directors determines, based upon
the advice of outside legal counsel to the Company, that the failure to
engage in such negotiations or discussions or provide such information
would be reasonably likely to be inconsistent with the Board of Directors'
fiduciary duties under applicable law, the Company may in response to an
Acquisition Proposal and subject to compliance with Section 6.4(c), furnish
information with respect to the Company and its Subsidiaries pursuant to a
confidentiality agreement and participate in negotiations regarding such
Acquisition Proposal. For purposes of this Agreement, "Acquisition
Proposal" means any inquiry, offer or proposal from any person relating to
any direct or indirect acquisition or purchase of a substantial portion of
the assets of the Company or any of its Subsidiaries or of over 20% of any
class of equity securities of the equity interest of the Company or any of
its Subsidiaries, any tender offer or exchange offer that if consummated
would result in any person beneficially owning 20% or more equity interest
of any class of equity securities of the Company or any of its
Subsidiaries, any merger, consolidation, business combination, sale of
substantially all the assets, recapitalization, liquidation, dissolution or
similar transaction involving the Company or any of its Subsidiaries, other
than the transactions contemplated by this Agreement. Nothing contained in
this Section 6.4 shall prohibit the Company or its Board of Directors from
taking and disclosing to the Company's stockholders a position with respect
to a tender or exchange offer by a third party pursuant to Rules 14d-9 and
14e-2(a) promulgated under the Exchange Act or from making such disclosure
to the Company's stockholders or making such disclosure as may be required
by applicable law; provided, however, neither the Company nor its Board of
Directors nor any committee thereof shall, except as permitted by Section
6.2 or 6.4(b), withdraw, modify or change, or propose to withdraw, modify
or change, its recommendation of approval and adoption of this Agreement
and the Merger or approve or recommend, or propose to approve or recommend,
an Acquisition Proposal.
(b) Except as set forth in this Section 6.2 or Section 6.4(b),
neither the Company nor the Board of Directors of the Company nor any
committee thereof shall (x) withdraw, modify or change, or propose to
withdraw, modify or change, in a manner adverse to Buyer, the
recommendation by such Board of Directors or such committee of the
approval and adoption of this Agreement and the Merger, (y) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or
(z) cause the Company to enter into any agreement with respect to any
Acquisition Proposal. Notwithstanding the foregoing, in the event that the
Board of Directors of the Company determines, based upon the advice of
outside legal counsel to the Company, that the failure to take any of the
actions contemplated by the preceding sentence would be reasonably likely
to be inconsistent with the Board of Directors' fiduciary duties, the Board
of Directors of the Company may withdraw, modify or change its
recommendation of approval and adoption of this Agreement and the Merger,
approve or recommend a Superior Proposal or cause the Company to enter into
an agreement with respect to a Superior Proposal; but in the case of
approving, recommending or causing the Company to enter into an agreement
with respect to a Superior Proposal, only at a time that is after the
second day following Buyer's receipt of written notice (a "Notice of
Superior Proposal") advising Buyer that the Board of Directors of the
Company has received a Superior Proposal, specifying the material terms and
conditions of such Superior Proposal and identifying the person making such
Superior Proposal. In addition, if the Company enters into an agreement
with respect to a Superior Proposal and this Agreement is terminated
pursuant to Section 10.1(vi)(B) or Section 10.1(vii), the Company shall
promptly pay, or cause to be paid, to Buyer, the Buyers' Expenses (as such
term is defined in Section 12.4). For purposes of this Agreement, a
"Superior Proposal" means any bona fide Acquisition Proposal to acquire,
directly or indirectly, for consideration consisting of cash and/or
securities, more than 50% of the shares of the Company common stock 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 its good faith judgment (based on the advice of a financial advisor of
nationally recognized reputation) to be more favorable to the Company's
stockholders than the Merger.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 6.4, the Company shall notify Buyer
in writing within one business day of any request for information or of any
Acquisition Proposal, or any inquiry with respect to or which would
reasonably be expected to result in an Acquisition Proposal, the material
terms and conditions of such request, Acquisition Proposal or inquiry. The
Company will use it reasonable best efforts to keep Buyer informed of the
status and details (including amendments or proposed amendments) of any
such request, Acquisition Proposal or inquiry.
SECTION 6.5 Conveyance Taxes. The Company shall timely pay any
real property transfer or gains, sales, use, transfer, value added, stock
transfer and stamp taxes, any transfer, recording, registration and other
fees, and any similar taxes (collectively, the "Conveyance Taxes") which
become payable prior to the Effective Time in connection with the
transactions contemplated hereunder that are required to be paid in
connection therewith.
ARTICLE VII
COVENANTS OF BUYER
Buyer agrees that:
SECTION 7.1 Obligations of Merger Subsidiary.
Buyer will take all action necessary to cause Merger
Subsidiary to perform its obligations under this Agreement and to
consummate the Merger on the terms and conditions set forth in this
Agreement.
SECTION 7.2 Voting of Shares. Merger Subsidiary shall and Buyer
shall cause Merger Subsidiary to vote all Shares, if any, beneficially
owned by Merger Subsidiary or its affiliates in favor of adoption and
approval of the Merger and this Agreement at the Company Stockholder
Meeting.
SECTION 7.3 Director and Officer Liability. (a) Buyer, Merger
Subsidiary and the Company agree that all rights to indemnification and all
limitations on liability existing in favor of any Indemnitee (as defined
below) as provided in the Company Certificate of Incorporation, Company
By-laws or any Indemnity Agreement (as hereinafter defined) shall survive
the Merger and continue in full force and effect. To the extent permitted
by (i) the DGCL, (ii) the Company's Certificate of Incorporation and the
Company's By-laws or (iii) any agreement providing for indemnification by
the Company or any Subsidiary of the Company of any Indemnitee (A) in
effect on the date of this Agreement (or entered into thereafter in
accordance with the provisions of Section 6.1 of this Agreement) and listed
on Schedule 7.3 of the Company Disclosure Schedule (unless entered into
after the date hereof in accordance with Section 6.1) or (B) in effect on
the date of this Agreement and listed in the Company SEC Documents (each,
an "Indemnity Agreement"), advancement of Expenses (as hereinafter
defined) pursuant to this Section 7.3 shall be mandatory rather than
permissive and the Surviving Corporation shall advance Costs (as defined
in Section 7.3(b) hereof) in connection with such indemnification. Buyer
shall, and shall cause the Surviving Corporation to, expressly assume and
honor in accordance with their terms all Indemnity Agreements.
(b) In addition to the other rights provided for in this
Section 7.3 and not in limitation thereof (but without in any way limiting
or modifying the obligations of any insurance carrier contemplated by
Section 7.3(d)), for ten years from and after the Effective Time, Buyer
shall, and shall cause the Surviving Corporation to, to the fullest extent
permitted by applicable law, (i) indemnify and hold harmless the
individuals who on or prior to the Effective Time were officers, directors
or employees of the Company or any of its Subsidiaries, and the heirs,
executors, trustees, fiduciaries and administrators of such officers,
directors or employees (collectively, the "Indemnitees," which term shall
not include any Halmos Entity or other Person described or referred to in
Section 7.3(c) hereof, even if any such Halmos Entity or other Person is or
was an officer, director or employee of the Company) against all losses,
Expenses (as hereinafter defined), claims, damages, liabilities, judg-
ments, or amounts paid in settlement (collectively, "Costs") in respect to
any threatened, pending or completed claim, action, suit or proceeding,
whether criminal, civil, administrative or investigative based on, or
arising out of or relating to the fact that such person is or was a
director, officer or employee of the Company or any of its Subsidiaries and
arising out of acts or omissions occurring on or prior to the Effective
Time (including, without limitation, in respect of acts or omissions in
connection with this Agreement and the transactions contemplated hereby)
(an "Indemnifiable Claim") and (ii) advance to such Indemnitees all
Expenses incurred in connection with any Indemnifiable Claim promptly after
receipt of reasonably detailed statements therefor; provided, that, except
as otherwise provided pursuant to any Indemnity Agreement, the person to
whom Expenses are to be advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled to
indemnification from Buyer or the Surviving Corporation. In the event any
Indemnifiable Claim is asserted or made within such ten year period, all
rights to indemnification and advancement of Expenses in respect of any
such Indemnifiable Claim shall continue until such Indemnifiable Claim is
disposed of or all judgments, orders, decrees or other rulings in
connection with such Indemnifiable Claim are fully satisfied; provided,
however, that Buyer shall not be liable for any settlement effected without
its written consent (which consent shall not be unreasonably withheld or
delayed). Except as otherwise may be provided pursuant to any Indemnity
Agreement, the Indemnitees as a group may retain only one law firm with
respect to each related matter except to the extent there is, in the
opinion of counsel to an Indemnitee, under applicable standards of
professional conduct, a conflict on any significant issue between positions
of any two or more Indemnitees; provided, that, any law firm or firms so
retained shall be reasonably acceptable to Buyer. For the purposes of this
Section 7.3, "Expenses" shall include reasonable attorneys' fees and all
other costs, charges and expenses paid or incurred in connection with
investigating, defending, being a witness in or participating in (including
on appeal), or preparing to defend, be a witness in or participate in any
Indemnifiable Claim.
(c) Notwithstanding the foregoing, with respect to any
Indemnifiable Claim commenced or threatened by or on behalf of, (i) Peter
Halmos, Steven Halmos, Halmos Trading and Investment Company, The Halmos
Foundation, Creditline Corporation, Continuity Marketing Corporation and
High Plains Capital Corporation (collectively, the "Halmos Entities"), (ii)
any heirs, executors, successors, family members, assigns and any other
Person claiming by, through or because of, a Halmos Entity ("Halmos
Assign"), (iii) a Person that directly or indirectly, whether through the
ownership of voting securities or otherwise, controls or is controlled by
or is under common control with any Halmos Entity, (iv) any Person in which
any Halmos Entity or Halmos Assign has a 10% ownership interest, (v) any
employee or agent as of the date of this Agreement of any Halmos Entity or
(vi) any Person acting at the direct or indirect request of any Halmos
Entity or Halmos Assign, against any Indemnitee asserted at any time after
ten years after the Effective Time, Buyer shall, and shall cause the
Surviving Corporation to, indemnify and hold harmless and advance Expenses
to such Indemnitees to the extent provided in Section 7.3(b), but without
any time limit on the period for which the obligation of Buyer pursuant to
this Section 7.3(c) shall be in effect.
(d) For three years from the Effective Time, Buyer will, and
will cause the Surviving Corporation to maintain in effect the Company's
current directors' and officers' liability insurance covering those Persons
who are currently covered by the Company's directors' and officers'
liability insurance policy (a copy of which has been made available to
Buyer), or Buyer may substitute therefor policies for directors' and
officers' liability insurance covering such Persons for at least the same
coverage with respect to matters occurring prior to the Effective Time;
provided, however, that in no event shall Buyer be required to expend in
any one year an amount in excess of $887,040 (i.e., the amount that is 200%
of the annual premiums currently paid by the Company for such insurance);
provided, further, that if the annual premiums of such insurance coverage
exceed such amount, Buyer shall be obligated to cause the Surviving
Corporation to obtain a policy with the greatest coverage available for a
cost not exceeding such amount. In the event that any Indemnitee is
entitled to coverage under an officers' and directors' liability insurance
policy pursuant to this Section 7.3(d) and such policy has lapsed,
terminated, been repudiated or is otherwise in breach or default as a
result of Buyer's failure to maintain and fulfill its obligations pursuant
to such policy as provided in this Section 7.3(d), Buyer shall, and shall
cause the Surviving Corporation to pay to the Indemnitee such amounts and
provide any other coverage or benefits as the Indemnitee shall have
received pursuant to such policy. Buyer agrees that, should the Surviving
Corporation fail to comply with the obligations of this Section 7.3, Buyer
shall be responsible therefor.
(e) Notwithstanding any other provisions hereof, the
obligations of the Company, the Surviving Corporation and Buyer contained
in this Section 7.3 shall be binding upon the successors and assigns of
Buyer and the Surviving Corporation. In the event the Company or the
Surviving Corporation or any of their respective successors or assigns (i)
consolidates with or merges into any other Person or (ii) transfers all or
substantially all of its properties or assets to any Person, then, and in
each case, proper provision shall be made so that successors and assigns of
the Company or the Surviving Corporation, as the case may be, honor the
indemnification obligations set forth in this Section 7.3.
(f) The obligations of the Company, the Surviving Corporation,
and Buyer under this Section 7.3 shall not be terminated or modified in
such a manner as to adversely affect any Indemnitee to whom this Section
7.3 applies without the consent of such affected Indemnitee (it being
expressly agreed that the Indemnitees to whom this Section 7.3 applies
shall be third party beneficiaries of this Section 7.3).
(g) Buyer shall, and shall cause the Surviving Corporation to,
advance all Expenses to any Indemnitee incurred by enforcing the indemnity
or other obligations provided for in this Section 7.3.
ARTICLE VIII
COVENANTS OF BUYER, MERGER SUBSIDIARY
AND THE COMPANY
The parties hereto agree that:
SECTION 8.1 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each party will use its reasonable best
efforts to take, or cause to be taken, all actions and to do, or cause to
be done, all things necessary, proper or advisable under applicable laws
and regulations to consummate the transactions contemplated by this
Agreement.
SECTION 8.2 Certain Filings. The Company and Buyer shall
cooperate with one another (a) in connection with the preparation of the
Proxy Statement and the Form S-4 Registration Statement, and (b) in
determining whether any action by or in respect of, or filing with, any
Governmental Entity 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 Company Proxy Statement or the Form S-4
Registration Statement and seeking timely to obtain any such actions,
consents, approvals or waivers.
SECTION 8.3 Public Announcements. Buyer, Merger Subsidiary and
the Company will consult with each other before issuing any press release
or making any public statement with respect to this Agreement and the
transactions contemplated hereby and, except as may be required by
applicable law or any listing agreement with any national securities
exchange or foreign securities exchange, as determined by Buyer, Merger
Subsidiary or the Company, as the case may be, will not issue any such
press release or make any such public statement prior to such consultation.
SECTION 8.4 Conveyance Taxes. Buyer and the Company shall
cooperate in the preparation, execution and filing of all Tax Returns,
questionnaires, applications, or other documents regarding any Conveyance
Taxes which become payable in connection with the transactions contemplated
hereunder that are required to be filed on or before the Effective Time.
SECTION 8.5 Further Assurances. At and after the Effective
Time, the officers and directors of the Surviving Corporation will be
authorized to execute and deliver, in the name and on behalf of the Company
or Merger Subsidiary, any deeds, bills of sale, assignments or assurances
and to take and do, in the name and on behalf of the Company or Merger
Subsidiary, any other actions and things to vest, perfect or confirm of
record or otherwise in the Surviving Corporation any and all right, title
and interest in, to and under any of the rights, properties or assets of
the Company acquired or to be acquired by the Surviving Corporation as a
result of, or in connection with, the Merger.
SECTION 8.6 Employee Matters. (a) For a period of one year
immediately following the Effective Time, Buyer agrees to cause the
Surviving Corporation and its Subsidiaries to provide to all active
employees of the Company as of the Effective Time who continue to be
employed by the Company ("Continuing Employees") coverage under group
medical, dental, 401(k) savings, disability insurance, life insurance,
accidental death and disability, and vacation plans or arrangements which
are, in the aggregate, substantially similar to the Plans providing such
benefits to the employees immediately prior to the Effective Time.
(b) Buyer shall, and shall cause its Subsidiaries to, honor in
accordance with their terms all agreements, contracts, arrangements,
commitments and understandings described in Schedule 8.6 of the Company
Disclosure Schedule.
(c) For a period of one year immediately following the Closing
Date, Buyer agrees to cause the Surviving Corporation and its Subsidiaries
to provide to all active employees of the Company at the Closing Date which
may be affected by any reduction in force subsequent to the Closing Date
the benefits set forth in the Severance Policy adopted by the Board of
Directors of the Company in connection with the July 1995 restructuring and
applied in the September 1995 and December 1995 restructurings and adopted
by resolution for any reductions in force in 1996 at the February 6, 1996
meeting of the Board of Directors.
SECTION 8.7 Company Proxy Statement and Registration Statement.
Buyer will, as promptly as practicable, prepare and, following receipt of
notification from the SEC that it has no further comments on the Company
Proxy Statement, file with the SEC a registration statement on Form S-4
(the "Form S-4 Registration Statement"), containing the Company Proxy
Statement, and the prospectus in connection with the registration under
the Securities Act of Buyer Common Shares issuable upon conversion of the
Shares and the other transactions contemplated hereby. Buyer will cooperate
with the Company in the preparation and filing of the Company Proxy
Statement and will provide the Company with all financial and other data
concerning Buyer (including, if required, pro forma financial statements
and financial and other data regarding the other parties to the
transactions described in Schedule 6.2 of the Buyer Disclosure Schedule) as
is necessary in order for the Company to prepare the Company Proxy
Statement. Buyer and the Company will, and will cause their accountants and
lawyers to, use their best efforts to have or cause the Form S-4
Registration Statement declared effective as promptly as practicable,
including, without limitation, causing their accountants to deliver
necessary or required instruments such as opinions and certificates, and
will take any other action required or necessary to be taken under federal
or state securities laws or otherwise in connection with the registration
process.
SECTION 8.8 Tax-Free Reorganization Treatment. The Company,
Buyer and Merger Subsidiary shall execute and deliver to Skadden, Arps,
Slate, Meagher & Flom, counsel to the Company, a certificate substantially
in the form attached hereto as Exhibit 2 or Exhibit 3, as the case may be,
(the "Buyer Tax Certificate" and the "Company Tax Certificate", as the case
may be) at such time or times as reasonably requested by such law firm in
connection with its delivery of an opinion with respect to the transactions
contemplated hereby, and shall provide a copy thereof to Buyer and the
Company. Prior to the Effective Time, none of the Company, Buyer and Merger
Subsidiary shall take or cause to be taken any action which would cause to
be untrue (or fail to take or cause not to be taken any action which would
cause to be true) any of the information, representations or covenants in
Exhibit 2 or Exhibit 3, as the case may be.
SECTION 8.9 Notification of Certain Matters. The Company shall
give prompt notice to Buyer and Merger Subsidiary, and Buyer and Merger
Subsidiary shall give prompt notice to the Company, of (i) the occurrence
or nonoccurrence of any event the occurrence or nonoccurrence of which
would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to
the Effective Time, (ii) any material failure of the Company, Buyer or
Merger Subsidiary, as the case may be, to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with
or satisfied by it hereunder, (iii) any notice of, or other communication
relating to, a default or event which, with notice or lapse of time or
both, would become a default, received by it or any of its subsidiaries
subsequent to the date of this Agreement and prior to the Effective Time,
under any material contract or agreement, (iv) any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions
contemplated by this Agreement, or (v) any Material Adverse Effect, other
than changes resulting from general economic conditions; provided, however,
that the delivery of any notice pursuant to this Section 8.9 shall not
cure such breach or noncompliance or limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
SECTION 8.10 Blue Sky Permits. Buyer shall use its best efforts
to obtain, prior to the effective date of the Form S-4 Registration
Statement, all necessary state securities laws or "blue sky" permits and
approvals required to carry out the transactions contemplated by this
Agreement and the Merger, and will pay all expenses incident thereto.
SECTION 8.11 NYSE Listing. Buyer shall use its best efforts to
cause the shares of Buyer Common Stock constituting the Merger
Consideration to be listed on the NYSE, subject to notice of official
issuance thereof.
SECTION 8.12 Pooling Letter. (a) Buyer shall use its best
efforts to cause Ernst & Young LLP, its independent auditors, to deliver to
Buyer a letter to the effect that pooling of interests accounting (under
Accounting Principles Board Opinion No. 16) is appropriate for the Merger,
provided that the Merger is consummated in accordance with the terms and
conditions of this Agreement, and the Company shall use its best efforts to
cause its independent auditors, Price Waterhouse LLP, to cooperate fully
with Ernst & Young LLP (including, without limitation, by delivering to the
Company a letter substantially similar to Ernst & Young LLP's letter to
Buyer) in connection with the delivery to Buyer of such letter.
(b) The Company shall use its best efforts to cause Price
Waterhouse LLP to deliver to the Company a letter to the effect that
pooling of interests accounting (under Accounting Principles Board Opinion
No. 16) is appropriate for the Merger, provided that the Merger is
consummated in accordance with the terms and conditions of this Agreement,
and Buyer shall use its best efforts to cause Ernst & Young LLP to
cooperate fully with Price Waterhouse LLP (including, without limitation,
by delivering to Buyer a letter substantially similar to Price Waterhouse
LLP's letter to the Company) in connection with the delivery to the Company
of such letter.
SECTION 8.13 Pooling. The Company and Buyer each agrees that it
will not knowingly take any action which could prevent the Merger from
being accounted for as a pooling of interests for accounting purposes
(under Accounting Principles Board Opinion No. 16) and the Company will
bring to the attention of Buyer, and Buyer will bring to the attention of
the Company, any actions, or agreements or understandings, whether written
or oral, that could be reasonably likely to prevent Buyer from accounting
for the Merger as a pooling of interests. The Company will use its
reasonable best efforts to inform all Company Affiliates and other relevant
employees as to those actions that should or should not be taken by such
persons so that the Merger will be accounted for as a pooling of interests.
SECTION 8.14 SEC Filings. Each of Buyer and the Company shall
promptly provide the other party (or its counsel) with copies of all
filings made by the other party or any of its Subsidiaries with the SEC or
any other state or federal Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
SECTION 8.15 Affiliate Agreements. Buyer and Merger Subsidiary
shall have received the Affiliate Letters from the Company Affiliates.
SECTION 8.16 Affiliates. Promptly upon the Company obtaining
knowledge of persons who, to the best knowledge of the Company, following
the date of this Agreement until the Effective Time, become "affiliates" of
the Company for purposes of Rule 145 of the Securities Act, the Company
shall use its reasonable best efforts to identify any such person in
writing to Buyer, and will use its reasonable best efforts to cause such
persons prior to the mailing of the Company Proxy Statement, or if
thereafter as soon as reasonably practicable, to deliver to Buyer an
Affiliate Letter; provided, however, that the Company will not
affirmatively, without the prior written consent of Buyer, take any action,
by hiring or appointing a new officer or director or otherwise, so as to
cause any person to become an "affiliate" unless such person executes an
Affiliate Letter prior thereto.
ARTICLE IX
CONDITIONS TO THE MERGER
SECTION 9.1 Conditions to the Obligations of Each Party. The
obligations of the Company, Buyer and Merger Subsidiary to consummate the
Merger are subject to the satisfaction on or prior to the Effective Time of
the following conditions, except to the extent permitted by applicable law,
that such conditions may be waived:
(i) Stockholder Approval. The Merger shall have been duly
approved by a majority of the votes cast by stockholders of the
Company entitled to vote thereon in accordance with applicable law
and the Company Certificate of Incorporation and Company By-laws.
(ii) Listing of Buyer Common Stock. The shares of Buyer
Common Stock issuable in accordance with the Merger shall have been
approved for listing on the NYSE, subject to official notice of
issuance.
(iii) Registration Statement. The Form S-4 Registration
Statement shall have become effective in accordance with the
provisions of the Securities Act, and no order suspending such
effectiveness shall have been issued and remain in effect.
(iv) HSR Act. Any applicable waiting period under the HSR
Act relating to the Merger shall have expired.
(v) No Injunction. No provision of any applicable
law or regulation and no judgment, injunction, order or decree shall
prohibit the consummation of the Merger or any transactions contem-
plated hereby.
(vi) Pooling. Buyer shall have received a letter from
Ernst & Young LLP and the Company shall have received a letter from
Price Waterhouse LLP each to the effect that pooling of interests
accounting (under Accounting Principles Board Opinion No. 16) is
appropriate for the Merger, provided that the Merger is consummated
in accordance with the terms of this Agreement; provided, further,
that the foregoing shall not be a condition to the Company's
obligations if either Price Waterhouse LLP or Ernst & Young LLP is
unable to deliver such letter as a result of the Company having
breached the Company's representation set forth in Section 4.21 or
the Company's covenants set forth in Sections 8.12, 8.13 or 8.16 or
the Company or any of its affiliates having taken or failed to take
any other action, in any such case that would prevent, in the opinion
of such firm, Buyer from accounting for the Merger as a pooling of
interests.
SECTION 9.2 Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Merger are subject to the
satisfaction on or prior to the Effective Time of the following conditions,
except to the extent permitted by applicable law, that such conditions may
be waived:
(i) Performance of Obligations Buyer and Merger
Subsidiary. Each of Buyer and Merger Subsidiary will have performed
in all material respects its agreements and covenants contained in or
contemplated by this Agreement which are required to be performed by
it at or prior to the Effective Time.
(ii) Representations and Warranties. The representations
and warranties of Buyer and Merger Subsidiary set forth in this
Agreement shall be true and correct in all material respects (i) on
and as of the date hereof and (ii) on and as of the Closing Date with
the same effect as thought such representations and warranties had
been made on and as of the Closing Date (except for representations
and warranties that expressly speak only as of a specific date or
time which need only be true and correct as of such date and time).
(iii) Closing Certificate. The Company shall have
received a certificate signed by the chief executive officer of
Buyer, dated the Closing Date, to the effect that, to the best of
such officer's knowledge, the conditions set forth in Section 9.2(i)
and 9.2(ii) hereof have been satisfied.
(iv) Tax Opinion. The Company shall have received an
opinion of Skadden, Arps, Slate, Meagher & Flom, counsel to the
Company, in form and substance reasonably satisfactory to the
Company, dated as of the Effective Time, substantially to the effect
that on the basis of facts, representations and assumptions set forth
in such opinion which are consistent with the state of facts then
existing, the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code, and, accordingly, for United
States federal income tax purposes, that:
(A) no gain or loss will be recognized by the
Company, Buyer or Merger Subsidiary as a
result of the Merger;
(B) no gain or loss will be recognized by a stockholder of
the Company whose Shares are exchanged solely for Buyer
Common Stock pursuant to the Merger (except with respect
to cash received by a holder of Shares in lieu of a
fractional share interest in Buyer Common Stock);
(C) the tax basis of the Buyer Common Stock received by a
holder of Shares in the Merger will be the same as the
tax basis of the Shares surrendered in exchange therefor
(reduced by any amount allocable to a fractional share
interest in Buyer Common Stock for which cash is
received); and
(D) the holding period of the shares of Buyer
Common Stock received by a holder of
Shares in the Merger will include the
period during which such Shares surren-
dered in exchange therefor were held,
provided that such Shares were held as
capital assets at the Effective Time of
the Merger.
In rendering such opinion, such firm may require and rely upon
representations contained in the Buyer Tax Certificate, the Company Tax
Certificate and such other certificates from such other persons as such
firm may require.
SECTION 9.3 Conditions to the Obligations of Buyer and Merger
Subsidiary. The obligations of Buyer and Merger Subsidiary to consummate
the Merger are subject to the satisfaction on or prior to the Effective
Time of the following conditions, except to the extent permitted by
applicable law, that such conditions may be waived:
(i) Performance of Obligations the Company. The Company
will have performed in all material respects its agreements and
covenants contained in or contemplated by this Agreement which are
required to be performed by it at or prior to the Effective Time.
(ii) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement shall be
true and correct in all material respects (i) on and as of the date
hereof and (ii) on and as of the Closing Date with the same effect as
though such representations and warranties had been made on and as of
the Closing Date (except for representations and warranties that
expressly speak only as of a specific date or time which need only be
true and correct as of such date and time).
(iii) Closing Certificate. Buyer and Merger Subsidiary
shall have received a certificate signed by the chief executive
officer of the Company, dated the Closing Date, to the effect that,
to the best of such officer's knowledge, the conditions set forth in
Section 9.3(i) and 9.3(ii) hereof have been satisfied.
(iv) Affiliate Agreements. Each Company
Affiliate shall have performed his or its
respective obligations under the applicable Affiliate Letter.
ARTICLE X
TERMINATION
SECTION 10.1 Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
Company):
(i) by mutual written consent of the Company
and Buyer;
(ii) by either the Company or Buyer, if the Merger has not been
consummated by December 31, 1996 (as such date may be extended by
mutual agreement or pursuant to the proviso to this sentence, the
"Outside Termination Date"); provided, however, that the right to
terminate this Agreement under this paragraph 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
to meet the date requirements of this paragraph;
(iii) by either the Company or Buyer, if there shall be any law
or regulation that makes consummation of the Merger illegal or if any
judgment, injunction, order or decree enjoining Buyer or the Company
from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and nonappealable;
(iv) by the Company if (A) there shall have been a breach of
any representation or warranty on the part of Buyer or Merger
Subsidiary set forth in this Agreement, or if any representation or
warranty of Buyer or Merger Subsidiary shall have become untrue, in
either case such that the condition set forth in Section 9.2(ii)
would be incapable of being satisfied by the Outside Termination Date
or (B) there shall have been a breach by Buyer or Merger Subsidiary
of any of their respective covenants or agreements hereunder having a
Material Adverse Effect on Buyer or materially adversely affecting
(or materially delaying) the consummation of the Merger, and Buyer or
Merger Subsidiary, as the case may be, has not cured such breach
within twenty business days after notice by the Company thereof;
(v) by Buyer and Merger Subsidiary if (A) there shall have been
a breach of any representation or warranty on the part of the Company
set forth in this Agreement, or if any representation or warranty of
the Company shall have become untrue, in either case such that the
condition set forth in Section 9.3(ii) would be incapable of being
satisfied by the Outside Termination Date or (B) there shall have
been a breach by the Company of its covenants or agreements hereunder
having a Material Adverse Effect on the Company or materially
adversely affecting (or materially delaying) the consummation of
the Merger, and the Company has not cured such breach within twenty
business days after notice by Buyer or Merger Subsidiary thereof;
(vi) by Buyer or Merger Subsidiary, if (A) the Board of
Directors of the Company or any committee thereof shall have
withdrawn, modified or changed in a manner adverse to Buyer or Merger
Subsidiary its recommendation of the Merger or this Agreement or approved
or recommended a Superior Proposal or (B) the Company shall have entered
into a definitive agreement with respect to an Acquisition Proposal;
(vii) by the Company, upon entering into a definitive agreement
in accordance with Section 6.4(b), provided (x) it has complied with
all provisions of Section 6.4, including the notice provisions
therein, and (y) that it makes simultaneous payment of Buyer's
Expenses (as defined in Section 12.4); or
(viii) by Buyer, Merger Subsidiary or the Company, if the
Company's stockholders do not approve the Merger at the Company
Stockholder Meeting.
The party desiring to terminate this Agreement pursuant to this Section
10.1 (other than with respect to Section 10.1(i)) shall give written notice
of such termination to the other party.
SECTION 10.2 Effect of Termination. If this Agreement is
terminated pursuant to Section 10.1 hereof, this Agreement shall become
void and of no effect with no liability on the part of any party hereto;
provided that (i) the agreements contained in Sections 4.16, 5.6, 10.2 and
12.4, hereof shall survive the termination hereof; (ii) the Confidentiality
Agreement shall remain in full force and effect and Section 6.3(b) hereof
shall have no binding effect whatsoever; and (iii) nothing contained in
this Section 10.2 shall relieve any party from liability for any breach of
this Agreement.
ARTICLE XI
DEFINED TERMS
For the purposes of this Agreement, the following terms shall
have the following respective meanings:
"Active Subsidiary" shall have the meaning set
forth in Section 4.6(a).
"Affiliate Letter" shall have the meaning set
forth in the Introduction.
"Agreement" shall have the meaning set forth
in the Introduction.
"Acquisition Proposal" shall have the meaning
set forth in Section 6.4.(a).
"Affiliates" shall have the meaning set forth
in Section 8.9.
"Average Stock Price" shall have the meaning
set forth in Section 1.2(a).
"blue sky" shall have the meaning set forth in
Section 8.10.
"Buyer" shall have the meaning set forth in
the Introduction.
"Buyer Certificates" shall have the meaning
set forth in Section 1.3(a).
"Buyer Common Stock" shall have the meaning
set forth in the Introduction.
"Buyer Disclosure Schedule" shall have the
meaning set forth in Section 5.1.
"Buyer Preferred Stock" shall have the meaning
set forth in Section 5.9.
"Buyer's Expenses" shall have the meaning set
forth in Section 12.4(d).
"Buyer SEC Documents" shall have the meaning
set forth in Section 5.12.
"Buyer Securities" shall have the meaning set
forth in Section 5.9.
"Buyer Tax Certificate" shall have the meaning
set forth in Section 8.8.
"Buyer's Accountants" shall have the meaning
set forth in Section 8.12(a).
"Certificate of Merger" shall have the meaning
set forth in Section 1.1(b).
"Closing" shall have the meaning set forth in
Section 2.1.
"Closing Date" shall have the meaning set
forth in Section 2.1.
"Code" shall have the meaning set forth in the
Introduction.
"Company" shall have the meaning set forth in
the Introduction.
"Company Affiliate" shall have the meaning set
forth in Section the Introduction.
"Company Affiliate Letter" shall have the
meaning set forth in the Introduction.
"Company By-laws" shall have the meaning set
forth Section 3.2.
"Company Certificate of Incorporation" shall
have the meaning set forth in Section 3.1.
"Company Disclosure Schedule" shall have the
meaning set forth in Section 4.1.
"Company Proxy Statement" shall have the mean-
ing set forth in Section 6.2(i).
"Company SEC Documents" shall have the meaning
set forth in Section 4.7.
"Company Securities" shall have the meaning
set forth in Section 4.5.
"Company Stock Plans" shall have the meaning
set forth in Section 1.10.
"Company Stockholder Meeting" shall have the
meaning set forth in Section 6.2.
"Company Tax Certificate" shall have the mean-
ing set forth in Section 8.8.
"Company's Accountants" shall have the meaning
set forth in Section 8.12(a).
"Company's Expenses" shall have the meaning
set forth in Section 12.4(e).
"Confidentiality Agreement" shall have the
meaning set forth in Section 6.3(a).
"Continuing Employees" shall have the meaning
set forth in Section 8.6(a).
"Conversion Number" shall have the meaning set
forth in Section 1.2(a).
"Conveyance Taxes" shall have the meaning set
forth in Section 6.5.
"Costs" shall have the meaning set forth in
Section 7.3(b).
"DGCL" shall have the meaning set forth in
Section 1.1(a).
"Effective Time" shall have the meaning set
forth in Section 1.1(b).
"employee pension benefit plan" shall have the meaning set
forth in Section 4.13(a).
"employee welfare benefit plan" shall have the meaning set
forth in Section 4.13(a).
"Environmental Law" shall have the meaning set
forth in Section 4.17(c).
"ERISA" shall have the meaning set forth in
Section 4.13(a).
"ERISA Affiliate" shall have the meaning set
forth in Section 4.13(a).
"ERISA Plans" shall have the meaning set forth
in Section 4.13(a).
"Exchange Act" shall have the meaning set
forth in Section 4.3.
"Exchange Agent" shall have the meaning set
forth in Section 1.3(a).
"Exchange Fund" shall have the meaning set
forth in Section 1.3(a).
"Expenses" shall have the meaning set forth in
Section 7.3(b).
"Form S-4 Registration Statement" shall have the meaning set
forth in Section 8.7.
"GAAP" shall have the meaning set forth in
Section 4.8.
"Governmental Entity" shall have the meaning
set forth in Section 4.3.
"Halmos Entities" shall have the meaning set
forth in Section 7.3(c)(i).
"Halmos Assign" shall have the meaning set
forth in Section 7.3(c)(iii).
"HSR Act" shall have the meaning set forth in
Section 4.3.
"Indemnifiable Claim" shall have the meaning
set forth in Section 7.3(b).
"Indemnitees" shall have the meaning set forth
in Section 7.3(b).
"Indemnity Agreement" shall have the meaning
set forth in Section 7.3(a).
"Intangible Property" shall have the meaning
set forth in Section 4.19(a).
"Licenses" shall have the meaning set forth in
Section 4.1.
"Lien" shall have the meaning set forth in
Section 4.4.
"Material Adverse Effect" shall have the mean-
ing set forth in Section 4.1.
"Material Contracts" shall have the meaning
set forth in Section 4.20.
"Measurement Period" shall have the meaning
set forth in Section 1.2(a).
"Merger" shall have the meaning set forth in
Section 1.1(a).
"Merger Consideration" shall have the meaning
set forth in Section 1.2(a).
"Merger Subsidiary" shall have the meaning set
forth in the Introduction.
"Notice of Superior Proposal" shall have the
meaning set forth in Section 6.4(b).
"NYSE" shall have the meaning set forth in
Section 1.2(a).
"Option" shall have the meaning set forth in
Section 1.10.
"Outside Termination Date" shall have the
meaning set forth in Section 10.1(ii).
"PBGC" shall have the meaning set forth in
Section 4.13(c).
"Person" shall have the meaning set forth in
Section 1.4.
"Plans" shall have the meaning set forth in
Section 4.13(a)
"Preferred Stock" shall have the meaning set
forth in Section 4.5.
"SafeCard" shall have the meaning set forth in
Section 4.20.
"SEC" shall have the meaning set forth in
Section 4.7.
"Secretary of State" shall have the meaning
set forth in Section 1.1(b).
"Securities Act" shall have the meaning set
forth in the Introduction.
"Share Certificates" shall have the meaning
set forth in Section 1.3(b).
"Shares" shall have the meaning set forth in
the Introduction.
"single employer" shall have the meaning set
forth in Section 4.13(a).
"Subsidiary" shall have the meaning set forth
in Section 4.6(a).
"Substitute Option" shall have the meaning set
forth in Section 1.10.
"Surviving Corporation" shall have the meaning
set forth in Section 1.1(a).
"Tax Return" shall have the meaning set forth
in Section 4.12(b)(ii).
"Taxes" shall have the meaning set forth in
Section 4.12(b)(i).
"Third Party" shall have the meaning set forth
in Section 12.4(e).
"Third Party Acquisition" shall have the mean-
ing set forth in Section 12.4(e).
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including
telecopy or similar writing) and shall be given,
if to Buyer or Merger Subsidiary, to:
CUC International, Inc.
707 Summer Street
Stamford, CT 06901
Telecopy: (203) 348-1982
Attention: Amy N. Lipton, Esq.
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telecopy: (212) 310-8007
Attention: Howard Chatzinoff, Esq.
if to the Company, to:
Ideon Group, Inc.
7596 Centurion Parkway
Jacksonville, Florida 32256
Telecopy: (904) 218-1850
Attention: Mr. Eugene Miller, Chairman
of the Board and Chief Executive Officer
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Telecopy: (212) 735-2000
Attention: Roger S. Aaron, Esq.
or such other address or telecopy number as such party may hereafter
specify for the purpose by notice to the other parties hereto. Each such
notice, request or other communication shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number
specified in this Section 11.1 and the appropriate telecopy confirmation is
received or (ii) if given by any other means, when delivered at the address
specified in this Section 12.1.
SECTION 12.2 Survival of Representations and Warranties. The
representations and warranties contained herein and in any certificate or
other writing delivered pursuant hereto shall not survive the Effective
Time or the termination of this Agreement. All covenants and agreements
contained herein which by their terms are to be performed in whole or in
part subsequent to the Effective Time shall survive the Merger in
accordance with their terms. Nothing contained in this Section 12.2 shall
relieve any party from liability for any willful breach of this Agreement.
SECTION 12.3 Amendments; No Waivers.
(a) Except as may otherwise be provided herein, any provision of this
Agreement may be amended or waived prior to the Effective Time if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company, Buyer and Merger Subsidiary or in the case of a
waiver, by the party against whom the waiver is to be effective; provided
that after the adoption of this Agreement by the stockholders of the
Company, no such amendment or waiver shall, without the further approval of
such stockholders, alter or change (i) the amount or kind of consideration
to be received in exchange for any shares of capital stock of the Company
or (ii) any of the terms or conditions of this Agreement if such alteration
or change could adversely affect the holders of any shares of capital stock
of the Company.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.
SECTION 12.4 Expenses. (a) Except as provided below in this
Section 12.4, all fees and expenses incurred in connection with the Merger,
this Agreement and the transactions contemplated by this Agreement shall be
paid by the party incurring such fees or expenses, whether or not the
Merger is consummated.
(b) The Company shall pay, or cause to be paid, in same day
funds to Buyer, Buyer's Expenses (as hereinafter defined), in the event
that the Company shall enter into a definitive agreement with respect to a
Superior Proposal and this Agreement shall be terminated pursuant to
Section 10.1(vi)(B) or Section 10.1(vii). In addition, in the event that
this Agreement shall be terminated pursuant to Section 10.1(vi) or Section
10.1(vii) and, (i) within twelve months thereafter, the Company enters into
an agreement with respect to a Third Party Acquisition (which is
consummated within twelve months after such termination), or a Third Party
Acquisition occurs and is completed, (ii) after the date hereof and prior
to the date of termination, (x) the Company or its agents had engaged in
negotiations with a Third Party with respect to a Third Party Acquisition,
(y) the Company or its agents furnished information to a Third Party with
respect to a Third Party Acquisition or (z) a Third Party submitted to the
Company a proposal (which shall include price and other material terms and
conditions) for a Third Party Acquisition and (iii) with respect to (x) and
(y) above, the relevant Third Party makes or announces (before or after
such termination) a proposal with respect to a Third Party Acquisition;
then the Company shall pay, or cause to be paid, in same day funds, to
Buyer, (A) a termination fee in the amount of $7,000,000, which termination
fee shall be paid on the date of consummation of a Third Party Acquisition
(if and only if a Third Party Acquisition shall be consummated within
twelve months after the date of termination), and (B) to the extent not
previously paid by the Company to Buyer pursuant to the first sentence of
this Section 12.4(b), Buyers' Expenses. It is expressly agreed that the
amount to be paid pursuant to this Section 12.4(b) represents liquidated
damages and not a penalty.
(c) The cost of printing the Form S-4 Registration Statement
and the Company Proxy Statement shall be borne equally by the Company and
Buyer.
(d) The Company shall pay or cause to be paid (not later than
ten business days after submission of statements therefor) in same day
funds to Buyer, Buyer's Expenses in the event this Agreement shall be
terminated pursuant to Section 10.1(v). Buyer shall pay or cause to be paid
(not later than ten business days after submission of statements therefor)
in same day funds to the Company, Company's Expenses in the event this
Agreement shall be terminated pursuant to Section 10.1(iv). If Buyer or
Merger Subsidiary shall submit a request for reimbursement hereunder, Buyer
or Merger Subsidiary will provide the Company in due course with invoices
or other reasonable evidence of such expenses upon request. If the Company
shall submit a request for reimbursement hereunder, the Company will
provide Buyer in due course with invoices or other reasonable evidence of
such expenses upon request.
(e) For purposes of this Section 12.4, "Third Party
Acquisition" means the occurrence of any of the following events: (i) the
acquisition of the Company by merger or otherwise by any person (which
includes a "person" as such term is defined in Section 13(d)(3) of the
Exchange Act) or entity other than Buyer, Merger Subsidiary or any
affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party
of more than 35% of the total assets of the Company and its Subsidiaries,
taken as a whole; or (iii) the acquisition by a Third Party of 35% or more
of the outstanding shares of Company Common Stock. For purposes of this
Section 12.4, "Buyer's Expenses" shall mean documented out-of-pocket fees
and expenses reasonably and actually incurred or paid by or on behalf of
Buyer in connection with the Merger and the consummation of any of the
transactions contemplated by this Agreement, including, reasonable fees and
expenses of counsel, accountants, experts, financial advisors and
consultants to Buyer, in an aggregate amount not to exceed $1,000,000. For
purposes of this Section 12.4, "Company's Expenses" shall mean documented
out-of-pocket fees and expenses reasonably and actually incurred or paid by
or on behalf of the Company in connection with the Merger and the
consummation of any of the transactions contemplated by this Agreement,
including, reasonable fees and expenses of counsel, accountants, experts,
financial advisors and consultants to the Company, in an aggregate amount
not to exceed $1,000,000.
SECTION 12.5 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, provided that no party
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other parties hereto.
SECTION 12.6 Governing Law. This Agreement shall be construed
in accordance with and governed by the law of the State of Delaware without
regard to conflicts of laws.
SECTION 12.7 Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any
rule of law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated herein is not
affected in any manner materially adverse to any party hereto. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good
faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner.
SECTION 12.8 Third Party Beneficiaries. No provision of this
Agreement other than Section 7.3 and Section 8.6 hereof is intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder.
SECTION 12.9 Entire Agreement. This Agreement, including any
exhibits or schedules hereto and the Confidentiality Agreement constitutes
the entire agreement among the parties hereto with respect to the subject
matter hereof and supersede all other prior agreements or undertaking with
respect thereto, both written and oral.
SECTION 12.10 Counterparts; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Agreement shall become effective when each
party hereto shall have received counterparts hereof signed by all of the
other parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of
the day and year first above written.
IDEON GROUP, INC.
By:
Name:
Title:
CUC INTERNATIONAL INC.
By:
Name:
Title:
IG ACQUISITION CORP.
By:
Name:
Title:
EXHIBIT 1
Form of Affiliate Letter
April __, 1996
CUC INTERNATIONAL INC.
707 Summer Street
Stamford, Connecticut 06901
Dear Sirs:
Reference is made to the provisions of the
Agreement and Plan of Merger, dated as of the date hereof
(together with any amendments thereto, the "Merger
Agreement"), among IDEON GROUP, INC., a Delaware
corporation (the "Company"), CUC INTERNATIONAL INC., a
Delaware corporation ("Buyer"), and IG ACQUISITION CORP.,
a Delaware corporation and a wholly-owned subsidiary of
Buyer ("Merger Subsidiary"), pursuant to which Merger
Subsidiary will be merged with and into the Company, with
the Company continuing as the surviving corporation (the
"Merger"). This letter constitutes the undertakings of
the undersigned contemplated by the Merger Agreement.
I understand that I may be deemed to be an
"affiliate" of the Company, as such term is defined for
purposes of paragraphs (c) and (d) of Rule 145 ("Rule
145") promulgated under the Securities Act of 1933, as
amended (the "Securities Act"). Execution of this letter
shall not be construed as an admission of "affiliate"
status nor as a waiver of any rights that I may have to
object to any claim that I am an "affiliate" on or after
the date of this letter.
If in fact I were to be deemed an "affiliate"
of the Company under paragraphs (c) and (d) of Rule 145,
my ability to sell, transfer or otherwise dispose of any
shares of the common stock, par value $.01 per share of
Buyer (the "Buyer Shares"); received by me in exchange
for any shares of common stock of the Company (the
"Company Shares") pursuant to the Merger may be
restricted.
I hereby represent, warrant and covenant to
Buyer that:
(a) I will not transfer, sell or otherwise
dispose of any of the Buyer Shares except (i) pursuant to
an effective registration statement under the Securities
Act, or (ii) as permitted by, and in accordance with,
Rule 145 or another applicable exemption under the
Securities Act or the rules and regulations promulgated
thereunder; and
(b) I will not (i) transfer, sell or otherwise
dispose of any Company Shares prior to the Effective Time
(as defined in the Merger Agreement) or (ii) sell or
otherwise reduce my risk (within the meaning of the
Securities and Exchange Commission's Financial Reporting
Release No. 1., "Codification of Financial Reporting
Policies," Section 201.01 [47 F.R. 21028] (April 15,
1982) with respect to any Buyer Shares until after such
time (the "Delivery Time") as consolidated financial
statements which reflect at least 30 days of post-merger
combined operations of Buyer and the Company have been
published by Buyer, except as permitted by Staff
Accounting Bulletin No. 76 issued by the Securities and
Exchange Commission; and
(c) I have not knowingly taken and will not
knowingly take or agree to take any action that would
prevent the Merger from qualifying, or being accounted
for, as a pooling-of-interests.
I hereby acknowledge that, except as otherwise
provided in the Merger Agreement, Buyer is under no
obligation to register the sale, transfer, pledge or
other disposition of the Buyer Shares or to take any
other action necessary for the purpose of making an
exemption from registration available.
I agree that, from time to time, at Buyer's
reasonable request and without further consideration, I
shall execute and deliver such additional documents and
shall use my reasonable best efforts to take all such
further lawful action as may be reasonably necessary or
desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions
contemplated by the Merger Agreement.
I understand that Buyer will issue stop
transfer instructions to its transfer agents with respect
to the Buyer Shares and that a restrictive legend will be
placed on certificates delivered to me evidencing the
Buyer Shares in substantially the following form:
"This certificate and the shares represented
hereby have been issued pursuant to a
transaction governed by Rule 145 ("Rule 145")
promulgated under the Securities Act of 1933,
as amended (the "Securities Act"), and may not
be sold or otherwise disposed of unless
registered under the Securities Act pursuant to
a Registration Statement in effect at the time
or unless the proposed sale or disposition can
be made in compliance with Rule 145 or without
registration in reliance on another exemption
therefrom. Reference is made to that certain
letter of agreement, dated April __, 1996,
between the Holder and the Issuer, a copy of
which is on file in the principal office of the
Issuer which contains further restrictions on
the transferability of this certificate and the
shares represented hereby."
The term Buyer Shares as used in this letter
shall mean and include not only the common stock of Buyer
as presently constituted, but also any other stock which
may be issued in exchange for, in lieu of, or in addition
to, all or any part of such Buyer Shares.
I hereby acknowledge that the receipt of this
letter by Buyer is an inducement and a condition to
Buyer's obligation to consummate the Merger under the
Merger Agreement, that Buyer and its independent public
accountants will be relying upon this letter in
connection with the determination that the Merger will
qualify or be accounted for as a pooling-of-interests,
and that I understand the requirements of this letter and
the limitations imposed upon the transfer, sale or other
disposition of the Company Shares and the Buyer Shares.
Very truly yours,
As an inducement to the above individual to
deliver this letter, Buyer agrees that for so long as and
to the extent necessary to permit such individual to sell
the Buyer Shares pursuant to Rule 145, and to the extent
applicable, Rule 144, Buyer shall use all reasonable
efforts to file, on a timely basis, all reports and data
required to be filed by it with the Securities and
Exchange Commission pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended.
CUC INTERNATIONAL INC.
By: _______________________
Name:
Title:
EXHIBIT 2
[CUC INTERNATIONAL INC. LETTERHEAD]
______________, 1996
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Ladies and Gentlemen:
You have been requested to render an opinion
regarding certain federal income tax consequences of the
merger (the "Merger") of IG Acquisition Corp., a Delaware
corporation ("Merger Subsidiary") and a wholly owned
subsidiary of CUC International Inc., a Delaware
corporation ("Buyer"), with and into Ideon Group, Inc., a
Delaware corporation (the "Company"), upon the terms and
conditions set forth in the Agreement and Plan of Merger
dated as of April ___, 1996 (the "Merger Agreement")
among Buyer, Merger Subsidiary and the Company.
Capitalized terms not otherwise defined herein have the
meanings specified in the Merger Agreement.
In connection with the Merger, and recognizing
that you will rely upon this certificate in rendering
such opinions, Buyer hereby certifies that, as of the
Effective Time:
1. The exchange ratio of the Buyer Common
Stock for each of the Shares is the result of arm's
length bargaining intended to reflect the relative fair
market values of the respective securities. Accordingly,
the fair market value of the shares of Buyer Common Stock
to be received by each Company shareholder (plus the
cash, if any, to be received by such shareholder in lieu
of a fractional share of Buyer Common Stock) will be
approximately equal to the fair market value of the
Shares surrendered by such Company shareholder in
exchange therefor pursuant to the Merger.
2. Following the Merger, the Company will hold
at least 90 percent of the fair market value of Merger
Subsidiary's net assets and at least 70 percent of the
fair market value of Merger Subsidiary's gross assets
held immediately prior to the Effective Time.
3. Immediately prior to the Merger, Buyer will
be in control of Merger Subsidiary within the meaning of
Section 368(c) of the Code.
4. Buyer has no plan or intention to cause the
Company to issue additional shares of its stock that
would result in Buyer losing control of the Company
within the meaning of Section 368(c) of the Code.
5. Neither Buyer nor any of its affiliates
(i) is under any obligation to, or has entered into any
agreement to make any extraordinary distribution in
respect of such shares of Buyer Common Stock or (ii) has
any plan or intention to reacquire any shares of Buyer
Common Stock to be issued in the Merger. Notwithstanding
the preceding sentence, Buyer may repurchase shares of
Buyer Common Stock pursuant to an open-market stock
repurchase program.
6. Buyer has no plan or intention to liquidate
the Company, to merge the Company or any Subsidiary with
or into another entity, to sell or otherwise dispose of
any shares of capital stock of the Company or any
Subsidiary (except for transfers described in Section
368(a)(2)(C) of the Code at the time of transfer) or to
cause the Company or any Subsidiary to sell or otherwise
dispose of in any manner any of its assets held prior to
the Merger or any of the assets acquired from Merger
Subsidiary, except for dispositions made in the ordinary
course of business, transfers by the Company or any
Subsidiary of assets to a corporation controlled by the
Company or such Subsidiary within the meaning of Section
368(c) of the Code at the time of transfer or sales,
mergers or other dispositions that would not,
individually or in the aggregate, cause the Company and
its Subsidiaries taken as a whole, following the Merger,
to fail to hold at least 90 percent of the fair market
value of its net assets and at least 70 percent of the
fair market value of its gross assets held immediately
prior to the Effective Time (determined by treating the
items set forth in clauses (a) through (e) of paragraph 4
of the Company Tax Certificate as assets of the Company
immediately prior to the Effective Time).
7. Merger Subsidiary has no liabilities to be
assumed by the Company, and will not transfer to the
Company any assets subject to liabilities, in the Merger.
8. Assuming the correctness of paragraph 14 of
the Company Tax Certificate, following the Merger Buyer
will cause the Company to continue its "historic
business" or to use a "significant portion" of its
"historic business assets" in a business (as such terms
are used in Treas. Reg. SECTION 1.368-1(d)).
9. Buyer has paid, or will pay, the expenses
of only Buyer and Merger Subsidiary incurred in
connection with the Merger.
10. There is not, and has never been, any
indebtedness existing between Buyer and any of its
affiliates, on the one hand, and the Company and any of
its affiliates, on the other hand, or between Merger
Subsidiary and any of its affiliates, on the one hand,
and the Company and any of its affiliates, on the other
hand, that was issued, acquired or settled at a discount.
11. The shares of Buyer Common Stock that will
be issued for Shares in the Merger are voting stock
within the meaning of Section 368(a)(2)(E) of the Code.
12. Neither Buyer nor Merger Subsidiary will
(i) supply cash or other property directly for the
purpose of paying Conveyance Taxes or (ii) reimburse the
Company directly for any payments of Conveyance Taxes.
13. Neither Buyer nor any of its affiliates
owns beneficially or of record, nor will any of them have
owned during the past five years, any capital stock or
securities of the Company or any options or instruments
giving the holder thereof the right to acquire any
capital stock or securities of the Company.
14. Neither Buyer nor Merger Subsidiary is an
"investment company" as defined in Sections
368(a)(2)(F)(iii) and (iv) of the Code.
15. The payment of cash in lieu of fractional
shares of Buyer Common Stock pursuant to the Merger will
be solely for the purpose of avoiding the expense and
inconvenience to Buyer of issuing fractional shares and
will not represent separately bargained-for
consideration.
16. The total cash consideration that will be
paid in the Merger to the holders of Shares in lieu of
issuing fractional shares of Buyer Common Stock will not
exceed one percent of the total consideration that will
be delivered in the Merger to the holders of Shares in
exchange for their Shares.
17. None of the compensation to be received by
any shareholder-employee of the Company with respect to
periods beginning after the Effective Time will be
separate consideration for, or allocable to, any of his
Shares. Further, assuming the correctness of paragraph
11 of the Company Tax Certificate, none of the shares of
Buyer Common Stock to be received by any shareholder-
employee of the Company in exchange for Shares will be
separate consideration for, or allocable to, any
employment agreement or arrangement.
18. The compensation paid to any shareholder-
employee of the Company with respect to periods beginning
after the Effective Time will be for services actually
rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar
services.
19. The shareholders of the Company will not
be entitled to dissenters rights pursuant to the Merger.
The consideration paid by Buyer to each Company
shareholder in exchange for such shareholder's Shares
will consist solely of shares of Buyer Common stock,
except to the extent that cash, if any, is paid in lieu
of a fractional share of Buyer Common Stock.
20. The facts relating to the Merger, which
are described in the [Joint Proxy Statement and
Prospectus] relating to the Merger dated ,
1996, insofar as such facts pertain to Buyer or Merger
Subsidiary, are, true, correct and complete in all
material respects.
This certificate is only for your benefit and
is not intended to be relied upon by any other person.
Further, Buyer will promptly and timely notify Skadden,
Arps, Slate, Meagher & Flom if, after signing this
certificate, Buyer believes or has reason to believe that
(i) any of the facts described herein or in the [Joint
Proxy Statement and Prospectus] or (ii) any of the
representations, information or covenants contained in
this certificate, are untrue, incorrect or incomplete in
any respect.
CUC International Inc.
By:
Name:
Title:
EXHIBIT 3
[IDEON GROUP, INC. LETTERHEAD]
, 1996
Skadden, Arps, Slate,
Meagher & Flom
919 Third Avenue
New York, New York 10022
Ladies and Gentlemen:
You have been requested to render an opinion
regarding certain federal income tax consequences of the
merger (the "Merger") of IG Acquisition Corp., a Delaware
corporation ("Merger Subsidiary") and a wholly owned
subsidiary of CUC International Inc., a Delaware
corporation ("Buyer"), with and into Ideon Group, Inc., a
Delaware corporation (the "Company"), upon the terms and
conditions set forth in the Agreement and Plan of Merger
dated as of April ___, 1996 (the "Merger Agreement")
among Buyer, Merger Subsidiary and the Company.
Capitalized terms not otherwise defined herein have the
meanings specified in the Merger Agreement.
In connection with the Merger, and recognizing
that you will rely upon this certificate in rendering
such opinions, the Company hereby certifies that, as of
the Effective Time:
1. The exchange ratio of the Buyer Common
Stock for each of the Shares is the result of arm's
length bargaining intended to reflect the relative fair
market values of the respective securities. Accordingly,
the fair market value of the shares of Buyer Common Stock
to be received by each Company shareholder (plus the
cash, if any, to be received by such shareholder in lieu
of a fractional share of Buyer Common Stock) will be
approximately equal to the fair market value of the
Shares surrendered by such Company shareholder in
exchange therefor pursuant to the Merger.
2. To the best knowledge of the management of
the Company, there is no plan or intention on the part of
the holders of Shares to sell, exchange or otherwise
dispose of a number of shares of Buyer Common Stock
received in the Merger that would reduce the Company
shareholders' ownership of shares of Buyer Common Stock
to a number of shares having a value, at the Effective
Time, of less than 50 percent of the value of all the
Shares outstanding immediately preceding the Effective
Time. For purposes of this representation, Shares to be
exchanged for cash in lieu of fractional shares of Buyer
Common Stock will be treated as outstanding Shares
immediately preceding the Effective Time. Moreover,
Shares and shares of Buyer Common Stock held by Company
shareholders and sold, redeemed or otherwise disposed of
prior or subsequent to the Merger in connection with any
overall plan of which the Merger is a part have been
considered in making this representation.
3. No holder of Shares owns (beneficially or
of record) five percent or more of the outstanding Shares
(although, for purposes of filing Schedule 13G pursuant
to the rules of the Securities and Exchange Commission,
FMR Corp., Legg Mason, Inc., Pioneering Management
Corporation, and The Equitable Companies, Inc. may be
considered as owning five percent or more of the
outstanding Shares).
4. Assuming the correctness of paragraph 6 of
the Buyer Tax Certificate, following the Merger the
Company will hold at least 90 percent of the fair market
value of its net assets and at least 70 percent of the
fair market value of its gross assets held by it
immediately prior to the Effective Time. For purposes of
this representation, the following shall be treated as
assets of the Company immediately prior to the Effective
Time: amounts paid by the Company or any Subsidiary (a)
for reorganization expenses incurred in connection with
or in contemplation of the Merger; (b) to repay
indebtedness of the Company or any Subsidiary (except to
the extent that any such repayment is funded through
indebtedness incurred by the Company or any Subsidiary);
(c) to redeem or repurchase any capital stock of the
Company; (d) as a dividend on the Shares (except for
regular, normal dividends); and (e) for other payments in
connection with or in contemplation of the Merger,
including, without limitation, amounts payable by the
Company pursuant to Section 6.5 of the Merger Agreement
(relating to Conveyance Taxes).
5. The Company and its shareholders have
paid, or will pay, only their respective expenses
incurred in connection with the Merger, except as
provided in Section 6.5 of the Merger Agreement.
6. There is not, and has never been, any
indebtedness existing between Buyer and any of its
affiliates, on the one hand, and the Company and any of
its affiliates, on the other hand, or between Merger
Subsidiary and any of its affiliates, on the one hand,
and the Company and any of its affiliates, on the other
hand, that was issued, acquired or settled at a discount.
7. The Company will not have outstanding any
warrants, options, convertible securities or any other
type of right pursuant to which any person could acquire
shares of capital stock of the Company that, if exercised
or converted, would affect Buyer's acquisition or
retention of control of the Company within the meaning of
Section 368(c) of the Code.
8. The Company is not an "investment company"
as defined in Sections 368(a)(2)(F)(iii) and (iv) of the
Code.
9. The Company is not under the jurisdiction
of any court in a Title 11 or similar case within the
meaning of Section 368(a)(3)(A) of the Code.
10. The fair market value of the assets of the
Company will exceed the sum of its liabilities, plus
(without duplication) the amount of liabilities, if any,
to which the assets are subject.
11. None of the compensation received by any
shareholder-employee of the Company with respect to
periods ending on or prior to the Effective Time will be
separate consideration for, or allocable to, any of his
Shares. Further, assuming the correctness of paragraph
17 of the Buyer Tax Certificate, none of the shares of
Buyer Common Stock to be received by any shareholder-
employee of the Company in exchange for Shares will be
separate consideration for, or allocable to, any
employment agreement or arrangement.
12. The compensation paid to any shareholder-
employee of the Company with respect to periods ending on
or prior to the Effective Time will be for services
actually rendered and will be commensurate with amounts
paid to third parties bargaining at arms-length for
similar services.
13. In the Merger, Shares representing control
of the Company, as defined in Section 368(c) of the Code,
will be exchanged solely for Buyer Common Stock. No
Shares will be exchanged for cash or other property
originating with Buyer (except for cash, if any, paid in
lieu of fractional shares of Buyer Common Stock).
14. Assuming the correctness of paragraph 8 of
the Buyer Tax Certificate, following the Merger the
Company will continue its "historic business" or use a
"significant portion" of its "historical business assets"
in a business (as such terms are used in Treas. Reg.
SECTION 1.368-1(d)).
15. The shareholders of the Company will not
be entitled to dissenters rights pursuant to the Merger.
The consideration paid by Buyer to each Company
shareholder in exchange for such shareholder's Shares
will consist solely of shares of Buyer Common stock,
except to the extent that cash, if any, is paid in lieu
of a fractional share of Buyer Common Stock.
16. The facts relating to the Merger, which
are described in the Company Proxy Statement and S-4
Registration Statement relating to the Merger dated
____________, 1996, insofar as such facts pertain to the
Company, are true, correct and complete in all material
respects.
This certificate is only for your benefit and
is not intended to be relied upon by any other person.
Further, the Company will promptly and timely notify
Skadden, Arps, Slate, Meagher & Flom if, after signing
this certificate, the Company believes or has reason to
believe that (i) any of the facts described herein or in
the Company Proxy Statement and S-4 Registration
Statement or (ii) any of the representations, information
or covenants contained in this certificate, are untrue,
incorrect or incomplete in any respect.
IDEON GROUP, INC.
By:
Name:
Title:
CONTACT: BILL LACKEY FOR IMMEDIATE RELEASE
(904) 218-1836 Moved on Business Wire
April 22, 1996
LAURA A. PLEVYAK
(203) 965-5114
IDEON GROUP, INC. TO BE ACQUIRED
BY CUC INTERNATIONAL INC.
STOCK TRANSACTION VALUED AT $375 MILLION
STRENGTHENS CUC'S CREDIT CARD ENHANCEMENT
SERVICES AND BROADENS MEMBERSHIP BASE
JACKSONVILLE, FL.--Ideon Group, Inc. (NYSE:IQ),
whose SafeCard Services unit is a leading provider of
credit card enhancement services to over 13 million
members across the United States today announced that it
has agreed to be acquired by CUC International Inc.
(NYSE: CU) in a move that will strengthen CUC's core
membership services business.
Ideon and Stamford, Connecticut-based CUC
International have signed a definite merger agreement
whereby CUC will acquire Ideon Group in a stock-for-stock
transaction valued at approximately $375 million. The
transaction is expected to close in early-to mid-summer.
The merger is subject to customary closing requirements,
including the expiration of any applicable wait period
under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 and the approval of Ideon stockholders.
Eugene Miller, Chairman and Chief Executive Officer
of Ideon Group commented, "Since the beginning of 1996,
we have intensified our efforts to maximize shareholder
value. The merger with CUC is a major step toward
achieving that goal. No company offers a better
strategic fit or growth opportunities than CUC. In
addition to the clear synergies between CUC's business
and ours, CUC has a proven track record of integrating
acquisitions and operating the credit card enhancement
business effectively."
Walter A. Forbes, Chairman and Chief Executive
Officer of CUC International, said, "This acquisition is
an outstanding strategic fit for CUC. Ideon's preeminent
position in credit card protection services, combined
with CUC's strong market presence in this business, will
enhance our product offerings as well as complement our
client and membership bases."
Mr. Forbes continued, "This acquisition also is a
perfect fit for our membership business model. Ideon's
database of 13 million members not only augments CUC's
database of over 46 million members, but it also presents
exciting prospects for marketing our core shopping, auto,
and other membership services to their customers."
TRANSACTION OUTLINED
Under the terms of the agreement, each share of
Ideon common stock outstanding on the effective date of
the proposed merger will be converted into the right to
receive CUC common stock ("CUC Common Stock") with an
aggregate value of $13.50 per share if the average
closing price per share of CUC Common Stock over a
specified fifteen day period prior to the date of the
Ideon stockholder meeting called to vote upon the
proposed merger (the "Average Stock Price") is within the
collar described below. The exact ratio of shares of CUC
Common Stock to be issued per outstanding share of Ideon
stock will be determined by dividing $13.50 by the
Average Stock Price. However, the number of shares of
CUC Common Stock to be issued in exchange for each share
of Ideon common stock will in no event be greater than
.6136 (if the Average Stock Price is at or below $22 per
share) nor less than .3750 (if the Average Stock Price is
at or above $36). The total number of Ideon common
shares outstanding was approximately 28 million as of
March 31, 1996.
CUC intends to account for the acquisition as a
"pooling-of-interests" and it is intended that the merger
be tax-free to Ideon stockholders. CUC expects to incur
costs related to this merger, which will include
integration and transaction costs as well as costs
relating to certain outstanding litigation matters
previously discussed in Ideon's public filings. The
amount of these costs will be reserved upon the closing
of the proposed merger and will be reflect in CUC's
financial statements upon completion of the merger.
DIRECTOR RESIGNATION
Ideon further stated that Paul G. Kahn, the
company's former chairman and chief executive officer,
had resigned as a director of Ideon effective April 18,
1996.
* * * * *
Ideon Group, Inc., is a holding company that
leverages information technology, targeted marketing and
customer service through its three operating units:
SafeCard Services, Wright Express, and National Leisure
Group. Ideon markets its services through partnerships
with approximately 160 credit card issuers, including
banks, retailers and oil companies.
CUC International Inc. is a leading membership-
services company, currently providing approximately 46.5
million consumers with access to a variety of services
including home shopping travel, insurance, auto, dining,
home improvement, lifestyle clubs, checking account
enhancements and discount coupon programs.
