As filed with the Securities and Exchange Commission on December 1, 2000.
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
<TABLE>
<CAPTION>
Check the appropriate box:
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of
[X] Definitive Proxy Statement the Commission Only
[ ] Definitive Additional Materials (as permitted by
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 Rule 14a-6(e)(2))
</TABLE>
PROGRAMMER'S PARADISE, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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(5) Total fee paid:
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[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identity the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
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<PAGE>
PROGRAMMER'S PARADISE, INC.
1157 Shrewsbury Avenue
Shrewsbury, New Jersey 07702
-----------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
to be held on December 21, 2000
TO OUR STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
Programmer's Paradise, Inc. will be held at the offices of Dechert, 30
Rockefeller Plaza, 23rd Floor, New York, New York, on Thursday, December 21,
2000, at 8:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement
for the Sale and Purchase of Shares, between the Company and
P.C. Ware Information Technologies AG, pursuant to which the
Company's European subsidiaries would be sold to P.C. Ware and
which sale, under Section 271 of the Delaware General
Corporation Law, may be construed as constituting a sale of
substantially all of the Company's property and assets. The
European subsidiaries are in the business of distributing
computer software and software license management services to
programmers in Europe; and
2. To consider and act upon such other matters as may properly
come before the meeting or any adjournments or postponements
thereof.
The Board of Directors has fixed November 17, 2000 as the record date
for determination of stockholders entitled to notice of and to vote at the
Special Meeting and any adjournments or postponements thereof. A complete list
of stockholders is open to the examination of any stockholder for any purpose
germane to the meeting, during ordinary business hours, at the Company's
headquarters, 1157 Shrewsbury Avenue, Shrewsbury, New Jersey.
By Order of the Board of Directors,
William H. Willett
Chairman and Chief Executive Officer
Dated: December 1, 2000
Your vote is important. You are urged to fill in, sign, date and mail the
enclosed proxy. If you attend the Special Meeting and vote in person, the proxy
will not be used. If the proxy is mailed in the United States in the enclosed
envelope, no postage is required. The prompt return of your proxy will save the
expense involved in further communication.
<PAGE>
TABLE OF CONTENTS
Page
----
INTRODUCTION ..................................................................1
Time, Date and Place......................................................1
Purpose of the Special Meeting............................................1
Vote Required; Proxies....................................................2
PROPOSAL TO APPROVE THE AGREEMENT FOR THE SALE AND PURCHASE
OF SHARES AND THE COMPANY'S SALE OF ITS EUROPEAN SUBSIDIARIES..................2
General...................................................................2
Background and Principal Reasons for the Proposed Sale....................2
Recommendation of the Board of Directors..................................3
Opinion of Financial Advisor..............................................3
Description of the Agreement for the Sale and Purchase of Shares..........4
Net Proceeds From the Proposed Sale; Ongoing Corporate Operations.........8
Accounting Treatment......................................................8
Federal Income Tax Consequences of the Proposed Sale......................8
Stockholder Approval......................................................8
Rights of Dissenting Stockholders.........................................8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................9
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION.............................10
Balance Sheet ..........................................................11
Statements of Operations.................................................12
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................13
OTHER MATTERS ................................................................14
ANNEX I Agreement for the Sale and Purchase of Shares
ANNEX II Fairness Opinion
i
<PAGE>
PROGRAMMER'S PARADISE, INC.
1157 Shrewsbury Avenue
Shrewsbury, New Jersey 07702
------------------
PROXY STATEMENT
for the Special Meeting of Stockholders
to be held on December 21, 2000
------------------
December 1, 2000
TO OUR STOCKHOLDERS:
INTRODUCTION
Time, Date and Place
This Proxy Statement is being furnished to you in connection with the
solicitation of proxies by the Board of Directors for use at the Special Meeting
of Stockholders (and any adjournments or postponements thereof) to be held at
the offices of Dechert, 30 Rockefeller Plaza, 23rd Floor, New York, New York, on
Thursday, December 21, 2000 at 8:00 a.m., local time. The approximate date on
which this Proxy Statement and the accompanying form of proxy will be sent to
the stockholders is December 1, 2000.
All holders of record of the Company's Common Stock at the close of
business on November 17, 2000, are entitled to vote at the meeting and their
presence is desired. Each outstanding share of Common Stock as of such date is
entitled to one vote. At the close of business on November 17, 2000, 5,210,125
shares of Common Stock were outstanding.
If you cannot be present in person at the Special Meeting, the Board of
Directors of the Company requests that you execute and return the enclosed proxy
as soon as possible. The person who signs the proxy must be either (i) the
registered stockholder of such shares of Common Stock or (ii) a trustee,
executor, administrator, guardian, attorney-in-fact, officer of a corporation or
any other person acting in a fiduciary or representative capacity on behalf of
such registered Stockholder. You can, of course, revoke a proxy at any time
before it is voted, if so desired, by filing with the Secretary of the Company
an instrument revoking the proxy or by returning a duly executed proxy bearing a
later date, or by attending the Special Meeting and voting in person. Any such
filing should be sent to Programmer's Paradise, Inc., 1157 Shrewsbury Avenue,
Shrewsbury, New Jersey 07702; Attention: Secretary.
Attendance at the Special Meeting will not by itself constitute revocation of a
proxy.
Purpose of the Special Meeting
On December 1, 2000, the Company entered into an Agreement for the Sale
and Purchase of Shares, dated as of December 1, 2000, with P.C. Ware Information
Technologies AG, a German corporation, pursuant to which the Company has agreed
to sell to P.C. Ware all of the issued and outstanding capital stock of the
Company's European subsidiaries, ISP*D International Software Partners GmbH,
InTeCo - Entwicklungsgesellschaft fur Informationstechnologie und Communication
mbH, Logicsoft Holding B.V., Logicsoft Group Nederland B.V., Euro Soft B.V.,
ISP*A Software Partners GmbH, Logicsoft Group France S.A.S., Logicsoft Group
Italia S.r.l., Programmer's Paradise Italia S.r.l., International Software
Partners Italia S.r.l., Systematika Ltd., Internet Paradise Ltd., Programmer's
Paradise UK Ltd., ISP*UK Ltd., International Software Partners UK Limited,
System Science Ltd., "C" Science Ltd., and Logicsoft Group (UK) Ltd. The Company
is retaining its equity investment in Healy-Hudson AG and Programmer's Paradise
France S.A.R.L.
<PAGE>
Under Delaware law, the sale of the European subsidiaries by the
Company might be deemed a sale of substantially all of the Company's assets
requiring stockholder approval. To remove any doubt, the Company's Board of
Directors has called a Special Meeting of Stockholders so that the Company's
stockholders may consider and vote upon the proposal to approve the Agreement
for the Sale and Purchase of Shares and the sale by the Company of its European
subsidiaries. Pursuant to the Delaware General Corporation Law, holders of
shares of the Company's voting securities will not be entitled to rights of
appraisal in connection with the sale of the European subsidiaries pursuant to
the Agreement for the Sale and Purchase of Shares.
Stockholders may also consider and vote upon such other matters as may
properly come before the Special Meeting or any adjournments or postponements
thereof.
Vote Required; Proxies
The presence in person or by proxy of a majority of the shares of
Common Stock outstanding and entitled to vote as of November 17, 2000 is
required for a quorum at the Special Meeting. If a quorum is present, the
affirmative vote of the holders of a majority of the outstanding Common Stock of
the Company entitled to vote is required for approval. As a result, abstention
votes will have the effect of a vote against the sale proposal.
Shares of Common Stock which are represented by properly executed
proxies, unless such proxies shall have previously been properly revoked, will
be voted in accordance with the instructions indicated in such proxies. If no
contrary instructions are indicated, such shares will be voted (1) FOR the
proposal to approve the Agreement for the Sale and Purchase of Shares and the
sale by the Company of its European subsidiaries; and (2) in the discretion of
the persons named in the proxies, as proxy appointees, as to any other matter
that may properly come before the Special Meeting.
If you are a participant in the Company's 401(k) Savings Plan, your
proxy represents the number of shares in your plan account as well as other
shares registered in your name. For those shares in your plan account, the proxy
will serve as a voting instruction for the trustee of the plan. If voting
instructions are not received by the trustee for shares in your plan account,
the trustee will not be able to vote those shares on your behalf.
Shares held by brokers may not be voted on the sale proposal absent
stockholder instructions.
PROPOSAL TO APPROVE THE AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
AND THE COMPANY'S SALE OF ITS EUROPEAN SUBSIDIARIES
General
At the Special Meeting, the stockholders of the Company will be asked
to consider and vote upon the approval of the Agreement for the Sale and
Purchase of Shares, dated as of December 1, 2000, between the Company and P.C.
Ware, which provides for the sale by the Company to P.C. Ware of all of the
outstanding capital stock of the Company's European subsidiaries for a purchase
price in cash of Euro 14,500,000. The terms of the agreement are summarized
below under the caption "Description of the Agreement for the Sale and Purchase
of Shares."
Background and Principal Reasons for the Proposed Sale
On August 2, 2000, the Company and P.C. Ware executed a letter of
intent in Leipzig, Germany and issued a press release as to the sale of the
Company's European subsidiaries to P.C. Ware for Euro 14,500,000. On December 1,
2000, the Company and P.C. Ware executed the Agreement for the Sale and Purchase
of Shares. The sale, which is subject to several customary conditions, including
the approval of the stockholders of the Company, is scheduled to close as soon
as practicable after December 21, 2000.
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<PAGE>
The Company believes that it can increase its profits and long-term
prospects by investing the net proceeds in expansion of its U.S. business or by
acquisition of related businesses. The Company has no present plans or proposals
with respect to the use of net proceeds.
Recommendation of the Board of Directors
The Board of Directors of the Company has unanimously concluded that
the sale of the European subsidiaries is in the best interests of the Company
and its stockholders and that the terms and conditions contained in the
Agreement for the Sale and Purchase of Shares are fair to, and in the best
interests of, the Company and its stockholders.
In arriving at its conclusion, the Board of Directors considered a
number of factors, including those noted immediately below, which were
determined by the Board to favor a decision to approve the consummation of the
proposed sale:
o The price and terms of the proposed sale;
o The current financial condition of and future prospects for the
Company;
o The opportunity to use the cash proceeds of the proposed sale to
strengthen the Company's financial position and to pursue more
aggressively the Company's remaining business;
o The opportunity to realize immediate value for the stockholders
of the Company; and
o The written opinion of C.E. Unterberg, Towbin to the effect that,
based on its review and analysis and subject to the assumptions
and limitations set forth therein, the terms of the proposed sale
are fair to the Company from a financial point of view.
In view of the variety of factors considered, the Board of Directors
did not assign relative weights to the factors listed above or determine that
any factor was of particular importance. Rather, the Board viewed its
recommendations as being based on the totality of the information presented.
Also, the Board relied on the experience and expertise of C.E. Unterberg,
Towbin, its financial advisor, for analysis of the financial terms of the
transaction. In considering all the factors described above, individual members
of the Board may have given different weight to different factors. The Board
considered all these factors as a whole to be favorable to the Company and to
support its determination to approve the transaction and recommend it to the
Company's stockholders.
The Board of Directors of the Company unanimously recommends that you
vote FOR the proposal to approve the Agreement for the Sale and Purchase of
Shares and the sale of the Company's European subsidiaries. Your approval of the
sale proposal will authorize the Company to make future amendments or
modifications to the terms and conditions of the transaction, provided such
amendments do not materially reduce the net proceeds that the Company will
receive from the sale.
Opinion of Financial Advisor
C.E. Unterberg, Towbin has acted as the Company's financial advisor in
connection with the transaction. On December 1, 2000, Unterberg, Towbin
delivered to the Board of Directors of the Company its written opinion (the
"CEUT Opinion") that as of that date and based upon and subject to the factors,
procedures and assumptions set forth in the CEUT Opinion, the purchase price to
be paid to the Company as provided in the Agreement for the Sale and Purchase of
Shares is fair, from a financial point of view, to the Company.
The full text of the CEUT Opinion is attached as Annex II to this Proxy
Statement. Stockholders are urged to read the CEUT Opinion in its entirety for
assumptions made, procedures followed, other matters considered and limits of
the review undertaken in arriving at such opinion. The CEUT Opinion was directed
to the Board of
- 3 -
<PAGE>
Directors and is limited to the fairness to the Company of the purchase price to
be received by the Company from a financial point of view. The CEUT Opinion does
not address the merits of the underlying decision by the Company to engage in
the transaction or other business strategies considered by the Board of
Directors. The CEUT Opinion does not constitute a recommendation to any
stockholder as to how such stockholder should vote at the Special meeting.
Finally, C.E. Unterberg, Towbin's opinion does not constitute an opinion or
imply a conclusion as to the current price per share of the Company's common
stock or the price at which the Company's common stock will trade at any future
time.
The Company imposed no restrictions or limitations on C.E. Unterberg,
Towbin with respect to the investigations made or the procedure followed by C.E.
Unterberg, Towbin in rendering its opinion. In arriving at its opinion, C.E.
Unterberg, Towbin reviewed the Agreement for the Sale and Purchase of Shares,
dated as of December 1, 2000 and the related schedules and exhibits. C.E.
Unterberg, Towbin also reviewed financial and other information that was
publicly available. The Company provided C.E. Unterberg, Towbin certain internal
financial statements and other financial information and forecasts for the
European subsidiaries prepared by the Company's management. In addition, C.E.
Unterberg, Towbin compared certain financial and securities data of the Company
and the European subsidiaries with similar information for certain other
companies whose securities are publicly traded, reviewed the financial terms, to
the extent publicly available, of certain comparable recent business
combinations of computer hardware and software resellers, and conducted such
other analyses and considered such other factors as C.E. Unterberg, Towbin
deemed appropriate for the purpose of rendering its opinion, as reflected in the
CEUT Opinion.
In rendering its opinion, C.E. Unterberg Towbin assumed and relied
upon, without independent verification, the accuracy and completeness of the
financial and other information it reviewed or received or discussed with the
Company's management. C.E. Unterberg, Towbin assumed, with the Board of
Directors' consent, that the financial projections supplied to it (and the
assumptions and bases therefor) were reasonably prepared in good faith and on a
basis reflecting the best currently available estimates, assumptions and
judgments of the management of the Company as to the future financial condition
and performance of the Company and the European subsidiaries. In addition, C.E.
Unterberg, Towbin assumed, in addition to such other matters described in the
CEUT Opinion, without independent verification, that (i) the representations and
warranties of the parties in the Agreement for the Sale and Purchase of Shares
were true and correct as of the date of the Agreement for the Sale and Purchase
of Shares, (ii) the transactions described herein will have the tax, accounting
and legal effects contemplated in the Agreement for the Sale and Purchase of
Shares, (iii) there has been no material change in the assets, financial
condition, business and prospects of the Company or the European subsidiaries
since the date of the most recent financial statements made available to it,
(iv) the historical financial statements of each of the Company and the European
subsidiaries were prepared and fairly presented in accordance with generally
accepted accounting principles consistently applied, and (v) all conditions to
the consummation of the transactions described herein will be fulfilled and
consummated in a timely manner. C.E. Unterberg, Towbin has not made an
independent evaluation or appraisal of the assets and liabilities of the
European subsidiaries and has not been furnished with any such evaluation or
appraisal.
C.E. Unterberg, Towbin's opinion is necessarily based on economic,
market and other conditions as in effect on, and on the information made
available to C.E. Unterberg, Towbin as of, the date of the CEUT Opinion, and
C.E. Unterberg, Towbin assumed no responsibility to update or revise its opinion
based upon circumstances or events occurring after that date. It should be
understood that subsequent developments could affect the conclusions expressed
in C.E. Unterberg, Towbin's opinion. In conducting its analysis and arriving at
such opinion, Unterberg, Towbin assumed, with the consent of the Company, that
the transaction would be consummated on the terms described in the Agreement for
the Sale and Purchase of Shares, without any modification, amendment or waiver
of any material terms or conditions thereof. In connection with the financial
advice rendered and the delivery of a final written opinion, the Company will
pay C.E. Unterberg Towbin a fee of $200,000. In addition, the Company has agreed
to reimburse C.E. Unterberg, Towbin for its reasonable expenses, including fees
and expenses of its counsel, and to indemnify C.E. Unterberg, Towbin and its
affiliates against certain liabilities and expenses related to their engagement,
including liabilities under the federal securities laws.
C.E. Unterberg, Towbin is a full service securities firm engaged in
securities trading and brokerage activities, as well as providing investment
banking, financing and financial advisory services. In the ordinary course of
its trading, brokerage and financing activities, C.E. Unterberg, Towbin or its
affiliates may at any time hold long
- 4 -
<PAGE>
or short positions, and may trade or otherwise effect transactions, for our own
account or the accounts of customers, in debt or equity securities or senior
loans of the Company.
Description of the Agreement for the Sale and Purchase of Shares
General
-------
The following is a brief summary of certain provisions of the Agreement
for the Sale and Purchase of Shares. This summary does not provide a complete
description of all of the terms and conditions of the Agreement for the Sale and
Purchase of Shares. It is qualified in its entirety by reference to the
Agreement for the Sale and Purchase of Shares, a copy of which (without
schedules or exhibits) is attached to this Proxy Statement as Annex I. You are
urged to read Annex I in its entirety.
Sale of European Subsidiaries
-----------------------------
The Agreement for the Sale and Purchase of Shares provides for the sale
by the Company of all of the outstanding capital stock of its European
subsidiaries (ISP*D International Software Partners GmbH, InTeCo -
Entwicklungsgesellschaft fur Informationstechnologie und Communication mbH,
Logicsoft Holding B.V., Logicsoft Group Nederland B.V., Euro Soft B.V., ISP*A
Software Partners GmbH, Logicsoft Group France S.A.S., Logicsoft Group Italia
S.r.l., Programmer's Paradise Italia S.r.l., International Software Partners
Italia S.r.l., Systematika Ltd., Internet Paradise Ltd., Programmer's Paradise
UK Ltd., ISP*UK Ltd., International Software Partners UK Limited, System Science
Ltd., "C" Science Ltd., and Logicsoft Group (UK) Ltd.) to P.C. Ware. The Company
is retaining its equity investment in Healy-Hudson AG and Programmer's Paradise
France S.A.R.L.
The Purchaser
-------------
P.C. Ware is a specialist service provider and developer of information
technology focusing on the software license dealing segment and related
services. P.C. Ware provides solutions for the optimization of information
technology investment strategies for the public sector and large industrial
accounts. P.C. Ware's full-service approach comprises purchasing and license
management for software as well as consulting and support services tailored to
individual customers. In addition, P.C. Ware develops its own Internet and
intranet software solutions.
P.C. Ware is among the top-three-selling Microsoft Select partners in
Germany and is a market leader in the licensing of standard software for public
sector administration.
In addition to its headquarters in Leipzig, Germany, P.C. Ware also has
offices in Berlin, Erfurt, Chemnitz, Kempten in Allgau, Magdeburg, Obertshausen
near Frankfurt am Main and Rostock. Business is conducted in P.C. Ware's own
premises in Leipzig and Magdeburg.
Purchase Price
--------------
Upon the terms and subject to the conditions set forth in the Agreement
for the Sale and Purchase of Shares, P.C. Ware will purchase from the Company
all of the outstanding capital stock of the European subsidiaries for a purchase
price in cash of Euro 14,500,000. Of that amount, Euro 725,000 has been
delivered to the Company as a down payment on December 1, 2000.
Closing; Conditions to Closing
------------------------------
It is anticipated that if the Agreement for the Sale and Purchase of
Shares and sale by the Company of its European subsidiaries is approved by the
stockholders at the Special Meeting, the closing of the sale will take place as
soon as practicable after December 21, 2000.
Pursuant to the Agreement for the Sale and Purchase of Shares, the
consummation of the sale is subject to, and conditioned upon, among other
things:
o the representations and warranties of the Company being true and
correct as of the closing date;
- 5 -
<PAGE>
o the Company having performed all of their material obligations
and agreements under the Agreement for the Sale and Purchase of
of Shares; and
o the Company having obtained all consents, approvals,
authorizations and waivers (i) necessary to assure the
continuance of the relationships of the European subsidiaries
with their existing customers and suppliers and (ii) required for
the transfer of the shares of the European subsidiaries to P.C.
Ware.
Indemnification
---------------
If any of the representations or warranties made by the Company in the
Agreement for the Sale and Purchase of Shares are not correct, P.C. Ware may
request that the Company restore, within reasonable time, but within four weeks
of receipt of such request, the situation that would exist had the
representation or warranty been correct.
If the Company does not restore the warranted situation within such
time, or if the restoration of such situation is not possible, P.C. Ware will be
entitled to money damages only and not rescission or reduction of the purchase
price.
The Company has also agreed to indemnify P.C. Ware and the European
subsidiaries against any and all tax liability in excess of the amounts accrued
therefor in the Subsidiary's financial statements for (i) taxes assessed against
the European subsidiaries with respect to all taxable periods ending on or prior
to the closing date or (ii) apportionment of taxes that relate to taxable
periods beginning before and ending after the closing date to the extent
attributable to the pre-closing portion thereof.
P.C. Ware will not be entitled to assert any claim for indemnification
against the Company in respect of a breach of any representation or warranty
until such time as all claims of P.C. Ware for indemnification against the
Company exceed Euro 300,000, in which case P.C. Ware will be entitled to claims
in an amount up to Euro 7,500,000 in the aggregate; provided, however, that the
Company will only be liable for the amount by which all claims exceed Euro
300,000.
Generally, claims may only be asserted by P.C. Ware within 240 days of
the closing date. Claims with respect to representations and warranties of the
Company regarding the Company's ownership of the shares of the European
subsidiaries and the valid issuance and transfer of such shares may be asserted
for a period of two years commencing on the closing date, except that with
respect to Logicsoft Group*F such claims may be asserted for a period of six
years from the closing date. Generally, claims with respect to tax liability may
be asserted for a period equal to the shorter of the statutes of limitation with
respect to such liabilities and six years following the closing date.
On the closing date, the Company is required to deliver to P.C. Ware a
letter of credit or a bank guarantee of a first-rate German bank or the German
branch office of a first-rate international bank in the amount of Euro
3,275,000. The letter of credit is intended to serve as security for any claims
of P.C. Ware arising from breaches of representations and warranties under, as
well as any other obligations of Seller arising from, the Agreement for the Sale
and Purchase of Shares.
The letter of credit or bank guarantee will expire 240 days after the
closing date insofar as no substantiated claims covered by such letter of credit
or bank guarantee have been asserted against the Company within such 240 days.
If substantiated claims have been asserted within such 240 days, the letter of
credit or bank guarantee will, after the expiration of the 240-day period,
remain in effect until such claims have been finally adjudicated, but only in
the amount of claims raised.
Representations and Warranties
------------------------------
The Company has made various representations and warranties to P.C.
Ware in the Agreement for the Sale and Purchase of Shares, including, among
others, representations and warranties related to: corporate organization and
existence; authorization and enforceability; subsidiaries; financial statements
and financial condition; title to and condition of assets; public subsidies;
insurance; contracts; litigation; taxes, public impositions and contributions;
ordinary course of business; permits; guarantees; retirement benefits; customers
and suppliers; important executives; employees; employment matters; disclosure;
and the capitalization of the European subsidiaries.
- 6 -
<PAGE>
Covenant Not to Compete; Confidentiality
----------------------------------------
The Agreement for the Sale and Purchase of Shares includes a covenant
not to compete providing that the Company, for a period of two years following
the closing date, shall not, in the territory where the European subsidiaries
currently distribute, resell and direct sales of software (Germany, The
Netherlands, Belgium, Luxemburg, France, Austria, Switzerland, England and
Wales, Scotland, Northern Ireland and Italy), engage in any activities that
intend or might result in any kind of direct or indirect competition with the
current business activities of the European subsidiaries.
The covenant not to compete does not, however, restrict the Company's
ability to continue to accept international orders received by the Company via
the Company's Internet website that relate to so-called shrink-wrapped products,
and to carry out such orders, provided that no existing customers of the
European subsidiaries with whom volume licensing agreements have been concluded
are serviced. Furthermore, the Company's ability to service customers in the
territory, is only subject to the covenant not to compete if the business volume
with such customers in the aggregate exceeds Euro 500,000 per year.
If the Company breaches the covenant not to compete and does not remedy
such breach within four weeks after notice of such breach by P.C. Ware, the
Company is required to pay P.C. Ware liquidated damages for each individual
breach (excluding the notion of a "continued breach") in the amount of Euro
25,000. If one breach extends over a longer period of time, the Company shall
pay additional liquidated damages in the amount of Euro 10,000 for each and any
additional month of such breach. P.C. Ware's right to assert higher damages, if
any, incurred by it or by the European subsidiaries and P.C. Ware's right to
seek injunctive relief shall be unaffected.
The Company has also agreed that for three years from the closing date,
the Company shall keep secret and confidential all and any information it
possesses relating to the European subsidiaries and their respective businesses.
Transition Services
-------------------
The Agreement for the Sale and Purchase of Shares provides that from
the closing date until December 31, 2001, the Company shall deliver, if and
insofar as P.C. Ware so requests, to P.C. Ware or the European subsidiaries
goods and services of essentially the same kind as delivered in the past to the
European subsidiaries, at a price equal to the Company's own cost, together with
reasonable shipping and handling charges.
Termination
-----------
The Agreement for the Sale and Purchase of Shares may be terminated by:
o either party if the closing shall not have occurred on or before
December 31, provided that such party is not in breach of the any
of its material obligations under the Agreement for the Sale and
Purchase of Shares and, provided, further, that such termination
right may not be exercised until February 16, 2001 in the event
that the necessary clearance by all competent competition
authorities has not been obtained or the special meeting of
stockholders of the Company shall not have occurred prior to
December 31, in each case, for reasons beyond the control of the
parties; or
o a non-breaching party if the other party is in material breach of
its obligations under the Agreement for the Sale and Purchase of
Shares, and such breach cannot be reasonably cured or the
breaching party is not taking reasonable efforts to cure such
breach.
Governing Law; Venue for Determination of Disputes
--------------------------------------------------
The Agreement for the Sale and Purchase of Shares is governed by and
will be construed in accordance with the internal laws of the Federal Republic
of Germany. All disputes arising in connection with the Agreement for the Sale
and Purchase of Shares or in view of its validity and which cannot be settled by
amicable agreement are required to be finally adjudicated in accordance with the
rules of arbitration of the German Institution of Arbitral Jurisdiction (DIS)
without recourse to courts of law. The court of arbitration can also finally
decide on the validity of the present arbitration agreement. The venue of the
court of arbitration is Dusseldorf, Germany.
- 7 -
<PAGE>
Net Proceeds From the Proposed Sale; Ongoing Corporate Operations
If the sale of the Company's European subsidiaries is approved by the
Company's stockholders and is thereafter consummated, the Company may be deemed
to have disposed of substantially all of its assets under Delaware law. The
Board of Directors, however, intends to continue to grow the Company's remaining
business. The Company has no present plans or proposals with respect to the use
of the net proceeds from the sale, except a general intention to use the net
proceeds to expand the Company's U.S. business or for the acquisition of related
businesses. See "Summary Unaudited Pro Forma Financial Information."
Accounting Treatment
The sale of the European subsidiaries will be accounted for as a sale
of all of the capital stock of the Company's European subsidiaries in accordance
with generally accepted accounting principles. The Company will record a gain or
loss for book purposes based upon the net proceeds to be received under the
Agreement for the Sale and Purchase of Shares and the book value of the capital
stock sold.
Federal Income Tax Consequences of the Proposed Sale
The following is a summary of certain of the federal income tax
consequences to the Company as a result of the sale of the European subsidiaries
under the Agreement for the Sale and Purchase of Shares, which summary is
believed by the Company to contain a description of all material tax aspects of
the sale of the European subsidiaries under the Agreement for the Sale and
Purchase of Shares. The consummation of the sale of the capital stock of the
European subsidiaries will be a taxable transaction to the Company. The
consummation of such sale will not in itself be a taxable event for the
stockholders of the Company.
Stockholder Approval
As of November 17, 2000, the directors and officers, and their spouses
and children, of the Company owned approximately 11.8% of the outstanding shares
of the Company's Common Stock, and they have indicated that they intend to vote
all such shares in favor of the sale of the European subsidiaries.
Approval at the Special Meeting by the Company's stockholders of the
Agreement for the Sale and Purchase of Shares and the transactions contemplated
thereby will also authorize the Company, without further stockholder approval
and without further solicitation of proxies from stockholders to make future
modifications and amendments to the terms and conditions of the sale of the
European subsidiaries, provided such amendments do not materially reduce the net
proceeds that the Company will receive from the sale. The Company is not
currently aware of any such amendments or modifications which are expected to
occur. If stockholder approval is not obtained, the Company will terminate the
Agreement for the Sale and Purchase of Shares in accordance with its terms and
the Company will continue to own and operate the European subsidiaries.
Rights of Dissenting Stockholders
Pursuant to the Delaware General Corporation Law, holders of shares of
the Company's voting securities will not be entitled to rights of appraisal in
connection with the sale of the European subsidiaries pursuant to the Agreement
for the Sale and Purchase of Shares.
- 8 -
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of November 17, 2000 by (i) each
person who, to the knowledge of the Company, beneficially owns more than 5% of
the outstanding Common Stock of the Company, (ii) the directors and certain
officers of the Company and (iii) all directors and officers of the Company as a
group. Except as indicated, each person listed below has sole voting and
investment power with respect to the shares set forth opposite such person's
name.
Shares Beneficially Owned(1)
----------------------------
Name Number Percentage
---- ------ ----------
Edwin Morgens (2)(3) 187,421 3.6%
Allan D. Weingarten (2)(4) 31,062 *
F. Duffield Meyercord (2)(5) 46,275 *
William H. Willett (2)(6) 229,447 4.2
Jeffrey Largiader (2)(7) 68,950 1.3
All directors and executive officers as a group 671,755 11.8
(9 persons) (2)(8)
ROI Capital Management, Inc. (9) 516,600 9.9
ROI Partners, L.P. (10) 292,300 5.6
Matador Capital Management Corp. (11) 473,600 9.1
Dimensional Fund Advisors, Inc. (12) 322,900 6.2
------------------------
* Less than 1%.
(1) To the Company's knowledge, except as set forth in the footnotes to
this table and subject to applicable community property laws, each
person named in the table has "beneficial ownership" with respect to
the shares set forth opposite such person's name. The information as to
beneficial ownership is based upon statements furnished to the Company
by the beneficial owners. For purposes of computing the percentage of
outstanding shares held by each person named above, pursuant to the
rules of the Securities and Exchange Commission, any security that such
person has the right to acquire within 60 days of the date of
calculation is deemed to be outstanding, but is not deemed to be
outstanding for purposes of computing the percentage ownership of any
other person.
(2) The address for each director and executive officer of the Company is
c/o Programmer's Paradise, 1157 Shrewsbury Avenue, Shrewsbury, New
Jersey 07702.
(3) Includes options to purchase 34,125 shares of Common Stock. Also
includes 36,439 shares of Common Stock held by a trust for the benefit
of Mr. Morgens' daughter, with respect to which Mr. Morgens disclaims
beneficial ownership.
(4) Includes options to purchase 29,062 shares of Common Stock.
(5) Includes options to purchase 35,025 shares of Common Stock.
(6) Includes options to purchase 215,000 shares of Common Stock.
(7) Includes options to purchase 60,950 shares of Common Stock.
(8) Includes options to purchase 487,762 shares of Common Stock.
(9) The address for ROI Capital Management, Inc. is 17 E. Sir Francis Drake
Blvd., Suite 225, Larkspur, CA 94939. Beneficial ownership information
is based upon information set forth in ROI Capital Management's
Schedule 13G, dated February 11, 2000.
- 9 -
<PAGE>
(10) The address for ROI Partners, L.P. is 17 E. Sir Francis Drake Blvd.,
Suite 225, Larkspur, CA 94939. Beneficial ownership information is
based upon information set forth in ROI Partners' Schedule 13G, dated
February 11, 2000
(11) The address for Matador Capital Management Corp. is 200 1st Avenue
North, Suite 203, St. Petersburg, FL 33701. Beneficial ownership
information is based upon information set forth in Matador Capital
Management's Schedule 13G, dated February 14, 2000.
(12) The address for Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue,
11th Floor, Santa Monica, CA 90401. Beneficial ownership information is
based upon information set forth in Dimensional Fund Advisors' Schedule
13G, dated February 11, 2000.
SUMMARY UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following summary unaudited Pro Forma Balance Sheet as of September
30, 2000, and the Pro Forma Statements of Operations for the year ended December
31, 1999, and the nine months ended September 30, 2000, are presented to give
effect to the sale of the Company's European subsidiaries.
Historical financial data used to prepare the pro forma financial
statements were derived from the audited financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999, and
the unaudited financial statements included in the Company's Quarterly Report on
Form 10-Q for the nine months ended September 30, 2000, which are incorporated
by reference into this Proxy Statement. See "Incorporation of Certain Documents
by Reference." These pro forma financial statements should be read in
conjunction with such historical financial statements.
The pro forma adjustments reflected herein are based on available
information and certain assumptions that the Company's management believes are
reasonable. Pro forma adjustments made in the Pro Forma Balance Sheet assume
that the sale of the European subsidiaries was consummated on September 30,
2000, and do not reflect the impact of the European subsidiaries historical
operating results or changes in other balance sheet amounts subsequent to
September 30, 2000. The pro forma adjustments related to the Pro Forma
Statements of Operations assume that the sale of the European subsidiaries was
consummated as of January 1, 1999.
The Pro Forma Balance Sheet and Pro Forma Statements of Operations are
based on assumptions and approximations and, therefore, do not reflect in
precise numerical terms the impact of the transaction on the historical
financial statements and are subject to change. Such pro forma financial
information should not be used as a basis for forecasting the future operations
of the Company. The pro forma financial information is presented for
illustrative purposes only and is not necessarily indicative of any future
results of operations or the results that might have occurred if the sale of the
European subsidiaries had actually occurred on the indicated dates.
- 10 -
<PAGE>
Balance Sheet:
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
As of September 30, 2000
------------------------
Pro Forma Adjustments
-------------------------------------------------------------------------------------------------------------------
Assets Sold Proceeds of Pro Forma as
Historical (3) Sale Adjusted
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $1,281 $(928) $11,377(4) $11,730
Accounts receivable, net 35,405 (23,069) - 12,336
Inventory - finished goods 6,746 (1,764) - 4,982
Prepaid expenses and other current assets 3,197 (934) - 2,263
Deferred income taxes 1,752 (732) - 1,020
-------------------------------------------------------------------------------------------------------------------
Total current assets 48,381 (27,427) 11,377 32,331
Equipment and leasehold improvements, net 1,717 (668) - 1,049
Goodwill, net 13,801 (6,374) - 7,427
Other assets 1,213 68 - 1,281
Deferred income taxes 1,807 (195) - 1,612
Intercompany trade receivables - (5,715) 5,715(5) -
-------------------------------------------------------------------------------------------------------------------
Total assets $66,919 $(40,311) $17,092 $43,700
----------------------------------------------------------=========================================================
Liabilities & Stockholders' equity Current liabilities:
Notes payable to bank $803 $ - $ (803)(4) -
Accounts payable and accrued expenses 31,512 (19,055) - 12,457
Other current liabilities 2,916 (2,760) - 156
-------------------------------------------------------------------------------------------------------------------
Total current liabilities 35,231 (21,815) (803) 12,613
Intercompany trade payables - (8,237) 8,237(5) -
Stockholder's equity:
Common Stock 52 - - 52
Additional paid-in-capital 35,476 (10,376) 10,376 35,476
Treasury stock (1,325) - - (1,325)
Retained earnings 262 (2,660) (718) (3,116)
Accumulated other comprehensive loss (2,777) 2,777 - -
-------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 31,688 (10,259) 9,658 31,087
----------------------------------------------------------=========================================================
Total liabilities & stockholders' equity $66,919 $(40,311) $17,092 $43,700
----------------------------------------------------------=========================================================
</TABLE>
- 11 -
<PAGE>
Statements of Operations:
(in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 2000 Year Ended December 31, 1999
----------------------------------------------------------------------------------------------------------------------
Pro Forma Pro Forma as Pro Forma Pro Forma
Historical Adjustments Adjusted Historical Adjustments as Adjusted
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Sales $147,650 $80,919 (1) $ 66,731 $244,139 $163,409 (1) $ 80,730
Cost of sales 132,589 74,243 (1) 58,346 218,014 148,574 (1) 69,440
--------- -------- ---------- --------- --------- ----------
Gross profit 15,061 6,676 8,385 26,125 14,835 11,290
Selling, general and
administrative expenses 16,958 8,544 (1) 8,414 24,422 13,996 (1) 10,426
Amortization of goodwill 1,059 126 (1) 933 1,795 48 (1) 1,747
--------- -------- ---------- --------- --------- ----------
Income (loss) from (2,956) (1,994) (962) (92) 791 (883)
operations
Other (expense) income:
Interest expense (245) (245) (2) - (408) (408)(2) -
Interest income 235 94 (1) 141 548 193 (1) 355
Realized foreign
exchange gain (loss) 33 (35) (1) 68 - - -
Unrealized foreign
exchange (loss) gain (155) (184) (1) 29 525 192 (1) 333
--------- -------- ---------- --------- --------- ----------
Income (loss) before income
taxes (3,088) (2,364) (724) 573 768 (195)
Income tax provision
(benefit) (893) (615) (1) (278) 1,302 1,609 (1) (307)
--------- -------- ---------- --------- --------- ----------
Net income (loss) $ (2,195) $ (1,749) $ (446) $ (729) $ (841) $112
Basic net income (loss) per
common share $ (0.44) $ (0.09) $ (0.14) $ 0.02
========= ========== ========= ----------
Diluted net income (loss)
per common share $ (0.44) $ (0.09) $ (0.14) $ 0.02
========= ========== ========= ----------
Weighted average common
shares outstanding - Basic 4,983 4,983 5,100 5,100
========= ========== ========= ----------
Weighted average common
shares outstanding - Diluted 4,983 4,983 5,100 5,100
--------------------------------=========--------------------==========-------==========--------------------==========
</TABLE>
- 12 -
<PAGE>
The unaudited pro forma financial information as of and for the nine-month
period ended September 30, 2000 and for the year ended December 31, 1999, gives
effect to the following pro forma adjustments (dollars in thousands):
Statements of Operations:
1. To give retroactive effect to the decrease in revenues, operating
expenses, other expenses, other income and income tax provision
(benefit) estimated by the Company to be attributable to substantially
all operating activities of the European subsidiaries.
2. To reflect a reduction in the Company's interest expense of $142 and
$104, for the year ended December 31, 1999 and the nine months ended
September 30, 2000 respectively, incurred relating to the revolving
line of credit with PNC Bank, National Association, assuming the
application of proceeds from the sale of the European subsidiaries to
repay the outstanding indebtedness under this facility. The total
interest expense of $408 and $245, for the year ended December 31, 1999
and the nine months ended September 30, 2000 respectively, includes
$266 and $141 for the same periods from the European subsidiaries.
Balance Sheet:
3. Represents the assets to be sold to and liabilities to be assumed by
P.C. Ware, excluding the inter-company account balances described in
footnote 5.
4. Represents estimated cash sales price of $12,835 (Euro 14,500 converted
at the Euro to U.S. Dollar exchange rate on September 30, 2000 of
.8851) less the repayment of $803 of a bank loan less the estimated
transaction costs of $655. Such costs include estimated professional
fees to be paid by the Company in connection with the sale of the
European subsidiaries. The resulting estimated gain (loss) on the sale
of the European subsidiaries and estimated transaction costs have not
been considered or reflected in the accompanying pro forma statements
of operations. In addition, as a condition to the consummation of the
sale of the European subsidiaries, the Company was required to enter
into a non-competition agreement with and for the benefit of P.C. Ware
for a period of two years. No value has been assigned to the
non-competition agreement in the Agreement for the Sale and Purchase of
Shares or in the pro forma financial information presented above.
5. Reflects the offset of the Company's and the European subsidiaries'
intercompany receivables and payables of $5,715 and $8,237,
respectively.
6. Sales price will be calculated based upon the foreign exchange rate in
effect on the closing date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company (File No.
000-14278) with the SEC pursuant to the Securities Exchange Act of 1934, as
amended, are incorporated into this Proxy Statement by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1999, filed on March 29, 2000; and
(b) TheCompany's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000, filed on November 14, 2000.
The Company will furnish without charge to each person whose proxy is
being solicited, upon the written request of any such person, a copy of the
foregoing documents that are incorporated by reference herein. Requests for
copies should be directed to Programmer's Paradise, Inc., 1157 Shrewsbury
Avenue, Shrewsbury, New Jersey 07702; Attention: Secretary.
- 13 -
<PAGE>
OTHER MATTERS
The Board of Directors of the Company knows of no other matters which
are to be brought before the Special Meeting. If any other matters should be
presented for proper action, it is the intention of the persons named in the
proxy, as proxy appointees, to vote in accordance with their discretion pursuant
to the terms of the proxy.
The Company is paying all costs of the solicitation of proxies,
including the expenses of printing and mailing this Proxy Statement, the
accompanying Notice of Special Meeting of Stockholders and the enclosed proxy.
The Company will also reimburse brokerage houses and other custodians, nominees
and fiduciaries for their expenses, in accordance with the regulations of the
Securities and Exchange Commission, in sending proxies and proxy materials to
the beneficial owners of the Company's Common Stock. Officers or employees of
the Company may also solicit proxies in person, or by mail, telegram or
telephone, but such persons will receive no compensation for such work, other
than their normal compensation as such officers or employees.
PROGRAMMER'S PARADISE, INC.
By William H. Willett
Chairman and Chief Executive Officer
It is important that your proxy be returned promptly. Therefore, if you do not
expect to attend the Special Meeting in person, you are urged to fill in, sign,
date and return the enclosed proxy.
- 14 -
<PAGE>
ANNEX I
AGREEMENT FOR THE SALE AND PURCHASE OF SHARES
Allg. Prot. No. /2000
------------
Notarial Deed
Regarding the Sale and Purchase of Shares
Negotiated at Basle on this 1st day of December 2000.
Before me, the undersigned Notary _________________________
with offices at Basle, Switzerland,
appeared today:
1. Dr. Denis Gebhardt
born on March 11th, 1971
with business address at Immermannstra(beta)e 40, 40210 Dusseldorf,
Germany
2. Dr. Knut Loschke
born on August 18th, 1950
with business address at Blochstra(beta)e 1, 04329 Leipzig, Germany
Appearant 1 declared that he was acting
not in his own name but in the name and on behalf of Programmer's
Paradise, Inc., a corporation organized and existing under the laws of
the State of Delaware, USA, with principal place of business at
Shrewsbury, NJ 07702-4321, USA,
- hereinafter referred to as "Seller"-,
by virtue of a power of attorney dated __________, a certified copy of
which is attached hereto.
The original of a Certificate of Incumbency certifying the incorporation
and good standing of Seller and the power of representation of the
subscriber to said power of attorney has been presented, and a certified
copy of such certificate is also attached hereto.
<PAGE>
Appearant 2 declared that he was acting
not in his own name but in his capacity as Chairman of the Board
(Vorstandsvorsitzender), having sole power of representation, for PC-Ware
Information Technologies AG, a corporation organized and existing under
the laws of the Federal Republic of Germany with principal place of
business at Leipzig, Germany, registered with the commercial register
(Handelsregister) of the Local Court (Amtsgericht) at Leipzig under HRB
15064,
- hereinafter referred to as "Buyer"-.
The original of a certified excerpt from the commercial register of the
Local Court at Leipzig (Amtsgericht) under HRB 15064, dated
_________________, has been presented and is attached hereto.
The Appearants proved their identities by presenting their identify
cards/passports with photographs.
An English translation of this Deed was likewise submitted for notarization. In
this context, the parties agreed that the German text shall be the final,
decisive and authentic text and that the English translation is for convenience
only, provided, however, that the English text shall be consulted for purposes
of contractual interpretation should there be a gap or an ambiguity in the
German text.
Upon request of the Appearants and based on their verbal statements made in my
presence, I hereby record the following
- 2 -
<PAGE>
Agreement for the Sale and Purchase of Shares
---------------------------------------------
WHEREAS
1. Seller is the sole shareholder of several European companies and intends
to sell all of its shares in European companies with the exception of its
shares in Healy-Hudson AG, a German joint-stock corporation, and in
Programmer's Paradise France S.A.R.L., a French limited-liability
company; Buyer intends to acquire the shares in all European companies
owned by Seller (but for the above exceptions) and the respective
companies' business; Seller and Buyer, therefore, intend to enter into
this Agreement for the Sale and Purchase of Shares (the "Agreement");
2. Seller and Buyer have already been in intense talks and negotiations,
which resulted in a letter of intent dated August 2nd, 2000 (the "Letter
of Intent"), which sets forth the material terms of the sale and purchase
of the shares in the European companies owned by Seller in a non-binding
form, based on the status of the negotiations as of the date of the
Letter of Intent;
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
Section 1
Status (Object of the Sale and Purchase)
1. Seller, directly and/or indirectly, holds all equity interests in the
following companies:
1.1. ISP*D International Software Partners GmbH, a company organized
and existing under the laws of the Federal Republic of Germany
with principal place of business at Poing, Germany, registered
with the commercial register (Handelsregister) of the Local Court
(Amtsgericht) at Munich under HRB 87387 ("ISP*D").
1.1.1 The total fully paid-up share capital (Stammkapital) of
ISP*D amounts to DM 850,000.00 (in words: eight hundred
fifty thousand Deutschmarks). It consists of the following
shares (Geschaftsanteile) held at 100 % by Seller:
- two shares in a nominal amount of DM 25,000.00 each;
- one share in a nominal amount of DM 200,000.00; and
- one share in a nominal amount of DM 600,000.00.
1.1.2 ISP*D has its principal place of business at Poing. It has
no further places of business or branch offices. Its
previous branch office at Vienna, Austria, is being
liquidated; the respective shareholders resolution dated
May 29th, 2000 was registered on August 25th, 2000 with
the register of firms (Firmenbuch) of the Commercial Court
(Handelsgericht) at Vienna under FN 48961 b.
1.1.3 The merger of ISP*D Software Services GmbH, a company with
principal place of business at Poing, Germany, registered
with the commercial register (Handelsregister) of the
Local Court (Amtsgericht) at Munich under HRB 90337, as
transferor, with ISP*D, as transferee, by way of a merger
by absorption (Verschmelzung durch Aufnahme), set forth in
the merger
- 3 -
<PAGE>
agreement dated April 12, 2000 and the pertinent
consenting shareholders resolutions of even date (deeds
Nos. 1903 and 1909 of the notary Dr. Karl Winkler with
offices at Munich), has become effective by registration
with the commercial register of ISP*D on May 5, 2000.
1.1.4 ISP*D holds the following shares in the company InTeCo,
which is described and defined in item 1.2 below:
- one share in a nominal amount of DM 10,000.00,
- one share in a nominal amount of DM 5,000.00,
- three shares in a nominal amount of DM 1,000.00 each,
and
- three shares in a nominal amount of DM 500.00 each.
1.1.5 ISP*D is the sole shareholder of ISP*A Software Partners
Gesellschaft m.b.H., a company organized and existing
under the laws of the Republic of Austria with principal
place of business at Vienna, Austria, registered with the
register of firms (Firmenbuch) of the Commercial Court
(Handelsgericht) at Vienna under FN 177299 i ("ISP*A").
1.1.5.1 The fully paid-up share capital (Stammkapital) of
ISP*A amounts to 40,000.00 (in words: forty
thousand Euros). It consists of the following
single share (Geschaftsanteil) held by ISP*A:
- one share in a nominal amount of 40,000.00.
1.2 InTeCo - Entwicklungsgesellschaft fur Informationstechnologie und
Communication mbH, a company organized and existing under the
laws of the Federal Republic of Germany with principal place of
business at Hochspeyer, Germany, registered with the commercial
register (Handelsregister) of the Local Court (Amtsgericht) at
Kaiserslautern under HRB 2035 ("InTeCo").
1.2.1 The total fully paid-up share capital (Stammkapital) of
InTeCo amounts to DM 150,000,00 (in words: one hundred
fifty thousand Deutschmarks). It consists of the following
shares (Geschaftsanteile):
- one share in a nominal amount of DM 25,500.00;
- one share in a nominal amount of DM 18,000.00;
- one share in a nominal amount of DM 87,000.00;
- one share in a nominal amount of DM 10,000.00;
- one share in a nominal amount of DM 5,000.00;
- three shares in a nominal amount of DM 1,000.00 each;
and
- three shares in a nominal amount of DM 500.00 each;
of which Seller holds:
- 4 -
<PAGE>
- one share in a nominal amount of DM 25,000.00;
- one share in a nominal amount of DM 18,000.00; and
- one share in a nominal amount of DM 87,000.00.
The remaining shares in the share capital of InTeCo are
held, as referred to in item 1.1.4 above, by ISP*D.
1.2.2 InTeCo has its principal place of business at Hochspeyer.
It has no further places of business or branch offices.
1.3 Logicsoft Holding B.V., a company organized and existing under
the laws of the Kingdom of the Netherlands with principal place
of business at Amsterdam, The Netherlands, registered with the
commercial register (handelsregister) of the Chamber of Commerce
and Industry (Kamer van Koophandel en Fabrieken) at Amsterdam
under Dossiernummer 33180139 ("Logicsoft Holding*NL").
1.3.1 The nominal share capital (maatschappelijk kapitaal) of
Logicsoft Holding*NL amounts to NLG 250,000.00 (in words:
two hundred fifty thousand Dutch Guilders), of which NLG
54,000.00 have been issued (geplaatst) and paid up
(gestort). It consists of 2,500 shares (aandelen) in a
nominal amount of NLG 100.00 each. Of the total of 540
issued and paid-up shares, Seller holds:
- 400 shares in a nominal amount of NGL 100.00 each.
The remaining 140 shares in the issued and paid-up share
capital are held by Logicsoft Holding*NL as treasury
shares.
1.3.2 Logicsoft Holding*NL is the sole shareholder of Logicsoft
Group Nederland B.V., a company organized and existing
under the laws of the Kingdom of the Netherlands with
principal place of business at Amsterdam, The Netherlands,
registered with the commercial register (handelsregister)
of the Chamber of Commerce and Industry (Kamer van
Koophandel en Fabrieken) at Amsterdam under Dossiernummer
33226399 ("Logicsoft Group*NL"), and of Euro Soft B.V., a
company organized and existing under the laws of the
Kingdom of the Netherlands with principal place of
business at Amsterdam, The Netherlands, registered with
the commercial register (handelsregister) of the Chamber
of Commerce and Industry (Kamer van Koophandel en
Fabrieken) at Amsterdam under Dossiernummer 33180665
("EuroSoft").
1.3.2.1 The nominal share capital (maatschappelijk
kapitaal) of Logicsoft Group*NL amounts to NLG
500,000.00 (in words: five hundred thousand Dutch
Guilders), of which NLG 111,100,00 have been
issued (geplaatst) and paid up (gestort). It
consists of 5,000 shares (aandelen) in a nominal
amount of NLG 100.00 each. The issued and paid-up
shares are held at 100 % by Logicsoft Holding*NL
as follows:
- 1,111 shares in a nominal amount of NLG
100.00 each.
1.3.2.2 The nominal share capital (maatschappelijk
kapitaal) of EuroSoft amounts to NLG 175,000.00
(in words: one hundred seventy-five thousand
Dutch Guilders),
- 5 -
<PAGE>
of which NLG 36,000,00 have been issued
(geplaatst) and paid up (gestort). It consists of
1,750 shares (aandelen) in a nominal amount of
NLG 100.00 each. The issued and paid-up shares
are held at 100 % by Logicsoft Holding*NL as
follows:
- 360 shares in a nominal amount of NLG 100.00
each.
1.4 (Indirectly:) Logicsoft Group France S.A.S., a company organized
and existing under the laws of the French Republic with principal
place of business at Courbevoie, France, registered with the
commercial and companies register (registre du commerce et des
societes) of the Commercial Court (Tribunal de Commerce) at
Nanterre under RCS Nanterre B 349 565 259 ("Logicsoft Group*F").
1.4.1 The fully paid-up share capital (capital social) of
Logicsoft Group*F amounts to (pound) 375,000.00 (in words:
three hundred seventy-five thousand Euros). It consists of
the following shares (actions):
- 60,000 shares in a nominal amount of (pound) 6.25 each.
These shares are held at 100 % by Programmer's Paradise
France S.A.R.L. with principal place of business at
Courbevoie, France, a company affiliated with Seller.
1.5 Logicsoft Group Italia S.r.l., a company organized and existing
under the laws of the Italian Republic with principal place of
business at Saronno (VA), Italy, registered with the businesses
register (registro delle imprese) of the the Chamber of Commerce,
Industry, Craft and Agriculture (Camera di Commercio Industria
Artigianato e Agricoltura) at Varese under No. VA 026-1994-28121
(and with the Repertorio Economico Amministrativo under No.
234890) ("Logicsoft Group*I").
1.5.1 The fully paid-up share capital (capitale sociale) of
Logicsoft Group*I amounts to LIT 1,140 million (in words:
one thousand one hundred forty million Italian Lire). It
consists of the following shares (quote):
- one share in a nominal amount of LIT 1,083 million;
and
- one share in a nominal amount of LIT 57 million;
of which Seller holds:
- one share in a nominal amount of LIT 57 million.
The remaining share in the share capital of Logicsoft
Group*I is held by Lifeboat Associates, Inc., a US company
affiliated with Seller.
1.5.2 Logicsoft Group*I is the sole shareholder of Programmer's
Paradise Italia S.r.l., a company organized and existing
under the laws of the Italian Republic with principal
place of business at Saronno (VA), Italy, registered with
the businesses register (registro delle imprese) of the
Chamber of Commerce, Industry, Craft and Agriculture
(Camera di Commercio Industria Artigianato e Agricoltura)
at Varese under No. VA 026-1994-28120 (and with the
Repertorio Economico Amministrativo under No. 234862)
("PP*I"), which, for its part, is the sole shareholder of
International Software Partners Italia S.r.l., a company
organized and existing under the laws of the Italian
Republic with principal place of business at Saronno (VA),
Italy, registered with the businesses register (registro
delle imprese) of the Chamber of Commerce, Industry, Craft
and Agriculture (Camera di
- 6 -
<PAGE>
Commercio Industria Artigianato e Agricoltura) at Varese
under No. VA 026-28148 (and with the Repertorio Economico
Amministrativo under No. 236219) ("ISP*I).
1.5.2.1 The fully paid-up share capital (capitale
sociale) of PP*I amounts to LIT 50,000,000.00 (in
words: fifty million Italian Lire). It consists
of the following single share (quota) held by
Logicsoft Group*I:
- one share in a nominal amount of LIT 50
million.
1.5.2.2 The fully paid-up share capital (capitale
sociale) of ISP*I amounts to LIT 30,000,000.00
(in words: thirty million Italian Lire). It
consists of the following single share (quota)
held by PP*I:
- one share in a nominal amount of LIT 30,000.
Both PP*I and ISP*I are in liquidation (in liquidazione).
1.6 Systematika Ltd, a company organized and existing under the laws
of England and Wales with principal place of business at London,
England, registered with the Registrar of Companies for England
and Wales under No. 02973781 ("Systematika").
1.6.1 The authorized share capital of Systematika amounts to
(pound) 100.00 (in words: one hundred Pounds Sterling), of
which (pound) 2.00 have been issued but are unpaid. It
consists of 100 shares in a nominal amount of (pound) 1.00
each. The issued but unpaid shares are all ordinary shares
and are held at 100% by Seller as follows:
- two shares in a nominal amount of (pound) 1.00 each.
1.6.2 Systematika is the sole shareholder of:
- Internet Paradise Ltd, a company organized and
existing under the laws of the laws of England and
Wales with principal place of business at London,
England, registered with the Registrar of Companies
for England and Wales under No. 03305592 ("Internet
Paradise");
- International Software Partners UK Ltd, a company
organized and existing under the laws of England and
Wales with principal place of business at London,
England, registered with the Registrar of Companies
for England and Wales under No. 3245381 ("Int'l
SP*UK"); and
- Programmer's Paradise UK Ltd, a company organized and
existing under the laws of England and Wales with
principal place of business at London, England,
registered with the Registrar of Companies for
England and Wales under No. 01476244 ("PP*UK");
which, for its part, is the sole shareholder of:
-- ISP*UK Ltd, a company organized and existing
under the laws of England and Wales with
principal place of business at London, England,
registered with the Registrar of Companies for
England and Wales under No. 03240083 ("ISP*UK");
-- "C" Science Ltd, a company organized and
existing under the laws of England and Wales
with principal place of business at London,
England, registered with
- 7 -
<PAGE>
the Registrar of Companies for England and Wales
under No. 1999553 ("C-Science");
-- System Science Ltd, a company organized and
existing under the laws of England and Wales
with principal place of business at London,
England, registered with the Registrar of
Companies for England and Wales under No.
2241994 ("System Science"); and
-- Logicsoft Group (UK) Ltd, a company organized
and existing under the laws of England and Wales
with principal place of business at London,
England, registered with the Registrar of
Companies for England and Wales under No.
3309281 ("Logicsoft Group*UK").
1.6.2.1 The authorized share capital of Internet Paradise
amounts to (pound) 100.00 (in words: one hundred
Pounds Sterling), of which (pound) 1.00 has been
issued and paid up. It consists of 100 shares in
a nominal amount of (pound) 1.00 each. The issued
and paid-up shares are all ordinary shares and
are held at 100% by Seller as follows:
- one share in a nominal amoun of 1.00 pound.
1.6.2.2 The authorized share capital of Int'l SP*UK
amounts to (pound) 100.00 (in words: one hundred
Pounds Sterling), of which (pound) 1.00 has been
issued and paid up. It consists of 100 shares in
a nominal amount of (pound) 1.00 each. The issued
and paid-up shares are all ordinary shares and
are held at 100% by Seller as follows:
- one share in a nominal amount of(pound)
1.00.
1.6.2.3 The authorized share capital of PP*UK amounts to
(pound) 1,000.00 (in words: one thousand Pounds
Sterling), of which (pound) 160.00 have been
issued and paid up. It consists of 1,000 shares
in a nominal amount of (pound) 1.00 each. The
issued and paid-up shares are all ordinary shares
and are held at 100 % by Seller as follows:
- 160 shares in a nominal amount of (pound)
1.00 each.
1.6.2.4 The authorized share capital of ISP*UK amounts to
(pound) 100.00 (in words: one hundred Pounds
Sterling), of which (pound) 1.00 has been issued
and paid up. It consists of 100 shares in a
nominal amount of (pound) 1.00 each. The issued
and paid-up shares are all ordinary shares and
are held at 100 % by Seller as follows:
- one share in a nominal amount of(pound)
1.00.
1.6.2.5 The authorized share capital of C-Science amounts
to (pound) 100.00 (in words: one hundred Pounds
Sterling), of which (pound) 2.00 have been issued
and paid up. It consists of 100 shares in a
nominal amount of (pound) 1.00 each. The issued
and paid-up shares are all ordinary shares and
are held at 100 % by Seller as follows:
- two shares in a nominal amount of(pound)
1.00 each.
1.6.2.6 The authorized share capital of System Science
amounts to (pound) 100.00 (in words: one hundred
Pounds Sterling), of which (pound) 2.00 have been
issued and paid up. It consists of 100 shares in
a nominal amount of (pound) 1.00 each. The issued
and paid-up shares are all ordinary shares and
are held at 100 % by Seller as follows:
- 8 -
<PAGE>
- two shares in a nominal amount of (pound)
1.00 each.
1.6.2.7 The authorized share capital of Logicsoft
Group*UK amounts to (pound) 100.00 (in words: one
hundred Pounds Sterling), of which (pound) 1.00
has been issued and paid up. It consists of 100
shares in a nominal amount of (pound) 1.00 each.
The issued and paid-up shares are all ordinary
shares and are held at 100 % by Seller as
follows:
- one share in a nominal amount of(pound)
1.00.
On May 29th, 2000, an application has been made for the
companies ISP*UK and C-Science to be dissolved and struck
off the register; they are expected to be struck off the
register and be dissolved on November 15th, 2000.
2. Except as set forth under paragraph 3 below, the companies ISP*D,
InTeCo, Logicsoft Holding*NL, Logicsoft Group*I and Systematika are the
only companies which had, as of the date of the Letter of Intent, and
have, as of the date hereof, their seat and/or their principal place of
business in Europe and in which Seller has direct shareholdings as of
the date hereof. Such companies, together with Logicsoft Group*F, will
hereinafter collectively be referred to as the "Subsidiaries"
(regardless of the fact that Seller's participation in Logicsoft Group*F
is only indirect, and that, besides Seller, also ISP*D holds shares in
InTeCo and , besides Seller, also Lifeboat Associates, Inc. holds a
share in Logicsoft Group*I).
The shares in the Subsidiaries held by Seller (or with regard to
Logicsoft Group*F: by Programmer's Paradise France S.A.R.L.) described
in items 1.1.1, 1.2.1, 1.3.1, 1.4.1, 1.5.1 and 1.6.1 above will
hereinafter collectively be referred to as the "Shares". The "Shares"
shall also include the share currently held by Lifeboat Associates, Inc.
in Logicsoft Group*I.
Economically, the sale and purchase under this Agreement also extends to
all direct or indirect participations of the Subsidiaries in other
companies even if such participations should have been described above
in an incorrect or incomplete manner.
The companies directly or indirectly owned by the Subsidiaries as set
forth in items 1.1.5, 1.3.2, 1.5.2 and 1.6.2 above will hereinafter be
collectively referred to as the "Indirect Subsidiaries".
Schedule 1.2 hereto contains two charts showing the European
subsidiaries of Seller, divided into the Continent and the U.K.
3. Seller's shares in Healy-Hudson AG and in Programmer's Paradise France
S.A.R.L. are explicitly not part of the sale and purchase under this
Agreement and shall remain with Seller.
4. The business activities of the Subsidiaries and Indirect Subsidiaries
(the "Business Activities") are the distribution, resale and direct sale
of software in the territory of Europe meaning the countries: Germany,
Austria, Switzerland, The Netherlands, Belgium, Luxemburg, France, Italy
and the United Kingdom of Great Britain and Northern Ireland (which
countries will hereinafter collectively be referred to as the
"Territory").
- 9 -
<PAGE>
Section 2
Sale and Purchase of the Shares in the Subsidiaries
1. Seller hereby sells to Buyer, and Buyer hereby buys from Seller, the
Shares in the Subsidiaries with economic effect as of the day set forth
in Section 3 paragraph 1 below.
2. With regard to the shares in Logicsoft Group*F and the share held by
Lifeboat Associates, Inc. in Logicsoft Group*I, Seller's obligation
under the sale and purchase to deliver such shares to Buyer shall be
fulfilled by way of a direct transfer of such shares from Programmer's
Paradise France S.A.R.L. or, respectively, Lifeboat Associates, Inc.,
the current holders of such shares, to Buyer (or, if Buyer so requests,
an entity designated by Buyer), upon Seller's initiative.
3. It is understood between the parties that the sale and purchase of the
Shares pursuant to paragraph 1 above extends to all equity interests of
Seller in the Subsidiaries even if such equity interests should have
been described above in an incorrect or incomplete manner.
4. The result of the current fiscal year and the non-distributed profits of
previous fiscal years, if any, (i.e. profits carried forward and profits
of previous fiscal years insofar as no final resolution as for their use
has been adopted by January 1st, 2000) of all Subsidiaries are part of
the sale and purchase and shall be for the sole benefit of Buyer.
Section 3
Economic Effect; Date when this Agreement Becomes Binding; Closing
1. Economic Effect
---------------
Regardless of the date of the transfer of the Shares, the Shares are
sold and purchased with economic effect as of December 21st, 2000, 24:00
hours Central European Time ("Economic Effective Date").
2. Date when this Agreement Becomes Binding
----------------------------------------
The binding character of this Agreement is subject to Section 11 below,
except for the following provisions that shall be binding immediately
upon the execution of this Agreement:
(a) without proviso: Section 4 items 2.1, 3; Section 14 items 1, 4;
Section 15; Section 16, Section 17 item 8;
(b) subject to the proviso that such provisions shall retroactively
lose their effect if the condition precedent under Section 11
below can irreversibly not be satisfied (or, respectively, if
either party terminates this Agreement pursuant to Section 14 item
1 below because such condition has not been satisfied): Section 9
items 1 - 4.1; Section 12 item 2.1 - 2.2;
(c) in conjunction with any of the provisions listed in (a) or (b)
above: Section 17 items 2 - 7, 9.
The day on which the condition precedent set forth in Section 11 below
is satisfied shall be the "Legal Effective Date".
- 10 -
<PAGE>
3. Closing
-------
The performance of the mutual principal obligations hereunder, i.e. the
transfer of the Shares and the payment of the outstanding purchase price
(the "Closing"), shall take place, in accordance with the provisions set
forth in Section 12 paragraph 3 below, at the offices of Holters &
Elsing in Dusseldorf, Germany, at 10 a.m. (local time) on the third
business day after the condition(s) to Closing set forth in Section 12,
paragraph 1 below shall have been satisfied or waived (the "Closing
Date").
Section 4
Purchase Price, Due Dates and Payment Mode
1. The total purchase price for the sold Shares shall be
Euro Dollar 14,500,000.00
(in words: fourteen million five hundred thousand Euros).
The total purchase price shall be allocated to the individual
Subsidiaries as specified on Schedule 4 hereto.
2. The total purchase price is payable as follows:
2.1 A down-payment of 5 percent of the total purchase price, i.e.
Euro Dollar 725,000.00 (the "Down Payment"), shall be paid
simultaneously with the execution of this Agreement and shall be
applied against the total purchase price. Seller shall retain the
Down Payment, unless (i) this Agreement should not become binding,
or (ii) Buyer terminates this Agreement based on a material breach
of contract by Seller pursuant to Section 14 paragraph 2 below, or
(iii) any necessary Clearance of this Agreement by competition
authorities can irreversibly not be obtained; in any of such three
cases, the Down Payment plus interest at the rate of 6 percent per
annum from the date of the Down Payment shall be repaid to Buyer.
2.2 The portion of the total purchase price remaining after deducting
the Down Payment, i.e. Euro Dollar 3,775,000.00, shall be paid at
the Closing Date (the "Closing Date Purchase Price").
3. All payments under this Agreement shall be made by bank transfer as per
telephone advice into the following accounts:
Account of Seller: The Bank of New York,
Account No. 6106039362,
ABA No. 021000018,
SWIFT: IRVTUS3N
Account of Buyer:
Section 5
Seller's Representations and Warranties (I)
Seller represents and warrants to Buyer, by way of ordinary warranties
(zugesicherte Eigenschaften within the meaning of Section 459 (2) of the German
Civil Code), that the following is true and correct as of the date hereof and,
notwithstanding Section 7 paragraph 2 below, as of the Closing Date:
- 11 -
<PAGE>
1. Status
------
The statements in the Recitals and Section 1 above regarding the
Subsidiaries and the Indirect Subsidiaries are true and complete.
2. Subsidiaries and Indirect Subsidiaries Duly Organized and Existing
-------------------------------------------------------------------
The Subsidiaries and the Indirect Subsidiaries are duly organized under
the laws applicable under their respective jurisdictions of formation
and continue to exist in the legal forms chosen at the time of their
formation or, if the legal form should have been changed as shown on
Schedule 5.2 hereto, in the legal form resulting from such change.
3. Transfer of the Shares
----------------------
Seller (or, with regard to the shares in Logisoft Group*F: Programmer's
Paradise France S.A.R.L., and with regard to the share held by Lifeboat
Associates, Inc. in Logicsoft Group*I: Lifeboat Associates, Inc.) is the
sole legal and beneficial owner of the Shares, which, unless otherwise
set forth on Schedule 5.3 hereto, are not pledged and are free and clear
of all encumbrances and other third-party rights. Seller (or, with
regard to the shares in Logisoft Group*F: Programmer's Paradise France
S.A.R.L., and with regard to the share held by Lifeboat Associates, Inc.
in Logicsoft Group*I: Lifeboat Associates, Inc.) has the right, power
and authority to dispose of the Shares; except for the necessary
approval by Seller's stockholders, no third-party approvals or consents
are required for the disposal of the Shares, nor will such disposal
violate any third-party rights.
There are no circumstances that might give rise to a revocation,
rescission or similar right by a third party justifying the avoidance of
previous transfers of the Shares to Seller (or, with regard to the
shares in Logisoft Group*F: Programmer's Paradise France S.A.R.L., and
with regard to the share held by Lifeboat Associates, Inc. in Logicsoft
Group*I: Lifeboat Associates, Inc.).
4. Contributions to Capital
------------------------
All of the shares in the Subsidiaries and the Indirect Subsidiaries, as
set forth in Section 1 paragraph 1 above, have been validly issued and
are, to the extent stated in Section 1 paragraph 1 above, fully paid up
and non-assessable (apart from any mandatory capitalization rules under
applicable local law); there have been no repayments, also including
hidden repayments, of contributions to the stated capital. There have
been no hidden profit distributions.
5. Assets
------
Each of the Subsidiaries and Indirect Subsidiaries has good and valid
title to all assets shown on its respective balance sheet, and disposes
of all assets needed for its respective business as currently carried
out. Insofar as such assets are not owned by the respective Subsidiary
or Indirect Subsidiary, they have been properly leased. The assets owned
by the Subsidiaries and Indirect Subsidiaries are free and clear of
defects of title, restrictions and encumbrances of all kinds and any
rights of third parties (hereinafter collectively referred to as
"Liens"), with the sole exception of customary retentions of title
regarding current assets and the Liens described in Schedule 5.5 hereto.
The business of the Subsidiaries and Indirect Subsidiaries is not
conducted under any specific restriction but for such restrictions which
would also be imposed upon other persons conducting a similar business
- 12 -
<PAGE>
or operating similar assets for similar purposes in the localities where
such businesses and assets are located.
6. Intellectual Property Rights
----------------------------
The Subsidiaries and Indirect Subsidiaries are the owners of all
intellectual property rights, including but not limited to patents,
registered designs and registered trade or service marks, needed for
their respective business, except for the intellectual property rights
described in Schedule 5.6 hereto. To the best of Seller's knowledge,
such intellectual property rights have not been challenged by third
parties, nor is such challenge threatened, nor is, for any other reason,
a deletion or extinction of such intellectual property rights
threatened. Such intellectual property rights or the use thereof do not
violate any intellectual property rights of third parties. The
intellectual property rights have been protected by paying all fees as
they fell due and by taking, in a complete and timely manner, all other
action required for maintaining the intellectual property rights.
Section 6
Seller's Representations and Warranties (II)
Further, Seller represents and warrants to Buyer, by way of independent
warranties (selbstandiges Garantieversprechen pursuant to Sections 305, 241 of
the German Civil Code), that the following is true and correct as of the date
hereof and, notwithstanding Section 7 paragraph 2 below, as of the Closing Date:
1. Seller Duly Organized and Existing
----------------------------------
Seller (i) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and (ii)
has the corporate power and authority to own, lease and operate its
properties and to carry on its business as now conducted.
2. Consents, Authorizations, Continuance of Relationships with Present
Customers or Suppliers and On-Going Contracts
-----------------------------------------------------------------------
Seller may execute, deliver and perform this Agreement without the
necessity of the Subsidiaries or Seller obtaining any consent, approval,
authorization or waiver, giving any notice, making any filings or
disclosures or otherwise. Except as otherwise stated on Schedule 6.2
hereto, the transfer of the sold Shares does neither under applicable
law, nor under any articles of association, by-laws or similar require,
with regard to any of the Subsidiaries or Indirect Subsidiaries, any
consent, approval or waiver by the respective company, its directors,
officers, any boards, committees or similar, its shareholders meeting,
individual shareholders or third parties. Except as set forth on
Schedule 6.2 hereto, no giving of any notice, making of any filings or
disclosures or otherwise in connection with the execution, delivery or
performance of this Agreement is necessary to assure to the business of
the Subsidiaries the continuance of its relationships with its present
customers or suppliers or the continued entitlement by the Subsidiaries
to the benefits of existing contracts (including, without limitation,
volume licensing agreements, leases, agreements, security granted or
received, licences, permits, commitments, orders and quotations). This
Agreement has been duly authorized, executed and delivered by Seller,
and this Agreement constitutes the legal, valid and binding obligation
of Seller, enforceable in accordance with its terms, subject, however,
to the approval of a majority of Seller's stockholders. The execution,
delivery and performance of this Agreement by Seller will not:
(a) constitute a violation of the by-laws or other corporate
governing documents of Seller;
- 13 -
<PAGE>
(b) except as described on Schedule 6.2 hereto, conflict with, result
in the breach of or constitute a default of any liability or
obligation under any contract to which Seller or any of the
Subsidiaries or Indirect Subsidiaries are parties or bound;
(c) constitute a violation of any statute, judgment, order, decree or
regulation or rule of any court, governmental authority or
arbitrator applicable or relating to Seller or any of the
Subsidiaries or Indirect Subsidiaries or their respective assets
or businesses; or
(d) result in the creation of any Lien upon any of the assets of
Seller or the Subsidiaries or Indirect Subsidiaries.
3. Subsidiaries
------------
Seller has no equity interests in companies in Europe other than the
Subsidiaries, Healy-Hudson AG and Programmer's Paradise France S.AR.L.
There are no other shareholders of the Subsidiaries than Seller
(notwithstanding the minority interest of ISP*D in InTeCo as well as the
interest of Lifeboat Associates, Inc. in Logicsoft Group*I and
notwithstanding the fact that the direct holder of the shares in
Logicsoft Group*F is Programmer's Paradise France S.A.R.L.).
The Subsidiaries have no other direct or indirect participations in any
companies than the Indirect Subsidiaries, nor are they under any
obligation to acquire such participations.
4. No Resolutions to Amend the Articles of Association of the Subsidiaries
and the Indirect Subsidiaries
------------------------------------------------------------------------
There are no shareholders resolutions amending the articles of
association (Gesellschaftsvertrage or Satzungen) of the Subsidiaries
ISP*D and InTeCo which have not been registered with the commercial
register, nor are there any side agreements relating to the legal status
and corporate organization of such Subsidiaries.
There are no shareholders resolutions amending the articles of
association (or equivalent corporate documents under the laws of the
respective jurisdiction of formation) of the other Subsidiaries, as
described in Section 1 items 1.3 - 1.6 above, and the Indirect
Subsidiaries which, insofar as registration is required under the laws
of the respective jurisdiction of formation, have not yet been
registered with the competent registry authority, nor are there any side
agreements relating to the legal status and corporate organization of
such Subsidiaries and Indirect Subsidiaries.
5. Capital of the Subsidiaries and Indirect Subsidiaries
----------------------------------------------------
5.1 Schedule 6.5.1 hereto contains commercial register excerpts
(Handelsregisterauszuge) or, respectively, comparable documents
under the laws of the respective jurisdictions of formation, of
the Subsidiaries and the Indirect Subsidiaries.
5.2 Schedule 6.5.2 hereto contains, for each of the Subsidiaries and
Indirect Subsidiaries, a true and complete list of all capital
increases and decreases and all changes in its respective
shareholder structure (also including ratios of participation)
since its date of formation.
- 14 -
<PAGE>
6. Business Activities of the Subsidiaries and Indirect Subsidiaries
-----------------------------------------------------------------
The description of the Business Activities set forth in Section 1
paragraph 4 above is a true and correct description of the business
activities of the Subsidiaries and Indirect Subsidiaries as they are
actually carried on; there are no business activities actually carried
on that are of importance for the business of a Subsidiary or Indirect
Subsidiary or that might materially adversely affect such business
outside the Business Activities. Activities of the Subsidiaries and
Indirect Subsidiaries, if any, outside the Business Activities are set
out on Schedule 6.6 hereto.
7. Proxies
-------
Neither the Subsidiaries nor the Indirect Subsidiaries have granted any
proxies or powers of attorney extending to the entire business of such
Subsidiary or Indirect Subsidiary which are not apparent from the
commercial register excerpts or comparable documents contained in
Schedule 6.5.1 hereto or from the list contained in Schedule 6.7 hereto.
8. Branch Offices
--------------
Branch offices, if any, of the Subsidiaries and Indirect Subsidiaries
have, insofar as this is legally required, been duly registered.
9. No Corporate Agreements or Silent Partnerships
----------------------------------------------
Seller, the Subsidiaries and the Indirect Subsidiaries have neither with
one another nor with third parties entered into corporate agreements
(Unternehmensvertrage) within the meaning of Sections 291 et seq. of the
German Joint-Stock Corporation Act (Aktiengesetz) or similar agreements,
nor have they entered into any agreements for the formation of a silent
partnership. There are no agreements between the shareholders, directors
and officers of Seller or any person related with them (within the
meaning of Section 15 of the German Tax Code [Abgabenordnung]), on the
one hand, and the Subsidiaries, the Indirect Subsidiaries and their
respective directors and officers, on the other hand.
10. No Insolvency Proceedings
-------------------------
No insolvency proceedings have been instituted against Seller or any of
the Subsidiaries or Indirect Subsidiaries. Until the date hereof, none
of the creditors of the Subsidiaries or Indirect Subsidiaries has
threatened to institute such proceedings.
11. Financial Statements and Financial Condition
--------------------------------------------
With respect to the financial statements and the financial condition of
the subsidiaries and the Indirect Subsidiaries, Seller warrants
exclusively as follows:
11.1 Each of the Subsidiaries and Indirect Subsidiaries has maintained
its books of account in accordance with local generally accepted
accounting principles consistently applied, and such books and
records are and, during the respective periods, were correct and
complete in all material respects, fairly and accurately reflect
or reflected the income, expenses, assets and liabilities of the
Subsidiaries and the Indirect Subsidiaries, including the nature
thereof and the transactions giving rise thereto, and provide or
provided a fair and accurate basis for the preparation of the
annual financial statements. Without limiting the generality of
the foregoing, the assets, liabilities, and financial condition
of the Subsidiaries or Indirect Subsidiaries are fairly described
and properly
- 15 -
<PAGE>
recorded in all material respects in the financial and accounting
records of the Subsidiaries and Indirect Subsidiaries underlying
the annual financial statements.
11.2 The following financial statements of the Subsidiaries are
attached as Schedule 6.11.2 hereto:
(a) the consolidated balance sheet of the Subsidiaries as of
December 31st, 1999 and the pertinent combined
consolidated statements of income for the fiscal year
ended on such date (together with pertinent notes and
schedules, the "1999 Consolidated Financial Statements"),
developed from Seller's 1999 group annual report, which is
audited with an unqualified opinion;
(b) the balance sheets of the Subsidiaries as of December
31st, 1999 and the pertinent statements of income for the
fiscal year ended on such date (subject to high level
review with an unqualified opinion with respect to ISP*D
and Logicsoft Holding*NL and subject to a limited review
with respect to the other Subsidiaries; the "1999
Individual Financial Statements"); and
(c) the unaudited consolidated balance sheet of the
Subsidiaries as of September 30th, 2000 and the pertinent
combined statement of income for the nine months ended on
such date (the "Interim Financial Statements").
The financial statements described above, together with the
"Monthly Financial Statements" delivered pursuant to Section 9
paragraph 3 below, will hereinafter together be referred to as
the "Financial Statements".
11.3 The 1999 Consolidated Financial Statements, which are not audited
themselves, have been developed from Seller's group annual
report, audited with an unqualified opinion by Ernst & Young, and
the 1999 A confirmation by Ernst & Young is attached as Schedule
6.11.3 hereto. Individual Financial Statements include full
reviews with an unqualified opinion of the financial statements
of ISP*D and Logicsoft Holding*NL by Ernst & Young and a limited
review of the financial statements of the other Subsidiaries in
conformity with local generally accepted auditing standards.
11.4 The Financial Statements are correct and complete in all material
respects and present fairly the consolidated financial position
of the Subsidiaries and Indirect Subsidiaries as of the dates of
such statements and the results of operations of the Subsidiaries
and Indirect Subsidiaries for the periods covered by such
statements, subject in the case of the Interim Financial
Statements delivered pursuant to item 11.2 (c) above to the
absence of prepaid expenses and deferred income
(Rechnungsabgrenzungsposten) and the absence of notes and
schedules thereto.
11.5 The Subsidiaries have, and on the Closing Date the Subsidiaries
will have, no liabilities or obligations (absolute, contingent or
otherwise) of a nature required by local generally accepted
accounting principles applied on a basis consistent with the 1999
Financial Statements to be reflected in financial statements,
other than:
(a) those set forth or reserved against in the Financial
Statements, and
(b) those incurred since the date of the Interim Balance Sheet
in the ordinary course of business in arms'-length
transactions.
- 16 -
<PAGE>
The Financial Statements do not include or reflect any assets,
liabilities, equity, results of operations or cash flows of any
person, corporation, partnership or other business other than the
Subsidiaries.
12. No Real Property
----------------
None of the Subsidiaries or Indirect Subsidiaries owns real property.
13. Public Subsidies
----------------
To the extent public subsidies have been applied for and received by the
Subsidiaries or Indirect Subsidiaries, the same have been applied for,
received and used solely in compliance with the applicable legal
provisions and in conformity with all and any public orders, directives
and burdens attached thereto.
In implementing the provisions of this Agreement, no redemption of such
public subsidies will be necessary, nor are there any other
circumstances which might result in such redemption.
14. Retirement Benefits
-------------------
Except as set forth on Schedule 6.14 hereto, none of the Subsidiaries
have made any promises for retirement benefits or any other
pension-scheme arrangements.
15. Taxes, Public Impositions and Contributions
-------------------------------------------
(a) The Subsidiaries and Indirect Subsidiaries have properly filed
all tax returns and comparable declarations required to be filed
under applicable law prior to the Closing Date, or will properly
file them until the Closing Date. Such returns as filed are or
will be true and complete. Seller has delivered or made
available, or will deliver or make available, to Buyer all tax
returns of the Subsidiaries for all periods from January 1st,
1999 to the date hereof.
(b) All taxes that the Subsidiaries or Indirect Subsidiaries were, or
will be, required by law to pay, withhold, deposit or collect
from January 1st, 1999 to the Closing Date have been, or will be,
duly paid, withheld, deposited or collected.
(c) None of the Subsidiaries or Indirect Subsidiaries has received
notice of any additional tax assessment (Steuernachforderung).
(d) In addition to taxes due, all social security contributions and
other public impositions of whatever nature that the Subsidiaries
or Indirect Subsidiaries were, or will be, required by law to pay
to the Closing Date have been duly paid, or will be duly paid
until the Closing Date.
(e) Taxes, social security contributions and other public impositions
are fully accrued in the Financial Statements handed over to
Buyer, insofar as they were not yet due and payable as of the
date of such Financial Statements. None of the Subsidiaries or
Indirect Subsidiaries has made hidden profit distributions
resulting in adverse tax effects or has been engaged in other
unusual tax schemes, and, therefore, there was no necessity for
accruals for risks resulting therefrom.
- 17 -
<PAGE>
16. Insurance
---------
Schedule 6.16 hereto contains a true and complete list of all policies
of insurance maintained by the Subsidiaries and Indirect Subsidiaries,
or for the benefit of the Subsidiaries and Indirect Subsidiaries, and
their respective businesses, also including insurance providing
retirement benefits for employees and insurance regarding motor vehicles
used for business purposes, in effect on the date hereof and generally
describing the coverage thereby. To the best of Seller's knowledge, the
respective policy-holders are not in default under any of the insurance
agreements. Except as described on Schedule 6.16 hereto, there are no
claims pending and, to the best of Seller's knowledge, there are no
claims threatened nor are there any disputes with an insurer. The
insurance policies are in full force and effect in accordance with their
respective terms. Those insurance policies that will terminate upon the
acquisition of the Shares in the Subsidiaries by Buyer are specifically
mentioned on Schedule 6.16 hereto. Those insurances that may not be
terminated in whatsoever way by Buyer without jeopardizing the
post-contractual obligation of the insurer to extend coverage for past
events also after the termination of the insurance agreement are
likewise specifically mentioned on Schedule 6.16 hereto.
17. Contracts
---------
To the best of Seller's knowledge, (i) each material written agreement,
contract, lease, licence or instrument as described in Schedule 6.17
hereto (collectively, the "Contracts") is in full force and effect, (ii)
none of the Subsidiaries or any other party to any of the Contracts is
in breach or default under any of the Contracts, except for such
breaches or defaults which would not, individually or in the aggregate,
have a material adverse effect, and (iii) the Subsidiaries have
heretofore delivered to Buyer or its Counsel true, correct and complete
copies of the Contracts.
Except as set forth in Schedule 6.17 hereto, the Subsidiaries and
Indirect Subsidiaries have not entered into agreements of any of the
following types:
o Agreements for the sale or purchase of fixed assets including
intellectual property rights, corporeal assets and financial
assets,
o Lease agreements,
o Distribution agreements, agency agreements or similar,
o Licensing agreements,
o Loan agreements,
o Factoring agreements,
o Employment agreements,
o Agreements with advisors,
o Agreements and commitments regarding retirement benefits, other
fringe benefits, profit-sharing schemes, benefits based on sales
or other benefits based on performance, or similar agreements,
o Collective-bargaining agreements and shop agreements,
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<PAGE>
o Co-operation agreements or similar,
o Agreements or commitments intending, or resulting in, restraints
of competition,
o Agreements outside the ordinary course of business of the
Subsidiaries and Indirect Subsidiaries.
Agreements relating to an object, and/or resulting in a (possible)
annual financial exposure, of less than Euro Dollar 25,000.00 shall be
disregarded, except for any and all support, consulting and help-desk
agreements, which shall be fully disclosed on Schedule 6.17 hereto.
18. Customers and Suppliers
-----------------------
Set forth on Schedule 6.18 hereto is a complete and correct list of the
top twenty customers and the top twenty suppliers of the Subsidiaries
(collectively), based upon Euro or Dollar volume. Set forth on Schedule
6.18 hereto is a complete and correct list of all essential contracts
(whether verbal or in writing) of the Subsidiaries and Indirect
Subsidiaries with their customers and suppliers that constitute the only
source for the Subsidiaries and Indirect Subsidiaries for the sale or
purchase, as the case may be, of the goods and services addressed
therein (the "C&S Contracts"). Neither Seller nor any of the
Subsidiaries or Indirect Subsidiaries has received written notice that
any material supplier will not sell supplies, or that any material
customer will not purchase products from, the Subsidiaries or Indirect
Subsidiaries on terms and conditions similar to those used in current
sales to and purchases from the Subsidiaries or Indirect Subsidiaries.
Neither Seller nor any of the Subsidiaries or Indirect Subsidiaries has
received any written notice questioning the enforceability of,
terminating, or threatening the termination of, any C&S Contract.
Neither Seller nor any of the Subsidiaries or Indirect Subsidiaries has
received written notice that it or any of the Subsidiaries has violated
any material provision of any C&S Contract or is in default in
performing its material contractual obligations thereunder. The terms of
this Agreement and their implementation will entitle no party to a C&S
Contract to terminate or modify such C&S Contract.
19. Litigation
----------
Set forth on Schedule 6.19 hereto is a list of all pending lawsuits,
claims, proceedings or investigations against any of the Subsidiaries or
Indirect Subsidiaries or their properties, assets, operations or
business, as to which Seller or any of the Subsidiaries or Indirect
Subsidiaries has received written notice and which reasonably could be
expected to have a material adverse effect, or which challenge the
legality of this Agreement or any action to be taken in connection
herewith, other than any such lawsuits, claims, proceeding or
investigations which are covered (subject to deductibles, co-payments,
retentions, policy limits and similar limitations) by insurance.
To the best of Seller's knowledge, the business of the Subsidiaries and
Indirect Subsidiaries does not violate any laws, regulations, orders by
public authorities, rights of neighbours, public or private
environmental laws, antitrust or competition laws, safety-at-work rules
(Bestimmungen der Berufsgenossenschaft und vergleichbare Vorschriften),
or other rules, decrees or orders of the jurisdiction in which the
respective Subsidiary or Indirect Subsidiary maintains its registered
seat or its business, so that, to the best of Seller's knowledge no
material lawsuits, claims, proceedings, or investigations of the kind
described in the preceding paragraph are threatened.
None of the Subsidiaries or Indirect Subsidiaries is in default under
any judgment, order or decree which default reasonably could be expected
to have a material adverse effect.
- 19 -
<PAGE>
Above and beyond that, none of the Subsidiaries or Indirect Subsidiaries
are involved in court or administrative proceedings, nor are any
employees of the Subsidiaries and Indirect Subsidiaries (insofar as such
court or administrative proceedings might result in the liability by a
Subsidiary or Indirect Subsidiary).
20. Permits
-------
The Subsidiaries and Indirect Subsidiaries (i) have been granted all
public permits required for conducting and continuing their respective
businesses as currently carried on and (ii), to the best of Seller's
knowledge, no revocation or restriction of any such permit is
threatened.
21. Security Granted
----------------
None of the Subsidiaries or Indirect Subsidiaries has pending any
guarantees, suretyships, declarations of co-assumption of liabilities,
comfort letters or similar declarations that might result in a liability
by the Subsidiaries or Indirect Subsidiaries for any liabilities of
Seller or third parties.
22. Ordinary Course
---------------
Since September 1st, 2000 the business of the Subsidiaries and the
Indirect Subsidiaries has been managed within the ordinary course of
business and with the reasonable care of prudent commercial practice and
in essentially the same way as prior to that date, and, since the date
of the Letter of Intent, also in accordance with the budget and the
financial plans that have been submitted to Buyer (see Schedule 6.22
hereto) or, respectively, in accordance with those deviations therefrom
agreed with Buyer (see Schedule 6.22 hereto).
The results of the Subsidiaries and Indirect Subsidiaries taken as a
whole in the 4th quarter of 2000 will be better than in the 3rd quarter.
Since said date, there have been no dividends or other profit
distributions, also including preliminary and hidden distributions, nor
have any hidden reserves been dissolved or withdrawn outside the
ordinary course of business, nor have any transfers from the accounts of
the Subsidiaries or the Indirect Subsidiaries been made outside the
ordinary course of business that are not known to Buyer.
23. Bank Accounts
-------------
Schedule 6.23 hereto is a true and complete list of all bank accounts of
the Subsidiaries and Indirect Subsidiaries and of the persons authorized
to dispose of such bank accounts.
24. Important Executives
--------------------
Set forth on Schedule 6.24 hereto is a complete and correct list of the
managing directors, Geschaftsfuhrer or the equivalent, and of all sales
employees and all key employees for finances and IT (the "Important
Executives") of each of the Subsidiaries and Indirect Subsidiaries.
Important Executives who are exclusively or also in an employment
relationship or similar with Seller are indicated by name on Schedule
6.24 together with a description of the nature of the contractual
relationship. Seller has not received notice, nor is it otherwise aware,
of an Important Executive's intention to terminate his or her
relationship with the applicable Subsidiary or Indirect Subsidiary.
- 20 -
<PAGE>
25. Employees
---------
Set forth on Schedule 6.25 hereto is a complete and correct list of all
classes of employees of the Subsidiaries and the Indirect Subsidiaries
(insofar as these are not already included in Schedule 6.24 hereto),
indicating age, marital status, entry date, emoluments and other
benefits and job position.
26. Employment Matters
------------------
There are no disputes relating to employment save as disclosed in
Schedule 6.19 hereto. Seller has heretofore made available to Buyer
documents relating to employment agreements of employees, directors and
officers of the Subsidiaries and Indirect Subsidiaries; compared with
the salaries, emoluments and other benefits described therein, (i) such
salaries, emoluments and other benefits have not been increased except
for the usual annual adjustments of salaries and other emoluments, and
(ii) the duration of employment agreements has not been extended.
Schedule 6.26 hereto contains a complete list of all
collective-bargaining agreements, shop agreements, and financial
obligations arising out of past practice for the payment of premiums,
bonuses, Christmas, vacation and other gratifications, relating to the
Subsidiaries and the Indirect Subsidiaries.
Buyer is aware of the fact that there are agreements with two managing
directors or executives, Mr. Simon Nijnens and Mr. Harry van der Voort,
regarding bonus payments for their assistance in preparing and
implementing this Agreement, the respective costs being borne by Seller.
27. Disclosure
----------
To the best of Seller's knowledge, all statements in this Agreement and
the schedules hereto are true, correct and complete. They are not
misleading and do not omit to state material facts relating to the
Shares, the shares in the Indirect Subsidiaries, the Subsidiaries and
Indirect Subsidiaries and their respective businesses that would have
been of material importance as for the respective statement made, or
which Buyer should have known in order to be able to properly evaluate
such statement as of the date hereof.
Insofar as any of the preceding representations and warranties under
Section 5 and Section 6 paragraphs 1 - 26 above have been given without
the qualification "to the best of Seller's knowledge", this shall be
unaffected by the fact that this paragraph 27 contains such
qualification.
Section 7
No Further Warranties by Seller; Vicarious Liability
1. No Further Representation and Warranties by Seller
--------------------------------------------------
Except for the representations and warranties, both ordinary and
independent, set forth in Sections 5 and 6 above, no further
representations are made and no further warranties are given by Seller.
Without limiting the generality of the foregoing, Seller makes no
representation, warranty or guarantee to Buyer with respect to any
projections, estimates, budgets, future revenues, future expenses,
future results or future cash flows of the Subsidiaries and Indirect
Subsidiaries.
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<PAGE>
2. "To the Best of Seller's Knowledge"
-----------------------------------
Insofar as representations and warranties as set forth in Sections 5 and
6 above depend on Seller's knowledge (which term shall also include any
knowledge that Seller should have had) of certain facts and
circumstances, or representations and warranties are explicitly made "to
the best of Seller's knowledge", (i) the knowledge of key executives of
the Subsidiaries and Indirect Subsidiaries listed in Schedule 7.2 hereto
shall be deemed the knowledge of Seller and (ii) the relevant standard
for determining whether Seller should have known certain facts shall be
the diligence applied by a reasonable and prudent businessman in a
comparable situation and (iii) exclusively the knowledge as of the date
hereof shall be relevant.
In case of Section 6 paragraph 24 above, the knowledge of any of the
Important Executives that he or she intends to terminate his or her
current position shall in no event be attributable to Seller.
3. Knowledge by Buyer
------------------
The principles set forth in Sections 439, 460 and 464 of the German
Civil Code, to the extent they deal with the knowledge of facts, shall
apply to all representations and warranties under Sections 5 and 6
above, whether ordinary or independent.
Section 8
Remedies; Security
1. Should any of the (ordinary or independent) warranties under Sections 5
and 6 above be incorrect, Buyer may request that Seller restores the
situation that would exist had the warranty been correct within
reasonable time, but within four weeks as of receipt of such request at
the latest. Buyer shall be entitled to damages in money only. Rescission
and reduction of the purchase price are excluded.
If Seller does not restore the warranted situation within such time, or
if the restoration of such situation is not possible, Buyer shall be
entitled to damages in money.
2. The maximum amount to be recovered by Buyer for all claims under this
Agreement shall be Euro Dollar 7,500,000.00 ("Maximum Amount"). Buyer
may only assert claims under this Agreement if the aggregate of such
claims exceeds a de minimis amount of Euro Dollar 300,000.00 ("De
Minimis Amount"). If the aggregate of Buyer's claims exceeds Euro Dollar
300,000.00, only the excess over the De Minimis Amount, up to the
Maximum Amount, may be asserted.
3. Each and any claim of Buyer under this Section 8 shall be reduced by tax
benefits, if any, which may be achieved by Buyer, the Subsidiaries or
the Indirect Subsidiaries with regard to the circumstances giving rise
to such claim.
4. Claims of Buyer arising from any representations and warranties by
Seller under Sections 5 and 6 above may only be asserted within 240 days
as of the Closing Date; paragraphs 5 and 6 below shall be unaffected
thereby.
5. All warranty claims of Buyer arising from representations and warranties
under Section 5 paragraphs 3 and 4 above shall become time-barred within
two years. In so far as the representations and warranties relate to
shares in the Logicsoft Group*F the limitation period shall be six
years. Time of limitation shall run from the Closing Date.
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<PAGE>
6. Claims arising from breaches of the warranties under Section 6
paragraph 15 above relating to taxes, social security contributions and
other public impositions shall become time-barred (i) insofar as there
is a formal assessment, three months as of the date when a final tax
order regarding the respective tax and the respective time period
becomes unappealable (or, in other cases of a formal assessment, three
months after the respective final assessment has become unappealable),
but in no event later than six years from the Closing Date, (ii) in all
other cases six years as of the Closing Date; this shall not apply in
cases of criminal tax evasion, based on intent or negligence, and in
other cases of intentional or grossly negligent non-payment of due
social security contributions and other public impositions. Mere shifts
in time, i.e. tax claims or reimbursements relating to the time period
until the Closing Date which are balanced by tax reimbursement or claims
after the Closing Date, shall be disregarded.
7. On the Closing Date, Seller shall deliver to Buyer a letter of credit/a
bank guarantee of a first-rate German bank or the German branch office
of a first-rate international bank in the amount of Euro Dollar
3,275,000.00. This amount shall serve as security for each and any claim
of Buyer arising from breaches of representations and warranties under
Sections 5 and 6 above as well as any other obligations of Seller
arising from this Agreement (Sections 9 item 4.2, 10 paragraph 2, 14
paragraph 3).
The letter of credit or bank guarantee shall expire 240 days after the
Closing insofar as no substantiated claims covered by such letter of
credit or bank guarantee have been asserted against Seller before the
arbitral tribunal in accordance with Section 17 paragraph 7 below within
such 240 days. If substantiated claims have been asserted in time, the
letter of credit or bank guarantee shall, after the expiration of the
240-days period, remain in effect until such claims have been finally
adjudicated, but only in the amount of claims raised.
8. Seller shall have the right, but not the obligation, at its own expense,
to contest, defend or litigate, and to retain counsel of its choice in
connection therewith, any claim by any third party which might result in
a breach of any warranty under Sections 5 and 6 above ("Third-Party
Claim"), if Seller gives Prompt Notice of its intention to do so to
Buyer. "Prompt Notice" shall in any case mean no more than 30 days after
Buyer shall have notified Seller of a Third-Party Claim. If Seller gives
such Prompt Notice and promptly assumes such defence, Seller shall not
be required to reimburse Buyer for its costs and expenses incurred prior
to the assumption by Seller of such defence. In the event that Seller
shall assume the defence of a Third-Party Claim as aforesaid, Buyer
shall nevertheless be permitted to continue to participate in such
Third-Party Claim with counsel of its choice at its expense. Seller
shall not be entitled to settle or compromise any such Third-Party Claim
without the prior written consent of Buyer, which consent shall not be
unreasonably withheld, except that the consent of Buyer shall not be
required if such settlement would entail solely the payment of cash
damages payable in full (and not by instalment or on any deferred basis)
for which Seller shall be responsible and shall effect payment
simultaneously with the execution of any settlement agreement.
Section 9
Transfer of Business Activities to Buyer
1. Access to Records and Properties of the Subsidiaries
----------------------------------------------------
Seller shall provide Buyer and its advisors with all information useful
to Buyer for taking over the business of the Subsidiaries. Seller shall
see to it that management of the Subsidiaries and Indirect Subsidiaries
shall, between the date hereof and the Closing Date, grant to Buyer and
its advisors any
- 23 -
<PAGE>
information reasonably requested by it and shall grant Buyer access to
the respective premises, books and records of the Subsidiaries and
Indirect Subsidiaries as reasonably requested by Buyer.
Any investigation pursuant to this paragraph shall be conducted in a
such a manner as not to interfere unreasonably with the business and
operations of the Subsidiaries and Indirect Subsidiaries. Any
investigation conducted on the premises of the Subsidiaries or Indirect
Subsidiaries shall be conducted only after oral or written notice to
Seller and the Subsidiaries or Indirect Subsidiaries.
2. Operations of the Subsidiaries, etc.
------------------------------------
Seller shall see to it that:
2.1 From the date hereof, each of the Subsidiaries and Indirect
Subsidiaries shall operate its respective business exclusively in
the ordinary course and in accordance with the budget and
financial plans previously submitted to Buyer for approval and
approved by Buyer.
The Subsidiaries and Indirect Subsidiaries shall notify Buyer of
each and any intended material deviation from such budgets and
financial plans approved by Buyer and of each and any measure
outside the ordinary course of business, and shall not implement
such measure if Buyer opposes thereto within five business days as
of the respective notification. This clause does in no event imply
any representation, warranty, undertaking or similar by Seller
that the Subsidiaries and Indirect Subsidiaries actually meet the
said budgets and financial plans.
2.2 Each of the Subsidiaries and Indirect Subsidiaries shall, until
the Closing Date, use its best efforts to continue its operations
within its ordinary course of business as previously carried on
and, in consistence with such continuation of the ordinary course
of business, to preserve its relationships with present employees
and business partners as well as the reputation and business
organization of the Subsidiaries and Indirect Subsidiaries.
2.3 Each of the Subsidiaries and Indirect Subsidiaries shall use its
best efforts to continue in effect, until immediately following
the Closing Date, all present insurance coverage with respect to
its assets, business operations and employees.
2.4 Each of the Subsidiaries and Indirect Subsidiaries shall comply
with, and shall not be in default or violation in any material
respect under, any law, regulation, decree or order.
2.5 Each of the Subsidiaries and Indirect Subsidiaries and Seller
shall refrain from taking any action, and shall not suffer to
exist any event or occurrence, which would render any
representation and warranty of the Seller under Sections 5 and 6
above materially inaccurate at any time between the date hereof
and the Closing Date. Seller shall promptly notify Buyer of any
material changes of the facts and circumstances underlying the
warranties under Sections 5 and 6 above in the time period from
the date hereof until the Closing Date. Seller shall further
promptly notify in writing Buyer of any breach of warranty or
condition or obligation hereunder. Seller shall not make or
permit any distribution of property or assets to Seller or
declare, pay or set aside for payment any dividend (of any kind
or nature) or distribution with regard to the Shares.
3. Monthly Financial Statements
----------------------------
Seller shall deliver to Buyer unconsolidated monthly statements of
income for the time period October 2000 until the Closing Date ("Monthly
Financial Statements").
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<PAGE>
4. Taxation
--------
4.1 Accruals and Payments
---------------------
Seller shall cause to be prepared and filed all tax returns and
reports with respect to the Subsidiaries and Indirect Subsidiaries
for all tax periods prior to the Closing Date. Seller shall cause
to be timely paid all taxes to which such returns relate for all
periods covered by such returns, except to the extent that an
accrual for such taxes is reflected in the Interim Financial
Statements. Upon the Closing, such obligation shall pass to Buyer.
4.2 Co-operation
------------
After the Closing Date, Seller and Buyer shall make available to
any tax authority (and, if this is reasonably requested, also to
each other) all information, records or documents relating to tax
liabilities or potential tax liabilities of the Subsidiaries for
all periods prior to or including the Closing Date and shall
preserve all such information, records and documents until the
expiration of any applicable statute of limitations or extensions
thereof. Notwithstanding any other provisions hereof, each party
shall bear its own expenses in complying with the foregoing
provisions.
5. Registered Trademarks and Domain Names
--------------------------------------
The Subsidiaries and Indirect Subsidiaries may continue for a period of
180 days after the Closing Date to use the following trademarks and
domain names:
(a) the registered trademarks of Seller "Life Boat" and "Programmer's
Paradise"
and
(b) Europe: PROGRAMMERS-PARADISE.COM
The Netherlands: PARADISE.NL
Germany: PROGRAMMERS.DE
Italy: LIFEBOAT.IT; PPARADISE.IT
France: PROGRAMMERS.FR
U.K.: PPARADISE.CO.UK; PROGRAMMERS.CO.UK
As between the parties, the Subsidiaries and Indirect Subsidiaries will
have exclusive use of the domain names:
Europe: LOGICSOFT.COM
The Netherlands: LOGICSOFT.NL
Germany: LOGICSOFT.DE; ISPD.DE
Austria: ISPA.CO.AT; LOGICSOFT.AT; LOGICSOFT.CO.AT
France: LOGICSOFT.FR
U.K.: SYSTEMSCIENCE.CO.UK
6. Change of Company Names
-----------------------
Buyer shall procure, within 180 days from the Closing Date, that
"Programmer's Paradise" be deleted from all corporate and business names
of the Subsidiaries and Indirect Subsidiaries.
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<PAGE>
7. Release of Seller from Certain Obligations
------------------------------------------
After the Closing Date, Buyer shall procure that Seller be released from
any obligations vis-a-vis under the guarantee dated May 23rd, 1994 in
favour of Stadtsparkasse Munchen granted as security for liabilities of
ISP*D (maximum amount of such guarantee: DM 300,000.00 plus interest and
cost); in any event, Buyer shall indemnify and hold harmless Seller from
and against all and any third-party claims based on such obligations.
Section 10
Covenant not to Compete; Confidentiality
1. For a period of two years following the Closing Date, Seller shall not
engage in any activities in the Territory which intend, or might result
in, any kind of direct or indirect competition with the current Business
Activities of the Subsidiaries and Indirect Subsidiaries, as described
in Section 1 paragraph 4 above. In particular, Seller shall not set up
or acquire or participate in any company or other business which
directly or indirectly competes with the current Business Activities of
the Subsidiaries and Indirect Subsidiaries, nor shall it extend advice
to such company or business.
The foregoing covenant not to compete shall, however, not restrict
Seller's ability to continue to accept international orders received by
Seller via its Programmer's Paradise internet website that relate to
so-called wrapped-up products, and to carry out such orders, provided
that no existing customers of the Subsidiaries and Indirect Subsidiaries
are serviced with whom volume licensing agreements have been concluded.
Nothing herein shall, however, restrict Seller's ability to service
customers in the Territory, if the business volume with such customers
in the Territory does not exceed Euro Dollar 500,000.00 per year.
Seller, however, undertakes to refrain, within its obligation not to
compete, from any active advertising and any active soliciting of
customers in the Territory, in particular not to directly or indirectly
send catalogues and other advertising materials from the U.S. to
customers in the Territory and not to direct active advertising to the
Territory from its internet platform.
2. If Seller breaches the covenant not to compete set forth in paragraph 1
above and does not remedy such breach within four weeks from the
respective notification of any such breach by Buyer, Seller shall pay to
Buyer liquidated damages for each individual breach (excluding the
notion of "continued breach" [Fortsetzungszusammenhang]) in the amount
of Euro Dollar 25,000.00 (in words: twenty-five thousand Euros). If one
breach extends over a longer period of time, Seller shall pay additional
liquidated damages in the amount of Euro Dollar 10,000.00 (in words: ten
thousand Euros) for each and any additional month of such breach.
Buyer's right to assert higher damages, if any, incurred by it or by the
Subsidiaries or Indirect Subsidiaries and Buyer's right to seek
injunctive relief shall be unaffected.
3. During a period of three years from the Closing Date, Seller shall keep
secret and confidential all and any information it possesses relating to
the Subsidiaries and Indirect Subsidiaries and their respective
businesses, unless such information is generally available within the
public domain or Seller is required by law or under the rules of any
stock exchange or securities market to disclose such information, and
Seller shall not make use of such confidential information for its own
benefit or the benefit of others.
Know-how that is used by the Subsidiaries and Indirect Subsidiaries but
is attributable to Seller may be continued to be used by Seller outside
the Territory; with regard to such know-how, however, Seller
- 26 -
<PAGE>
undertakes to refrain from applying for any intellectual-property-rights
protection within or for the Territory.
Section 11
Condition Precedent
1. The supervisory board of Buyer has consented to this Agreement; an
excerpt from the respective minutes of the supervisory board meeting is
attached hereto as Schedule 11.1.
2. The legal effect of this Agreement is subject to the satisfaction of the
following condition precedent:
The stockholders of Seller shall have consented to this Agreement.
Seller shall promptly after its stockholders' consent has been obtained
notify Buyer of the satisfaction of the condition precedent in writing,
attaching a copy of the respective resolution of consent.
Section 12
Conditions to Closing; Steps to Be Taken with Regard to the Closing;
Consummation of this Agreement on the Closing Date
1. Conditions to Closing
---------------------
Provided that this Agreement becomes effective, the Closing shall occur
after the following conditions have been satisfied:
1.1 Conditions for Buyer
--------------------
Buyer'sobligation to close is subject to the following conditions
which, with the exception of the condition pursuant to item 1.1.4
below, may be waived by Buyer (the condition pursuant to item
1.1.4 below may be waived by mutual agreement of the parties,
insofar as both parties are reasonably satisfied that a Clearance
is not required).
1.1.1 Representations and Warranties and Obligations by Seller
--------------------------------------------------------
The representations and warranties by Seller set forth in
Sections 5 and 6 above are true and correct as of the
Closing Date.
Seller shall have complied with all material obligations
arising out of this Agreement, in particular the
obligations under Section 9 items 1 - 4.1 above, until the
Closing Date. Seller shall have obtained all necessary
consents, approvals, authorizations and waivers required
to assure the continuance of the relationships of the
Subsidiaries with their existing customers and suppliers
pursuant to Section 6 paragraph 2 above and has given all
notices and made all filings and disclosures pursuant to
Schedule 6.2 hereto.
1.1.2 Shareholders Resolutions and Declarations of Consent
----------------------------------------------------
Seller shall have obtained all consents, approvals,
authorizations and waivers of any company, its boards and
committees, its shareholders meetings or individual
shareholders or
- 27 -
<PAGE>
third parties required for the transfer of the sold Shares
under applicable law or the respective articles of
association (Gesellschaftsvertrag or Satzung) of the
respective Subsidiary, as set forth in Section 6 paragraph
2 above and on Schedule 6.2 hereto, and Seller shall have
delivered the pertinent documentation to Buyer.
1.1.3 Monthly Financial Statements
----------------------------
Seller shall have delivered to Buyer the unconsolidated
unaudited Monthly Financial Statements.
1.1.4 Clearance from Competition Authorities and Others
-------------------------------------------------
Buyer shall have received written notice of
non-prohibition from all competent national and European
Union competition and other regulatory authorities in
connection with the transactions contemplated by this
Agreement or, respectively, all statutory deadlines (as
extended with the consent of the parties) for the
prohibition of the transactions shall have expired
(non-prohibitions and expiration of deadlines
collectively: "Clearances", and any of them singly a
"Clearance").
1.1.5 Legal Opinion
-------------
Buyer shall have obtained legal opinions relating to
certain corporate law and other legal matters concerning
the Subsidiaries and Indirect Subsidiaries from counsel to
Seller in the respective jurisdictions in substantially
the forms set forth in Schedule 12.1.1.5 hereto.
1.1.6 Other Matters
-------------
Seller shall have furnished, or caused to be furnished, to
Buyer such certificates and other evidence as Buyer may
have reasonably requested as to the satisfaction of the
conditions contained in this sub-paragraph 1.1 and as to
such other matters as Buyer may reasonably request.
1.2 Conditions of Seller
--------------------
Seller's obligation to close is subject to the following
conditions which may be waived by Seller.
1.2.1 Down Payment
------------
Buyer shall have paid to Seller the Down Payment set forth
in Section 4 item 2.1 above.
2. Steps to Be Taken with Regard to the Closing
--------------------------------------------
2.1 Efforts of Seller to Satisfy Buyer's Conditions
-----------------------------------------------
Seller shall use all necessary efforts to satisfy Buyer's
conditions pursuant to sub-paragraph 1.1 above, insofar as this
is within Seller's control (provided, however, that in case of
item 1.1.4 above Seller shall only assist Buyer).
- 28 -
<PAGE>
2.2 Clearance by Competition Authorities
------------------------------------
Immediately following the execution of this Agreement, Buyer (if
required, jointly with Seller) shall notify all national and
European Union competition and other regulatory authorities whose
Clearance may be required in connection with the implementation
of this Agreement, and shall use all reasonable efforts in order
to obtain Clearance. Buyer (if required, jointly with Seller)
shall make all filings and take all actions necessary to comply
with applicable law and the rules and regulations of such
authorities and to ensure the timely Clearance by such
authorities of the transactions contemplated hereby.
3. Consummation of this Agreement on the Closing Date
--------------------------------------------------
3.1 Seller shall transfer and convey the Shares in accordance with
all formal requirements to be observed pursuant to the laws of
the respective jurisdictions and in substantially the forms set
forth in Schedule 12.3 hereto to Buyer and shall deliver to Buyer
all documents required under the laws of the respective
jurisdictions for the transfer of the Shares. Further, Seller
shall deliver to Buyer all documents to be delivered pursuant to
sub-paragraph 1.1 above insofar as this has not yet been done
prior to the Closing.
In modification of the foregoing, the shares in Logicsoft Group*F
and the share held by Lifeboat Associates, Inc. in Logicsoft
Group*I may, on Seller's initiative, be transferred directly from
Programmer's Paradise France S.A.R.L. or, respectively, Lifeboat
Associates, Inc. to Buyer; the same shall apply to the delivery
of documents required for the transfer of such shares.
If so requested by Buyer, the Shares or any of them shall be
transferred not to Buyer but rather to an entity to be designated
by Buyer.
3.2 Seller shall deliver to Buyer the letter of credit/bank guarantee
pursuant to Section 8 paragraph 7 above.
3.3 Buyer shall pay to Seller the Closing Date Purchase Price.
3.4 The transfer of the Shares and delivery of the letter of
credit/bank guarantee pursuant to Section 8 paragraph 7 above, on
the one hand, and the payment of the Closing Date Purchase Price,
on the other hand, shall occur pari passu (Zug um Zug).
3.5 Taxes, fees and costs, also including notary's costs, in
connection with the transfer of the Shares, shall be borne by
Buyer.
3.6 The notary recording the transfer of the Shares in the
Subsidiaries ISP*D and InTeCo shall be requested to notify the
transfer of the Shares to such Subsidiaries pursuant to Section
16 of the German Limited-Liability Companies Act (Gesetz
betreffend die Gesellschaften mit beschrankter Haftung) and to
file updated shareholders' lists with the registry courts.
Insofar as notices, filings or registrations should be necessary
for the transfer of the Shares in the other Subsidiaries, the
notaries acting in this respect shall be requested to see to such
notices, filings or registrations, or the parties shall take the
required steps themselves.
3.7 At the Closing, Seller shall further execute the waiver of claims
set forth and more fully described in Section 13 below.
- 29 -
<PAGE>
Section 13
Inter-Company Transactions
1. Settling of Inter-Company Accounts on the Closing Date
------------------------------------------------------
Upon the Closing, inter-company accounts between Seller, on the one
hand, and the Subsidiaries and Indirect Subsidiaries, on the other hand,
shall be settled as follows:
1.1. Seller shall waive all of its accounts receivable from the
Subsidiaries and Indirect Subsidiaries, which at October 31st,
2000 amounted to US$ 2,762,818.00 (net) (of which US$
2,205,972.00 gross was for goods sold and delivered). Should,
on the Closing Date, the aggregate of Seller's accounts
receivable from the Subsidiaries and Indirect Subsidiaries for
goods sold and delivered exceed US$ 2,205,972.00, Seller shall be
entitled to claim payment of the excess amount, which payment
shall be effectuated at the Closing. Seller shall ensure that
these net receivables from the Subsidiaries and Indirect
Subsidiaries shall not be reduced until the Closing Date by
(a) payment to after October 31st, 2000 of receivables of
Seller from the Subsidiaries and Indirect Subsidiaries
existing as on October 31st, 2000; and/or
(b) increasing the total of Seller's accounts payable to the
Subsidiaries and Indirect Subsidiaries after October 31st,
2000.
1.2 The receivables to be waived pursuant to item 1.1 above are net
receivables of Seller from the Subsidiaries and Indirect
Subsidiaries, after setting off payables to the Subsidiaries and
Indirect Subsidiaries, if necessary following internal transfers
of receivables and payables.
1.3 The amounts referred to in item 1.1 above are the amounts shown
in the books of Seller, kept in accordance with US generally
accepted accounting principles consistently applied. Deviations
therefrom, if any, in the books of the Subsidiaries and Indirect
Subsidiaries, shall not affect the provisions of this Section 13.
2. Deliveries in 2001
------------------
During the calendar year 2001, Seller shall deliver, if and insofar
Buyer so requests, to Buyer or the Subsidiaries or Indirect Subsidiaries
goods and services of essentially the same kind as delivered in the past
to the Subsidiaries and Indirect Subsidiaries at a price equalling
Seller's own cost, together with reasonable shipping and handling
charges.
3. Full Settlement
---------------
There shall be no more claims between Seller, on the one hand, and the
Subsidiaries and Indirect Subsidiaries, on the other hand, of whatever
nature and based on whatever cause of action in connection with any
payment transactions, including but not limited to accounts receivable
and payable based on the delivery of goods and services as well as
financing transactions, between Seller on the one hand, and the
Subsidiaries and Indirect Subsidiaries, on the other hand or of the
Subsidiaries and Indirect Subsidiaries among each other; nor shall there
be any claims of Buyer against Seller of whatever nature and based on
whatever cause of action, including but not limited to warranty claims
hereunder, even if such claims would be justified but for this
settlement clause, in connection with (i) any such facts and their tax
- 30 -
<PAGE>
implications, (ii) the way that such facts have been accounted for or
(iii) any resulting entries shown in the Financial Statements; this
exclusion of further claims shall, in particular, apply to such facts
insofar as they were raised in the letter dated November 10th, 2000 by
RolfsPartner, Counsel to Buyer, to Holters & Elsing, Counsel to Seller.
The Financial Statements do not reflect the effects, in particular the
tax effects, of the waiver of claims under item 1.1 above; any claims
against Seller based on this fact shall be excluded.
Section 14
Termination Right
1. Cut-Off Date
------------
In the event that this Agreement shall not have become effective, or the
Closing shall not have occurred, on or before December 31st, 2000 (the
"Cut-Off Date"), then either Buyer or Seller shall have the right
(provided in each case that such party is not in breach of one of its
material obligations under this Agreement), exercisable at any time
after such date by notice in writing, to terminate this Agreement and
its obligations. In the event the Closing has not occurred until the
Cut-Off Date because (i) the necessary Clearance by all competent
authorities (in particular, competition authorities) pursuant to Section
12 item 1.1.4 above has not yet been obtained, or (ii) delays in
clearance of proxy material by the U.S. Securities and Exchange
Commission (SEC) shall have delayed the consent of Seller's stockholders
scheduled for December 10th, 2000, insofar as this occurred for reasons
without and beyond the parties' control, then the termination right by
either party may not be exercised prior to February 16th, 2001.
2. Prior Breach of Contract
------------------------
In the event that, prior to the Cut-Off Date, any party is in material
breach of its obligations under this Agreement (the "Breaching Party"),
and such breach cannot be reasonably cured, or the breaching party is
not taking reasonable efforts to cure the breach within reasonable time
as requested by the other party (the "Non-Breaching Party"), then, so
long as the Non-Breaching party entitled to the benefit of such
obligations is not in default of its obligations under this Agreement
and is not in material breach of contract itself, the Non-Breaching
Party shall have the right to terminate this Agreement, unless it has
waived its rights arising from the other party's breach of contract in
writing prior to exercising its right to terminate this Agreement.
3. Reservation and Extinction of Further Rights
--------------------------------------------
In the event of a termination of this Agreement pursuant to paragraph 2
above, all rights of whatsoever nature of the Non-Breaching Party
against the Breaching Party arising out of the breach of contract shall
be unaffected. The failure to assert rights arising out of breach of
contract, or the failure to enforce individual provisions of this
Agreement, shall not affect the right of either party to enforce this
Agreement according to its terms. If the Closing takes place in spite of
a prior breach of contract, all and any rights except those set forth in
Section 8 in conjunction with Sections 5 - 7; 9 items 4.2 and 5; and 10
shall be precluded.
4. No Closing; Return of Documents
-------------------------------
In the event the Closing does not occur and this Agreement is
terminated, Seller and Buyer shall treat in confidence (and not use to
the detriment of the other party) all documents, materials and other
- 31 -
<PAGE>
information which they shall have obtained regarding the Subsidiaries or
the Seller or the Buyer during the course of the negotiations leading to
the transactions contemplated hereby or the due diligence investigation
in preparation of this Agreement. All copies of non-public documents and
materials shall be returned.
Section 15
Notices
All notices or other communications required or permitted hereunder shall be in
writing and shall be deemed to have been duly given (i) upon delivery if
delivered by hand; (ii) five days subsequent to mailing if mailed by certified
or registered mail, with postage prepaid; (iii) two days subsequent to pick-up
by courier if sent by a nationally or internationally recognized overnight
courier service that regularly maintains records of items picked up and
delivered; or (iv) when transmitted by telecopier, provided that a written
acknowledgement of receipt signed by or on behalf of the recipient of the
telecopy is transmitted back to the sender by the recipient. All notices shall
be sent as follows:
If to Seller:
Programmer's Paradise, Inc.
1157 Shrewsbury Avenue, Shrewsbury, NJ 07702-4321, USA
Attention: William H. Willett
Telecopy: +1-732-389-1207
with copies to:
Dechert
30 Rockefeller Plaza, New York, NY 10112, USA
Attention: Fredric J. Klink, Esq.
Telecopy: +1-212-698-3599
Holters & Elsing
Immermannstra(beta)e 40, 40210 Dusseldorf, Germany
Attention: Dr. Siegfried H. Elsing
Telecopy: +49-211-353928
If to Buyer:
P.C. Ware Information Technologies AG
Blochstra(beta)e 1, 04329 Leipzig, Germany
Attention: Dr. Knut Loschke
Telecopy: +49-341-25-68-999
with a copy to:
RolfsPartner
Brandvorwerkstra(beta)e 72, 04275 Leipzig, Germany
Attention: Stephan Schilling
Telecopy: +49-341-3980179
Any party may by notice change the address to which notice or other
communications to it are to be delivered or mailed.
- 32 -
<PAGE>
Section 16
Public Announcements
Prior to the Closing Date, any public announcement regarding the execution of
this Agreement or the disclosure of this Agreement or of parts thereof - both in
writing and orally - shall only be made with the other party's prior written
consent. This does not apply to notices required or permitted for the
satisfaction of the condition to Closing pursuant to Section 12 item 1.1 above,
and any disclosures that Seller and/or Buyer are obliged to make under
applicable law or in light of its respective status as a publicly traded
company.
Section 17
Miscellaneous
1. Entire Agreement
----------------
This Agreement together with the schedules hereto and the other documents
executed and delivered pursuant to or in connection with this Agreement,
contains the entire agreement between Buyer and Seller with respect to
the sale and purchase of the Shares in the Subsidiaries and supersedes
all prior arrangements or understandings between the parties also
including any binding provisions of the Letter of Intent.
There are no oral side-agreements relating to this Agreement.
2. Headings
--------
The descriptive headings of this Agreement are for convenience only and
shall not control or affect the meaning or construction of any provision
of this Agreement.
3. Written Form
------------
Modifications or amendments of this Agreement shall be in writing insofar
as notarial deeds are not required. This shall also apply to the
preceding sentence.
Each and any waiver of a provision or condition hereunder shall also be
in writing.
4. Third-Party Rights
------------------
This Agreement shall not create any rights of third parties. In
particular, all rights and obligations arising out of the sale and
purchase of the shares in Logicsoft Group*F and the share held by
Lifeboat Associates, Inc. in Logicsoft Group*I shall exclusively vest in
and be binding on Seller, regardless of the direct transfer of such
shares from Programmer's Paradise France S.A.R.L. or, respectively,
Lifeboat Associates, Inc. to Buyer set forth hereunder.
- 33 -
<PAGE>
5. Severability
------------
Should a provision of this Agreement be or become invalid or
unenforceable, this shall not affect the validity of the remainder of
this Agreement. The parties undertake to promptly replace an invalid or
unenforceable provision by a valid and enforceable provision which comes
closest to the economic objective of the provision to be replaced. The
same shall apply if this Agreement should be contain a gap. The parties
undertake to make all declarations required in this respect in notarial
deeds, should this be necessary.
6. Applicable Law
--------------
The transactions contemplated hereunder shall be governed by the
substantive laws of the Federal Republic of Germany (under exclusion of
the conflict-of-laws provisions).
7. Settlement of Disputes
----------------------
All disputes arising in connection with this Agreement or in view of its
validity and which cannot be settled by amicable agreement shall be
finally adjudicated in accordance with the Rules of Arbitration of the
German Institution of Arbitral Jurisdiction (Deutsche Institution fur
Schiedsgerichtsbarkeit e.V.) (DIS), without recourse to courts of law.
The arbitral tribunal can also finally decide on the validity of the
present arbitration agreement. The venue of arbitration shall be
Dusseldorf, Germany. The languages of the proceedings shall be German and
English. The costs of such arbitration shall be allocated in accordance
with the win/loss ratio.
8. Costs
-----
All taxes in connection with the execution and implementation of this
Agreement and the costs relating to the execution and notarization of
this Deed shall be borne by Buyer. Above and beyond that, either party
shall bear the costs of its own advisors and the costs of negotiations,
the execution and implementation of all measures necessary for the
consummation of this Agreement and required to be effectuated by such
party.
9. Governing Language
------------------
The governing language of this Agreement shall be German. The English
translation attached hereto shall only be used, should the German text
contain a gap or be ambiguous.
10. Other Matters
-------------
Appearant 1 declared: The Subsidiaries ISP*D and InTeCo do not own real
estate in Germany.
Any declarations of consent relating hereto will become effective as soon as
they are received by the acting Notary or his officially appointed deputy.
The Notary advised the Appearants that
- in connection with the transfer of shares in German limited-liability
companies, the transferee may only exercise shareholder rights after the
transfer of the shares has been notified and proved to the company;
- 34 -
<PAGE>
- any legal act conducted prior to such notification by the company vis-a-vis
the transferor or by the transferor vis-a-vis the company, insofar as this
relates to the relationship between the company and its shareholder, will
be deemed valid as against the transferee;
- the transferee will be liable for all payments owed the company with regard
to the shares outstanding at the time of such notification.
IN WITNESS WHEREOF, this Deed was read to the Appearants, was approved by them,
and was personally signed by them and the acting Notary, as follows:
PROGRAMMER'S PARADISE, INC.
By: /s/ Dr. Denis Gebhardt
-------------------------
Name: Dr. Denis Gebhardt
Title: Authorized Signatory by Power of Attorney
PC-WARE INFORMATION TECHNOLOGIES AG
By: /s/ Dr. Knut Loschke
-------------------------
Name: Dr. Knut Loschke
Title: Chairman of the Board
/s/ Thomas Gelcer, Notary
- 35 -
<PAGE>
ANNEX II
FAIRNESS OPINION
[Letterhead of C.E. Unterberg, Towbin]
December 1, 2000
Board of Directors
Programmer's Paradise, Inc.
1157 Shrewsbury Avenue
Shrewsbury, NJ 07702-4321
Gentlemen:
We understand that Programmer's Paradise, Inc. ("Programmer's" or the "Company")
and PC-Ware Information Technologies AG ("PC-Ware") propose to enter into an
Agreement for the Sale and Purchase of Shares which will provide, among other
things, for Programmer's sale ("Sale") of all of its shares in its European
subsidiaries with the exception of its shares in Healy-Hudson AG and
Programmer's Paradise France S.A.R.L. (the "Subsidiaries") to PC-Ware. Under the
terms set forth in that certain Agreement for the Sale and Purchase of Shares,
dated December 1, 2000 (the "Agreement"), PC-Ware will pay Programmer's Euro
14,500,000 (the "Purchase Price") for the shares of the Subsidiaries. The terms
and conditions of the Sale are set forth more fully in the Agreement.
Capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Agreement.
You have asked for our opinion as to whether the Purchase Price to be received
by the Company is fair, from a financial point of view, to the Company.
For purposes of this opinion, we have reviewed the Agreement and the Company's
preliminary proxy statement relating to the Sale, dated December 1, 2000, and
analyzed certain publicly available financial statements and other information
of the Company and analyzed certain internal financial statements and other
financial and operating data and financial forecasts for the Subsidiaries (the
"Forecasts"), in each case, prepared by the Company's management. We have held
discussions with members of senior management of the Company regarding the
financial information referred to above, as well as the strategic rationale for,
and the potential benefits of, the Sale and the past and current business
operations, financial condition and future prospects of the Subsidiaries, before
and after giving effect to the Sale. We have reviewed the pro forma impact of
the Sale on the Company's financial statements, and we have analyzed the
relative contributions of the Subsidiaries to the Company. In addition, we have
reviewed the reported price and trading activity for the Company's Common Stock
("Company Common Stock"), reviewed certain historic operating information
provided by the Company, compared certain financial information including market
prices and valuation multiples for the Company and the Subsidiaries with similar
information for certain other publicly traded companies that we considered most
comparable, reviewed the financial terms, to the extent available, of certain
recent business combinations of computer hardware and software resellers and
performed such other studies and analyses as we considered appropriate under the
circumstances for rendering this opinion.
For purposes of rendering this opinion, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all financial and
other information reviewed or received by and discussed with us in connection
with our review of the Sale, including, without limitation, the assessment by
the Company's management of the Company's technologies and products and the
validity of, and risks associated with, its existing and future products and
technologies. In rendering this opinion, we have assumed, with your consent,
that the Forecasts (and the assumptions and bases therefor) have been reasonably
prepared in good faith and on a basis
<PAGE>
Programmer's Paradise, Inc.
Page 2 of 2
December 1, 2000
reflecting the best currently available estimates, assumptions and judgments of
the management of the Company as to the future financial condition and
performance of the Company and the Subsidiaries.
In providing this letter, we have also assumed, with your consent and without
independent verification, that (i) the representations and warranties of the
parties in the Agreement are true and correct as of the date hereof, (ii) the
Sale will have the tax, accounting and legal effects contemplated in the
Agreement, (iii) there has been no material change in the assets, financial
condition, business and prospects of the Company or the Subsidiaries since the
date of the most recent financial statements made available to us, (iv) the
historical financial statements of each of the Company and the Subsidiaries
reviewed by us have been prepared and fairly presented in accordance with
generally accepted accounting principles consistently applied, and (v) all
conditions to the consummation of the Sale will be fulfilled and the Sale will
be consummated in a timely manner.
In addition, we have not made an independent evaluation or appraisal of the
assets and liabilities of the Subsidiaries and we have not been furnished with
any such evaluation or appraisal, nor have we conducted a physical inspection of
the properties or facilities of the Subsidiaries. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
Sale, and our opinion is limited to the fairness, from a financial point of view
to the Company, of the Purchase Price. Our opinion does not address the relative
merits of the Sale as compared to any alternative business strategy that might
be available to the Company nor does our opinion address the Company's
underlying business decision to effect the Sale or constitute a recommendation
of the Sale to the Company or its stockholders. This letter is not intended as a
substitute for the exercise of the business judgment of the Board of Directors
of the Company in reviewing the Sale. Finally, our opinion does not constitute
an opinion or imply a conclusion as to the current price per share of the
Company Common Stock or the price at which Company Common Stock will trade at
any future time.
Our opinion is based upon market, economic and other conditions as they exist
and can be evaluated on the date hereof, and we assume no responsibility to
update or revise our opinion based upon circumstances or events occurring after
that date. It should be understood that subsequent developments may affect the
conclusions expressed in this opinion.
Based upon and subject to the foregoing and based upon such other matters as we
considered relevant, it is our opinion that as of the date hereof, the Purchase
Price is fair, from a financial point of view, to the Company.
We are acting as the Company's financial advisor in connection with the Sale and
will receive a fee for our services, including the rendering of this opinion. In
addition, the Company has agreed to indemnify us for certain liabilities that
may arise out of our engagement. In the past, we and our affiliates have
provided financial advisory and financing services for the Company and have
received fees for the rendering of these services. In addition, in the ordinary
course of our business, we may actively trade in the Company Common Stock for
our own account and for the accounts of our customers and, accordingly, may at
any time hold long or short positions in such securities.
The foregoing opinion letter is provided for the information and assistance of
the Board of Directors of the Company in connection with its consideration of
the transactions contemplated herein and is not intended to be and does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote, or take any other action, with respect to the Sale or
any matter related thereto. This opinion is not intended to confer any rights or
remedies upon any employee, creditor, stockholder or other equity holder of the
Company or any other party. Our opinion is not to be disclosed to or relied upon
by any other person (including any stockholder of the Company) or used,
circulated, quoted or otherwise referred to for any other purpose, nor is it to
be filed with, included in or referred to in whole or in part in any publicly
available statement or document, except in accordance with our prior written
consent.
Very truly yours,
/s/ C.E. Unterberg, Towbin
--------------------------
<PAGE>
PROXY CARD
PROGRAMMER'S PARADISE, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 21, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
KNOW ALL MEN BY THESE PRESENTS, that the undersigned stockholder of
PROGRAMMER'S PARADISE, INC. (the "Company"), a Delaware corporation, does hereby
constitute and appoint William H. Willett and William Sheehy, or either one of
them, with full power to act alone and to designate substitutes, the true and
lawful proxies of the undersigned for and in the name and stead of the
undersigned, to vote all shares of Common Stock of the Company which the
undersigned would be entitled to vote if personally present at the Special
Meeting of Stockholders to be held at the offices of Dechert, 30 Rockefeller
Plaza, 23rd Floor, New York, NY 10112 on December 21, 2000 at 8:00 a.m., local
time, and at any and all adjournments and postponements thereof (the "Special
Meeting"), on Proposal 1 (Sale of the Company's European Subsidiaries) and on
all other matters that may come before such Special Meeting. Said proxies are
instructed to vote on the following matters in the manner herein specified.
(CONTINUED, AND TO BE MARKED, DATED AND SIGNED, ON THE OTHER SIDE)
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL 1.
Please mark your vote as indicated in this example [X]
Proposal to approve the Agreement for the Sale and Purchase of Shares,
between the Company and P.C. Ware Information Technologies AG, pursuant
to which the Company's European subsidiaries would be sold (Proposal 1)
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
OTHER MATTERS
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the Special Meeting.
IF THIS PROXY IS PROPERLY EXECUTED, THE SHARES OF COMMON STOCK COVERED HEREBY
WILL BE VOTED AS SPECIFIED HEREIN. IF NO SPECIFICATION IS MADE, SUCH SHARES WILL
BE VOTED "FOR" PROPOSAL 1 AND AS THE PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
NOTE: PLEASE DATE THIS PROXY, SIGN YOUR NAME EXACTLY AS IT APPEARS HEREON, AND
RETURN PROMPTLY USING THE ENCLOSED POSTAGE PAID ENVELOPE. JOINT OWNERS SHOULD
EACH SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH.
The undersigned hereby revokes all previous Proxies and acknowledges receipt of
the Notice of Special Meeting dated December 1, 2000, and the Proxy Statement
attached thereto.
Dated: , 2000
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Signature
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Signature
Please mark, sign and return this Proxy promptly using the enclosed envelope. If
stock is held in the names of joint owners, each should sign. Persons signing as
an attorney, executor, administrator, guardian, trustee, corporate officer or in
any other fiduciary or representative capacity should give full title.
