Agreement and Plan of Merger - Thomson Corp. and Elite Information Group Inc.
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of April 2, 2003,
by and among The Thomson Corporation, a corporation organized under the laws of
Ontario, Canada ("Parent"), Gulf Acquisition Corp., a Delaware corporation and
an indirect wholly-owned subsidiary of Parent and a direct wholly-owned
subsidiary of Thomson Legal and Regulatory Inc. ("Merger Sub"), and Elite
Information Group, Inc., a Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the Company, Parent and Merger Sub have
each determined that it is in the best interests of their respective
stockholders for Merger Sub to acquire the Company upon the terms and subject to
the conditions set forth herein; and
WHEREAS, in furtherance thereof, it is proposed that Merger Sub will make a
cash tender offer to acquire all shares of the issued and outstanding common
stock, $.01 par value, of the Company (the "Company Common Stock" or the
"Shares") for $14.00 per share, net to the seller in cash (such amount, or any
greater amount per Share paid pursuant to the Offer (as hereinafter defined),
being the "Per Share Amount"); and
WHEREAS, the Board of Directors of the Company has unanimously approved
the making of the Offer and resolved to recommend that holders of Shares tender
their Shares pursuant to the Offer; and
WHEREAS, also in furtherance of such acquisition, the Boards of Directors
of the Company, Merger Sub and Parent have each approved the merger of Merger
Sub with and into the Company (the "Merger"), with the Company as the surviving
corporation (the "Surviving Corporation"), following the Offer in accordance
with the laws of the State of Delaware and upon the terms and subject to the
conditions set forth herein; and
WHEREAS, the Board of Directors of each of the Company, Parent and Merger
Sub has approved and declared advisable this Agreement and the Merger, upon the
terms and subject to the conditions set forth in this Agreement, whereby each
issued and outstanding share of Company Common Stock, other than shares directly
or indirectly owned by Parent or the Company and other than Dissenting Shares
(as hereinafter defined), will be converted into the right to receive cash; and
WHEREAS, Parent, Merger Sub and certain stockholders of the Company (the
"Stockholders") have entered into a Stockholders Support Agreement, dated as of
the date hereof (the "Stockholders Agreement"), providing that, among other
things, the Stockholders (i) will tender their Shares into the Offer and (ii)
vote their Shares in favor of the Merger, if applicable, in each case, subject
to the conditions set forth therein; and
WHEREAS, the Company, Parent and Merger Sub desire to make certain
representations, warranties, covenants and agreements in connection with the
Offer and the Merger and also to prescribe various conditions to the Offer and
the Merger.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
<PAGE>
ARTICLE I
THE OFFER
SECTION 1.01 The Offer.
(a) Provided that nothing shall have occurred that, had the Offer referred
to below been commenced, would give rise to a right to terminate the Offer
pursuant to any of the conditions set forth in paragraphs (ii)(a) - (ii)(g) of
Annex I hereto, then as promptly as practicable after the date hereof (and in
any event within eight (8) business days of the date of this Agreement), Merger
Sub shall (A) commence (within the meaning of Rule 14d-2 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) an offer (the "Offer") to
purchase any and all of the outstanding shares of Company Common Stock at a
price per Share equal to the Per Share Amount, net to the seller in cash,
without interest and (B) after affording the Company a reasonable opportunity to
review and comment thereon, file a Tender Offer Statement on Schedule TO (the
"Schedule TO") and all other necessary documents (collectively, the "Offer
Documents") with the Securities and Exchange Commission (the "SEC"), make all
deliveries, mailings and telephonic notices required by Rule 14d-3 under the
Exchange Act, and publish, send or give the disclosure required by Rule 14d-6
under the Exchange Act by complying with the dissemination requirements of Rule
14d-4 under the Exchange Act in each case in connection with the Offer
Documents. The Offer shall be subject only to the condition that there shall be
validly tendered in accordance with the terms of the Offer and not withdrawn
prior to the Expiration Date (as hereinafter defined) a number of Shares that,
together with the Shares then owned by Parent and/or Merger Sub or any other
subsidiary of Parent, represents at least a majority of the Shares outstanding
on a Fully-Diluted Basis (as hereinafter defined) (the "Minimum Condition") and
to the other conditions set forth in Annex I hereto. Merger Sub expressly
reserves the right to waive any of the conditions to the Offer and to make any
change in the terms of or conditions to the Offer, provided that without the
prior written consent of the Company, (i) the Minimum Condition may not be
waived, (ii) the condition to the Offer that the applicable waiting period under
the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended (the "HSR
Act") or under any applicable foreign antitrust statutes or regulations shall
have expired or been terminated (the "Regulatory Condition") may not be waived,
(iii) no change may be made that changes the form of consideration to be paid,
decreases the Per Share Amount or the number of Shares sought in the Offer or
imposes conditions to the Offer in addition to those set forth in Annex I and
(iv) no other change may be made to any term of the Offer in any manner adverse
to the holders of the Shares. Notwithstanding the foregoing, except as otherwise
provided in this Section 1.01(a), without the consent of the Company, Merger Sub
shall have the right to extend the Offer, provided that such extension does not
extend beyond the later of (x) July 31, 2003 and (y) the date that is 30 days
after the date that the Company has complied with its obligations under Section
6.03 (the "Outside Date") (i) from time to time if, at the scheduled or extended
Expiration Date, any of the conditions to the Offer shall not have been
satisfied or waived, until such conditions are satisfied or waived or (ii) for
any period required by any rule, regulation, interpretation or position of the
SEC or the staff thereof applicable to the Offer or any period required by
applicable law. The Offer shall remain open until 12:00 midnight on the date
that is twenty (20) business days after the commencement of the Offer (the
"Expiration Date"), unless Merger Sub shall have extended the period of time for
which the Offer is open pursuant to, and in accordance with, the terms of this
Agreement or as may be
2
<PAGE>
required by applicable law, in which event, the term "Expiration Date" shall
mean the latest time and date as the Offer, as so extended, may expire. If, at
any scheduled or extended Expiration Date, the Offer shall not have been
consummated as a result of the failure to satisfy the Regulatory Condition or
the occurrence of a Litigation Event, Parent shall, if requested by the Company,
cause Merger Sub to extend the Expiration Date for one or more periods (not in
excess of ten (10) business days each) until such condition is satisfied, but in
no event later than September 9, 2003 (the "Alternative Outside Date"). If at
the expiration of the Offer all of the conditions to the Offer have been
satisfied or waived, but the number of Shares validly tendered and not withdrawn
in the Offer constitute less than 90% of the outstanding Shares, Merger Sub
shall extend the Offer pursuant to an amendment to the Offer providing for a
"subsequent offering period" not to exceed twenty (20) business days to the
extent permitted under, and in compliance with, Rule 14d-11 under the Exchange
Act. Subject to the foregoing and upon the terms and subject to the conditions
of the Offer, Merger Sub shall, and Parent shall cause it to, accept for payment
and pay for, as promptly as practicable after the expiration of the Offer, all
Shares validly tendered and not withdrawn pursuant to the Offer. Notwithstanding
the immediately preceding sentence and subject to the applicable rules of the
SEC and the terms and conditions of the Offer, Merger Sub expressly reserves the
right to delay payment for Shares in order to comply in whole or in part with
applicable laws. Any such delay shall be effected in compliance with Rule
14e-1(c) under the Exchange Act. If the payment equal to the Per Share Amount in
cash, without interest (the "Merger Consideration") is to be made to a person
other than the person in whose name the surrendered certificate formerly
evidencing Shares is registered on the stock transfer books of the Company, it
shall be a condition of payment that the certificate so surrendered shall be
endorsed properly or otherwise be in proper form for transfer and that the
person requesting such payment shall have paid all transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the certificate surrendered, or shall have
established to the satisfaction of Merger Sub that such taxes either have been
paid or are not applicable.
(b) Parent, Merger Sub and the Company each agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that such information shall have become false or misleading in any material
respect. Parent and Merger Sub agree to take all steps necessary to cause the
Schedule TO as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities laws. The Company
and its counsel shall be given a reasonable opportunity to review and comment on
the Offer Documents and any amendments thereto prior to their being filed with
the SEC or disseminated to the holders of Shares. Parent and Merger Sub shall
provide the Company and its counsel with a copy of any written comments or
telephonic notification of any oral comments Parent, Merger Sub or their counsel
may receive from the SEC or its staff with respect to the Offer promptly after
the receipt thereof, shall consult with the Company and its counsel prior to
responding to any such comments, and shall provide the Company and its counsel
with a copy of any written responses thereto and telephonic notification of any
oral responses thereto of Parent or Merger Sub or their counsel.
(c) Parent shall provide or cause to be provided to Merger Sub on a timely
basis the funds necessary to purchase any and all Shares that Merger Sub becomes
obligated to purchase pursuant to the Offer.
3
<PAGE>
SECTION 1.02 Company Action.
(a) The Company hereby approves of and consents to the Offer and represents
that its Board of Directors, at a meeting duly called and held has unanimously
(i) determined that this Agreement, the Stockholders Agreement and the
transactions contemplated hereby and thereby, including the Offer and the
Merger, are fair to and in the best interests of the Company's stockholders,
(ii) approved, adopted and declared advisable this Agreement, the Stockholders
Agreement and the transactions contemplated hereby and thereby, including the
Offer and the Merger, in accordance with the requirements of the General
Corporation Law of the State of Delaware (the "DGCL"), including, without
limitation Section 203 of the DGCL and (iii) resolved to recommend to its
stockholders that they tender their Shares in the Offer and vote to approve and
adopt this Agreement. The Company will promptly furnish Parent with a list of
its stockholders, mailing labels and any available listing or computer file
containing the names and addresses of all record holders of Shares and lists of
securities positions of Shares held in stock depositories, in each case true and
correct as of the most recent practicable date, and will provide to Parent such
additional information (including updated lists of stockholders, mailing labels
and lists of securities positions) and such other assistance as Parent may
reasonably request in connection with the Offer. From and after the date of this
Agreement, all such information concerning the Company's record holders and, to
the extent known, beneficial holders, shall be made available to Merger Sub.
Subject to the requirements of applicable laws and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer, the Merger and the other transactions contemplated by
this Agreement, Parent and Merger Sub shall, until consummation of the Offer,
hold in confidence the information contained in any of such labels and lists,
shall use such information only in connection with the Offer, the Merger and the
other transactions contemplated by this Agreement and, if this Agreement shall
be terminated in accordance with Section 8.01, shall deliver to the Company all
copies of such information then in their possession or under their control. The
Company further represents that Broadview International LLC has delivered to the
Company's Board of Directors a written opinion that, as of the date of this
Agreement, the Merger Consideration to be received by the holders of Shares
pursuant to each of the Offer and the Merger is fair to the holders of Shares
from a financial point of view (the "Fairness Opinion"). The Company hereby
consents to the inclusion in the Offer Documents of the recommendation of the
Company's Board of Directors described in Section 1.02(a)(iii), and the Company
shall not withdraw or modify such recommendation in any manner adverse to Merger
Sub or Parent except as provided in Section 5.04(b). The Company has been
advised by its directors that they currently intend either to tender all Shares
beneficially owned by them to Merger Sub pursuant to the Offer or to vote such
Shares in favor of the approval and adoption by the stockholders of the Company
of this Agreement and the transactions contemplated hereby.
(b) As soon as practicable on the day that the Offer is commenced (which
shall not be prior to the fifth business day after the date hereof without the
Company's consent), the Company shall file with the SEC and disseminate to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws, a Solicitation/Recommendation Statement on Schedule
14D-9 (together with any amendments or supplements thereto, the "Schedule
14D-9") that shall contain the Fairness Opinion and, subject to Section 5.04(b),
shall reflect the recommendations of the Company's Board of Directors referred
to above. The Company, Parent and Merger Sub each agrees promptly to correct any
information provided by it for use in the
4
<PAGE>
Schedule 14D-9 if and to the extent that such information shall have become
false or misleading in any material respect. The Company agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws. Parent and its counsel
shall be given a reasonable opportunity to review and comment on the Schedule
14D-9 and each amendment thereto prior to its being filed with the SEC or
disseminated to the holders of Shares. The Company shall provide Parent, Merger
Sub and their counsel with a copy of any written comments or telephonic
notification of any oral comments the Company or its counsel may receive from
the SEC or its staff with respect to the Schedule 14D-9 promptly after the
receipt thereof, shall consult with Parent, Merger Sub and their counsel prior
to responding to any such comments, and shall provide Parent, Merger Sub and
their counsel with a copy of any written responses thereto and telephonic
notification of any oral responses thereto of the Company and its counsel.
SECTION 1.03 Directors.
(a) Effective upon the acceptance for payment of, and payment for, the
Shares pursuant to the Offer, Parent shall be entitled to designate the number
of directors, rounded up to the next whole number, on the Company's Board of
Directors that equals the product of (i) the total number of directors on the
Company's Board of Directors (giving effect to the election of any additional
directors pursuant to this Section) and (ii) the percentage that the number of
Shares beneficially owned by Parent and/or Merger Sub (including Shares accepted
for payment) bears to the total number of Shares outstanding, and the Company
shall promptly take all action necessary to cause Parent's designees to be
elected or appointed to the Company's Board of Directors, including increasing
the number of directors, and seeking and accepting resignations of incumbent
directors. At such times, the Company shall use its best efforts to cause
persons designated by Parent to constitute the same percentage of each committee
of the Company's Board of Directors as persons designated by Parent shall
constitute of the Company's Board of Directors, to the extent permitted by
applicable law or the rules of NASDAQ or any other stock exchange or automated
quotation system in which the Company Common Stock is then listed or quoted.
(b) The Company's obligations to appoint Parent's designees to the Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder. The Company shall promptly take all actions, and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors, as Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder require in order to fulfill its obligations under this
Section. Parent shall supply to the Company in writing and be solely responsible
for any information with respect to itself and its nominees, officers, directors
and affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder.
(c) Following the election or appointment of Parent's designees pursuant to
Section 1.03(a) and until the Effective Time (as hereinafter defined), there
shall be in office at least one Continuing Director (as hereinafter defined) and
the approval of not less than a majority of the directors of the Company then in
office, which majority shall include the concurrence of a majority of the
directors neither designated by or otherwise affiliated with Parent nor employed
by the Company (the "Continuing Directors"), shall be required to authorize any
termination of
5
<PAGE>
this Agreement by the Company, any amendment of this Agreement requiring action
by the Board of Directors of the Company, any extension of time for performance
of any obligation or action hereunder by Parent or Merger Sub and any waiver of
compliance with any of the agreements or conditions contained herein for the
benefit of the Company or other action by the Company hereunder which adversely
affects the holders of Shares (other than Parent and Merger Sub); provided,
however, if the foregoing provisions of this subsection are invalid or incapable
of being enforced under applicable law, then neither Parent nor Merger Sub shall
approve (either in its capacity as a stockholder or as a party to this
Agreement, as applicable), and Parent and Merger Sub shall use their
commercially reasonable efforts to prevent the occurrence of, such action unless
such action shall have received the unanimous approval of the Board of Directors
of the Company. Following the election or appointment of Parent's designees
pursuant to Section 1.03(a) and until the Effective Time, the Company shall use
its reasonable best efforts to ensure that at least two Continuing Directors
shall remain members of the Board of Directors; provided that, if there shall be
in office fewer than two Continuing Directors for any reason, the parties shall
use their commercially reasonable efforts to cause the Board of Directors of the
Company to cause the person designated by the remaining Continuing Director to
be elected to fill such vacancy, which person shall be deemed to be a Continuing
Director for all purposes of this Agreement. If no Continuing Directors then
remain, the other directors of the Company then in office shall designate two
persons to fill such vacancies who will not be directors, officers, employees or
affiliates of Parent, Merger Sub or the Company, and such persons shall be
deemed to be Continuing Directors for all purposes of this Agreement. The Board
of Directors of the Company shall not delegate any matter covered by this
Section 1.03 to any committee of the Board of Directors of the Company unless
such committee consists only of Continuing Directors.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, Merger Sub shall be
merged with and into the Company at the Effective Time. Following the Effective
Time, the Company, as the Surviving Corporation, shall succeed to and assume all
the rights and obligations of Merger Sub in accordance with the DGCL.
SECTION 2.02 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m. on the first business day after satisfaction or waiver of
the conditions set forth in Article VII (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the fulfillment
or waiver of those conditions), unless another time or date is agreed to by the
parties hereto (the "Closing Date").
SECTION 2.03 Effective Time. Subject to the provisions of this Agreement,
as soon as practicable on the Closing Date, the parties shall acknowledge and
file a certificate of merger (the "Certificate of Merger") executed in
accordance with the relevant provisions of the DGCL. The Merger shall become
effective at such time as the Certificate of Merger is duly filed with the
Secretary of State of the State of Delaware, or at such subsequent date or time
as the
6
<PAGE>
Company and Parent shall agree and specify in the Certificate of Merger (the
time the Merger becomes effective being hereinafter referred to as the
"Effective Time").
SECTION 2.04 Effects of the Merger. The Merger shall have the effects set
forth in Section 259 of the DGCL.
SECTION 2.05 Certificate of Incorporation and By-laws.
(a) The Certificate of Incorporation of the Company shall be amended in the
Merger to read in its entirety as set forth on Exhibit A hereto and as so
amended, shall be the certificate of incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
(b) Subject to Section 6.05(b), the By-laws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the by-laws of the Surviving
Corporation until thereafter changed or amended as provided therein or by
applicable law.
SECTION 2.06 Board of Directors. The Board of Directors of Merger Sub shall
be the Board of Directors of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
SECTION 2.07 Officers. The officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, until the
earlier of their resignation or removal or until their respective successors are
duly elected and qualified, as the case may be.
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS
SECTION 3.01 Effect on Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares of
the Company Common Stock or capital stock of Merger Sub:
(a) Cancellation of Company Stock. Each share of the Company Common Stock
that is owned by Parent or the Company (or by any direct or indirect
wholly-owned subsidiary of Parent or the Company) shall automatically be
canceled and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) Conversion of the Company Common Stock. Each share of the Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled in accordance with Section 3.01(a) and other
than Dissenting Shares) shall be converted into the right to receive the Merger
Consideration without interest thereon. As of the Effective Time, all shares of
the Company Common Stock shall no longer be outstanding and shall automatically
be canceled and shall cease to exist, and each holder of a certificate that
immediately prior to the Effective Time represented shares of Company Common
Stock (a
7
<PAGE>
"Certificate") shall cease to have any rights with respect thereto except (other
than in the case of shares to be canceled in accordance with Section 3.01(a))
the right to receive the Merger Consideration to be paid in consideration
therefor upon surrender of such Certificate in accordance with Section 3.02,
without interest, or, in the case of Dissenting Shares, the rights, if any,
accorded under Section 262 of the DGCL.
(c) Capital Stock of Merger Sub. Each issued and outstanding share of
capital stock of Merger Sub shall be converted into and become one fully paid
and nonassessable share of Common Stock of the Surviving Corporation.
SECTION 3.02 Surrender of Certificates.
(a) Deposit with the Paying Agent. Prior to the Effective Time, Merger Sub
shall appoint an agent reasonably acceptable to the Company (the "Paying Agent")
for the purpose of exchanging Certificates for the Merger Consideration. As of
the Effective Time, Parent shall cause the Surviving Corporation to deposit with
the Paying Agent, for the benefit of the holders of Certificates, the cash
representing the Merger Consideration (the "Payment Fund") payable pursuant to
Section 3.01 in exchange for Certificates.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Paying Agent shall mail to each holder of record of a
Certificate or Certificates (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to such Certificate
shall pass, only upon delivery of such Certificates to the Paying Agent and
shall be in such form and have such other provisions as the Surviving
Corporation and the Company may reasonably specify) and (ii) instructions for
use in effecting the surrender of such Certificates in exchange for the Merger
Consideration. Upon surrender of such a Certificate for cancellation to the
Paying Agent or to such other agent or agents as may be appointed by the
Surviving Corporation, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Paying Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor the
cash which such holder has the right to receive pursuant to this Article III,
and the Certificate so surrendered shall forthwith be canceled. In the event of
a transfer of ownership of Company Common Stock that is not registered in the
transfer records of the Company, cash may be paid to a person other than the
person in whose name the Certificate surrendered is registered, if such
Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the payment of cash to a person other than the
registered holder of such Certificate or establish to the satisfaction of the
Surviving Corporation that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 3.02(b), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration which the holder thereof
has the right to receive in respect of such Certificate pursuant to the other
provisions of this Article III. No interest will be paid or will accrue on any
cash payable to holders of Certificates pursuant to the provisions of this
Article III. The Surviving Corporation shall pay the charge and expenses of the
Paying Agent.
(c) No Further Ownership Rights in Company Common Stock. All cash paid upon
the surrender of Certificates in accordance with the terms of this Article III
shall be deemed to
8
<PAGE>
have been paid and issued in full satisfaction of all rights pertaining to the
shares of Company Common Stock formerly represented by such Certificates, and
after the Effective Time there shall be no further registration of transfers on
the stock transfer books of the Surviving Corporation of the shares of Company
Common Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation or the Paying Agent for any reason, they shall be canceled and
exchanged as provided in this Article III, except as otherwise provided by law.
(d) Termination of Payment Fund. Any portion of the Payment Fund that
remains undistributed to the holders of the Certificates for one year after the
Effective Time shall be delivered to the Surviving Corporation, upon demand, and
any holders of Certificates who have not theretofore complied with this Article
III shall thereafter look only to the Surviving Corporation for payment of their
claim for any cash to which such holders may be entitled.
(e) No Liability. None of Parent, the Company, Merger Sub, the Surviving
Corporation or the Paying Agent shall be liable to any person in respect of any
cash from the Payment Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) Investment of Payment Fund. The Paying Agent shall invest any cash
included in the Payment Fund as directed by the Surviving Corporation; provided
that such investments shall be in obligations of or guaranteed by the United
States of America, in commercial paper obligations rated A-1 or P-1 or better by
Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively,
or in certificates of deposit, bank repurchase agreements or banker's
acceptances of commercial banks with capital exceeding $1 billion. Any net
profit resulting from, or interest or income produced by, such investments shall
be payable to the Surviving Corporation.
(g) Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Paying Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration, deliverable in respect thereof, pursuant to this Agreement.
(h) Withholding Rights. The Surviving Corporation or the Paying Agent shall
be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of a Certificate such amounts
as the Surviving Corporation or the Paying Agent is required to deduct and
withhold with respect to the making of such payment under the Internal Revenue
Code of 1986, as amended (the "Code"), or any provisions of state, local or
foreign tax law. To the extent that amounts are so withheld and paid over to the
appropriate taxing authority by the Surviving Corporation or the Paying Agent,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the holder of the Certificate in respect of which such
deduction and withholding was made by the Surviving Corporation or the Paying
Agent.
9
<PAGE>
SECTION 3.03 Shares of Dissenting Shareholders. Notwithstanding anything in
this Agreement to the contrary, any issued and outstanding shares of Company
Common Stock held by a person (a "Dissenting Stockholder") who shall not have
voted to adopt this Agreement and who properly demands appraisal for such shares
in accordance with Section 262 of the DGCL ("Dissenting Shares") shall not be
converted as described in Section 3.01, but shall be converted into the right to
receive such consideration as may be determined to be due to such Dissenting
Stockholder pursuant to the DGCL, unless such holder fails to perfect or
withdraws or otherwise loses his right to appraisal. If, after the Effective
Time, such Dissenting Stockholder fails to perfect or withdraws or loses his
right to appraisal, such Dissenting Stockholder's shares of Company Common Stock
shall no longer be considered Dissenting Shares for the purposes of this
Agreement and shall thereupon be deemed to have been converted into and to have
become exchangeable for, at the Effective Time, the right to receive for each
such share the Merger Consideration, without any interest thereon, upon
surrender, pursuant to Section 3.02, of the Certificates evidencing such Shares.
The Company shall give Parent (i) prompt notice of any demands for appraisal of
shares of Company Common Stock received by the Company and (ii) the opportunity
to participate in all negotiations and proceedings with respect to any such
demands. The Company shall not, without the prior written consent of Parent,
make any payment with respect to, or settle, offer to settle or otherwise
negotiate, any such demands.
SECTION 3.04 Exemption from Liability under Section 16(b). Notwithstanding
anything in this Agreement to the contrary, each of Parent, Merger Sub and
Company agree to cooperate fully in the structuring and timing of any
dispositions and acquisitions of equity securities by directors and officers (as
defined in Rule 16a-1 under the Exchange Act) of the Company pursuant to the
transactions contemplated by this Agreement and to take, and cause their
respective boards of directors, compensation committees or stockholders to take,
prior to the Expiration Date, or Effective Time, as applicable, any and all such
actions as may be necessary or desirable to afford an exemption from liability
under Section 16(b) of the Exchange Act for such acquisitions and dispositions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Representations and Warranties of the Company. Except as set
forth on the Disclosure Schedule dated the date hereof and delivered by the
Company to Parent in connection with the execution of this Agreement (the
"Company Disclosure Schedule") (provided that the listing of an item in one
schedule of the Company Disclosure Schedule shall be deemed to be a listing in
each schedule of the Company Disclosure Schedule and to apply to any other
representation and warranty of the Company in this Agreement to the extent that
it is reasonably apparent from a reading of such disclosure item that it would
also qualify or apply to such other schedule or representation and warranty),
the Company represents and warrants to Parent as follows:
(a) Organization, Standing and Corporate Power. Each of the Company and its
subsidiaries (as defined in Section 9.03) is duly organized, validly existing
and in good standing
10
<PAGE>
under the laws of the respective jurisdiction in which it is incorporated and
has the requisite corporate power and authority to carry on its business as now
being conducted. Each of the Company and its subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership or leasing of its properties makes
such qualification or licensing necessary and has all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted, other than in such jurisdictions where the failure
to be so qualified or licensed or where the failure to have such governmental
approvals, individually or in the aggregate, is not reasonably likely to have a
material adverse effect (as defined in Section 9.03) on the Company. The Company
has made available to Parent prior to the date hereof complete and correct
copies of its Certificate of Incorporation and By-laws and the certificates of
incorporation, by-laws and other organizational documents of its subsidiaries,
in each case as amended to the date hereof. Such Certificates of Incorporation,
By-laws and other organizational documents are in full force and effect. Neither
the Company nor any of its subsidiaries is in violation of any of the provisions
of its Certificate of Incorporation, By-laws or other organizational documents.
(b) Subsidiaries. Schedule 4.01(b) of the Company Disclosure Schedule lists
each subsidiary of the Company. All the outstanding shares of capital stock of,
or other ownership interests in, each subsidiary of the Company have been
validly issued and are fully paid and nonassessable and are owned directly or
indirectly by the Company, free and clear of all Liens (as defined in Section
4.01(t)) and free of any other restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or such other
ownership interest). The Company does not own, directly or indirectly, any
capital stock or other ownership interest in any corporation, partnership,
limited liability company, joint venture or other entity.
(c) Capital Structure. The authorized capital stock of the Company consists
of 20,000,000 shares of Company Common Stock and 2,000,000 shares of preferred
stock, par value $.01 per share. At the close of business on March 31, 2003, (i)
7,870,203 shares of the Company Common Stock and no shares of preferred stock
were issued and outstanding, (ii) 1,637,783 shares of the Company Common Stock
were held by the Company in its treasury and (iii) 400,000 shares of Series A
Junior Participating Preferred Stock, par value $.01 per share, of the Company
(the "Series A Junior Participating Preferred Stock") were reserved for issuance
in connection with the rights (the "Rights") to purchase shares of Series A
Junior Participating Preferred Stock, issued pursuant to the Rights Agreement,
dated as of April 14, 1999, as amended on December 14, 1999, and as further
amended on August 11, 2000 (the "Rights Agreement"), between the Company and
Equiserve Trust Company, N.A., as Rights Agent. As of March 31, 2003,
collectively, 1,638,294 shares of the Company Common Stock were subject to
options or other purchase rights (the "Company Stock Options") granted pursuant
to the grants described in Schedule 4.01(c) of the Company Disclosure Schedule
(the "Individual Grants"), and under the Restated 1985 Incentive Stock Option
Plan (the "1985 Stock Option Plan"), the Amended and Restated 1996 Stock Option
Plan (the "1996 Stock Option Plan") and the 2000 Employee Stock Purchase Plan
(the "ESPP," and together with Individual Grants, the 1985 Stock Option Plan and
the 1996 Stock Option Plan, the "Company Stock Plans"). As of March 31, 2003,
there were 2,218,304 shares of the Company Common Stock reserved for issuance
under the Company Stock Plans. Except as set forth above, at the close of
business on March 31, 2003, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or outstanding.
There are no outstanding stock appreciation rights ("SARs") or rights
11
<PAGE>
(other than the Company Stock Options) to receive shares of the Company Common
Stock on a deferred basis granted under the Company Stock Plans. Schedule
4.01(c) of the Company Disclosure Schedule sets forth a true and complete list,
as of March 31, 2003, of all the Company Stock Options, the holders thereof, the
number of shares subject to each such option, the grant dates and the exercise
prices thereof. All outstanding shares of capital stock of the Company are, and
all shares which may be issued pursuant to the Company Stock Plans will be, if
and when issued, duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights. As of the date of this Agreement, no
bonds, debentures, notes or other indebtedness of the Company having the right
to vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which stockholders of the Company may vote are issued
or outstanding. Except as set forth above, as of the date of this Agreement,
there are no preemptive or other outstanding securities, options, warrants,
calls, rights, conversion rights, redemption rights, repurchase rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company or any of its subsidiaries is a party or by which any of them is bound
obligating the Company or any of its subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock or
other voting securities of the Company or any of its subsidiaries, or giving any
person a right to subscribe for or acquire, any securities of the Company or any
of its subsidiaries or obligating the Company or any of its subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, conversion right, redemption right, repurchase right, commitment,
agreement, arrangement or undertaking. There are no outstanding contractual
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of its
subsidiaries. There are no outstanding contractual obligations of the Company to
vote or to dispose of any shares of the capital stock of any of its
subsidiaries. All outstanding shares of Company Common Stock, all outstanding
Company Stock Options and all outstanding shares of capital stock of each
subsidiary of the Company have been issued and granted in compliance with (i)
all applicable securities laws and other applicable laws and (ii) all
requirements set forth in applicable contracts.
(d) Authority; Noncontravention.
(i) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to receipt of the Company
Stockholder Approval (as defined in Section 4.01(m)), if required by law,
to consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated by this Agreement have been
duly authorized by all necessary corporate action on the part of the
Company, subject to receipt of the Company Stockholder Approval, if
required by law. This Agreement has been duly executed and delivered by the
Company and, assuming the due execution and delivery of this Agreement by
Parent and Merger Sub, constitutes a legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms
subject to (A) applicable bankruptcy, insolvency, fraudulent transfer and
conveyance, moratorium, reorganization, receivership and similar laws
relating to or affecting the enforcement of the rights and remedies of
creditors generally, and (B) principles of equity (regardless of whether
considered and applied in a proceeding in equity or at law). The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with
12
<PAGE>
the provisions of this Agreement by the Company will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation or to loss of a material
benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its subsidiaries under, (A)
the Certificate of Incorporation or By-laws of the Company or the
comparable certificate of incorporation or organizational documents of any
of its subsidiaries, (B) any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license or other instrument or obligation applicable
to the Company or any of its subsidiaries or their respective properties or
assets or (C) subject to the governmental filings and other matters
referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or assets, other
than, in the case of clauses (B) and (C), any such conflicts, violations,
defaults, obligations, losses, rights, Liens, judgments, orders, decrees,
statutes, laws, ordinances, rules or regulations that, individually or in
the aggregate, are not reasonably likely to have a material adverse effect
on the Company. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Federal, state or local
government or any court, administrative agency or commission or other
governmental authority or agency, domestic or foreign (a "Governmental
Entity"), is required to be made or obtained by or with respect to the
Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the
Company of any of the transactions contemplated by this Agreement, except
for (A) the filing of a premerger notification and report form and the
expiration or termination of the waiting period under the HSR Act; (B) if
required by law, the filing with the SEC of a proxy statement relating to
the Company Stockholders Meeting (as defined in Section 6.01(b)) (such
proxy statement, as amended or supplemented from time to time, the "Proxy
Statement"); (C) the filing with the Secretary of State of the State of
Delaware of the Certificate of Merger and the filing of appropriate
documents with the relevant authorities of other states in which the
Company is qualified to do business; (D) the filing of the Schedule 14D-9
with the SEC; (E) such filings as may be required under state securities,
or "blue sky" laws; (F) such filings as may be required under the rules of
any securities exchange or automated quotation system on which the Company
Common Stock is then listed or quoted; and (G) such consents, approvals,
orders or authorizations the failure of which to be made or obtained,
individually or in the aggregate, is not reasonably likely to have a
material adverse effect on the Company.
(ii) As of the date hereof, the Board of Directors of the Company at a
meeting duly called and held (A) has unanimously approved, adopted and
declared advisable this Agreement, the Stockholders Agreement, the Offer,
the Merger and the other transactions contemplated by this Agreement and
the Stockholders Agreement and (B) has resolved to recommend that the
holders of Company Common Stock approve and adopt this Agreement and tender
their Shares in the Offer.
(e) SEC Documents; Undisclosed Liabilities. The Company has filed all
required reports, schedules, forms, statements and other documents with the SEC
since December 31, 2000 (including all filed reports, schedules, forms,
statements and other documents whether or
13
<PAGE>
not required, the "Company SEC Documents"). As of their respective dates of
filing with the SEC, the Company SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to the Company SEC Documents, and none
of the Company SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the Company SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with U.S.
generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end adjustments). Except for
liabilities and obligations reflected or reserved for on the most recent audited
consolidated financial statements and the notes thereto included in the Company
SEC Documents and liabilities and obligations incurred in the ordinary course of
business since the date of the most recent audited consolidated balance sheet
included in the Company SEC Documents and except for liabilities and obligations
which, individually or in the aggregate, would not be reasonably likely to have
a material adverse effect on the Company, neither the Company nor any of its
subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise).
(f) Information Supplied. None of the Schedule 14D-9, the Proxy Statement
or the information supplied or to be supplied by the Company for inclusion or
incorporation by reference in the Offer Documents will, at the date the Schedule
14D-9, the Proxy Statement, the Offer Documents or any amendments or supplements
thereto are filed with the SEC, are first published or mailed to the Company's
stockholders, at the time of the Company Stockholders Meeting, if such meeting
is required by law, and at the Effective Time, as the case may be, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders' Meeting which shall have
become false or misleading. The Schedule 14D-9 and Proxy Statement will comply
as to form in all material respects with the requirements of the Exchange Act,
and the rules and regulations promulgated thereunder, except that no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by
Parent or Merger Sub specifically for inclusion or incorporation by reference in
the Schedule 14D-9 or Proxy Statement.
(g) Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Company Filed SEC
Documents"), since the date of the most recent audited financial statements
included in the Company Filed SEC Documents, the Company has conducted its
business only in the ordinary course, and there has not been since such date,
(i) any
14
<PAGE>
material adverse change (as defined in Section 9.03) in the Company, (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to any of the Company's
capital stock, (iii) any split, combination or reclassification of any of the
Company's capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iv) (A) any granting by the Company or any of its
subsidiaries to any director, executive officer or key employee of the Company
or any of its subsidiaries of any award or incentive payment or increase in
compensation or benefits, except in the ordinary course of business consistent
with past practice (including, without limitation, pursuant to the Company's
annual performance review of its employees in March 2003) or as was required
under employment agreements in effect as of the date of this Agreement, (B) any
granting by the Company or any of its subsidiaries to any such director,
executive officer or key employee of any increase in severance or termination
pay, except as was required under any employment, severance or termination
agreements in effect as of the date of this Agreement (all of which are listed
in Schedule 4.01(j) of the Company Disclosure Schedule) or (C) any entry by the
Company or any of its subsidiaries into any employment, severance or termination
agreement with any such director, executive officer or key employee, (v) any
change in accounting methods, principles or practices by the Company, other than
reasonable and usual actions in the ordinary course of business and consistent
with past practice, except insofar as may have been required by a change in U.S.
generally accepted accounting principles, or (vi) action by the Company or any
of its subsidiaries that, if taken after the date of this Agreement, would
constitute a breach of any of the covenants set forth in Sections 5.01(d), (e),
(h), (i) or (l).
(h) Litigation. Except as disclosed in the Company Filed SEC Documents,
there is no suit, action, proceeding or (to the knowledge of the Company)
investigation pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any of its subsidiaries; provided, that for
purposes of this paragraph (h) only (and not for purposes of paragraph (a) of
Annex I), any such suit, action, proceeding, judgment, decree, injunction, rule
or order arising after the date hereof shall not be deemed to have a material
adverse effect on the Company if and to the extent such suit, action,
proceeding, judgment, decree, injunction, rule or order (or any relevant part
thereof) is based on this Agreement, or the transactions contemplated hereby.
(i) Labor Relations.
(i) There are no collective bargaining or other labor union agreements
to which the Company or any of its subsidiaries is a party or by which the
Company or any of its subsidiaries is bound. As of the date hereof, none of
the employees of the Company or any of its subsidiaries are represented by
any union with respect to their employment by the Company or such
subsidiary. As of the date hereof, since December 31, 2000, neither the
Company nor any of its subsidiaries has experienced any labor disputes,
union organization attempts or work stoppages, slowdowns or lockouts due to
labor disagreements.
(ii) The Company and each of its subsidiaries is currently in
compliance in all material respects with all applicable laws relating to
the employment of labor, including
15
<PAGE>
those related to wages, hours, collective bargaining and the payment and
withholding of taxes and other sums as required by any appropriate
Governmental Entity and has withheld and paid to the appropriate
Governmental Entity or is holding for payment not yet due to such
Governmental Entity all amounts required to be withheld from employees of
the Company or any of its subsidiaries and is not liable for any arrears of
wages, taxes, penalties or other sums for failure to comply with any of the
foregoing; and no third party has requested information from the Company or
any of its subsidiaries that suggests that any such claim set forth in any
of the foregoing might be contemplated.
(iii) To the knowledge of the Company, no employee has: (A) violated
or is violating any of the terms or conditions of any employment,
non-competition, non-solicitation, or non-disclosure agreement between such
employee and any former employer or other third party, (B) disclosed or may
be disclosing, or utilized or may be utilizing, any trade secret or
proprietary information or documentation of such third party, or (C)
interfered or may be interfering in the employment relationship between
such third party and any employee or any former employee, except for such
matters contemplated by (A), (B) or (C) as are not, individually or in the
aggregate, reasonably likely to have a material adverse effect on the
Company.
(iv) All officers and employees of the Company or any of its
subsidiaries are under written obligation to the Company or its
subsidiaries to maintain in confidence all confidential or proprietary
information acquired by them in the course of their employment or
engagement, as the case may be, and to assign to the Company or its
subsidiaries, as applicable, all inventions made by them within the scope
of their employment or engagement, as the case may be, during such
employment or engagement, as the case may be, and for a reasonable period
thereafter. All independent contractors retained by the Company or any of
its subsidiaries are under written obligation to the Company or its
subsidiaries to maintain in confidence all confidential or proprietary
information acquired by them in the course of their engagement and to
assign or grant to the Company or its subsidiaries, as applicable, such
rights in any work product of such contractor as are required by the
Company or its subsidiaries to use internally, and/or create derivative
works, and/or license, and/or sublicense such work product to end user
customers as appropriate.
(j) Benefit Plans.
(i) Schedule 4.01(j) of the Company Disclosure Schedule contains a
list and brief description of (A) all "employee pension benefit plans" (as
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")) (sometimes collectively referred to herein as
the "Company Pension Plans"), "employee welfare benefit plans" (as defined
in Section 3(l) of ERISA, hereinafter a "Welfare Plan"), severance,
termination, change in control, incentive compensation profit sharing stock
option, stock purchase, stock ownership, phantom stock, deferred
compensation plans, and other employee fringe benefit plans or arrangements
and all employment, termination, severance or other contracts or
agreements, to which the Company or any of its subsidiaries is a party,
with respect to which the Company or any of its subsidiaries has any
obligation or which are maintained, contributed to or required to be
maintained
16
<PAGE>
or contributed to by the Company or its subsidiaries for the benefit of any
present or former officers, employees, directors or independent contractors
of the Company or any of its subsidiaries, (B) each employee benefit plan
(as defined in Section 3(3) of ERISA) for which the Company could incur
liability under Section 4069 of ERISA in the event such plan has been or
were to be terminated and (C) any employee benefit plan in respect of which
the Company could incur liability under Section 4212(c) of ERISA (all the
foregoing being herein called the "Company Benefit Plans"). The Company has
made available to Parent true, complete and correct copies of (A) each
Company Benefit Plan (or, in the case of any unwritten Benefit Plans,
descriptions thereof), (B) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each Company Benefit Plan
(if any such report was required by applicable law), (C) the most recent
summary plan description for each Company Benefit Plan for which such a
summary plan description is required by applicable law and (D) each
currently effective trust agreement and insurance or annuity contract
relating to any Company Benefit Plan.
(ii) Except as required by COBRA, none of the Company Benefit Plans
provides for or promises retiree medical, disability or life insurance
benefits to any current or former employee, officer or director of the
Company or any of its subsidiaries.
(iii) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms. To the knowledge of the Company, the
Company, its subsidiaries and all the Company Benefit Plans are in material
compliance with the applicable provisions of ERISA, the Code and other
applicable laws as to the Company Benefit Plans. No action, claim or
proceeding is pending, or to the knowledge of the Company, threatened with
respect to any Company Benefit Plan (other than claims for benefits in the
ordinary course) and to the knowledge of the Company, no fact or event
exists that could give rise to any such action, claim or proceeding.
(iv) The Company has not, and no subsidiary of the Company, and no
entity that at any time was required to be treated as a single employer
together with the Company under Section 414 of the Code or Section 4001 of
ERISA (an "ERISA Affiliate"), has, at any time maintained, sponsored or
contributed to, and none of the Company Benefit Plans is, a single employer
plan, within the meaning of Section 4001(a)(15) of ERISA, a multiemployer
plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA) (a
"Multiemployer Plan") or a single employer pension plan (within the meaning
of Section 4001(a)(15) of ERISA) for which the Company or any subsidiary of
the Company could incur liability under Section 4063 or 4064 of ERISA (a
"Multiple Employer Plan"). Neither the Company nor any subsidiary of the
Company has incurred any liability under, arising out of or by operation of
Title IV of ERISA (other than liability for premiums to the Pension Benefit
Guaranty Corporation arising in the ordinary course), including, without
limitation, any liability in connection with (i) the termination or
reorganization of any employee benefit plan subject to Title IV of ERISA or
(ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan,
and no fact or event exists which could give rise to any such liability.
(v) Each Company Benefit Plan that is intended to comply with the
provisions of Section 401(a) of the Code has been the subject of a
determination letter from the
17
<PAGE>
Internal Revenue Service to the effect that such Company Benefit Plan is
qualified and exempt from Federal income taxes under Sections 401(a) and
501(a), respectively, of the Code; no such determination letter has been
revoked, and, to the knowledge of the Company, revocation has not been
threatened; and no amendment to such Company Benefit Plan as to which the
remedial amendment period has expired would adversely affect its
qualification or materially increase its cost. The Company has made
available to Parent a copy of the most recent determination letter received
with respect to each Company Benefit Plan for which such a letter has been
issued, as well as a copy of any pending application for a determination
letter. Schedule 4.01(j) of the Company Disclosure Schedule lists all the
Company Benefit Plan amendments as to which a favorable determination
letter has not yet been received.
(vi) With respect to each Company Benefit Plan that is not subject to
United States Law (a "Foreign Benefit Plan"): (A) all employer and employee
contributions to each Foreign Benefit Plan required by applicable law or by
the terms of such Foreign Benefit Plan have been made or, if applicable,
accrued in accordance with applicable accounting practices; (B) the fair
market value of the assets of each funded Foreign Benefit Plan, the
liability of each insurer for any Foreign Benefit Plan funded through
insurance or the book reserve established for any Foreign Benefit Plan,
together with any accrued contributions, is sufficient to procure or
provide for the accrued benefit obligations, as of the date of this
Agreement, with respect to all current and former participants in such plan
according to the actuarial assumptions and valuations most recently used to
determine employer contributions to such Foreign Benefit Plan and no
transaction contemplated by this Agreement shall cause such assets or
insurance obligations to be less than such benefit obligations; and (C)
each Foreign Benefit Plan required to be registered has been registered and
has been maintained in good standing with applicable regulatory
authorities.
(vii) No employee of the Company or other person will be entitled to
any payment or additional benefits or any acceleration of the time of
payment, funding or vesting of any benefits under any Company Benefit Plan
solely or partially as a result of the transactions contemplated by this
Agreement or as a result of a "change in ownership or control," within the
meaning of such term under Section 280G of the Code.
(viii) Since the date of the most recent audited financial statements
included in the Company Filed SEC Documents, there has not been any
adoption or amendment in any material respect by the Company or any of its
subsidiaries of any Company Benefit Plan.
(ix) Schedule 4.01(j) sets forth a complete list of the Company's
employees as of March 31, 2003.
(k) Taxes.
(i) Each of the Company and its subsidiaries has filed all Tax returns
and reports required to be filed by it or extensions to file such returns
or reports have been timely filed, granted and have not expired, except to
the extent that all such failures to
18
<PAGE>
file, taken together, are not reasonably likely to have a material adverse
effect on the Company. All returns filed by the Company and each of its
subsidiaries are complete and accurate in all material respects. The
Company and each of its subsidiaries have paid (or the Company has paid on
its behalf) all Taxes shown as due on such returns, and the most recent
financial statements contained in the Company Filed SEC Documents reflect
an adequate reserve for all Taxes payable by the Company and its
subsidiaries for all taxable periods and portions thereof accrued through
the date of such financial statements.
(ii) No deficiencies for any Taxes have been proposed, asserted or
assessed against the Company or any of its subsidiaries that are not
adequately reserved for, except for deficiencies that, individually or in
the aggregate, are not reasonably likely to have a material adverse effect
on the Company, and no requests for waivers of the time to assess any such
taxes have been granted or are pending.
(iii) Neither the Company nor any of its subsidiaries is a party to
any agreement or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payment" within the
meaning of Section 280G of the Code, without regard to Section 280G(b)(4)
of the Code.
(l) Compliance with Applicable Laws.
(i) Each of the Company and its subsidiaries has in effect all
approvals, authorizations, certificates, filings, franchises, licenses,
notices, permits, consents and rights ("Permits") from all Governmental
Entities necessary for it to own, lease or operate its assets and to carry
on its business as now conducted, and there has occurred no default under
or cancellations, suspensions or limitation with respect to any such Permit
and no suspension or cancellation of any of the Permits is pending or, to
the knowledge of the Company, threatened, except for the lack of Permits
and for defaults under actual or pending, or to the knowledge of the
Company, threatened cancellations, suspensions or limitations of Permits
which, individually or in the aggregate, are not likely to have a material
adverse effect on the Company. The Company and its subsidiaries are, and
have been, in compliance with all applicable statutes, laws, ordinances,
rules, orders and regulations of any Governmental Entity, except for
instances of noncompliance which, individually or in the aggregate, are not
reasonably likely to have a material adverse effect on the Company. No
investigation, examination or review by any Governmental Entity with
respect to the Company or any of its subsidiaries is pending or, to the
knowledge of the Company, threatened, nor has any Governmental Entity
indicated, to the knowledge of the Company, an intention to conduct the
same, except for those the outcome of which, individually or in the
aggregate, are not likely to have a material adverse effect on the Company.
(ii) The businesses of each of the Company and its subsidiaries are
being and have been conducted in compliance in all respects with all
applicable statutes, laws, ordinances, rules, orders and regulations which
are administered, interpreted or enforced by the U.S. Environmental
Protection Agency and state and local agencies with jurisdiction over
pollution or protection of the environment, except for instances of
19
<PAGE>
noncompliance which, individually or in the aggregate, are not reasonably
likely to have a material adverse effect on the Company.
(m) Voting Requirements. The affirmative vote at the Company Stockholders
Meeting (as hereinafter defined) of the holders of a majority in voting power of
all outstanding shares of the Company Common Stock to adopt this Agreement (the
"Company Stockholder Approval"), if required by law, is the only vote of the
holders of any class or series of the Company's capital stock necessary to adopt
this Agreement.
(n) State Takeover Statutes. No "fair price," "moratorium," "control share
acquisition" or other similar antitakeover statute or regulation enacted under
state or federal laws in the United States (with the exception of Section 203 of
the DGCL) applicable to the Company is applicable to the Offer, the Merger or
the other transactions contemplated hereby or by the Stockholders Agreement.
Assuming the accuracy of the representation and warranty set forth in Section
4.02(f), the action of the Board of Directors of the Company in approving this
Agreement and the Stockholders Agreement (and the transactions provided for
herein or therein) is sufficient to render inapplicable to this Agreement and
the Stockholders Agreement (and the transactions provided for herein or therein)
the restrictions on "business combinations" (as defined in Section 203 of the
DGCL) as set forth in Section 203 of the DGCL.
(o) Brokers. No broker, investment banker, financial advisor or other
person, other than Broadview International LLC, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Company. The Company has heretofore furnished to
Parent a complete and correct copy of all agreements between the Company and
Broadview International LLC pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereby.
(p) Opinion of Financial Advisor. The Company has received an opinion (a
copy of which has been, or promptly upon receipt thereof will be, delivered to
Parent) of Broadview International LLC, dated as of the date hereof, that the
consideration to be paid in the Offer and the Merger is fair, from a financial
point of view, to the holders of shares of the Company Common Stock.
(q) Material Contracts.
(i) Subsections (A) through (P) of Schedule 4.01(q) of the Company
Disclosure Schedule contain a list of the following types of contracts and
agreements to which the Company or any of its subsidiaries is a party (such
contracts, agreements and arrangements as are required to be set forth in
Schedule 4.01(q) of the Disclosure Schedule being the "Material
Contracts"):
(A) each contract and agreement, whether or not made in the
ordinary course of business (1) between Elite Information Systems,
Inc. ("EIS") and any customer, which agreement was one of the 20
largest sources of customer billings for EIS during the fiscal year
ended December 31, 2002; and (2) between Law Manager, Inc. ("LMI") and
any customer, which agreement was one of the 5
20
<PAGE>
largest sources of customer billings for LMI during the fiscal year
ended December 31, 2002;
(B) each contract relating to the sale of Company Intellectual
Property, information services, data services or content by the
Company or any of its subsidiaries, other than in the ordinary course
of business;
(C) all contracts and agreements evidencing indebtedness in
excess of $50,000;
(D) all joint venture, partnership and business acquisition or
divestiture agreements executed since December 31, 1998 (and all
letters of intent and term sheets relating to any pending
transactions);
(E) all agreements relating to issuances of securities of the
Company or any of its subsidiaries (and all letters of intent, term
sheets and draft agreements relating to any such pending
transactions);
(F) exclusive and non-exclusive distribution contracts (for the
distribution of the Company's products) to which the Company or any of
its subsidiaries is a party;
(G) leases of real property;
(H) agreements to which the Company or any of its subsidiaries is
a party for the distribution by the Company or its subsidiaries of a
third party's products;
(I) all contracts not listed in subsections (F) or (H) above,
involving the payment of royalties or other amounts, which exceeded
$150,000 in 2002 or reasonably could be expected to exceed $150,000 in
2003, calculated based upon the revenues, income, or sales of the
Company or any of its subsidiaries or income or revenues related to
any product of the Company or any of its subsidiaries to which the
Company or any of its subsidiaries is a party;
(J) all contracts and agreements that limit, or purport to limit,
the ability of the Company or any of its subsidiaries to compete in
any line of business or with any person or entity or in any geographic
area or during any period of time;
(K) all material contracts or arrangements that result in any
person or entity holding a power of attorney from the Company or any
of its subsidiaries that relates to the Company, any of its
subsidiaries or their respective businesses;
(L) all agreements related to professional services rendered to
the Company or any of its subsidiaries in connection with the Offer,
the Merger and this Agreement;
21
<PAGE>
(M) market research, marketing consulting and advertising
contracts and agreements;
(N) all agreements that license Company Software (excluding
application program interfaces ("APIs")) to a third party for the
purpose of allowing such third party to develop software code to be
delivered to the Company or its subsidiary;
(O) all agreements that license Company Software (excluding APIs)
to third parties for their internal use, or for use on behalf of a
licensed customer of the Company or its subsidiaries, for the purpose
of allowing such third party to perform development or implementation
services relating to such Company Software for such customer; and
(P) all other contracts and agreements between the Company and
any party (other than customers) that contemplate an exchange of
consideration with a value of more than $200,000 in the aggregate over
the term of such contract or agreement.
(ii) Each Material Contract is a legal, valid and binding agreement.
None of the Company or any of its subsidiaries has received any claim of
default under or cancellation of any Material Contract and none of the
Company or any of its subsidiaries is in breach or violation of, or default
under, any Material Contract. To the Company's knowledge, no other party is
in breach or violation of, or default under, any Material Contract. Neither
the execution of this Agreement nor the consummation of any transaction
contemplated hereby shall constitute default, give rise to cancellation
rights, or otherwise adversely affect any of the Company's rights under any
Material Contract. The Company has furnished or made available to Parent
true and complete copies of all Material Contracts, including any
amendments thereto.
(r) Intellectual Property.
(i) (A) "Intellectual Property" means patents, trademarks, service
marks, trade dress, trade names, domain names, copyrights, computer
software (source code and object code), trade secrets, know-how,
technology, data rights and other proprietary or technical information,
including registrations and applications for registration of the foregoing;
(B) "Company Intellectual Property" means all Intellectual Property owned
by or proprietary to the Company and its subsidiaries; (C) "Company
Software" means all computer software and applications, data and databases
that are material to the operation of the Company's business, or
manufactured, distributed, sold, licensed or marketed by the Company or any
Subsidiary in connection with their business; (D) "Third Party Intellectual
Property" means all Intellectual Property that is owned by or proprietary
to a party other than the Company or any of its subsidiaries; and (E)
"Company IP Licenses" means all agreements under which the Company or its
subsidiary licenses or provides any other right to Intellectual Property to
a third party or which the Company or its subsidiary licenses or obtains
any other right to Intellectual Property from a third party.
22
<PAGE>
(ii) The Company Disclosure Schedule sets forth a true and complete
list of all (A) patents, patent applications, trademark registrations and
applications, copyright registrations and applications and domain name
registrations included in the Company Intellectual Property, (B) Company
Software that is material to the business of the Company and its
subsidiaries, and (C) Company IP Licenses that are material to the business
of the Company and its subsidiaries (other than shrink-wrap or
click-through licenses of commercially available, commodity software).
(iii) (A) The Company or its subsidiary is the exclusive owner of the
entire and unencumbered right, title and interest in and to the
Intellectual Property asserted to be owned by the Company or its
subsidiaries in the Company Disclosure Schedule, free and clear of any
Liens; (B) the Company and its subsidiaries own, license or have a valid
right to use all Intellectual Property used, held for use or necessary in
the operation of their business; (C) neither the Company or any of its
subsidiaries is under any obligation to pay royalties, license fees or any
other monetary consideration to a third party for the use of any
Intellectual Property other than pursuant to the Company IP Licenses; (D)
no Company Intellectual Property is subject to any outstanding decree,
order, injunction, judgment, settlement or ruling restricting the use of
such Intellectual Property or that would impair the validity or
enforceability of such Intellectual Property; (E) all Company Intellectual
Property and the Company IP Licenses are valid and enforceable, and all
registrations and applications for registration of Company Intellectual
Property listed in the Company Disclosure Schedule are in good standing,
have not lapsed or been abandoned, and are in full force and effect; and
(F) no party to any Company IP License is in breach thereof or default
thereunder and none of the Company or any of its subsidiaries has received
any notice of termination, cancellation, breach or default under any
Company IP License.
(iv) The consummation of the transactions contemplated in this
Agreement will not terminate or impair (A) the validity or enforceability
of any of the material Company Intellectual Property, (B) any Company IP
License, or (C) any right of the Company and its subsidiaries to use any
material Third Party Intellectual Property currently used or held for use
by the Company and its subsidiaries.
(v) Except as set forth in the Company Disclosure Schedule: (A) the
operation of the Company and its subsidiaries' business, including the
manufacture, sale, license or provision of their products and services, do
not infringe, misappropriate, dilute or otherwise violate any Third-Party
Intellectual Property, and the Company has no knowledge of any basis of a
claim therefor; and (B) there are no actions, proceedings or litigation
pending, or to the knowledge of the Company, threatened, before any court,
tribunal or governmental authority alleging any of the foregoing, or
challenging the Company or any of its subsidiaries' right to use any
Intellectual Property or the ownership, validity, enforceability or
effectiveness of the Company Intellectual Property.
(vi) The Company is in compliance in all material respects with all
regulations or law governing the import and export of computer software. No
rights in the Company Software have been transferred to any third party
except pursuant to agreements listed on Schedule 4.01(q)(i)(N) or (O) of
the Company Disclosure Schedule or relating to APIs
23
<PAGE>
which were provided pursuant to agreements substantially in the form
included on Schedule 4.01(r)(vi) of the Company Disclosure Schedule.
(vii) The Company and its subsidiaries have taken reasonable steps in
accordance with normal industry practice to maintain the confidentiality of
the trade secrets and other confidential Intellectual Property used in
connection with their business. To the knowledge of the Company: (A) there
has been no misappropriation of any material trade secrets or other
material confidential Intellectual Property used in connection with their
business by any person; (B) no employee, independent contractor or agent of
the Company or any of its subsidiaries has misappropriated any trade
secrets of any other person in the course of performance as an employee,
independent contractor or agent of their business; and (C) no employee,
independent contractor or agent of the Company or any of its subsidiaries
is in default or breach of any term of any employment agreement,
nondisclosure agreement, assignment of invention agreement or similar
agreement or contract relating in any way to the protection, ownership,
development, use or transfer of Intellectual Property.
(s) Rights Agreement. The Company has amended the Rights Agreement to
ensure that (a) none of a "Section 11(a)(ii) Event," a "Section 13 Event," a
"Distribution Date," or a "Stock Acquisition Date" (in each case as defined in
the Rights Agreement) will occur, and none of Parent, Merger Sub or any of their
"Affiliates" or "Associates" will be deemed to be an "Acquiring Person" (in each
case as defined in the Rights Agreement), solely by reason of the execution and
delivery of this Agreement or the Stockholders Agreement, the making of the
Offer, the acceptance for payment of Shares by Merger Sub pursuant to the Offer,
the consummation of the Merger, or the consummation of the other transactions
contemplated by this Agreement or the Stockholders Agreement; and (b) the Rights
will expire immediately prior to the acceptance for payment of, and payment for,
the Shares pursuant to the Offer.
(t) Real Property; Leases.
(i) None of the Company or any of its subsidiaries owns or has owned
(within the past five (5) years) any real property.
(ii) Schedule 4.01(t)(ii) of the Company Disclosure Schedule sets
forth a true and complete list of all real property currently leased by the
Company or any of its subsidiaries. Each parcel of real property leased by
the Company or any of its subsidiaries (i) is, except as may be set forth
in the lease agreement for such real property, leased free and clear of all
mortgages, pledges, liens, security interests, conditional and installment
sale agreements, encumbrances, charges or other claims of third parties of
any kind, including, without limitation, any easement, right of way or
other encumbrance to title, or any option, right of first refusal, or right
of first offer (collectively, "Liens"), other than (A) Liens for current
Taxes and assessments not yet past due, (B) inchoate mechanics' and
materialmen's Liens for construction in progress, (C) workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary
course of business of the Company or such Subsidiary consistent with past
practice, (D) all matters of record, Liens and other imperfections of title
and encumbrances that, individually or in the aggregate, would not be
reasonably likely to have a material
24
<PAGE>
adverse effect on the Company, and (E) the terms of the Company's leases
(collectively, "Permitted Liens"), and (ii) is to the knowledge of the
Company neither subject to any governmental decree or order to be sold nor
is being condemned, expropriated or otherwise taken by any public authority
with or without payment of compensation therefor, nor, to the knowledge of
the Company, has any such condemnation, expropriation or taking been
proposed.
(iii) There are no contractual or legal restrictions that preclude or
restrict the ability to use any real property leased by the Company or any
of its subsidiaries for the purposes for which it is currently being used.
(u) Customers and Suppliers. Schedule 4.01(u) of the Company Disclosure
Schedule sets forth a true and complete list of the Company's top 25 customers
(based on the billings to such customer) during the 12-month period ended
December 31, 2002. As of the date of this Agreement, no customer that accounted
for more than two percent of the Company's customer billings during the 12-month
period ended December 31, 2002, and no material supplier of the Company and any
of its subsidiaries, (i) has cancelled or otherwise terminated any contract with
the Company or any of its subsidiaries prior to the expiration of the contract
term, (ii) has returned, or threatened to return, a substantial amount of any of
the products, equipment, goods and services purchased from the Company or any of
its subsidiaries, or (iii) to the Company's knowledge, has threatened, or
indicated its intention, to cancel or otherwise terminate its relationship with
the Company or any of its subsidiaries or to reduce substantially its purchase
from or sale to the Company or any of its subsidiaries of any products,
equipment, goods or services. Neither the Company nor any of its subsidiaries
has materially breached any agreement with any such customer or supplier of the
Company or any of its subsidiaries.
(v) Insurance. Schedule 4.01(v) of the Company Disclosure Schedule sets
forth, with respect to each insurance policy under which the Company or any of
its subsidiaries is an insured, a named insured or otherwise the principal
beneficiary of coverage, (A) the names of the insurer, the principal insured and
each named insured, (B) the policy number, (C) the period, scope and amount of
coverage and (D) the premium charged.
(w) Assets.
(i) Each of the Company or its subsidiary, as the case may be, owns,
leases or has the legal right to use all the properties and assets (the
"Assets"), including, without limitation, the Company Intellectual Property
used or intended to be used in the conduct of the Company's or any of its
subsidiaries' business or otherwise owned, leased or used by the Company or
any of its subsidiaries, and, with respect to contract rights, is a party
to and enjoys the right to the benefits of all contracts, agreements and
other arrangements used or intended to be used by the Company or any of its
subsidiaries or in or relating to the conduct of the Company's or any of
its subsidiaries' business. Each of the Company or its subsidiary, as the
case may be, has good and marketable title to, or, in the case of leased or
subleased Assets, valid and subsisting leasehold interests in, all the
Assets, free and clear of all Liens, except Permitted Liens.
25
<PAGE>
(ii) The Assets constitute all the properties, assets and rights
forming a part of, used, held or intended to be used in, and all such
properties, assets and rights as are necessary in the conduct of, the
Company's and any of its subsidiaries' business.
(x) Cash. As of the date of this Agreement, the Company's bank account
balance includes cash, net of any indebtedness, of not less than $27 million.
There are no Liens on the Company's cash, nor are there any contractual
restrictions on the use or distribution of the Company's cash.
SECTION 4.02 Representations and Warranties of Parent and Merger Sub.
Except as set forth on the Disclosure Schedule dated the date hereof and
delivered by Parent to the Company in connection with the execution of this
Agreement (the "Parent Disclosure Schedule") (provided that the listing of an
item in one schedule of the Parent Disclosure Schedule shall be deemed to be a
listing in each schedule of the Parent Disclosure Schedule and to apply to any
other representation and warranty of Parent and Merger Sub in this Agreement to
the extent that it is reasonably apparent from a reading of such disclosure item
that it would also qualify or apply to such other schedule or representation and
warranty), Parent and Merger Sub represent and warrant to the Company as
follows:
(a) Organization, Standing and Corporate Power. Each of Parent and Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the respective jurisdiction in which it is incorporated and has the
requisite corporate power and authority to carry on its business as now being
conducted. Each of Parent and Merger Sub is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed, individually or in the aggregate, is not reasonably
likely to have a material adverse effect on Parent or Merger Sub. Parent has
made available to the Company prior to the date hereof complete and correct
copies of its Certificate of Incorporation and By-laws and the certificates of
incorporation and by-laws of Merger Sub, in each case as amended to the date
hereof. Such certificates of incorporation, by-laws and other organizational
documents are in full force and effect. Neither Parent nor Merger Sub is in
violation of any of the provisions of its Certificate of Incorporation, By-laws,
or other organizational documents.
(b) Subsidiaries. All the outstanding shares of capital stock of, or other
ownership interests in Merger Sub have been validly issued and are fully paid
and nonassessable and are owned directly or indirectly by Parent, free and clear
of all Liens and free of any other restriction (including any restriction on the
right to vote, sell or otherwise dispose of such capital stock or such other
ownership interest). Since the date of its incorporation, Merger Sub has not
engaged in any activities other than in connection with or as contemplated by
this Agreement.
(c) Authority; Noncontravention.
(i) Each of Parent and Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of
this Agreement by Parent and Merger Sub and the consummation of the
transactions contemplated by this Agreement have been
26
<PAGE>
duly authorized by all necessary corporate action on the part of Parent and
Merger Sub. This Agreement has been duly executed and delivered by each of
Parent and Merger Sub, and, assuming the due execution and delivery of the
Agreement by the Company, the Agreement constitutes a legal, valid and
binding obligation of each of Parent and Merger Sub, enforceable against
each of Parent and Merger Sub in accordance with its terms subject to (A)
applicable bankruptcy, insolvency, fraudulent transfer and conveyance,
moratorium, reorganization, receivership and similar laws relating to or
affecting the enforcement of the rights and remedies of creditors
generally, and (B) principles of equity (regardless of whether considered
and applied in a proceeding in equity or at law). The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement by each of Parent and Merger Sub will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation or to loss of a material
benefit under, or result in the creation of any Lien upon any of the
properties or assets of Parent or Merger Sub under, (A) the Certificate of
Incorporation or By-laws of Parent or Merger Sub, (B) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license or other instrument or
obligation applicable to Parent or Merger Sub or their respective
properties or assets or (C) subject to the governmental filings and other
matters referred to in the following sentence, any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or Merger
Sub or their respective properties or assets, other than, in the case of
clauses (B) and (C), any such conflicts, violations, defaults, obligations,
losses, rights, Liens, judgments, orders, decrees, statutes, laws,
ordinances, rules or regulations that, individually or in the aggregate,
would not have a material adverse effect on Parent. No consent, approval,
order or authorization of, or registration, declaration or filing with, any
Governmental Entity is required to be made or obtained by or with respect
to Parent or Merger Sub in connection with the execution and delivery of
this Agreement by Parent or Merger Sub or the consummation by Parent and
Merger Sub of any of the transactions contemplated by this Agreement,
except for (A) the filing of a premerger notification and report form and
the expiration or termination of the waiting period under the HSR Act; (B)
the filing with the Secretary of State of the State of Delaware of the
Certificate of Merger and the filing of appropriate documents with the
relevant authorities of other states in which Parent is qualified to do
business; (C) the filing of the Schedule TO and the other Offer Documents
with the SEC; (D) such filings as may be required under the Exchange Act,
state securities, or "blue sky" laws and state takeover laws; (E) such
filings as may be required under the rules of any securities exchange or
automated quotation system on which the Company Common Stock or securities
of Parent is then listed or quoted; and (F) such consents, approvals,
orders or authorizations the failure of which to be made or obtained,
individually or in the aggregate, is not reasonably likely to have a
material adverse effect on Parent or Merger Sub.
(ii) As of the date hereof, the Board of Directors of each of Parent
and Merger Sub has unanimously approved, adopted and declared advisable
this Agreement, the Stockholders Agreement, the Offer, the Merger and the
other transactions contemplated by this Agreement and the Stockholders
Agreement. No vote of any class or series of
27
<PAGE>
capital stock of Parent is necessary to approve and adopt this Agreement,
the Offer, the Merger or the other transactions contemplated hereby.
(d) Information Supplied. None of the Offer Documents or the information
supplied or to be supplied by Parent or Merger Sub for inclusion or
incorporation by reference in the Schedule 14D-9 or Proxy Statement will, at the
date the Offer Documents, the Schedule 14D-9, the Proxy Statement or any
amendments or supplements thereto are filed with the SEC, are first published or
mailed to the Company's stockholders, at the time of the Company Stockholders
Meeting, if such meeting is required by law, and at the Effective Time, as the
case may be, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders'
Meeting which shall have become false or misleading. The Offer Documents will
comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations promulgated thereunder, except that no
representation or warranty is made by Parent or Merger Sub with respect to
statements made or incorporated by reference therein based on information
supplied by the Company specifically for inclusion or incorporation by reference
in the Offer Documents.
(e) Financing. Parent has as of the date hereof and will have, at the
Effective Time, all cash necessary to consummate the transactions contemplated
by this Agreement, to provide for the Surviving Corporation's ongoing working
capital requirements and to pay all related fees and expenses.
(f) Company Stock. Neither Parent nor Merger Sub is, or at any time during
the last three years has it been, an "interested stockholder" of the Company as
defined in Section 203 of the DGCL. Neither Parent nor Merger Sub owns (directly
or indirectly, beneficially or of record) or is party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, any shares of capital stock of the Company.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 5.01 Conduct of Business. During the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause its
subsidiaries to, carry on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and, to
the extent consistent therewith, use all reasonable efforts to preserve intact
their current business organizations, licenses and authorizations, keep
available the services of their current officers and employees and preserve
their relationships with customers, suppliers, licensors, licensees,
distributors, managers and others having business dealings with them to the end
that their goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing, except as set forth on
Schedule 5.01 of the Company Disclosure Schedule, as otherwise permitted under
Section 5.04 of this Agreement or as consented to by Parent in writing (which
consent shall not be
28
<PAGE>
unreasonably withheld, delayed or conditioned), during the period from the date
of this Agreement to the Effective Time, the Company shall not, and shall not
permit any of its subsidiaries to:
(a) (i) declare, set aside or pay any dividends payable in cash, stock or
property on, or make any other distributions in respect of, any of its capital
stock, other than dividends and distributions by a direct or indirect
wholly-owned subsidiary of the Company to its parent, (ii) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect or in lieu of or in substitution for shares of its
capital stock or (iii) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities other than in accordance with the terms
thereof, the issuance of the Company Common Stock (and corresponding Rights)
upon the exercise of Company Stock Options or otherwise pursuant to equity
stock-based awards, in each case outstanding on the date of this Agreement and
in accordance with their present terms;
(c) amend its certificate of incorporation, by-laws or other comparable
organizational documents;
(d) acquire (i) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, joint venture, association or other business
organization or division thereof or (ii) any assets that, in the case of clause
(i) or (ii), are material, individually or in the aggregate, to the Company;
(e) sell, lease, license, mortgage or otherwise encumber or subject to any
Lien or otherwise dispose of any of its properties or assets, except sales of
assets in the ordinary course of business;
(f) (i) incur any indebtedness for borrowed money or assume or guarantee
any such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or any of
its subsidiaries, assume or guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for borrowings incurred in the
ordinary course of business, which in no event shall exceed $25,000,
individually, or $100,000, in the aggregate, and except for intercompany
indebtedness between the Company and any of its subsidiaries or between such
subsidiaries, or (ii) make any loans, advances or capital contributions to, or
investments in, any other person, other than to the Company or any direct or
indirect wholly-owned subsidiary of the Company and other than investments made
in the ordinary course of business;
(g) make or agree to make any new capital expenditure or expenditures, or
enter into any agreement or agreements providing for payments which,
individually, or, in the aggregate,
29
<PAGE>
exceed in any month by more than $50,000 the amount of monthly budgeted
expenditures as set forth in the Company's fiscal year 2003 budget which has
been made available to Parent;
(h) make any tax election that, individually or in the aggregate, is
reasonably likely to have a material adverse effect on the tax liability of the
Company or settle or compromise any material income tax liability;
(i) pay, discharge, settle or satisfy any claims, liabilities, obligations
or litigation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business or in accordance with their terms, of
liabilities recognized or disclosed in the most recent consolidated financial
statements (or the notes thereto) of the Company included in the Company Filed
SEC Documents or incurred since the date of such financial statements;
(j) except as required by law, enter into, adopt or amend in any material
respect or terminate any Company Benefit Plan or any other agreement involving
the Company or its subsidiaries, and one or more of its directors, officers or
employees;
(k) hire additional employees except to fill current vacancies or vacancies
arising after the date of this Agreement due to the termination of any
employee's employment or increase the compensation of any director, executive
officer or other key employee other than as required by, or pay any benefit or
amount not required by, a plan or arrangement as in effect on the date of this
Agreement to any such person; provided, that so long as such increases do not
cause the expenses of the Company and its subsidiaries for compensation and
benefits to exceed the amounts set forth in their budget for fiscal year 2003,
the Company and its subsidiaries may increase salaries and other benefits of
employees in the ordinary course of business consistent with past practice in
connection with their annual performance review of employees in March 2003;
(l) settle any litigation, suit, claim, action, proceeding or investigation
to the extent such settlement would provide for relief other than monetary
damages, except for settlement of any litigation, suit, claim, action,
proceeding or investigation based on, resulting from, or otherwise related to,
this Agreement or the Stockholders Agreement, the transactions contemplated
hereby or thereby or the approval of, submission to, review of, or conduct of
the Board of Directors or stockholders of the Company or any Governmental
Entity;
(m) enter into any contract or agreement, other than in the ordinary course
of business and consistent with past practice;
(n) amend, modify or consent to the termination of any Material Contract,
or amend, waive, modify or consent to the termination of any material rights of
the Company or any of its subsidiaries thereunder, other than in the ordinary
course of business consistent with past practice;
(o) make any change in accounting methods, principles or practices of the
Company, other than reasonable and usual actions in the ordinary course of
business and consistent with
30
<PAGE>
past practice, except insofar as may have been required by U.S. generally
accepted accounting principles; or
(p) authorize, or commit or agree to take, any of the foregoing actions.
SECTION 5.02 Other Actions. Except as required by law, Parent, Merger Sub
and the Company shall not, and shall not permit any of their respective
subsidiaries to, voluntarily take any action that would, or that is reasonably
likely to, result in any of the conditions to the Offer set forth in Annex I
hereto or the Merger set forth in Article VII not being satisfied.
SECTION 5.03 Advice of Changes. Parent, Merger Sub and the Company shall
promptly advise the other parties orally and in writing to the extent it has
knowledge of (a) any representation or warranty made by it contained in this
Agreement, becoming untrue or inaccurate in any material respect, (b) the
failure by it to comply in any material respect with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement, and (c) any change or event having, or which is
reasonably likely to have a material adverse effect on such party or on the
truth of their respective representations and warranties or the ability of the
conditions set forth in Annex I hereto or Article VII to be satisfied; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement.
SECTION 5.04 No Solicitation by the Company.
(a) The Company shall not, and shall cause its subsidiaries and its and
their respective directors, officers, employees and agents (including any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries) not to, directly or
indirectly through another person, (i) solicit, initiate or knowingly encourage
(including by way of furnishing information), or take any other action designed
to facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, a Company Takeover Proposal (as
hereinafter defined) or (ii) participate in any discussions or negotiations
regarding any Company Takeover Proposal or, any proposal that may reasonably be
expected to lead to a Company Takeover Proposal; provided, however, that, at any
time prior to acceptance for payment of, and payment for, the Shares pursuant to
the Offer (the "Company Applicable Period"), the Company may, in response to a
Company Takeover Proposal which the Board of Directors of the Company determines
in good faith may reasonably be expected to result in a Company Superior
Proposal (as defined in Section 5.04(b)), which was not solicited by it and
which did not otherwise result from a breach of this Section 5.04(a), after the
Board of Directors of Company has determined in good faith that the furnishing
of information and participating in discussions or negotiations pursuant to this
clause is required by its fiduciary duties under applicable law, after having
received advice from outside legal counsel and after the Company has entered
into a customary confidentiality agreement on terms no less favorable to the
Company than those contained in the Confidentiality Agreement (as defined
below), and subject to providing three business days prior written notice of its
decision to take such action to Parent and compliance with Section 5.04(d), (x)
furnish information with respect to the Company and its subsidiaries to any
person making such a Company Takeover Proposal pursuant to a confidentiality
agreement and (y) participate in discussions or negotiations
31
<PAGE>
regarding such Company Takeover Proposal. For purposes of this Agreement,
"Company Takeover Proposal" means any inquiry, proposal or offer from any person
relating to (i) any sale, transfer or other disposition of assets of any
business that constitutes 20% or more of the net revenues, net income or the
assets of the Company and its subsidiaries, taken as a whole, (ii) any sale,
transfer, or other disposition of 20% or more of any class of equity securities
of the Company or any of its subsidiaries, (iii) any tender offer or exchange
offer that if consummated would result in any person beneficially owning 20% or
more of any class of equity securities of the Company or any of its
subsidiaries, or (iv) any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries, other than the transactions contemplated by
this Agreement.
(b) Except as expressly permitted by this Section 5.04, neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, in a manner adverse to
Parent, the approval or recommendation by such Board of Directors or such
committee of this Agreement, the Stockholders Agreement, the Offer or the
Merger unless the Board of Directors of the Company determines in good faith
that the failure to take the foregoing actions would be a breach of its
fiduciary duties under applicable law after having received advice from outside
legal counsel, (ii) approve or recommend, or propose publicly to approve or
recommend, any Company Takeover Proposal, or (iii) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Company Takeover Proposal (each, a
"Company Acquisition Agreement"). Notwithstanding anything in this Agreement to
the contrary, in response to a Company Superior Proposal (as hereinafter
defined) which was not solicited by the Company and which did not otherwise
result from a breach of Section 5.04(a), the Board of Directors of the Company
may, during the Company Applicable Period, terminate this Agreement (and
concurrently with or after such termination, if it so chooses, cause the Company
to enter into any Company Acquisition Agreement with respect to any Company
Superior Proposal), provided that the Company may not effect any termination or
enter into any such Company Acquisition Agreement pursuant to this Section
5.04(b) unless and until (i) Parent's receipt of three business days' prior
written notice advising Parent that the Board of Directors of the Company is
prepared to accept a Company Superior Proposal; (ii) during such three business
day period, the Company shall, and shall cause its financial and legal advisors
to, consider any adjustment in the terms and conditions of this Agreement that
Parent may propose; and (iii) the Company shall have paid the Termination Fee in
full. For purposes of this Agreement, a "Company Superior Proposal" means any
bona fide, unsolicited offer made by a third party to consummate (x) a tender
offer, exchange offer, merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company pursuant to which the stockholders of the Company immediately preceding
such transaction hold less than 50% of the equity interest in the surviving or
resulting entity of such transaction, (y) the acquisition by any person or group
of more than 50% of the voting power of the shares of the Company Common Stock
then outstanding or (z) the sale, transfer or other disposition of all or
substantially all the assets of the Company and its subsidiaries taken together;
in each case on terms which the Board of Directors of the Company determines in
good faith (after having received the advice of a financial advisor of
nationally recognized reputation) to be more favorable to the Company's
stockholders than the Offer and Merger and is reasonably capable of being
consummated.
32
<PAGE>
(c) The Company shall, and shall direct or cause its subsidiaries and its
and their respective directors, officers, employees and agents (including any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company) to, immediately cease and cause to be
terminated any discussions or negotiations with any parties that may be, or may
have been, ongoing prior to or as of the date hereof, with respect to any
Company Takeover Proposal. Subject to the exercise of its rights under Section
5.04, the Company agrees not to release any third party from, or waive any
provision of, any confidentiality or standstill agreement to which the Company
is a party.
(d) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 5.04, the Company shall promptly advise Parent
orally and in writing of the existence of any request for information or of any
Company Takeover Proposal, the material terms and conditions of such request or
Company Takeover Proposal and the identity of the person making such request or
Company Takeover Proposal and any changes in any such request or to the Company
Takeover Proposal.
(e) Nothing contained in this Section 5.04 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule 14d-9
or Rule 14e-2(a) promulgated under the Exchange Act or from making any other
disclosure required by applicable law or the terms of any listing agreement
between the Company and NASDAQ or any other stock exchange or automated
quotation system on which the Company Common Stock is then listed or quoted;
provided, however, that any withdrawal, qualification, modification or amendment
of the Board of Directors of the Company's recommendation in favor of the Offer
and the Merger shall be made only as permitted by Section 5.04(b).
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01 Preparation of the Proxy Statement; Stockholder Meeting.
(a) If following acceptance for payment of, and payment for, the Shares
pursuant to the Offer, the adoption of this Agreement by the stockholders of the
Company is required in order to effect the Merger under the DGCL, the Company
and Parent shall, as promptly as practicable, prepare and the Company shall file
with the SEC the Proxy Statement and the Company shall use its commercially
reasonable efforts to respond as promptly as practicable to any comments of the
SEC with respect thereto and to cause the Proxy Statement to be mailed to the
stockholders of the Company as promptly as practicable following the date of
this Agreement. The Company shall promptly notify Parent upon the receipt of any
comments from the SEC or the staff of the SEC or any request from the SEC or the
staff of the SEC for amendments or supplements to the Proxy Statement and shall
provide Parent with copies of all correspondence between the Company and its
representatives, on the one hand, and the SEC and the staff of the SEC, on the
other hand. Notwithstanding the foregoing, prior to filing or mailing the Proxy
Statement (or any amendment or supplement thereto) or responding to any comments
of the SEC or the staff of the SEC with respect thereto, the Company (i) shall
provide Parent a reasonable opportunity to review and comment on such document
or response and (ii) shall
33
<PAGE>
include in such document or response all comments reasonably proposed by Parent;
provided, that Parent shall use commercially reasonable efforts to provide or
cause to be provided its comments to the Company as promptly as reasonably
practicable after the Proxy Statement is transmitted to Parent for its review.
If at any time prior to the Effective Time any information relating to Parent,
Merger Sub or the Company, or any of their respective affiliates, officers or
directors, should be discovered by Parent, Merger Sub or the Company which
should be set forth in an amendment or supplement to the Proxy Statement, so
that any of such documents would not include any misstatement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, the party
which discovers such information shall promptly notify the other parties hereto
and an appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company.
(b) If following acceptance for payment of, and payment for, the Shares
pursuant to the Offer, the adoption of this Agreement by the stockholders of the
Company is required in order to effect the Merger under the DGCL, the Company
(i) shall, as promptly as practicable, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Company Stockholders Meeting") for the
purpose of obtaining the Company Stockholder Approval and (ii) shall, through
its Board of Directors, recommend to its stockholders the adoption of this
Agreement, subject to Section 5.04(b), and use its reasonable best efforts to
obtain such approval and adoption.
(c) Parent agrees to vote all Shares beneficially owned by it or any of its
subsidiaries in favor of the adoption of this Agreement at the Company
Stockholders Meeting and agrees that it shall not dispose of any Shares (and
shall cause Merger Sub not to dispose of any Shares) prior to the Company
Stockholders Meeting.
(d) Notwithstanding the foregoing, if at any time Parent or Merger Sub
shall acquire at least 90% of the outstanding Shares, Parent, Merger Sub and the
Company shall take all necessary and appropriate action to cause the Merger to
become effective as promptly as practicable after consummation of the Offer and
the satisfaction or waiver of the conditions set forth in Article VII without
the Company Stockholders Meeting in accordance with Section 253 of the DGCL.
SECTION 6.02 Access to Information; Confidentiality. Subject to the
Confidentiality Agreement, dated as of October 3, 2002, between the Company and
Parent (the "Confidentiality Agreement") and except as otherwise required by
applicable law, the Company shall, and shall cause its respective subsidiaries
to, afford to Parent and Merger Sub and to the officers, directors, employees,
accountants, counsel, financial advisors and other representatives of Parent and
Merger Sub, reasonable access during normal business hours during the period
prior to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall, and shall cause its subsidiaries to, furnish promptly to the
Parent and Merger Sub (a) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of Federal or state securities laws, and (b) except as otherwise
required by applicable law, all other information concerning its business,
properties and personnel as Parent
34
<PAGE>
and Merger Sub may reasonably request. No disclosure by or on behalf of the
Company or any of its subsidiaries pursuant to this Section 6.02 shall have any
effect for the purpose of determining the accuracy of any representation or
warranty given by either party hereto to the other party hereto. Each of Parent
and Merger Sub will hold, and will cause its respective officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreement.
SECTION 6.03 Filings; Other Action. Subject to the terms and conditions
provided in this Agreement, each of the Company, Merger Sub and Parent shall (a)
promptly make their respective filings and thereafter make any other required
submissions under the HSR Act and other regulatory filings with any relevant
Governmental Entity and comply with all reasonable requests for information from
any Governmental Entity with respect to the Merger and the transactions
contemplated by this Agreement; and (b) use their respective reasonable best
efforts promptly to take, or cause to be taken, all other action and do, or
cause to be done, all other things necessary, proper or appropriate under this
Agreement and applicable laws and regulations to obtain as promptly as
practicable all consents, approvals, orders, authorizations, registrations and
permits required to be obtained by it from any Governmental Entity or third
party in connection with the execution and delivery of this Agreement and the
consummation of the Merger and the other transactions contemplated by this
Agreement as soon as practicable after the date hereof; provided, however, that
neither Parent nor the Company will be required to agree to, or proffer to, (i)
divest or hold separate any of Parent's, the Company's or any of their
respective affiliates' businesses or assets, (ii) cease to conduct business or
operations in any jurisdiction in which Parent, the Company or any of their
respective subsidiaries conducts business or operations as of the date of this
Agreement, or (iii) otherwise limit (after the Effective Time) Parent's freedom
of action with respect to, or its ability to retain, the Company and its
subsidiaries or any portion thereof or any of Parent's or its affiliates' assets
or businesses.
SECTION 6.04 Stock Options.
(a) As soon as practicable following the date of this Agreement, the Board
of Directors of the Company (or, if appropriate, any committee administering the
Individual Grants, the 1985 Stock Option Plan or the 1996 Stock Option Plan,
collectively, the "Stock Option Plans") shall adopt such resolutions or take
such other actions as may be required, including, without limitation, using its
reasonable best efforts to obtain the consent of each holder of the Company
Stock Options (provided, that the Company will not be required to take any
action in violation of the terms of any Company Stock Option Plan or in breach
of any underlying optionee agreement), so that at the Effective Time, each then
outstanding Company Stock Option to purchase or acquire shares of Company Common
Stock under the Stock Option Plans, whether or not then exercisable or vested,
shall be canceled and shall represent the right to receive the following
consideration in settlement thereof: for each share of Company Common Stock
subject to such Company Stock Option, including any additional shares subject
thereto by reason of their terms upon consummation of the "change of control"
resulting from the Offer or the Merger, an amount (subject to any applicable
withholding tax) in cash equal to the difference between the Merger
Consideration and the per share exercise price of such Company Stock Option to
the extent such difference is a positive number (such amount in cash as
described above being hereinafter referred to as the "Option Consideration").
35
<PAGE>
(b) The surrender of a Company Stock Option to the Company in exchange for
the Option Consideration as set forth in Section 6.04(a) shall be deemed a
release of any and all rights the holder had or may have had in respect of such
Company Stock Option. Prior to the Effective Time, the Company shall take all
action necessary (including causing the Board of Directors of the Company (or
any committees thereof) to take such actions as are allowed by the Company Stock
Option Plans) to ensure that, following the Effective Time, no participant in
any Company Stock Plan shall have any right thereunder to acquire equity
securities of the Company, the Surviving Corporation or any subsidiary thereof.
(c) Upon the Effective Time, Parent shall, or shall cause the Surviving
Corporation to, pay to each holder of a Company Stock Option under the Stock
Option Plans the Option Consideration in respect thereof. No interest shall be
paid or accrued on such Option Consideration. Until settled in accordance with
the provisions of this Section 6.04(c), each Company Stock Option under the 1996
Stock Option Plan shall be deemed at any time after the Effective Time to
represent for all purposes only the right to receive the Option Consideration.
(d) The Company shall cause the ESPP to terminate at the Effective Time and
shall promptly refund to each Participant (as defined in the ESPP) the cash
balance in the Participant's account in accordance with the terms of the ESPP.
SECTION 6.05 Indemnification, Exculpation and Insurance.
(a) From the Effective Time through the sixth anniversary of the date on
which the Effective Time occurs, Parent shall cause the Surviving Corporation to
(and be liable for any failure of the Surviving Corporation to), and the
Surviving Corporation shall, indemnify and hold harmless each person who is now,
or has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, a director or officer of the Company or any of its subsidiaries
(the "Covered Parties"), against all claims, losses, liabilities, damages,
judgments, fines and reasonable fees, costs and expenses, including attorneys'
fees and disbursements (collectively, "Costs"), incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to (i) the fact
that the Covered Party is or was an officer or director of the Company or any of
its subsidiaries or (ii) matters existing or occurring at or prior to the
Effective Time (including this Agreement and the transactions and actions
contemplated hereby), whether asserted or claimed prior to, at or after the
Effective Time, to the fullest extent permitted under applicable law. Each
Covered Party will be entitled to advancement of expenses incurred in the
defense of any claim, action, suit, proceeding or investigation from Parent and
the Surviving Corporation within ten business days of receipt by Parent or the
Surviving Corporation from the Covered Party of a request therefor; provided
that any person to whom expenses are advanced provides an undertaking, to the
extent required by the DGCL, to repay such advances if it is ultimately
determined that such person is not entitled to indemnification.
(b) The Certificate of Incorporation and By-laws of the Surviving
Corporation shall contain provisions no less favorable with respect to
indemnification, advancement of expenses and exculpation of present and former
directors, officers, employees and agents of the Company and its subsidiaries
than are presently set forth in Articles 8 and 9 of the Certificate of
Incorporation and Article V of the By-laws of the Company, which provisions
shall not be
36
<PAGE>
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would affect adversely the rights thereunder
of a Covered Party, unless such modification shall be required by law.
(c) Parent shall cause the Surviving Corporation to maintain, at no expense
to the beneficiaries, in effect for six years from the Effective Time, the
current policies of the directors' and officers' liability insurance maintained
by the Company with respect to matters existing or occurring at or prior to the
Effective Time (including the transactions contemplated by this Agreement)
(provided that the Surviving Corporation may substitute therefor policies of at
least the same coverage (containing terms and conditions that are not less
favorable) with respect to matters occurring prior to the Effective Time).
(d) Notwithstanding anything herein to the contrary, if any claim, action,
suit, proceeding or investigation (whether arising before, at or after the
Effective Time) is made against any Covered Party, on or prior to the sixth
anniversary of the Effective Time, the provisions of this Section 6.05 shall
continue in effect until the final disposition of such claim, action, suit,
proceeding or investigation.
(e) The covenants contained in this Section are intended to be for the
benefit of, and shall be enforceable by, each of the Covered Parties and their
respective heirs and legal representatives and shall not be deemed exclusive of
any other rights to which a Covered Party is entitled, whether pursuant to law,
contract or otherwise.
(f) In the event that the Parent or Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors or assigns of the Parent or
Surviving Corporation, as the case may be, shall succeed to the obligations set
forth in this Section 6.05
SECTION 6.06 Fees and Expenses.
(a) All fees and expenses incurred in connection with this Agreement, the
Stockholders Agreement and the transactions contemplated by this Agreement or
the Stockholders Agreement shall be paid by the party incurring such fees or
expenses, whether or not such transactions are consummated. The Company
covenants and agrees that the Company and its subsidiaries shall not incur or
cause to be incurred Transaction Fees (as hereinafter defined) in excess of
$2,500,000. The Company covenants and agrees that it will incur legal fees and
expenses in connection with the preparation, negotiation, execution, delivery,
and performance of this Agreement on a reasonable and customary basis,
consistent with past practice. For purposes of this Section 6.06, "Transaction
Fees" shall mean the fees and disbursements of the Company's financial advisors
that are incurred in connection with the preparation, negotiation, execution,
delivery and performance of the Merger Agreement and the consummation of the
transactions contemplated hereby.
(b) If (i) the Company terminates this Agreement pursuant to Section
8.01(d) or (ii) any person shall have commenced, publicly proposed or
communicated to the Company a
37
<PAGE>
Company Takeover Proposal that is publicly disclosed and not withdrawn and (A)
the Offer shall have remained open for at least 20 business days, (B) the
Minimum Condition shall not have been satisfied, (C) this Agreement shall have
been terminated pursuant to Section 8.01 (other than Sections 8.01(a),
8.01(b)(iii) or 8.01(c) and other than on account of the conditions set forth in
paragraphs (a), (d), or (g) of Annex I), and (D) other than in the case of
termination pursuant to Section 8.01(f) or on the account of the condition set
forth in paragraph (f) of Annex I, the Company enters into an agreement with
respect to a Company Takeover Proposal, or a Company Takeover Proposal is
consummated, in each case within 12 months after the termination of this
Agreement pursuant to Section 8.01, and the Company shall not theretofore have
been required to pay the Termination Fee to Parent pursuant to subsection
6.06(b)(i), then in each case, the Company shall pay, or cause to be paid to
Parent, an amount equal to $3,500,000 (the "Termination Fee").
SECTION 6.07 Public Announcements. Each of the Company, Merger Sub and
Parent will consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Offer and the Merger, and shall not issue any such press release
or make any such public statement prior to such consultation, except as any such
party may determine in good faith is required by applicable law, by court
process or by obligations pursuant to any listing agreement between such party
and any securities exchange or automated quotation system on which such party's
common stock (or equivalent equity securities) are then listed or quoted. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties. The parties further agree that the Confidentiality
Agreement is hereby amended to the extent necessary to be consistent with the
terms of this Section 6.07.
SECTION 6.08 Employee Matters.
(a) Parent agrees that, until the later of the date which is 6 months after
the Effective Time or December 31, 2003, the Company shall honor in accordance
with their respective terms and, on and after the Effective Time, Parent shall
cause the Surviving Corporation to honor, without offset, deduction,
counterclaim, interruption or deferment, all Company Benefit Plans to the extent
the Company Benefit Plans are not superseded by other plans, agreements or other
arrangements; provided that any such superseding plans, agreements or other
arrangements are at least no less favorable, in the aggregate, to the employees
and former employees as the Company Benefit Plans in effect immediately prior to
the time of acceptance for payment of, and payment for, any Shares pursuant to
the Offer. Parent acknowledges that, for the purposes of certain of the Company
Benefit Plans set forth in Schedule 4.01(j)(vii) of the Company Disclosure
Schedule, the consummation of the Offer or the Merger or stockholder approval of
the Merger (depending upon the terms of the applicable plan or agreement) will
constitute a "change in control" of the Company (as such term is defined in such
plans and agreements). Parent agrees to cause the Surviving Corporation, after
consummation of the Offer, to pay all amounts provided under such Company
Benefit Plans in accordance with their respective terms and to honor, and to
cause the Surviving Corporation to honor, all rights, privileges and
modifications to or with respect to any such Company Benefit Plans that become
effective as a result of such change in control, except to the extent that such
payments are to be made pursuant to Company Benefit Plans listed in Schedule
4.01(j)(vii) of the Company Disclosure Schedule that are
38
<PAGE>
superseded by agreements with individuals that become effective prior to, or at
the Effective Time.
(b) Parent agrees that, until the later of the date which is 6 months
after the Effective Time or December 31, 2003, it shall, or shall cause the
Surviving Corporation to, provide employee pension and welfare plans for the
benefit of employees and former employees of the Company that, in the aggregate,
are at least no less favorable to such employees and former employees as the
Company Benefit Plans in effect immediately prior to the time of acceptance for
payment of, and payment for, any Shares pursuant to the Offer. To the extent any
benefit plan of Parent (or any plan of the Surviving Corporation) shall be made
applicable to any employee or former employee of the Company, Parent shall, or
shall cause the Surviving Corporation to, as the case may be, grant to employees
and former employees of the Company credit for service with the Company prior to
the Effective Time for the purposes of determining eligibility to participate
and the employee's nonforfeitable interest in benefits thereunder and, unless a
duplication of benefits would thereby result, for calculating benefits
(including benefits the amount or level of which is determined by reference to
an employee's vesting service) thereunder. In addition, to the extent any plan
of Parent (or any plan of the Surviving Corporation) which constitutes a
"Welfare Plan," as defined in Section 4.01(j) hereof, shall be made applicable
to any employee or former employee of the Company, Parent shall, or shall cause
the Surviving Corporation to, as the case may be, (i) waive all preexisting
condition exclusions and waiting periods otherwise applicable to employees and
former employees of the Company, except to the extent any such limitations or
waiting periods in effect under comparable Company Benefit Plans have not been
satisfied as of the date such plan is made so applicable and (ii) credit each
employee and former employee of the Company for any co-payments, co-insurance,
and deductibles paid by such employee or former employee under comparable
Company Benefit Plans prior to the date such plan is made so applicable. Nothing
in this Agreement shall be interpreted as limiting the power of the Surviving
Corporation to amend or terminate any Company Benefit Plan or any other employee
benefit plan, program, agreement or policy or as requiring the Surviving
Corporation or Parent to offer to continue (other than as required by its terms)
any written employment contract.
SECTION 6.09 Confidentiality Agreement. The Company hereby waives the
provisions of the Confidentiality Agreement as and to the extent necessary to
permit the consummation of the transactions contemplated hereby. Upon the
acceptance for payment of shares of Company Common Stock pursuant to the Offer,
the Confidentiality Agreement shall be deemed to have terminated without further
action by the parties thereto.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger is subject to the
satisfaction or waiver (except as otherwise provided in this Agreement), on or
prior to the Closing Date of the following conditions:
39
<PAGE>
(a) Stockholder Approval. If required by law, the Company Stockholder
Approval shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(c) No Injunctions or Restraints. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued
by any court or other Governmental Entity of competent jurisdiction or other
legal restraint or prohibition (collectively, "Restraints") shall be in effect
preventing the consummation of the Merger or any of the other transactions
contemplated by this Agreement; provided, however, that each of the parties
shall have used its reasonable best efforts to prevent the entry of any such
Restraints and to appeal as promptly as practicable any such Restraints that may
be entered.
(d) Purchase of Shares. Merger Sub shall have previously accepted for
payment and paid for all Shares validly tendered pursuant to the Offer and not
withdrawn.
SECTION 7.02 Frustration of Closing Conditions. Neither the Company nor
Parent may rely on the failure of any condition set forth in Section 7.01 (or,
also in the case of Parent, the conditions set forth in Annex I) to be satisfied
if such failure was caused by such party's (including, in the case of Parent,
Merger Sub's) failure to comply with its obligations under this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the Company Stockholder
Approval or adoption of this Agreement by Parent as the sole stockholder of
Merger Sub:
(a) by mutual written consent of the Company and Parent;
(b) by either the Company or Parent (provided that the party seeking to
terminate may not rely on the existence of any of the following conditions
resulting from its (including, in the case of Parent, Merger Sub's) failure to
perform any of its obligations under this Agreement):
(i) if Merger Sub shall not have purchased Shares pursuant to the
Offer on or before the Outside Date; provided that if the Company has
requested that Parent cause Merger Sub to extend the Expiration Date to a
period not to exceed the Alternative Outside Date under the conditions
specified in Section 1.01(a), the right to terminate this Agreement
pursuant to this Section 8.01(b)(i) shall not become effective until the
earlier of the Alternative Outside Date or such time as the Company shall
withdraw its request that Parent cause Merger Sub to extend the Expiration
Date pursuant to Section 1.01(a);
40
<PAGE>
(ii) if the Offer shall have expired without any Shares being
purchased pursuant thereto or the Offer is terminated as permitted under
this Agreement without any Shares having been accepted for payment
thereunder; or
(iii) if any Restraint which has the effect of making consummation of
the Offer or the Merger illegal or otherwise preventing or prohibiting
consummation of the Offer or the Merger shall have become final and
nonappealable; provided that the party seeking to terminate this Agreement
pursuant to this Section 8.01(b)(iii) shall have used reasonable best
efforts to prevent the entry of and to remove such Restraint;
(c) by the Company, during the Company Applicable Period, if Parent or
Merger Sub shall have breached or failed to perform in any material respect any
of its representations, warranties, covenants or other agreements contained in
this Agreement, such that (i) (A) the representations and warranties of Parent
or Merger Sub set forth in the Agreement that are qualified as to materiality or
material adverse effect shall not be true and correct, or any such
representation and warranty of Parent or Merger Sub that is not so qualified
shall not be true and correct in all material respects, both when made and at
and as of the expiration of the Offer, as if made at and as of such time (except
to the extent expressly made as of any earlier date, in which case as of such
date) or (B) Parent or Merger Sub shall not have performed in all material
respects all obligations required to be performed by it under the Agreement at
or prior to the expiration of the Offer and (ii) such breach or failure to
perform is incapable of being, or is not, cured by Parent or Merger Sub, as the
case may be, by the earlier of the Expiration Date or within five business days
of notice thereof;
(d) by the Company, at any time during the Company Applicable Period, in
accordance with Section 5.04(b); provided that, in order for the termination of
this Agreement pursuant to this paragraph (d) to be deemed effective, the
Company shall have complied with the notice provisions of Section 5.04 and shall
have paid the Termination Fee delineated in Section 6.06(b) hereof;
(e) by Parent, during the Company Applicable Period, if the Company shall
have breached or failed to perform in any material respect any of its
representations, warranties, covenants or other agreements contained in this
Agreement, which breach or failure to perform (A) would give rise to the failure
of a condition set forth in (ii) (b) and (c) of Annex I and (B) is incapable of
being, or is not, cured by the Company by the earlier of the Expiration Date or
within five business days of notice thereof;
(f) by Parent, if the Board of Directors of the Company or any committee
thereof shall, during the Company Applicable Period, have withdrawn or modified
in a manner adverse to Parent or the Merger Sub, the approval or recommendation
of the Offer, the Merger, this Agreement, or the Stockholders Agreement, or
approved or recommended any Company Takeover Proposal or any other acquisition
of Shares (except for approvals not inconsistent with the Offer or the Merger as
may be necessary or desirable in connection with the issuance of Company Common
Stock as permitted under Section 5.01(b) or to exempt acquisitions of Company
Common Stock from liability under Section 16(b) of the Exchange Act) other than
the Offer and the Merger, or the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing; or
41
<PAGE>
(g) by Parent, if due to an occurrence or circumstance that would result in
the failure to satisfy any conditions set forth in Annex I (other than the
Minimum Condition or the Regulatory Condition), Merger Sub shall have failed to
commence the Offer within 30 days following the date of this Agreement.
SECTION 8.02 Frustration of Closing Conditions. Neither the Company nor
Parent may rely on the failure of any condition set forth in Section 7.01 (or,
also in the case of Parent, the conditions set forth in Annex I) to be satisfied
if such failure was caused by such party's (including, in the case of Parent,
Merger Sub's) failure to comply with its obligations under this Agreement,
including, without limitation, pursuant to Section 6.03 hereof.
SECTION 8.03 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 8.01, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of the Company or Parent, other than (a) the
provisions of the last sentence of Section 6.02, (b) the provisions of Section
6.06, (c) this Section 8.03, (d) Article IX and (e) the Confidentiality
Agreement (without giving effect to any waiver or amendment thereto contemplated
by this Agreement), which provisions and agreements shall survive such
termination, and termination of this Agreement will not relieve a breaching
party from liability for any breach by such party of any of its representations,
warranties, covenants or agreements set forth in this Agreement giving rise to
such termination.
SECTION 8.04 Amendment. Subject to Section 1.03(c), this Agreement may be
amended by the parties hereto at any time before or after the Company
Stockholder Approval; provided, however, that after any such approval, there
shall not be made any amendment that by law requires the further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties.
SECTION 8.05 Extension; Waiver. Subject to Section 1.03 (c), at any time
prior to the Effective Time, a party may (a) extend the time for the performance
of any of the obligations or other acts of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement or (c) except as otherwise provided in this Agreement and subject to
the proviso of Section 8.03, waive compliance by the other parties with any of
the agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time. This Section 9.01
shall not limit (a) any covenant
42
<PAGE>
or agreement of the parties which by its terms contemplates performance after
the Effective Time or (b) the survival of the last sentence of Section 6.02 and
of Section 6.06, Section 8.03, this Article IX and the Confidentiality
Agreement, as set forth in Section 8.03.
SECTION 9.02 Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
reputable overnight courier to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
(a) if to the Company, to:
Elite Information Group, Inc.
5100 Goldleaf Circle, Suite 100
Los Angeles, California 90056
Facsimile: (323) 642-5400
Attention: President
with a copy to:
Robinson Bradshaw & Hinson, PA
1900 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Facsimile: 704-378-4000
Attention: Patrick S. Bryant
(b) if to Parent or Merger Sub, to:
The Thomson Corporation
Metro Center
One Station Place
Stamford, Connecticut 06902
Facsimile: 203-357-9762
Attention: Ed Friedland
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Facsimile Number: 212-848-7179
Attention: Peter J. Rooney
SECTION 9.03 Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first person, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of voting securities, by contract, as trustee or executor, or otherwise;
43
<PAGE>
(b) "business day" shall have the meaning set forth in Rule 14d-1(g)(3)
under the Exchange Act;
(c) "Fully-Diluted Basis" means after taking into account all outstanding
Shares and assuming the exercise, conversion or exchange of all options,
warrants, convertible or exchangeable securities and similar rights (other than,
unless exercisable, the Rights) and the issuance of all shares of the Company
Common Stock that the Company is obligated to issue thereunder;
(d) "knowledge" of any person which is not an individual means the actual
knowledge (after the exercise of reasonable diligence) of, in the case of the
Company, those persons set forth in Schedule 9.03(d) of the Company Disclosure
Schedule;
(e) "material adverse change" or "material adverse effect" means, when used
in connection with Parent or the Company, any change, effect, event, occurrence
or state of facts that (i) is, or is reasonably likely to be, materially adverse
to the business, financial condition or results of operations of such party and
its subsidiaries taken as a whole, (ii) materially impairs or delays the ability
of such party to perform its obligations under this Agreement or (iii) prevents
the consummation of any of the transactions contemplated by this Agreement,
except to the extent that any such change, effect, event, occurrence or state of
facts results from (A) any act or omission of any party hereto that has been
previously consented to in writing by the other parties hereto, (B) changes in
the United States or global economy or securities markets in general, which
changes do not affect the Company disproportionately relative to other entities
operating in its industry, (C) general changes or developments in the industry
in which the Company operates, which changes do not affect the Company
disproportionately relative to other entities operating in its industry, or (D)
the negotiation, execution and delivery of this Agreement, the recommendation of
this Agreement by the Company's Board of Directors, the consummation of the
transactions contemplated hereby, the announcement of any of the foregoing or
the actions of Parent taken in connection herewith;
(f) "person" means an individual, corporation, partnership, limited
liability company, limited partnership, joint venture, association, trust,
unincorporated organization or other entity or government, political
subdivision, agency or instrumentality of a government;
(g) a "subsidiary" of any person means another person, an amount of the
voting securities, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, at least a
majority of the equity interests of which) is owned directly or indirectly by
such first person; and
(h) "Tax" or "Taxes" means any and all taxes, fees, levies, duties,
tariffs, imposts and other similar charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any United States federal, state, local or United
Kingdom or other Non-United States governmental or taxing authority, including,
without limitation: taxes or
44
<PAGE>
other charges on or with respect to income, franchise, windfall or other
profits, gross receipts, property, sales, use, capital stock, payroll,
employment, social security, workers' compensation, unemployment compensation or
net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value-added or gains taxes; license, registration and
documentation fees; and customs' duties, tariffs and similar charges.
SECTION 9.04 Interpretation. When a reference is made in this Agreement to
an Article, Section or Exhibit, such reference shall be to an Article or Section
of, or an Exhibit to, this Agreement unless otherwise indicated. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The words
"hereof," "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All terms defined in this Agreement shall have the
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a person are also to its permitted successors and
assigns.
SECTION 9.05 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
SECTION 9.06 Entire Agreement; Third-Party Beneficiaries. This Agreement
and the Confidentiality Agreement (as amended hereby) (a) constitute the entire
agreement, and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter of this Agreement
and (b) except for the provisions of Section 6.04 (but only to the extent of any
failure after the Effective Time to pay the Option Consideration to any
optionee, provided that such optionee shall have executed a release of rights in
form reasonably satisfactory to Parent with respect to such optionee's Company
Stock Options) and Section 6.05, are not intended to confer upon any person
other than the parties hereto any rights or remedies.
SECTION 9.07 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without regard
to the laws that might otherwise govern under applicable principles of conflict
of laws thereof.
SECTION 9.08 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties; provided, however, that Merger Sub
may assign all or any of its rights and obligations hereunder to any affiliate
of Parent, provided that no such assignment shall relieve the assigning party of
its obligations hereunder if such assignee does not perform such obligations.
Any assignment in
45
<PAGE>
violation of the preceding sentence shall be void. Subject to the preceding two
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 9.09 Enforcement; Waiver of Jury Trial.
(a) The parties agree that irreparable damage would occur and that the
parties would not have any adequate remedy at law in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any Federal court located in the State of Delaware or in
Delaware state court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court.
(b) Each party acknowledges and agrees that any controversy which may arise
under this Agreement is likely to involve complicated and difficult issues, and
therefore each such party hereby irrevocably and unconditionally waives any
right such party may have to a trial by jury in respect of any litigation
directly or indirectly arising out of or relating to this Agreement or the
transactions contemplated by this Agreement. Each party certifies and
acknowledges that (i) no representative, agent or attorney of any other party
has represented, expressly or otherwise, that such other party would not, in the
event of litigation, seek to enforce the foregoing waiver, (ii) each party
understands and has considered the implications of this waiver, (iii) each party
makes this waiver voluntarily and (iv) each party has been induced to enter into
this Agreement by, among other things, the mutual waivers and certifications in
this Section 9.09(b).
SECTION 9.10 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.11 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, unless the effects of such invalidity, illegality or unenforceability
would prevent the parties from realizing the economic or legal substance of the
transactions contemplated hereby that they currently anticipate obtaining
therefrom, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
46
<PAGE>
SECTION 9.12 Time is of the Essence. Each of Parent, Merger Sub and the
Company agree that time is of the essence with respect to every covenant,
condition to be satisfied and action to be taken hereunder, and shall proceed
accordingly with respect to every such action necessary, proper or advisable to
make effective the transactions contemplated by this Agreement.
47
<PAGE>
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
ELITE INFORMATION GROUP
/s/ Christopher K. Poole
---------------------------------------
Name: Christopher K. Poole
Title: Chairman & Chief Executive
Officer
S-1
<PAGE>
THE THOMSON CORPORATION
/s/ Deirdre Stanley
---------------------------------------
Name: Deirdre Stanley
Title: Senior Vice President
GULF ACQUISITION CORP.
/s/ Michael E. Wilens
---------------------------------------
Name: Michael E. Wilens
Title: President
S-2
<PAGE>
ANNEX I
Notwithstanding any other provision of the Offer, Merger Sub shall not be
required to accept for payment or, subject to applicable law, pay for any
Shares, and may, subject to the Company's right in Section 1.01(a) of the
Agreement to require that Parent cause Merger Sub to extend the Offer,
terminate, amend or extend the Offer, if (i) immediately prior to the Expiration
Date, (A) the Minimum Condition (as defined in the Agreement) shall not have
been satisfied or (B) the Regulatory Condition (as defined in the Agreement)
shall not have been satisfied or (C) a Litigation Event exists or (ii) at any
time on or after the date of the Agreement and prior to the expiration of the
Offer, any of the following conditions, other than the Litigation Event, exists:
(a) there shall be (x) any statute, rule, regulation, judgment, order or
injunction enacted, entered, promulgated, issued or enforced by or on behalf of
a Governmental Entity (and, in the case of any judgment, order or injunction,
the same shall have become final and nonappealable) or (y) there shall have been
instituted or be pending any litigation, suit, claim, action, proceeding or
investigation before any Governmental Entity (and which is reasonably likely to
be successful on its merits) or by any Governmental Entity (such event described
in (y), a "Litigation Event") that, in the case of either (x) or (y), (i)
prohibits, restrains, seeks to prohibit or restrain or makes materially more
costly the acquisition by the Merger Sub of any of the Shares under the Offer or
the making or consummation of the Offer, the Merger or the other transactions
contemplated by the Agreement or the Stockholders Agreement, (ii) prohibits,
limits or seeks to prohibit or limit the ownership or operation by the Company,
Parent or any of their respective subsidiaries of a material portion of the
business or assets of the Company and its subsidiaries, or of Parent and its
subsidiaries, in each case, taken as a whole, or compels or seeks to compel the
Company or Parent or any of their respective subsidiaries to dispose of or hold
separate any material portion of the business or assets of such person, in each
case as a result of the Offer or the Merger, (iii) imposes or seeks to impose
any material limitations on the ability of Parent or the Merger Sub to acquire
or hold, or exercise full rights of ownership of, any Shares to be accepted for
payment pursuant to the Offer, including, without limitation, the right to vote
such Shares on all matters properly presented to the stockholders of the
Company, (iv) prohibits Parent or any of its subsidiaries from effectively
controlling in any material respect any material portion of the business or
operations of the Company and its subsidiaries or of Parent and its
subsidiaries, in each case, taken as a whole, (v) requires or seeks to require
the divestiture by Parent, Merger Sub or any other affiliate of Parent of any
Shares, (vi) seeks an amount of monetary damages which, if awarded, would be
reasonably likely to have a material adverse effect on the Company, or (vii)
otherwise would prevent or materially delay consummation of the Offer or the
Merger or otherwise prevent or materially delay the Company from performing its
obligations under the Agreement or would be reasonably likely to have a material
adverse effect on the Company; or
(b) the representations and warranties of the Company set forth in the
Agreement shall not be true and correct, when made and at and as of the
Expiration Date, as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such date) except
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to "materiality" or
"material adverse effect" set forth therein), individually or in the aggregate,
does not have, and is not reasonably likely to have, a material adverse effect
on the Company; or
<PAGE>
(c) the Company shall not have performed in all material respects all
obligations required to be performed by it under the Agreement at or prior to
the Expiration Date; or
(d) there shall have occurred and be continuing (x) any general suspension
of trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United States for a
period in excess of 24 hours or (y) any declaration of a banking moratorium or
general suspension of payments in respect of lenders that regularly participate
in the U.S. market in loans to large corporations; or
(e) any material adverse change in the Company shall have occurred; or
(f) the Company's Board of Directors, or any committee thereof, shall have
withdrawn or modified, in a manner adverse to Parent or Merger Sub, the approval
or recommendation of the Offer, the Merger, the Agreement or the Stockholders
Agreement, or approved or recommended any Company Takeover Proposal or any other
acquisition of Shares other than the Offer and the Merger or the Company's Board
of Directors, or any committee thereof, shall have resolved to do any of the
foregoing; or
(g) Merger Sub and the Company shall have agreed that Merger Sub shall
terminate the Offer or postpone the acceptance for payment of Shares thereunder.
The foregoing conditions are for the sole benefit of Merger Sub and Parent
and may be asserted by Merger Sub or Parent regardless of the circumstances
giving rise to any such conditions (except to the extent that any such condition
results from the breach by Parent or Merger Sub of any of their respective
representations, warranties, covenants or obligations under the Agreement) and,
except with respect to the Minimum Condition and the Regulatory Condition, may
be waived by Merger Sub or Parent in whole or in part at any time and from time
to time prior to the expiration of the Offer. The failure by Merger Sub or
Parent at any time to exercise any of the foregoing rights shall not be deemed a
waiver of any such right; the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right which may be asserted at any time and from time to time
prior to the expiration of the Offer.
<PAGE>
Exhibit A
RESTATED
CERTIFICATE OF INCORPORATION
OF
[ELITE INFORMATION GROUP, INC.]
1. The name of the Corporation is [Elite Information Group, Inc.]
2. The address of its registered office in the State of Delaware is 2711
Centreville Road, Suite 400 in the City of Wilmington, Delaware, County of New
Castle. The name of its registered agent at such address is Corporation Service
Company.
3. The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
The Corporation shall possess and exercise all the powers and privileges
granted by the General Corporation Law or by any other law of Delaware or by
this Certificate of Incorporation together with any powers incidental thereto,
so far as such powers are necessary or convenient to the conduct, promotion or
attainment of the business or purposes of the Corporation.
4. The aggregate number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, $0.01
par value.
5. Cumulative voting is prohibited.
6. The Corporation is to have perpetual existence.
7. To the fullest extent permitted by law, all of the powers of the
management of the business and affairs of the Corporation are hereby conferred
upon the Board of Directors of the Corporation. In furtherance and not in
limitation thereof, the Board of Directors shall have the power to make, adopt,
alter, amend and repeal the Bylaws of the Corporation, subject to the right of
the stockholders to adopt, alter, amend and repeal bylaws made by the Board of
Directors.
8. To the fullest extent permitted by the Delaware General Corporation Law
as it now exists or may hereafter be amended, a director of the Corporation
shall not be liable to the Corporation or to any of its stockholders for
monetary damages for breach of fiduciary duty as a director. Any repeal or
modification of this Article 8 shall not increase the personal liability of any
director of the Corporation for any act or occurrence taking place before such
repeal or modification, or otherwise adversely affect any right or protection of
a director of the Corporation existing at the time of such repeal or
modification. The provisions of this Article 8
<PAGE>
shall not be deemed to limit or preclude indemnification of a director by the
Corporation of any liability of a director which has not been eliminated by the
provisions of this Article 8.
9. (a) Each person who was or is made a party or is threatened to be made a
party to or is involved (including, without limitation, as a witness) in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether or not by or in the right
of the Corporation (a "proceeding"), by reason of the fact that he or she is or
was a director or officer of the Corporation or, being or having been such a
director or officer, he or she, or a person of whom he or she is a legal
representative, is or was serving at the request of the Corporation as a
director, officer, partner, trustee, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such proceeding is
alleged action or inaction in an official capacity as a director, officer,
partner, trustee, employee or agent or in any other capacity while serving as a
director, officer, partner, trustee, employee or agent, shall be indemnified and
held harmless by the Corporation to the fullest extent not prohibited by the
Delaware General Corporation Law, public policy or other applicable law as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than prior to such amendment), against all
expense, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement) actually
and reasonably incurred or suffered by such person in connection therewith. The
right to indemnification granted in this Article 9(a) shall be a contract right
and shall include the right to be paid by the Corporation the expenses incurred
in defending any proceeding in advance of its final disposition; provided,
however, that the payment of such expenses in advance of the final disposition
of a proceeding shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined (including the final resolution
of any suit which may be brought by such director or officer pursuant to the
Bylaws of the Corporation seeking to enforce rights of indemnification) that
such director or officer is not entitled to be indemnified under this Article
9(a) or otherwise. The indemnification granted in this Article 9(a) shall
continue as to a person who has ceased to be a director, officer, partner,
trustee, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that except as may be provided
in the Bylaws of the Corporation with respect to proceedings seeking to enforce
rights of indemnification, the Corporation shall indemnify any such person
seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation.
(b) If a claim under Article 9(a) is not paid in full by the Corporation
within sixty days after a written claim has been received by the Corporation,
except in the case of a claim for expenses incurred in defending a proceeding in
advance of its final disposition, in which case the applicable period shall be
twenty days, the claimant may at any time thereafter bring an action against the
Corporation to recover the unpaid amount of the claim and, to the extent
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. The claimant shall be presumed to be
entitled to indemnification under Article 9(a) upon submission of a written
claim (and, in an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition, upon tender of any
required
<PAGE>
undertaking), and thereafter the Corporation shall have the burden of proof to
overcome the presumption that the claimant is so entitled. Neither the failure
of the Corporation (including its Board of Directors, independent legal counsel
or its stockholders) to have made a determination prior to the commencement of
such action that indemnification of the claimant is proper in the circumstances
nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) that the claimant is
not entitled to indemnification shall be a defense to the action or create a
presumption that the claimant is not so entitled. If an action is brought
pursuant to Article 9(a), a final nonappealable order in such action shall
constitute the ultimate determination of the claimant's right to
indemnification.
(c) The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition granted in Article
9(a) shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of this Certificate of
Incorporation or the Bylaws of the Corporation, agreement, vote of stockholders
or disinterested directors or otherwise. The Corporation shall have the express
right to grant additional indemnity without seeking further approval by the
stockholders. All applicable indemnity provisions and any applicable law shall
be interpreted and applied so as to provide a claimant with the broadest
nonduplicative indemnity legally possible.
(d) Any repeal or amendment of this Article 9 or any portion hereof by the
stockholders of the Corporation or by changes in applicable law shall, to the
extent permitted by applicable law, be prospective only, and shall not adversely
affect any right of any person to indemnification and advancement of expenses
existing at the time of such repeal or amendment.
(e) In the event that any provision of this Article 9 is determined by a
court to require the Corporation to do or to fail to do an act which is in
violation of applicable law, such provision shall be limited or modified in its
application to the minimum extent necessary to avoid a violation of law, and, as
so limited or modified, such provision and the balance of this Article 9 shall
remain in full force and effect.
10. The Corporation reserves the right to amend, alter, change, or repeal
any provisions contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
of the Corporation herein are granted subject to this reservation.