Exhibit 2.8
_______________________________________________________________________________
AGREEMENT AND PLAN OF MERGER
Dated as of March 4, 1998
Among
Xerox Corporation
TDC Subsidiary Corporation
TDC Two Subsidiary Corporation
Intelligent Electronics, Inc.
and
XLConnect Solutions, Inc.
_______________________________________________________________________________
Execution
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement") entered into as of
March 4, 1998 by and among Xerox Corporation, a New York corporation
("Purchaser"), TDC Subsidiary Corporation, a Pennsylvania corporation and a
wholly-owned subsidiary of Purchaser ("Acquisition Sub One"), TDC Two
Subsidiary Corporation, a Pennsylvania corporation and a wholly-owned
subsidiary of Purchaser ("Acquisition Sub Two"), Intelligent Electronics,
Inc., a Pennsylvania corporation ("Parent"), and XLConnect Solutions, Inc.,
a Pennsylvania corporation ("Sub"). Purchaser, Acquisition Sub One,
Acquisition Sub Two, Parent and Sub are referred to individually herein as
a "Party" and collectively herein as the "Parties".
Recitals
--------
WHEREAS, this Agreement contemplates a transaction in which Purchaser
will indirectly acquire, through a reverse triangular merger of Acquisition
Sub One with and into Sub (the "Sub Merger"), all of the capital stock of
Sub that is not owned directly or indirectly by Parent;
WHEREAS, this Agreement contemplates that immediately after completion
of the Sub Merger, Purchaser will acquire, through a reverse triangular
merger of Acquisition Sub Two with and into Parent (the "Parent Merger")
all of the capital stock of Parent;
WHEREAS, the Board of Directors of Sub (the "Sub Board") has
determined that the Sub Merger is fair to and in the best interests of the
holders of Sub's common stock and has resolved to recommend the acceptance
and approval of the Sub Merger by the holders of Sub Shares and Parent-
Owned Sub Shares (as defined in Section 1.2);
WHEREAS, the Independent Committee of the Board of Directors of Sub
(the "Independent Committee") has determined that the Sub Merger is fair to
and in the best interests of the holders of Sub Shares and has resolved to
recommend the acceptance and approval of the Sub Merger by the holders of
Sub Shares;
WHEREAS, the Sub Board, the Independent Committee and the respective
Boards of Directors of Purchaser and Acquisition Sub One have approved the
Sub Merger pursuant to and subject to the terms and conditions of this
Agreement;
WHEREAS, the Board of Directors of Parent (the "Parent Board") has
determined that the Parent Merger is fair to and in the best interests of
the holders of Parent's common stock and has resolved to take all necessary
action to approve the Sub Merger and to recommend the acceptance and
approval of the Parent Merger by the holders of Parent Shares (as defined
in Section 2.2);
WHEREAS, the Parent Board and the respective Boards of Directors of
Purchaser and Acquisition Sub Two have approved the Parent Merger pursuant
to and subject to the terms and conditions of this Agreement;
WHEREAS, the Parties desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
promises set forth herein, and in consideration of the representations,
warranties and covenants set forth herein, intending to be legally bound
hereby, the Parties agree as follows:
ARTICLE I
The Sub Merger
--------------
1.1 The Sub Merger. Subject to the terms and conditions of this
Agreement, at the Sub Effective Time (as defined in Section 1.8),
Acquisition Sub One shall be merged with and into Sub pursuant to the Sub
Merger and the separate corporate existence of Acquisition Sub One shall
thereupon cease. Sub shall be the surviving corporation in the Sub Merger
(sometimes hereinafter referred to as the "Sub Surviving Corporation") and
shall continue to be governed by the laws of the Commonwealth of
Pennsylvania, with all of Sub's rights, privileges, immunities, powers and
franchises unaffected by the Sub Merger except as set forth in Sections 3.1
and 3.2 hereof. The Sub Merger shall have the effects specified in the
Pennsylvania Business Corporation Law of 1988, as amended (the "PABCL").
1.2 Conversion of Securities. At the Sub Effective Time, by virtue
of the Sub Merger and without any action on the part of the holder of any
shares of capital stock of Sub or common stock of Acquisition Sub One:
(i) each share of common stock of Sub issued and outstanding
immediately before the Sub Effective Time ("Sub Shares") shall as of
the Sub Effective Time be converted into and become the right to
receive from Purchaser the Sub Share Conversion Price, as provided in
Section 1.3; provided, however, that Sub Shares shall not include any
shares of common stock of Sub which immediately before the Sub
Effective Time are owned directly or indirectly by Parent ("Parent-
Owned Sub Shares");
(ii) each option or warrant to purchase a share of common stock
of Sub that is outstanding as of the Sub Effective Time ("Sub
Options") shall as of the Sub Effective Time be converted into and
become the right to receive from Purchaser the applicable Sub Option
Conversion Price, if any, as provided in Section 1.4;
(iii) each share of common stock of Sub issued and held in the
treasury of Sub at the Sub Effective Time shall as of the Sub
Effective Time be cancelled and no such shares shall be converted into
rights to receive the Sub Share Conversion Price;
(iv) each Parent-Owned Sub Share shall remain issued,
outstanding and unchanged, which shares shall be the only capital
stock of Sub outstanding after the Sub Effective Time, and as of the
Sub Effective Time Sub shall be a wholly-owned subsidiary of XLSource,
Inc., an Arkansas corporation and indirect wholly-owned subsidiary of
Parent; and
(v) the shares of common stock of Acquisition Sub One issued and
outstanding at the Sub Effective Time shall be surrendered and
cancelled.
1.3 Sub Share Conversion Price. The "Sub Share Conversion Price"
shall be an amount equal to $20.00.
1.4 Sub Option Conversion Price. The "Sub Option Conversion Price"
means, in the case of any Sub Option, the excess, if any, of $20.00 over
the exercise price of each such Sub Option, which excess shall be payable
at such time or times, if any, as shall be determined pursuant to the terms
and conditions of the applicable plan and/or agreement pursuant to which
such Sub Option is governed.
1.5 Payment for Sub Shares and Sub Options. Prior to the Sub
Effective Time, Purchaser shall designate a bank or trust company
reasonably acceptable to Sub to act as Paying Agent in connection with the
Sub Merger ("Paying Agent") and to receive and disburse the cash to which
holders of Sub Shares or Sub Options become entitled pursuant to Section
1.2. At the Sub Effective Time, Purchaser will provide Paying Agent with
sufficient cash to allow the Sub Share Conversion Price and the Sub Option
Conversion Price to be paid to the holders of each Sub Share or Sub Option
then entitled to be so paid. Promptly after the Sub Effective Time, the
Sub Surviving Corporation shall cause to be mailed to each Person who was,
at the Sub Effective Time, a holder of record of Sub Shares or Sub Options
forms (in a form mutually agreed to by Purchaser and Sub) of letters of
transmittal, with instructions for use in effecting the surrender of
certificates that represented Sub Shares before the Sub Effective Time in
exchange for payment of the Sub Share Conversion Price or in connection
with the payment of the applicable Sub Option Conversion Price. Upon
surrender to Paying Agent of such certificates and proper submittal of the
related letter of transmittal (in connection with Sub Shares), or upon
proper submittal of the letter of transmittal (in connection with Sub
Options), the Sub Surviving Corporation shall promptly cause to be paid to
the Persons entitled thereto a check in the amount of the Sub Share
Conversion Price and/or Sub Option Conversion Price to which such Persons
are entitled, after giving effect to any required tax withholdings. No
interest will be paid or will accrue on the amount payable to any such
Person. If payment of any Sub Share Conversion Price is to be made to a
Person other than the registered holder of the certificate surrendered, it
shall be a condition of such payment that the certificate so surrendered
shall be properly endorsed or otherwise in proper form for transfer and
that the Person requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a Person other than the
registered holder of the certificate surrendered or establish to the
satisfaction of the Sub Surviving Corporation or the Paying Agent that such
tax has been paid or is not applicable. The Sub Surviving Corporation
shall pay all charges and expenses, including those of the Paying Agent, in
connection with the exchange of cash for Sub Shares and Sub Options. In
the event any certificate representing Sub Shares 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, the
Paying Agent will issue in exchange for such lost, stolen or destroyed
certificate the Sub Share Conversion Price payable in respect thereof;
provided, however, the Person to whom the Sub Share Conversion Price is
paid shall, as a condition precedent to the payment thereof, give the Sub
Surviving Corporation a bond in such sum as it may direct or otherwise
indemnify the Sub Surviving Corporation in a manner satisfactory to it
against any claim that may be made against the Sub Surviving Corporation
with respect to the certificate alleged to have been lost, stolen or
destroyed. Promptly following the first anniversary of the Sub Effective
Time, the Paying Agent shall deliver to the Sub Surviving Corporation all
cash held for payment for Sub Shares or Sub Options and all other documents
in its possession relating to the transactions described in this Agreement,
and the Paying Agent's duties shall terminate. Thereafter each holder of a
certificate representing Sub Shares, and each holder of a Sub Option, may
surrender such certificate and/or other appropriate documentation to the
Sub Surviving Corporation (subject to applicable abandoned property,
escheat and similar laws) and receive in exchange therefor the Sub Share
Conversion Price or Sub Option Conversion Price in respect thereof, without
interest thereon.
1.6 Transfers After the Sub Effective Time. No transfers of Sub
Shares or Sub Options shall be made on the stock transfer or other
applicable books of Sub at or after the Sub Effective Time.
1.7 Sub Closing. The closing of the Sub Merger (the "Sub Closing")
shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ at 10:00 A.M. on the first business day
after the last of the conditions set forth in Article 7 hereof shall be
fulfilled or waived in accordance with this Agreement, or at such other
place and time and/or on such other date as Sub and Purchaser may agree;
provided that the Sub Closing and the Parent Closing shall occur on the
same day.
1.8 Filing of Sub Merger Documents; Sub Effective Time. In
connection with the Sub Closing, Sub and Acquisition Sub One will execute
and file, and Purchaser will cause Acquisition Sub One to execute and file,
Articles of Merger relating to the Sub Merger ("Sub Articles of Merger")
with the Secretary of State of Pennsylvania as provided in the PABCL. The
Sub Merger shall become effective at the time at which the Sub Articles of
Merger have been duly filed with the Secretary of State of Pennsylvania
(the "Sub Effective Time"), which shall occur immediately prior to the
Parent Effective Time.
1.9 Dissenters Rights. Notwithstanding any provision of this
Article I to the contrary, shares held of record by shareholders who shall
not have voted such shares in favor of the Sub Merger and who shall have
properly exercised rights to demand payment of the fair value of such
shares in accordance with the applicable provisions of the PABCL ("Sub
Dissenting Shares") shall not be converted into the right to receive the
Sub Share Conversion Price, but the holders thereof shall be entitled to
payment of the fair value of such shares in accordance with the applicable
provisions of the PABCL; provided, however, that (i) if such a holder fails
to file a notice of election to dissent in accordance with the PABCL, or
after having done so delivers an effective withdrawal of such notice or
fails to establish (if he is required to do so) his entitlement to
dissenters rights as provided in the PABCL, or (ii) if a court shall
determine that such holder is not entitled to receive payment for his
shares or such holder shall otherwise lose his dissenters rights, each Sub
Share held of record by such holder shall automatically be converted into
and represent only the right to receive the Sub Share Conversion Price,
upon the surrender of the certificate or certificates representing such Sub
Shares. Sub will give Purchaser prompt notice of any demands received by
Sub for payment of the fair value of such shares, and Purchaser shall have
the right to participate in all negotiations and proceedings with respect
to such demands, Sub will not, except with the prior written consent of
Purchaser, make any payment (except to the extent that any such payment is
made pursuant to a court order) with respect to, or settle or offer to
settle, any such demands.
1.10 PABCL. Section 1906 of the PABCL shall apply to the Sub
Merger. Dissenters rights shall be available to the holders of Sub Shares
as provided in Section 1.9.
ARTICLE II
The Parent Merger
-----------------
2.1 The Parent Merger. Subject to the terms and conditions of this
Agreement, at the Parent Effective Time (as defined in Section 2.8),
Acquisition Sub Two shall be merged with and into Parent pursuant to the
Parent Merger and the separate corporate existence of Acquisition Sub Two
shall thereupon cease. Parent shall be the surviving corporation in the
Parent Merger (sometimes hereinafter referred to as the "Parent Surviving
Corporation") and shall continue to be governed by the laws of the
Commonwealth of Pennsylvania, with all of Parent's rights, privileges,
immunities, powers and franchises unaffected by the Parent Merger except as
set forth in Sections 3.1 and 3.2 hereof. The Parent Merger shall have the
effects specified in the PABCL.
2.2 Conversion of Securities. At the Parent Effective Time, by
virtue of the Parent Merger and without any action on the part of the
holder of any shares of capital stock of Parent or common stock of
Acquisition Sub Two:
(i) each share of common stock of Parent (and related Right,
as defined in the Rights Agreement) issued and outstanding
immediately before the Parent Effective Time ("Parent Shares")
shall as of the Parent Effective Time be converted into and become
the right to receive from Purchaser the Parent Share Conversion
Price, as provided in Section 2.3;
(ii) each option or warrant to purchase a share of common stock
of Parent that is outstanding as of the Parent Effective Time ("Parent
Options") shall as of the Parent Effective Time be converted into and
become the right to receive from Purchaser the applicable Parent
Option Conversion Price, if any, as provided in Section 2.4;
(iii) each share of common stock of Parent issued and held in
the treasury of Parent at the Parent Effective Time shall as of the
Parent Effective Time be cancelled and no such shares shall be
converted into rights to receive the Parent Share Conversion Price;
and
(iv) the shares of common stock of Acquisition Sub Two issued
and outstanding at the Parent Effective Time shall be converted into
and become the number of shares of common stock of Parent issued and
outstanding at the Parent Effective Time, which shares shall be the
only capital stock of Parent outstanding after the Parent Effective
Time, and as of the Parent Effective Time Parent shall become a
wholly-owned subsidiary of Purchaser.
2.3 Parent Share Conversion Price. The "Parent Share Conversion
Price" shall be an amount equal to $7.60.
2.4 Parent Option Conversion Price. The "Parent Option Conversion
Price" means, in the case of any Parent Option, the excess, if any, of
$7.60 over the exercise price of each such Parent Option, or such other
amount, if any, and which excess or other amount shall be payable at such
time or times, if any, as shall be determined pursuant to the terms and
conditions of the applicable plan and/or agreement pursuant to which such
Parent Option is governed.
2.5 Payment for Parent Shares and Parent Options. The Paying Agent
shall receive and disburse the cash to which holders of Parent Shares or
Parent Options become entitled pursuant to Section 2.2. At the Parent
Effective Time, Purchaser will provide Paying Agent with sufficient cash to
allow the Parent Share Conversion Price and the Parent Option Conversion
Price to be paid to the holders of each Parent Share or Parent Option then
entitled to be so paid. Promptly after the Parent Effective Time, the
Parent Surviving Corporation shall cause to be mailed to each Person who
was, at the Parent Effective Time, a holder of record of Parent Shares or
Parent Options forms (in a form mutually agreed to by Purchaser and Parent)
of letters of transmittal, with instructions for use in effecting the
surrender of certificates that represented Parent Shares before the Parent
Effective Time in exchange for payment of the Parent Share Conversion Price
or in connection with the payment of the applicable Parent Option
Conversion Price. Upon surrender to Paying Agent of such certificates and
proper submittal of the related letter of transmittal (in connection with
Parent Shares), or upon proper submittal of the letter of transmittal (in
connection with Parent Options), the Parent Surviving Corporation shall
promptly cause to be paid to the Persons entitled thereto a check in the
amount of the Parent Share Conversion Price and/or Parent Option Conversion
Price to which such Persons are entitled, after giving effect to any
required tax withholdings. No interest will be paid or will accrue on the
amount payable to any such Person. If payment of any Parent Share
Conversion Price is to be made to a Person other than the registered holder
of the certificate surrendered, it shall be a condition of such payment
that the certificate so surrendered shall be properly endorsed or otherwise
in proper form for transfer and that the Person requesting such payment
shall pay any transfer or other taxes required by reason of the payment to
a Person other than the registered holder of the certificate surrendered or
establish to the satisfaction of the Parent Surviving Corporation or the
Paying Agent that such tax has been paid or is not applicable. The Parent
Surviving Corporation shall pay all charges and expenses, including those
of the Paying Agent, in connection with the exchange of cash for Parent
Shares and Parent Options. In the event any certificate representing
Parent Shares 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, the Paying Agent will issue in exchange for such
lost, stolen or destroyed certificate the Parent Share Conversion Price
payable in respect thereof; provided, however, the Person to whom the
Parent Share Conversion Price is paid shall, as a condition precedent to
the payment thereof, give the Parent Surviving Corporation a bond in such
sum as it may direct or otherwise indemnify the Parent Surviving
Corporation in a manner satisfactory to it against any claim that may be
made against the Parent Surviving Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed. Promptly
following the first anniversary of the Parent Effective Time, the Paying
Agent shall deliver to the Parent Surviving Corporation all cash held for
payment for Parent Shares or Parent Options and all other documents in its
possession relating to the transactions described in this Agreement, and
the Paying Agent's duties shall terminate. Thereafter each holder of a
certificate representing Parent Shares, and each holder of a Parent Option,
may surrender such certificate and/or other appropriate documentation to
the Parent Surviving Corporation (subject to applicable abandoned property,
escheat and similar laws) and receive in exchange therefor the Parent Share
Conversion Price or Parent Option Conversion Price in respect thereof,
without interest thereon.
2.6 Transfers After the Effective Time. No transfers of Parent
Shares or Parent Options shall be made on the stock transfer or other
applicable books of Parent at or after the Parent Effective Time.
2.7 Parent Closing. The closing of the Parent Merger (the "Parent
Closing") shall take place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ at 10:00 A.M. on the first
business day after the last of the conditions set forth in Article 7 hereof
shall be fulfilled or waived in accordance with this Agreement, or at such
other place and time and/or on such other date as Parent and Purchaser may
agree; provided that the Parent Closing and the Sub Closing shall occur on
the same day.
2.8 Filing of Parent Merger Documents; Parent Effective Time. In
connection with the Closing, Parent and Acquisition Sub Two will execute
and file, and Purchaser will cause Acquisition Sub Two to execute and file,
Articles of Merger relating to the Parent Merger ("Parent Articles of
Merger") with the Secretary of State of Pennsylvania as provided in the
PABCL. The Parent Merger shall become effective at the time at which the
Parent Articles of Merger have been duly filed with the Secretary of State
of Pennsylvania (the "Parent Effective Time"), which shall occur
immediately after the Sub Effective Time.
2.9 Dissenters Rights. Notwithstanding any provision of this
Article II to the contrary, and to the extent required under the applicable
provisions of the PABCL, Parent Shares held of record by shareholders who
shall not have voted such shares in favor of the Parent Merger and who
shall have properly exercised rights to demand payment of the fair value of
such shares in accordance with the applicable provisions of the PABCL
("Parent Dissenting Shares") shall not be converted into the right to
receive the Parent Share Conversion Price, but the holders thereof shall be
entitled to payment of the fair value of such shares in accordance with the
applicable provisions of the PABCL; provided, however, that (i) if such a
holder fails to file a notice of election to dissent in accordance with the
PABCL, or after having done so delivers an effective withdrawal of such
notice or fails to establish (if he is required to do so) his entitlement
to dissenters rights as provided in the PABCL, or (ii) if a court shall
determine that such holder is not entitled to receive payment for his
shares or such holder shall otherwise lose his dissenters rights, each
Parent Share held of record by such holder shall automatically be converted
into and represent only the right to receive the Parent Share Conversion
Price, upon the surrender of the certificate or certificates representing
such Parent Shares. Parent will give Purchaser prompt notice of any
demands received by Parent for payment of the fair value of such shares,
and Purchaser shall have the right to participate in all negotiations and
proceedings with respect to such demands, Parent will not, except with
the prior written consent of Purchaser, make any payment (except to the
extent that any such payment is made pursuant to a court order) with
respect to, or settle or offer to settle, any such demands.
ARTICLE III
Articles of Incorporation and By-Laws
of the Surviving Corporations
-----------------------------
3.1 Articles of Incorporation. The Articles of Incorporation of the
Sub Surviving Corporation shall, upon the Sub Effective Time, be and remain
unchanged until further amended in accordance with the terms thereof and
the PABCL, subject, however, to the provisions of Section 6.2(f)(i) hereof.
The Articles of Incorporation of the Parent Surviving Corporation shall,
upon the Parent Effective Time, be and remain unchanged until
further amended in accordance with the terms thereof and the PABCL,
subject, however, to the provisions of Section 6.2(f)(i) hereof.
3.2 By-Laws. The By-Laws of the Sub Surviving Corporation in effect
at the Sub Effective Time shall be and remain unchanged until duly amended
in accordance with the terms thereof and the PABCL, subject, however, to
the provisions of Section 6.2(f)(i) hereof. The By-Laws of Parent
Surviving Corporation in effect at the Parent Effective Time shall be and
remain unchanged until duly amended in accordance with the terms thereof
and the PABCL, subject, however, to the provisions of Section 6.2(f)(i)
hereof.
ARTICLE IV
Officers and Directors
----------------------
4.1 Sub. At the Sub Effective Time, the directors of Acquisition
Sub One shall be all the directors of the Sub Surviving Corporation, each
of such directors to hold office, subject to the applicable provisions of
the Articles of Incorporation and By-Laws of the Sub Surviving Corporation,
until their respective successors shall be duly elected or appointed and
qualified. At the Sub Effective Time, the officers of Acquisition Sub One
immediately prior to the Sub Effective Time shall, subject to the
applicable provisions of the Articles of Incorporation and By-Laws of the
Sub Surviving Corporation, be the officers of the Sub Surviving Corporation
until their respective successors shall be duly elected or appointed and
qualified.
4.2 Parent. At the Parent Effective Time, the directors of
Acquisition Sub Two shall be all the directors of the Parent Surviving
Corporation, each of such directors to hold office, subject to the
applicable provisions of the Articles of Incorporation and By-Laws of the
Parent Surviving Corporation, until their respective successors shall be
duly elected or appointed and qualified. At the Parent Effective Time, the
officers of Acquisition Sub Two immediately prior to the Parent Effective
Time shall, subject to the applicable provisions of the Articles of
Incorporation and By-Laws of the Parent Surviving Corporation, be the
officers of the Parent Surviving Corporation until their respective
successors shall be duly elected or appointed and qualified.
ARTICLE V
Representations and Warranties
------------------------------
5.1 Representations and Warranties of Parent and Sub. Parent and
Sub hereby jointly and severally (but subject to Section 5.1(bb)) represent
and warrant to Purchaser that, except as set forth in the disclosure letter
of even date herewith delivered by Parent to Purchaser in conjunction with
execution of this Agreement (the "Disclosure Letter"):
(a) Organization, Qualification and Corporate Power. Each of
Parent and its subsidiaries (direct or indirect) (such subsidiaries,
including Sub, being collectively referred to as "Parent Subsidiaries") is
a corporation duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation, and is duly authorized to
conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the lack of
such qualification would not result in a Material Adverse Change. Each of
the Parent and the Parent Subsidiaries has full corporate power and
corporate authority, and all foreign, federal, state and local governmental
permits, licenses and consents (collectively, "Permits"), to carry on the
businesses in which it is engaged and to own and use the properties owned
and used by it, except where the failure to have Permits would not result
in a Material Adverse Change. The Disclosure Letter contains an accurate
list of the Parent Subsidiaries and the Sub Subsidiaries, their
jurisdiction, date of incorporation and date of acquisition directly or
indirectly by Parent, and their respective material Permits as well as
material Permits the applicable entity does not have and which Parent or
Sub has knowledge that it is required to have.
(b) Capitalization. (I) The authorized capital stock of
Parent consists of 100,000,000 shares of common stock, par value $.01 per
share (the "Parent Common Stock") and 15,000,000 shares of preferred stock,
par value $50.00 per share (the "Parent Preferred Stock"). As of March 3,
1998, (i) 41,798,091 shares of Parent Common Stock are issued and
outstanding, and (ii) 7,006,540 shares of Parent Common Stock have been
reserved for issuance upon the exercise of outstanding options and
warrants. No shares of Parent Preferred Stock are issued and outstanding,
and 200,000 shares of Series A Junior Participating Preferred Stock have
been reserved for issuance upon exercise of the outstanding Rights (as
defined in the Rights Agreement), none of which is or will be outstanding
at or before the Parent Effective Time. All issued and outstanding shares
of Parent's capital stock and all issued and outstanding shares of each
Parent Subsidiary's capital stock, have been validly issued and are fully
paid and nonassessable, and are not subject to, nor were they issued in
violation of, any preemptive rights. Except as detailed in the Disclosure
Letter, neither Parent nor any of the Parent Subsidiaries has any
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other agreements relating to
the acquisition of capital stock, or any cash settlement option, phantom
stock, stock appreciation right or similar instrument (the "Stock Rights")
relating to any capital stock of Parent or any Parent Subsidiary.
(II) The authorized capital stock of Sub consists of
100,000,000 shares of common stock, par value $.01 per share (the "Sub
Common Stock") and 10,000,000 shares of preferred stock, par value $.01 per
shares (the "Sub Preferred Stock"). As of March 3, 1998, (i) 16,684,100
shares of Sub Common Stock are issued and outstanding, (ii) 13,348,280
shares of Sub Common Stock are owned by XLSource, Inc., an indirect wholly-
owned subsidiary of Parent, and (iii) 2,791,645 shares of Sub Common Stock
have been reserved for issuance upon the exercise of outstanding options
and warrants. No shares of Sub Preferred Stock are issued and outstanding.
All issued and outstanding shares of Sub's capital stock have been validly
issued and are fully paid and nonassessable, are entitled to full voting
rights as to the election of directors and other matters, and are not
subject to, nor were they issued in violation of, any preemptive rights.
Except as detailed in the Disclosure Letter, there exist no Stock Rights
relating to any capital stock of Sub. No stock of Sub or of any Sub
Subsidiary owned by Parent or any Parent Subsidiary is subject to any put
option, redemption agreement (including a right to cause redemption of
stock) or any other instrument that provides for the right to transfer such
stock. Disregarding the execution of this Agreement, the Parent Merger and
the Sub Merger, (x) neither the shares of Sub capital stock directly or
indirectly owned by Parent nor the holders of any such shares are subject
to any limitations, pursuant to any provision of Chapter 25 of the PABCL,
of voting rights afforded generally to holders of shares of such class or
series of capital stock, and (y) no transaction has occurred or state of
facts exists which has triggered dissenters rights or any other right on
the part of a shareholder under the PABCL to receive payment in respect of
such shares. Since December 1, 1997, neither Parent nor any Parent
Subsidiary has purchased or otherwise acquired any shares of common stock
of Sub for a per share price in excess of the Sub Share Conversion Price.
(III) The Disclosure Letter describes the equity
capitalization of each Parent Subsidiary, including the authorized capital
stock, the issued and outstanding capital stock, and the ownership thereof.
With the exception of Sub and the Sub Subsidiaries, Parent is directly or
indirectly the owner of all shares of capital stock of each Parent
Subsidiary. All Sub Subsidiaries are 100% owned by Sub.
(c) Authorization of Transaction. Each of Parent and Sub has
the requisite corporate power and authority, and has taken all required
action necessary, to properly execute and deliver this Agreement and to
perform its obligations hereunder, and this Agreement constitutes the valid
and legally binding obligation of each of Parent and Sub, enforceable in
accordance with its terms and conditions, except as limited by (i)
applicable bankruptcy, insolvency reorganization, moratorium and other laws
of general application affecting enforcement of creditors' rights generally
and (ii) general principles of equity, regardless of whether asserted in a
proceeding in equity or at law; provided, however, that Parent cannot
consummate the Parent Merger and Sub cannot consummate the Sub Merger
unless and except upon receipt of the approval of the holders of Parent
Common Stock and Sub Common Stock to the extent required by the PABCL.
(d) Noncontravention. Neither the execution and delivery of
this Agreement, nor the consummation by Parent or Sub of the transactions
contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree or other restriction
of any government, governmental agency or court to which Parent or any of
the Parent Subsidiaries is subject or any provision of the charter or
bylaws of Parent or any of the Parent Subsidiaries, or (ii) conflict with,
result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify or cancel or require any notice under any contract required to be
listed on the Disclosure Letter or under any other material agreement,
contract, lease, license, instrument or other arrangement to which Parent
or any of the Parent Subsidiaries is a party or by which any of them is
bound or to which any of their respective assets is subject (or result in
the imposition of any lien, encumbrance or other security interest (a
"Security Interest") upon any of their respective assets), except in the
case of clause (ii) as disclosed in the Disclosure Letter. Other than
filings required in connection with the provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvement Act of 1976, as amended (the "HSR Act"), the PABCL
and the Exchange Act, neither Parent nor any of the Parent Subsidiaries
needs to give any notice to, make any filing with or obtain any
authorization, consent or approval of any government or government agency
in order for the Parties to consummate the transactions contemplated by
this Agreement.
(e) Filings with the SEC. Since January 1, 1992, Parent and
Sub have made all filings with the SEC that either of them has been
required to make under the Securities Act and the Exchange Act
(collectively, the "Public Reports"). Each of the Public Reports complied
with the requirements of the Securities Act and the Exchange Act in all
material respects and none of the Public Reports, as of their respective
dates, contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(f) Financial Statements. (I) Parent has filed an Annual
Report on Form 10-K, as amended by its Form 10-K/A (the "Parent 10-K"), for
the fiscal year ended on February 1, 1997 and a Quarterly Report on Form
10-Q (the "Parent 10-Q") for the fiscal quarter ended November 1, 1997 (the
"Parent Most Recent Quarter End"). The financial statements included in
the Parent 10-K and the Parent 10-Q (including the related notes and
schedules) have been prepared from the books and records of Parent and the
Parent Subsidiaries in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
covered thereby, and present fairly in all material respects the financial
condition of Parent and the Parent Subsidiaries as of the indicated dates
and the results of operations and cash flows of Parent and the Parent
Subsidiaries for the indicated periods. In the opinion of Parent's
management, all adjustments (consisting only of normal recurring
adjustments) which are necessary for a fair statement of operating results
for the interim periods presented have been made.
(II) Sub has filed an Annual Report on Form 10-K (the "Sub
10-K") for the fiscal year ended on December 31, 1996 and a Quarterly
Report on Form 10-Q, as amended by its Form 10-Q/A (the "Sub 10-Q") for the
fiscal quarter ended September 30, 1997 (the "Sub Most Recent Quarter
End"). The financial statements included in the Sub 10-K and the Sub 10-Q
(including the related notes and schedules) have been prepared from the
books and records of Sub and the Sub Subsidiaries in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby, and
present fairly in all material respects the financial condition of Sub and
the Sub Subsidiaries as of the indicated dates and the results of
operations and cash flows of Sub and the Sub Subsidiaries for the indicated
periods. In the opinion of Parent's and Sub's management, all adjustments
(consisting only of normal recurring adjustments) which are necessary for a
fair statement of operating results for the interim periods presented have
been made.
(g) Events Subsequent to Most Recent Quarter End. (I) Since
the Parent Most Recent Quarter End, there has not been any Material Adverse
Change or any development or combination of developments relating to Parent
or any of the Parent Subsidiaries of which Parent has knowledge and which
would result in a Material Adverse Change.
(II) Since the Sub Most Recent Quarter End, there has not
been any Material Adverse Change or any development or combination of
developments relating to Sub or any of the Sub Subsidiaries of which Parent
or Sub has knowledge and which would result in a Material Adverse Change.
(h) Compliance. Parent and the Parent Subsidiaries are in
compliance with all applicable laws, rules and regulations, except where
the failure to be in compliance would not result in a Material Adverse
Change.
(i) Litigation and Liabilities. There are (i) no actions,
suits or proceedings pending or, to the knowledge of Parent or Sub,
threatened against Parent or any of the Parent Subsidiaries which (x) if
adversely determined against Parent or any of the Parent Subsidiaries could
reasonably be expected to result in a Material Adverse Change, or (y) could
reasonably be expected to materially impair or delay the Parties' ability
to consummate the transactions contemplated by this Agreement, and (ii) no
obligations or liabilities of Parent or any of the Parent Subsidiaries
known to Parent or Sub and not disclosed in the Disclosure Letter or
reflected in the financial statements or related notes included in the
Parent 10-K, the Parent 10-Q, the Sub 10-K or the Sub 10-Q which could
reasonably be expected to result in a Material Adverse Change. The
Disclosure Letter lists all pending and, to the knowledge of Parent or Sub,
threatened EEOC and similar investigations, actions, suits or proceedings
against Parent or any Parent Subsidiary (regardless of the materiality
thereof) and copies of the pleadings for each such pending matter have been
made available to Purchaser by Parent.
(j) Taxes. (I) Each of Parent and the Parent Subsidiaries has
duly filed all federal, state, local and foreign tax returns required to be
filed by it and has duly paid, caused to be paid or made adequate provision
for the payment of all Taxes (as hereinafter defined) required to be paid
in respect of the periods covered by such returns. No claims for Taxes
have been asserted against Parent or any of the Parent Subsidiaries, and no
deficiency for any Taxes has been proposed, asserted or assessed against
Parent or any of the Parent Subsidiaries, in either case which has not been
resolved or paid in full. To Parent's knowledge, no Tax return for any
taxable period of Parent or any Parent Subsidiary is under examination by
any taxing authority, Parent has not received written notice of any pending
audit by any taxing authority against the Parent or any of the Parent
Subsidiaries, and there are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax return for any
taxable period of Parent or any of the Parent Subsidiaries. "Taxes" means
all federal, state, territorial, local, foreign and other net income, gross
income, gross receipts, sales, use, value added, ad valorem, transfer,
franchise, profits, license, lease, service, use, withholding, payroll,
employment, unemployment insurance, workers compensation, social security,
excise, severance, stamp, business license, occupation, premium, property,
environmental, windfall profits, customs, duties, alternative minimum,
estimated or other taxes, fees, premiums, assessments or charges of any
kind whatever imposed or collected by any governmental entity or political
subdivision thereof.
(II) Each of Sub and the Sub Subsidiaries has duly filed all
federal, state, local and foreign tax returns required to be filed by it
and has duly paid, caused to be paid or made adequate provision for the
payment of all Taxes required to be paid in respect of the periods covered
by such returns. No claims for Taxes have been asserted against Sub or any
of the Sub Subsidiaries, and no deficiency for any Taxes has been proposed,
asserted or assessed against Sub or any of the Sub Subsidiaries, in either
case which has not been resolved or paid in full. To Parent's and Sub's
knowledge, no Tax return for any taxable period of Sub is under examination
by any taxing authority, Sub has not received written notice of any pending
audit by any taxing authority against the Sub or any of the Sub
Subsidiaries, and there are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax return for any
taxable period of Sub or any of the Sub Subsidiaries.
(III) Parent and each Parent Subsidiary has been a continuous
member of the consolidated group of companies of which Parent is the common
parent for Federal income tax purposes since the time such Subsidiary first
became affiliated with the Parent's consolidated group.
(k) Brokers' and Other Fees. Except for the fees and expenses
of Lazard Freres & Co. LLC ("Lazard") for Parent and NationsBanc ▇▇▇▇▇▇▇▇▇▇
Securities LLC ("▇▇▇▇▇▇▇▇▇▇") for Sub, none of Parent or the Parent
Subsidiaries has any liability or obligation to pay any fees or commissions
to any investment adviser, broker, finder or agent with respect to the
transactions contemplated by this Agreement.
(l) Fairness Opinions. ▇▇▇▇▇▇▇▇▇▇ has delivered to the
Independent Committee of the Board of Directors of Sub, and not withdrawn,
its opinion that the consideration being paid to the holders of Sub Shares
(other than shares held directly or indirectly by Parent) pursuant to
Section 1.2 hereof is fair to such holders, as of the date of such opinion,
from a financial point of view (the "Sub Fairness Opinion"), and a true and
complete copy thereof has been furnished to Purchaser. Lazard has
delivered to the Board of Directors of Parent, and not withdrawn, its
opinion that the consideration being paid pursuant to Section 2.2 hereof is
fair to the shareholders of Parent, as of the date of such opinion, from a
financial point of view (the "Parent Fairness Opinion"), and a true and
complete copy thereof has been furnished to Purchaser.
(m) Rights Plan. Parent has amended the Rights Agreement to
provide that the Purchaser and all direct and indirect wholly-owned
subsidiaries thereof and their respective Associates and Affiliates (as
such terms are defined in the Rights Agreement), for purposes of entering
into and consummating the transactions contemplated by this Agreement, are
considered an "Exempt Person", as defined in the Rights Agreement, until
such time as this Agreement shall terminate, if at all. Parent has taken
all necessary action so that none of the execution and delivery of this
Agreement or the consummation of the Sub Merger or Parent Merger
contemplated hereby will (i) cause the Rights (as such term is defined in
the Rights Agreement) issued pursuant to the Rights Agreement to become
exercisable, (ii) cause any Person to become an Acquiring Person (as such
term is defined in the Rights Agreement) or (iii) give rise to a
Distribution Date (as such term is defined in the Rights Agreement).
(n) Management Letters. There is no management letter of
outside auditors for the year ended February 1, 1997 (in the case of
Parent) or for the year ended December 31, 1996 (in the case of Sub).
(o) Environmental Matters. The conduct or operation of Parent
and Parent Subsidiaries and any condition of property presently or
previously owned, leased or operated by any of them violates or violated no
Environmental Laws in any material respect and no condition has existed or
event has occurred with respect to any of them or any such property that,
with notice or the passage of time, or both, is reasonably likely to result
in any material liability under Environmental Laws. Neither Parent nor any
of the Parent Subsidiaries has received any notice from any person or
entity that Parent or any Parent Subsidiary or the operation or condition
of any property ever owned, leased or operated by any of them are or were
in violation of or otherwise are alleged to have liability under any
Environmental Law. "Environmental Laws" means all applicable local, state
and federal environmental, health and safety laws and regulations,
including, without limitation, the Resource Conservation and Recovery Act,
the Comprehensive Environmental Response, Compensation and Liability Act,
the Clean Water Act, the Federal Clean Air Act, and the Occupational Safety
and Health Act, each as amended, regulations promulgated thereunder, and
state counterparts.
(p) Other Interests. Neither Parent nor any Parent Subsidiary
owns any shares of capital stock in any corporation (other than in the
Parent Subsidiaries as disclosed herein) or holds any debt or equity
interest in any joint venture, partnership or other entity.
(q) Intellectual Property. (I) Parent and each Parent
Subsidiary owns, or is licensed or otherwise possesses legally enforceable
rights to use, all material patents, trademarks, trade names, service
marks, copyrights, technology, know-how, computer software programs (which
shall exclude off-the-shelf software programs) that are used in the
business of Parent and each of the Parent Subsidiaries as currently
conducted (the "Intellectual Property").
(II) No claim against Parent or any Parent Subsidiary has
been asserted in writing or, to Parent's or Sub's knowledge, orally by a
third party respecting or related to the Intellectual Property or related
to the alleged infringement by Parent or any Parent Subsidiary of the
intellectual property of others and, in either case, Parent and the Parent
Subsidiaries do not know of any reasonable grounds for any such claim.
(III) To the knowledge of Parent and Sub, there is no
material unauthorized use, infringement or misappropriation of any
Intellectual Property by any third party, including any employee or former
employee of Parent or any Parent Subsidiary.
(r) Employment Matters. (I) The Disclosure Letter identifies
all stock options, restricted stock rights and other Stock Rights
outstanding under Parent's 1995 Long-Term Incentive Plan and Parent's Non-
Qualified Stock Option Plan for employees and directors and Sub's 1996
Long-Term Incentive Plan (the "Sub Plan") or any other agreement, plan or
arrangement of Parent or any Parent Subsidiary. Parent has provided
Purchaser with copies of all such agreements, plans and arrangements,
except for agreements utilizing a standard form of agreement, in which case
Parent has provided Purchaser with a copy of such standard form.
(II) Except as described in the Disclosure Letter, neither
Parent nor any Parent Subsidiary (i) is a party or subject to any contract
of employment with any person which is not terminable at will without
penalty (other than standard severance policies offered to all employees
generally), or which would entitle any person to any payment (severance or
otherwise) as a result of the Merger, or any collective bargaining
agreement, or (ii) maintains or contributes to any profit sharing, pension,
retirement, thrift, savings, incentive compensation, deferred compensation,
bonus, stock option, stock purchase, restricted stock, stock appreciation
right, performance share, performance unit, severance, salary continuation,
holiday, vacation, disability, insurance, medical or other employee
benefit, incentive or welfare plan, policy, material contract or material
arrangement (collectively, the "Employee Benefit Plans").
(III) During the last three years there have been no actual
or threatened strikes or labor stoppages involving any employees of Parent
or any Parent Subsidiary, and neither Parent nor any Parent Subsidiary is
aware of any organizing activity actively seeking to certify a collective
bargaining unit or representative for any employees.
(IV) All retirement and employee benefit or welfare plans of
Parent or any Parent Subsidiary have been maintained and operated in
accordance with their terms in all material respects, and all such plans
which are subject to the Employee Retirement Income Security Act of 1974
("ERISA") or the Internal Revenue Code ("IRC") have been maintained and
operated in material compliance with all applicable provisions of ERISA and
the IRC and the regulations thereunder and are not subject to any
accumulated funding deficiency within the meaning of ERISA and the
regulations thereunder or to any outstanding liability to the Pension
Benefit Guaranty Corporation (other than for routine premium payments).
All such plans are identified in the Disclosure Letter. No "prohibited
transaction" has occurred with respect to any such plan, nor has any
"reportable event" occurred in respect thereof, as such terms are defined
in ERISA and the regulations thereunder, and no such plan is a
"Multiemployer Plan" or a "Multiple Employer Plan", as such terms are
defined in ERISA and the regulations thereunder.
(s) Credit Support Arrangements. Neither the Parent nor any
Parent Subsidiary has issued any currently existing guarantee or credit
support or has obtained any currently existing letter of credit or bond
with respect to, or has directly or indirectly made any currently existing
promise, agreement or undertaking to fund, support, guarantee or otherwise
backstop any obligation or liability, contingent or otherwise, of any
person or entity other than Parent or a Parent Subsidiary.
(t) Changes. Since November 1, 1997 Parent and each Parent
Subsidiary has been operated only in the ordinary course of business and
there has not been any:
(i) Material Adverse Change;
(ii) casualty loss, whether or not covered by insurance,
involving in any instance an amount in excess of $50,000;
(iii) obligation or liability, contingent or otherwise,
incurred by Parent or any Parent Subsidiary other than obligations and
liabilities incurred in the ordinary course of business and consistent with
past practice, or loss of a customer otherwise required to be listed on the
Disclosure Letter pursuant to Section 5.1(v)(II);
(iv) payment, discharge or settlement of any claim against
or obligation or liability of Parent or any Parent Subsidiary except in the
ordinary course of business and consistent with past practice;
(v) capital expenditures or commitment to make any
capital expenditure by the Parent or any Parent Subsidiary not included in
Parent's or Sub's capital budget as set forth in the Disclosure Letter;
(vi) issuance, sale, transfer or pledge by Parent or any
Parent Subsidiary of any capital stock of Parent or any Parent Subsidiary;
(vii) sale, lease, transfer, pledge, mortgage or
encumbrance by Parent or any Parent Subsidiary of any capital assets in an
aggregate amount exceeding $100,000;
(viii) write-down or write off of any tangible or
intangible assets in an aggregate amount exceeding $100,000 except with
respect to accounts receivable and inventory in the ordinary course of
business and consistent with past practices; or
(ix) event which, if this Agreement were in effect, would
have required the consent of Purchaser pursuant to Section 6.1(a) (other
than (viii), (xiii) or (xiv) of Section 6.1(a)) and with respect to which
such consent was not obtained.
(u) Assets and Property. Parent and each Parent Subsidiary has
good and marketable title to all the assets it purports to own, free and
clear of all liens, claims and encumbrances, and valid leasehold interests
in all assets it purports to lease. Neither Parent nor any Parent
Subsidiary owns any real property.
(v) Contracts. (I) The Disclosure Letter lists all agreements
and arrangements pursuant to which Parent or any Parent Subsidiary has any
rights, obligations or liabilities with respect to (i) borrowed money, (ii)
real property leases, (iii) royalty agreements, (iv) joint venture or
product development agreements, (v) indemnification agreements, (vi)
limitations or restrictions on the use of assets it may own, the businesses
it may conduct, the persons or entities with whom it may do business or
whom it may hire or retain, or the locations in which it may own assets or
conduct business, or (vii) the performance of intercompany services or
other arrangements between or among Parent and any of the Parent
Subsidiaries.
(II) The Disclosure Letter lists all contracts and
arrangements to which Parent or any of the Parent Subsidiaries is a party
with vendors or customers that involve payments for services in excess of,
for any vendor or customer, $250,000 in the last fiscal year.
(III) Neither Parent or any Parent Subsidiary nor, to the
knowledge of Parent or Sub, any other party thereto is in breach or default
under any contract, agreement or instrument where the effect of such breach
or default would, singly or in the aggregate with breaches and defaults
under other contracts, agreements or instruments, result in a Material
Adverse Change.
(IV) Parent has provided Purchaser with a complete and
correct copy of each contract, agreement and instrument disclosed in the
Disclosure Letter (in the case of customer contracts, to the extent
available to Parent or Sub), and all such contracts, agreements and
instruments are in full force and effect, and are valid, binding and
enforceable in accordance with their terms subject, as to enforcement, to
laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(w) Insurance. The Disclosure Letter lists all insurance
policies insuring Parent or any Parent Subsidiary or any of their
respective assets or operations. All such policies are and will be in full
force and effect through the Parent Effective Time except to the extent
such policies expire and cannot be renewed on a commercially reasonable
basis. Except as disclosed in the Disclosure Letter there are no pending
or threatened disputes or communications with or from any insurance carrier
denying or disputing any claim or coverage or regarding cancellation or
nonrenewal of any such policy.
(x) Related Party Transactions. Except as described in the
Disclosure Letter, no executive officer of Parent or any Parent Subsidiary,
nor any entity in which any of the foregoing has a 1% or more equity
interest is a party to any contract, agreement or other financial or
business arrangement with Parent or any Parent Subsidiary.
(y) Reserves etc. (I) Parent has previously furnished to
Purchaser a list of (i) all reserves maintained on the unaudited books and
records of Parent or any Parent Subsidiary as of January 31, 1998, (ii)
each item in respect of which such reserves are maintained, and (iii) the
amount of reserves maintained for each such item. Parent management
believes no additional material reserves are required under GAAP.
(II) Neither Parent nor any Parent Subsidiary has any
liability in respect of the Novaquest or Pacific On Line notes receivable
totalling approximately $5.9 million as of May 1, 1997 that have been sold
to ▇▇▇▇▇▇ Micro.
(III) The reserves maintained on the unaudited books and
records of Parent and the Parent Subsidiaries respecting the sale
transaction with GE Capital are sufficient to satisfy any claims which
might reasonably be expected to arise out of either of those transactions.
(z) Board Action. The Boards of Directors of Parent and Sub
have duly and validly approved and taken all corporate action required to
be taken by the Boards of Directors for the execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement. The Boards of Directors of Parent and Sub have determined that
it is advisable and in the best interest of their respective stockholders
for the Parent Merger and the Sub Merger to occur upon the terms and
subject to the conditions of this Agreement and the Parent's Board of
Directors has resolved to recommend that Parent's stockholders approve and
adopt the Parent Merger and Sub's Board of Directors and Independent
Committee thereof have resolved to recommend that Sub's stockholders
approve and adopt the Sub Merger. The Board of Directors of Sub has
determined that the shareholders of Sub shall be entitled to dissenters
rights under Subchapter D of Chapter 15 of the PABCL in connection with
the Sub Merger in lieu of providing for a statutory class vote pursuant to
Section 1906(b) of the PABCL. The Board of Directors of Sub and the
Independent Committee thereof have approved an amendment to Sub's Articles
of Incorporation to provide that Subchapter E of Chapter 25 of the PABCL
shall not be applicable to Sub.
(aa) Expenses. Parent and Sub have provided to Purchaser a good
faith estimate and description of the expenses which either of them has
incurred or which either of them expects to incur in connection with the
transactions contemplated by this Agreement.
(bb) Effect of Certain Representations and Warranties. (i)
Insofar as any of the foregoing representations and warranties are
inaccurate with respect to or as a result of circumstances involving Sub,
and if Parent did not have knowledge of such inaccuracy, Parent will have
no liability for damages to Purchaser or Acquisition Sub One or Two for
breach of such representation and warranty; provided, however, that this
subparagraph shall have no effect on whether the condition set forth in
Section 7.2(b) has been satisfied, or on any right of Purchaser to
terminate this Agreement under Section 8.3, or on any obligation of Parent
and Sub to pay the Termination Fee to Purchaser pursuant to Section 9.1(b).
(ii) Insofar as any of the foregoing representations and
warranties are inaccurate with respect to or as a result of circumstances
involving Parent or any Parent Subsidiary (other than Sub or any Sub
Subsidiary), and if Sub did not have knowledge of such inaccuracy, Sub will
have no liability for damages to Purchaser or Acquisition Sub One or Two
for breach of such representation and warranty; provided, however, that
this subparagraph shall have no effect on whether the condition set forth
in Section 7.2(b) has been satisfied, or on any right of Purchaser to
terminate this Agreement under Section 8.3, or on any obligation of Parent
and Sub to pay the Termination Fee to Purchaser pursuant to Section 9.1(b).
5.2 Representations and Warranties of Purchaser, Acquisition Sub One
and Acquisition Sub Two. Purchaser, Acquisition Sub One and Acquisition
Sub Two jointly and severally represent and warrant to Parent and Sub that:
(a) Corporate Organization. Each of Purchaser, Acquisition Sub
One and Acquisition Sub Two is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. Each of Acquisition Sub One and Acquisition Sub Two is a
direct, wholly-owned subsidiary of Purchaser and was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement.
Except for obligations or liabilities incurred in connection with its
incorporation or other agreements or arrangements contemplated by this
Agreement, neither Acquisition Sub One nor Acquisition Sub Two has and will
not have incurred, directly or indirectly, through any subsidiary or
affiliate, any obligations or liabilities or engaged in any business
activities of any type or kind whatsoever or entered into any agreements or
arrangements with any Person.
(b) Corporate Authority. Purchaser, Acquisition Sub One and
Acquisition Sub Two each has the requisite corporate power and authority,
and has taken all required action necessary, to properly execute and
deliver this Agreement and to perform its obligations hereunder, and this
Agreement constitutes the valid and legally binding obligation of each of
Purchaser, Acquisition Sub One and Acquisition Sub Two, enforceable in
accordance with its terms and conditions, except as limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other
laws of general application affecting enforcement of creditors' rights
generally and (ii) general principles of equity, regardless of whether
asserted in a proceeding in equity or at law.
(c) Noncontravention. Neither the execution and the delivery
of this Agreement, nor the consummation by Purchaser, Acquisition Sub One
or Acquisition Sub Two of the transactions contemplated hereby, will (i)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree or other restriction of any government, governmental agency
or court to which Purchaser, Acquisition Sub One or Acquisition Sub Two or
any of their respective subsidiaries is subject or any provision of the
charter or bylaws of the Purchaser, Acquisition Sub One or Acquisition Sub
Two or any of their respective subsidiaries, or (ii) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify or cancel or
require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which Purchaser, Acquisition Sub One or
Acquisition Sub Two or any of their respective subsidiaries is a party or
by which any of them is bound or to which any of their respective assets is
subject, and which would have a material adverse effect on the ability of
the Parties to consummate the transactions contemplated by this Agreement.
Other than filings required in connection with the provisions of the HSR
Act, the PABCL and the Exchange Act, neither Purchaser nor Acquisition Sub
One nor Acquisition Sub Two needs to give any notice to, make any filing
with or obtain any authorization, consent or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement.
(d) Litigation. There are no actions, suits or proceedings
pending or, to the knowledge of the executive officers of Purchaser,
Acquisition Sub One or Acquisition Sub Two, threatened against Purchaser,
Acquisition Sub One or Acquisition Sub Two which if adversely determined
against Purchaser, Acquisition Sub One or Acquisition Sub Two would
materially impair or delay the Parties' ability to consummate the
transactions contemplated by this Agreement.
(e) Funds. Purchaser has all of the funds in its control and
possession required in order to consummate the Parent Merger and the Sub
Merger and to pay all fees and expenses as contemplated by this Agreement
(the "Payment Funds").
(f) Brokers' and Other Fees. Neither Parent nor any Parent
Subsidiary has or will have any liability or obligation to pay any fees or
commissions to any investment advisor, broker, finder or agent engaged by
Purchaser, Acquisition Sub One or Acquisition Sub Two with respect to the
transactions contemplated by this Agreement. Any such fees or commissions
will be paid by Purchaser.
(g) Proxy Statement. None of the information supplied in
writing by Purchaser or any subsidiary of Purchaser specifically for
inclusion in the Proxy Statements (as defined in Section 6.1(c)), including
all amendments and supplements thereto, shall, in the case of the Proxy
Statements, at the date thereof and at the time of the meetings of
shareholders to vote on the matters covered thereby, contain any untrue
statement of a material fact, or omit a state material fact required to be
stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they are made, not misleading.
ARTICLE VI
Covenants
---------
6.1 Covenants of the Parent and Sub. Parent and Sub jointly and
severally (but subject to Section 6.4) covenant and agree that, except as
otherwise required by this Agreement:
(a) Interim Operations of Parent and Sub. From the date hereof
and continuing until the earlier of (i) the termination of this Agreement
or (ii) the Sub Effective Time (in the case of Sub) or (iii) the Parent
Effective Time (in the case of Parent), the business of Parent and Sub and
their respective subsidiaries, as applicable, shall be conducted only in
the ordinary and usual course and, to the extent consistent therewith,
Parent and Sub each shall use all commercially reasonable efforts to
preserve its business organization intact and maintain its existing
relations with customers, suppliers, employees and business associates.
Without limiting the generality of the foregoing from the date hereof and
continuing until the earlier of (i) the termination of this Agreement or
(ii) the Sub Effective Time (in the case of Sub) or (iii) the Parent
Effective Time (in the case of Parent), Parent and Sub will not with
respect to themselves or any Parent Subsidiary without the prior written
consent of Purchaser (or except as expressly permitted by the Disclosure
Letter or as required by this Agreement) do or commit to do any of the
following:
(i) authorize or effect any change in its charter or bylaws;
(ii) grant, amend or modify any Stock Rights or issue, sell
or otherwise dispose of any of its capital stock (except, in the case of
Parent, upon the exercise of Stock Rights outstanding as of the date of
this Agreement; it being understood, however, that Sub shall not issue any
capital stock, whether or not upon the exercise of Stock Rights);
(iii) declare, set aside or pay any dividend or distribution
with respect to its capital stock (whether in cash or in kind), or redeem,
repurchase or otherwise acquire any of its capital stock or any Stock
Rights;
(iv) issue any note, bond or other debt security or create,
incur, assume or guarantee any indebtedness for borrowed money or
capitalized lease obligation other than borrowings and reborrowings under
existing credit facilities to fund current obligations in the ordinary
course of business;
(v) impose or allow to be imposed any Security Interest upon
any of its assets except pursuant to after-acquired property clauses in
existing security arrangements disclosed in the Disclosure Letter or
purchase money security interests on inventory financed in the ordinary
course of business;
(vi) make any expenditure for a capital asset or lease any
real property except in accordance with the Parent or Sub capital budget as
disclosed in the Disclosure Letter;
(vii) implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by
generally accepted accounting principles and provided that same is promptly
disclosed to Purchaser;
(viii) (I) enter into or amend or renew any written
employment, consulting, severance, "golden parachute" or similar agreement
or arrangement with any director, officer or employee of Parent or of a
Parent Subsidiary, or (II) grant any salary or wage increase, or (III)
increase any employee benefit (including incentive or bonus payments),
except in the case of "(II)" for normal individual increases in
compensation to employees (other than officers and directors of Parent or a
Parent Subsidiary) in the ordinary course of business consistent with past
practice;
(ix) enter into, establish, adopt or amend (except as may be
required by applicable law) any pension, retirement, stock option, stock
purchase, savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, in respect of any director, officer or
employee of Parent or any Parent Subsidiary, or take any action to
accelerate the vesting or exercisability of stock options, restricted stock
or other compensation or benefits payable thereunder;
(x) knowingly or negligently take or fail to take any
action, if such action or failure to act would, directly or indirectly,
cause any of the Parent Subsidiaries to cease to be a member of the
consolidated group of companies of which Parent is the common parent for
Federal income tax purposes; it being understood that compliance with
Section 6.1(g)(iii) and (iv) will not constitute a violation of this
Section 6.1(a)(x); and it being further understood that except as
contemplated by Section 6.1(g)(iv) or as otherwise agreed by Purchaser in
writing, Parent shall comply with this Section 6.1(a)(x) without resort to
exercising its rights to acquire additional shares of Sub pursuant to that
certain Stock Registration and Option Agreement dated as of May 31, 1996
among Parent, Sub and The Future Now of Arkansas, Inc., as amended;
(xi) take any action that would materially alter the
strategic business plan and/or services delivery capability of Sub;
(xii) make any capital investment in or make any loan to or
acquire the securities or assets of any other Person other than to or from
its subsidiaries in the ordinary course of business;
(xiii) make any change in employment terms for any of its
directors, officers and employees other than customary increases to non-
director or non-officer employees awarded in the ordinary course of
business consistent with past practices; or
(xiv) except as may be required by law, intentionally take
or fail to take any action the reasonably foreseeable effect of which would
be to cause any representation or warranty in this Agreement to be or
become inaccurate.
In the event Parent or Sub shall request Purchaser to consent in
writing to an action otherwise prohibited by this Section 6.1(a), Purchaser
shall use all reasonable efforts to respond in a prompt and timely fashion,
but may otherwise respond affirmatively or negatively in its sole
discretion exercised in good faith.
(b) Acquisition Proposals.
(1) Neither the Parent nor the Sub or any of their
respective officers and directors shall, and the Parent and Sub will cause
their respective employees, agents and representatives (including, without
limitation, any investment banker, attorney or accountant retained by the
Parent or Sub) not to, solicit, initiate or encourage (including by way of
furnishing information), or take any other action designed or reasonably
likely to facilitate (including, without limitation, any amendment,
modification or termination, or any agreement to do any of the foregoing,
to the Rights Agreement or any redemption of rights issued thereunder) any
inquiries or the submission or any proposal or offer from any Person
relating to an Acquisition Proposal (as defined below) involving Parent,
Sub or any other Parent Subsidiary or participate in any discussions or
negotiations regarding any such Acquisition Proposal; provided, however,
that subject to compliance with this Section 6.1(b), the Parent, the Sub
and their respective directors and officers may participate in any
discussions or negotiations regarding, furnish any information with respect
to, assist or facilitate any effort or attempt by any Person to do or seek,
an Acquisition Proposal, solely to the extent that the Board of Directors
of Parent or Sub, as applicable, determines in good faith, that such
actions are necessary in order for the Board of Directors of Parent or Sub,
as applicable, to comply with its fiduciary obligations under applicable
law in response to an Acquisition Proposal or material modification to an
Acquisition Proposal, which Acquisition Proposal or material modification
was made after the date hereof and was not solicited after the date hereof.
As used herein, the term "Acquisition Proposal" means, with respect to a
particular Person, a merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving, or any purchase of all or any significant portion of
the assets or any equity securities of, or any tender offer or exchange
offer for shares of any class of equity securities of, such Person. The
transactions contemplated by this Agreement shall not be deemed an
Acquisition Proposal. The Parent and Sub will cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal and
will notify Purchaser promptly if any such Acquisition Proposal is received
by, any such information is requested from, or any such negotiations or
discussions are sought to be instituted or continued with, the Parent or
the Sub.
(2) Except as set forth in this paragraph (2), neither the
Board of Directors of Parent nor the Board of Directors of Sub nor any
committee of either of them shall (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Purchaser, or take
any action not explicitly permitted by this Agreement that would be
inconsistent with, the approval or recommendation by such Board of
Directors or such committee of the Parent Merger or the Sub Merger, (ii)
approve or recommend, or propose publicly to approve or recommend, any
Acquisition Proposal, or (iii) cause Parent or Sub to enter into any letter
of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "Acquisition Agreement") related to any Acquisition
Proposal. Notwithstanding the foregoing, in the event that the Board of
Directors of Parent or Sub has received a Superior Proposal (defined below)
and determines in good faith, after receipt of advice from outside counsel,
that it is necessary to do so in order to comply with its fiduciary
obligations under applicable law, the Board of Directors of Parent or Sub,
as applicable, may (subject to compliance with this Section 6.1(b) and
subject to payment of any Termination Fee (as hereinafter defined) then
required pursuant to this Agreement), (x) withdraw or modify its approval
or recommendation of the Parent Merger or the Sub Merger or (y) terminate
this Agreement (and concurrently with or after such termination, if it so
chooses, cause Parent or Sub, as applicable, to enter into any Acquisition
Agreement with respect to any Superior Proposal), but in any such case set
forth in this clause (y), only at a time that is after the fifth (5th) day
following Purchaser's receipt of written notice advising Purchaser that the
Board of Directors of Parent or Sub or any such committee has received a
Superior Proposal, specifying the material terms and conditions of such
Superior Proposal and identifying the Person making such Superior Proposal.
For purposes of this Agreement, a "Superior Proposal" means any bona fide
proposal made by a third party to acquire, directly or indirectly, for
consideration consisting of cash and/or securities, all or substantially
all of the voting power of the shares of Parent Common Stock or Sub Common
Stock then outstanding or all or substantially all of the assets of Parent
(which proposal may include as a component thereof the purchase of all or
substantially all of the shares of capital stock of Sub) or Sub and
otherwise on terms which the Board of Directors of Parent or Sub or such
committee determines in its good faith judgment (based on the advice of a
financial advisor of nationally recognized reputation) to be materially
more favorable to Parent's or Sub's stockholders than the Parent Merger and
the Sub Merger and for which financing, to the extent required, is then
committed or which, in the good faith judgment of the Board of Directors of
Parent or Sub or such committee, is reasonably capable of being furnished
by such third party.
(c) Meetings of the Shareholders. Each of Parent and Sub will
take all action necessary in accordance with applicable law and its
Articles of Incorporation and By-Laws to convene a meeting of its
stockholders as promptly as practicable to consider and vote upon the
approval of this Agreement and the Parent Merger or Sub Merger, as
applicable (the "Stockholder Meetings"). Subject to Section 6.1(b)(2), the
Board of Directors of Parent shall recommend approval of the Parent Merger,
and the Board of Directors of Sub and the Independent Committee of Sub's
Board shall recommend approval of the Sub Merger, and the Parent and Sub
shall take all lawful action to solicit such approvals, as applicable.
Each of the Parent and Sub hereby severally represents, warrants and
covenants that the proxy or information statement with respect to such
meeting of its shareholders (each, a "Proxy Statement"), at the date
thereof and at the date of such meetings, will not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided,
however, the foregoing shall not apply to the extent that any such untrue
statement of a material fact or omission to state a material fact was made
in reliance upon and in conformity with written information concerning the
Purchaser, Acquisition Sub One or Acquisition Sub Two furnished by
Purchaser specifically for use in the Proxy Statement. No Proxy Statement
shall be filed, and no amendment or supplement to such Proxy Statement will
be made by the Parent or Sub, without consultation with Purchaser and its
counsel.
(d) Exchange Act Filings. Unless an exemption shall be
expressly applicable to the Parent or the Sub, or unless Purchaser agrees
otherwise in writing, the Parent and the Sub will each file with the SEC
and NASDAQ National Market System ("NASDAQ") all reports required to be
filed by it pursuant to the rules and regulations of the SEC (including,
without limitation, all required financial statements). Such reports and
other information shall comply in all material respects with all of the
requirements of the SEC rules and regulations and, when filed, will not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Purchaser and its counsel, shall be given a reasonable
opportunity to review and to comment on such filings prior to their being
filed with the SEC and NASDAQ.
(e) Access. Upon reasonable notice, the Parent and the Sub
shall afford Purchaser's officers, employees, counsel, accountants and
other authorized representatives access, during reasonable business hours
throughout the period prior to the Parent Effective Time and in a manner
which will not unreasonably interfere with the management of the business
of Parent or any Parent Subsidiary, to its officers, employees, agents,
independent auditors, representatives, properties, books and records and,
during such period, the Parent and the Sub each shall furnish promptly to
Purchaser all information concerning its business, properties and personnel
as Purchaser may reasonably request provided, however, neither the Parent
nor the Sub shall be obligated to furnish Purchaser with information
respecting any negotiations referred to in the last sentence of Section
6.1(b)(1) of this Agreement.
(f) Takeover Statutes. If any "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or
regulation enacted under state or federal laws in the United States,
including, without limitation, Subchapter E, F, G or H of the PABCL (each,
a "Takeover Statute" and, collectively, "Takeover Statutes"), is or becomes
applicable to the Parent Merger or the Sub Merger or the transactions
contemplated hereby, Parent, Sub and their respective Boards or Directors
will use all commercially reasonable efforts (a) to grant such approvals
and take such actions as are reasonably necessary, lawful and requested or
consented to by Purchaser so that the transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated hereby and thereby, and (b) to otherwise act to eliminate the
effects of any Takeover Statute on any of the transactions contemplated
hereby and thereby. Parent and Sub will use all commercially reasonable
efforts to effect, prior to the Sub Effective Time, the amendment to Sub's
Articles of Incorporation described in Section 5.1(z) hereof.
(g) Options and Warrants.
(i) Prior to the Parent Effective Time, the Parent shall
take such actions (including obtaining any required consents) as may be
necessary such that at the Parent Effective Time each Stock Right issued by
the Parent shall be cancelled or converted into the right to receive, as
the case may be, and the holder thereof, upon surrender thereof, shall
receive, the Parent Option Conversion Price to which such holder is
entitled, if any.
(ii) Prior to the Sub Effective Time, Sub shall take such
actions (including obtaining any required consents) as may be necessary
such that at the Sub Effective Time each Stock Right issued by Sub shall be
cancelled or converted into the right to receive, as the case may be, and
the holder thereof, upon surrender thereof, shall receive, the Sub Option
Conversion Price to which such holder is entitled, if any.
(iii) In connection with the exercise, prior to the Sub
Effective Time, of any employee stock options issued by Sub, Sub shall
(unless otherwise agreed by Purchaser in writing), in accordance with the
cash-out option of Sub under Section 3(l) of its 1996 Long-Term Incentive
Plan (the "XLC Plan"), pay to each holder of an option, upon notice of any
exercise thereof, cash in an amount equal to the spread between the
exercise price and the fair market value of the underlying common share or
the Spread Value (as defined in the XLC Plan), and will take all other
action as may be necessary to ensure that in no event will any capital
stock of Sub be issued upon or in connection with the exercise of any such
option. Parent will, if necessary, lend sufficient funds to Sub on
commercially reasonable terms to enable Sub to pay such cash in a timely
manner.
(iv) In connection with the exercise, prior to the Sub
Effective Time, of any Stock Rights issued by Sub (other than employee
stock options), Sub shall not issue or permit to be issued any shares of
capital stock of Sub upon the exercise thereof other than simultaneously
with or after Parent (or a direct or indirect wholly-owned subsidiary of
Parent) shall have purchased (which Parent hereby agrees to do or cause to
be done), and Sub shall have issued (which Sub agrees to do or cause to be
done) that number of validly issued shares of the same class to Parent or
such subsidiary that is equal to four times the number of shares of capital
stock issuable upon such exercise of such Stock Rights, it being understood
that Parent, Sub and Purchaser expect such purchase and issuance to occur
pursuant to that certain Stock Registration and Option Agreement dated as
of May 31, 1996 among Parent, Sub and The Future Now of Arkansas, Inc., as
amended; provided, however, that in no event will Parent or any Parent
Subsidiary purchase or otherwise acquire any such shares of Sub for a per
share amount in excess of the Sub Share Conversion Price.
(h) [intentionally left blank]
(i) IBMCC. Parent and Sub shall request that IBM Credit
Corporation ("IBMCC") give any consent to the Sub Merger or the Parent
Merger necessary under Parent's and Sub's credit arrangements with IBMCC.
If Purchaser so requests, Parent and Sub will take all action necessary to
pay, at the time the Parent Merger and Sub Merger are consummated, any or
all of the balance of any amounts owed to IBMCC, subject, however, to
Purchaser making available to Parent and Sub the cash necessary to do so.
(j) Third Party Consents. Parent and Sub shall use their
commercially reasonable efforts to obtain all necessary consents to the
transactions contemplated by this Agreement as may be required under
contracts to which Parent or any Parent Subsidiary is a party and as to
which Purchaser requests that such consents be obtained, including without
limitation the real property leases required to be listed in Section 5.1(v)
of the Disclosure Letter.
6.2 Covenants of the Parties. Each of the Parties, severally and
not jointly, covenants and agrees as to itself, as follows:
(a) Confidentiality. The terms and conditions of that certain
letter agreement dated December 8, 1997 entered into by the Purchaser and
the Parent (the "Confidentiality Agreement") are ratified and confirmed and
shall remain in full force and effect. Notwithstanding the foregoing, the
Parent and Purchaser hereby amend the Confidentiality Agreement such that
the provisions of the paragraph 2(c) thereof do not apply to any public
announcement effected in accordance with the provisions of Section 6.2(d)
below regarding the Parties' execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby.
(b) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Filings. Each Party will file any
Notification and Report Forms and related material that it may be required
to file with the Federal Trade Commission and the Antitrust Division of the
United States Department of Justice under the HSR Act, will use
commercially reasonable efforts to obtain termination of the applicable
waiting period under the HSR Act, and will make any further filings
pursuant thereto that may be necessary or appropriate.
(c) Notification of Certain Matters. Each Party will give
prompt written notice to the others of any development causing a breach of
any of its own representations and warranties set forth in this Agreement.
(d) Publicity. The initial press release relating to the
transactions contemplated hereby shall be a joint press release and
thereafter the Parent, the Sub and Purchaser shall consult with each other
in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and in making any filings
with any federal or state governmental or regulatory agency or with any
national securities exchange with respect thereto. None of the Parties
shall issue any such press release or make any such public statement or
filing prior to such consultation, except as may be required by law or by
obligations pursuant to any listing agreement with any national securities
exchange or the NASDAQ.
(e) Cooperation. Each Party shall upon the request of another
Party provide its commercially reasonable cooperation and assistance to the
requesting Party in the latter's efforts to obtain any consents, approvals
and amendments to contracts required or to take such actions as may be
required to comply with any applicable laws to effect the Sub Merger, the
Parent Merger or otherwise required under this Agreement.
(f) Indemnification; Directors' and Officers' Insurance.
(i) The Parties agree that all rights to indemnification and
advancement of expenses by the Parent or the Sub now existing in favor of
each present and former director and officer of the Parent or the Sub
(acting in their capacities as directors and/or officers of the Parent or
the Sub, as applicable, the "Indemnified Parties") as provided in (i) the
Parent's or the Sub's respective Articles of Incorporation or By-Laws, or
(ii) the indemnification agreements listed in the Disclosure Letter as in
effect on the date thereof (the "Indemnification Agreements"), shall, with
respect to matters occurring at or prior to the Parent or Sub Effective
Time, as applicable, continue in full force and effect, shall survive the
Sub Merger and Parent Merger and shall continue in full force and effect
thereafter until the date which is six (6) years from the Sub Effective
Time or Parent Effective Time, as applicable; provided, however, in the
event any claim or claims are asserted or threatened within such period,
all rights to indemnification in respect of any such claim or claims shall
continue until final disposition of any and all such claims.
(ii) Subject to the provisions of Section 6.2(f)(iii) below,
after the Sub Effective Time or Parent Effective Time, as applicable, the
Purchaser shall, subject to the further terms set forth herein, indemnify
and hold harmless, to the fullest extent permitted under applicable law
(and shall also advance expenses as incurred to the fullest extent
permitted under applicable law provided the Person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification), each
Indemnified Party against any costs or expenses (including reasonable
attorneys' fees and disbursements), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to the
transactions contemplated by this Agreement (and whether commenced prior to
or after the Sub Effective Time or the Parent Effective Time), for a period
of six (6) years after the Sub Effective Time or Parent Effective Time, as
applicable, in each case regardless of by whom asserted and regardless of
whether such claim, action, suit, proceeding or investigation arises out
of, pertains to or results from, solely or in part, the active, passive or
concurrent negligence of any Indemnified Party; provided, however, in the
event any claim or claims are asserted or threatened within such six-year
period, all right to indemnification in respect of any such claim or claims
shall continue until final disposition of any and all such claims. Any
Indemnified Party wishing to claim indemnification under this Section
6.2(f)(ii), and notwithstanding the provisions set forth in the Parent's or
the Sub's respective Articles of Incorporation or By-Laws, or in the
Indemnification Agreements, upon learning of any such claim, action, suit,
proceeding or investigation, such Indemnified Party shall promptly notify
Purchaser thereof, but the failure to so notify shall not relieve Purchaser
of any liability it may have to such Indemnified Party if such failure does
not materially prejudice the indemnifying party. In the event of any such
claim, action, suit, proceeding or investigation (whether arising before or
after the Sub Effective Time or the Parent Effective Time), (i) Purchaser
shall have the right to assume the defense thereof and Purchaser shall not
be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified
Parties in connection with the defense thereof, except that if Purchaser
fails to assume such defense or counsel for Purchaser advises that there
are issues which raise conflicts of interest between the Parties, on the
one hand, and the Indemnified Parties, on the other hand, or that there are
additional defenses available to the Indemnified Parties which are not
otherwise available to the Parties, the Indemnified Parties may retain
counsel satisfactory to them, and the Purchaser shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties promptly as
statements therefor are received; provided, however, that Purchaser shall
be obligated pursuant to this paragraph (ii) to pay for only one firm of
counsel for all Indemnified Parties in any jurisdiction unless the use of
one counsel for such Indemnified Parties would present such counsel with a
conflict of interest, in which case Purchaser need only pay for separate
counsel to the extent necessary to resolve such conflict, (ii) the
Indemnified Parties will cooperate in the defense of any such matter and
(iii) Purchaser shall not be liable for any settlement effectuated without
its prior written consent. Purchaser shall not settle any action or claim
identified in this Section 6.2(f)(ii) in any manner that would impose any
liability on an Indemnified Party not paid by Purchaser or the Sub
Surviving Corporation or the Parent Surviving Corporation without such
Indemnified Party's prior written consent.
(iii) Notwithstanding any thing contained in paragraph (ii)
of this Section 6.2(f), Purchaser shall not have any obligation hereunder
to any Indemnified Party if the indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable law, or the
conduct of the Indemnified Party relating to the matter for which
indemnification is sought involved willful misconduct.
(iv) Parent and Sub shall maintain their respective existing
officers' and directors' liability insurance ("D&O Insurance") for a period
of three (3) years after the Sub Effective Time or Parent Effective Time,
as applicable, so long as the annual premium therefor, in the aggregate, is
not in excess of 150% of the last annual premium paid prior to the date
hereof (the "Maximum Premium"); provided, however, if the existing D&O
Insurance expires, or is terminated or cancelled by the insurance carrier
during such three-year period, the Parent and Sub will use their
commercially reasonable efforts to obtain as much D&O Insurance as can be
obtained for the remainder of such period for a premium not in excess (on
an annualized basis) of the Maximum Premium.
(v) To the fullest extent not prohibited by applicable New
York law or federal securities laws, Purchaser agrees to guarantee the
payment and performance of the Parent's, Sub's, Acquisition Sub One's and
Acquisition Sub Two's obligations under this Section 6.2(f). This Section
6.2(f) shall survive the closing of the transactions contemplated hereby
and is intended to benefit each of the Indemnified Parties (each of whom
shall be entitled to enforce this Section against the Parties). If any
Party, or any of their respective successors or assigns (i) reorganizes or
consolidates with or merges into any other Person and is not the resulting,
continuing or surviving corporation or entity of such consolidation or
merger or (ii) liquidates, dissolves or transfers all or substantially all
of its properties and assets to any Person, then, and in each such case,
prior to such action, proper provision will be made so that the successors
and assigns of such party assume the obligations of such party set forth in
this Section.
6.3 Covenants of Purchaser. Purchaser covenants and agrees as
follows:
(a) Maintenance of Payment Funds. Prior to the Sub Effective
Time and Parent Effective Time, as applicable, Purchaser shall cause the
Payment Funds to be available to effect payment of the Sub Share Conversion
Price, the Sub Option Conversion Price, the Parent Share Conversion Price
and the Parent Option Conversion Price and neither Purchaser, Acquisition
Sub One nor Acquisition Sub Two will enter into any transaction, commitment
or obligation which could reasonably result in the Payment Funds not being
so available as and when required for such payments pursuant to the terms
and conditions of this Agreement.
(b) Purchaser Shares. At the Parent Stockholders' Meeting, all
Parent Shares then owned by Purchaser or any of its direct or indirect
wholly-owned subsidiaries shall be voted in favor of the Parent Merger. At
the Sub Stockholders' Meeting, all Sub Shares then owned by Purchaser or
any of its direct or indirect wholly-owned subsidiaries shall be voted in
favor or the Sub Merger.
6.4 Effect of Certain Covenants. (i) Insofar as any covenants in
this Article VI relate specifically to Sub, Parent shall have no obligation
to force Sub to comply therewith, but shall take such actions as may
reasonably assist and facilitate Sub in complying therewith. If Parent has
done so and Sub has nonetheless failed to comply with such covenant, Parent
will have no liability for damages to Purchaser, Acquisition Sub One or
Acquisition Sub Two for breach of such covenant; provided, however, that
this subparagraph shall have no effect on whether the condition set forth
in Section 7.2(a) has been satisfied, or on any right of Purchaser to
terminate this Agreement under Section 8.3, or on any obligation of Parent
and Sub to pay the Termination Fee to Purchaser pursuant to Section 9.1(b).
(ii) Insofar as any Covenants in this Article VI relate
specifically to Parent or any Parent Subsidiaries (other than Sub or any
Sub Subsidiaries), Sub shall have no obligation to force Parent to comply
therewith, but shall take such actions as may reasonably assist and
facilitate Parent in complying therewith. If Sub has done so and Parent
has nonetheless failed to comply with such covenant, Sub will have no
liability for damages to Purchaser, Acquisition Sub One or Acquisition Sub
Two for breach of such covenant; provided, however, that this subparagraph
shall have no effect on whether the condition set forth in Section 7.2(a)
has been satisfied, or on any right of Purchaser to terminate this
Agreement under Section 8.3, or on any obligation of Parent and Sub to pay
the Termination Fee to Purchaser pursuant to Section 9.1(b).
ARTICLE VII
Conditions
----------
7.1 Conditions to Obligations of the Parties. The obligations of
the Parties to consummate the Sub Merger and the Parent Merger are subject
to the fulfillment of each of the following conditions, any or all of which
may be waived in whole or in party by any of the Parties, as the case may
be, to the extent permitted by applicable law:
(a) Parent Shareholder Approval. The Parent Merger shall have
been duly approved by the holders of the outstanding stock of Parent in
accordance with the PABCL and the Articles of Incorporation and By-Laws of
the Parent.
(b) Sub Shareholder Approval. The Sub Merger and the amendment
to Sub's Articles of Incorporation described in Section 5.1(z) hereof shall
have been duly approved by the holders of the outstanding stock of Sub in
accordance with the PABCL and the Articles of Incorporation and By-Laws of
the Sub.
(c) Governmental and Regulatory Consent. (i) The HSR waiting
period shall have expired or been terminated, and (ii) other than the
filings provided for in Section 1.8, all other filings required to be made
prior to the Sub Effective Time or Parent Effective Time, as applicable, by
the Parties with, and all consents, approvals and authorizations required
to be obtained prior to the applicable Effective Time by the Parties from,
governmental and regulatory authorities in connection with the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby shall have been made or obtained (as the case may be).
(d) Statutes; Injunctions. Neither any statute, rule,
regulation, order, stipulation or injunction (each an "Order") shall be
enacted, promulgated, entered, enforced or deemed applicable to the Sub
Merger or the Parent Merger, nor shall any other action have been taken by
any governmental authority, administrative agency or court of competent
jurisdiction which (i) prohibits the consummation of the transactions
contemplated by this Agreement, or (ii) prohibits Purchaser's direct or
indirect ownership or operation of all or any material portion of the
business or assets of Parent or Sub, or (iii) could compel Purchaser to
dispose of or hold separate all or any material portion of such business or
assets as a result of the transactions contemplated by this Agreement.
(e) Both Mergers. No Party shall be obligated to consummate the
Parent Merger if the Sub Merger shall not have been consummated. No Party
shall be obligated to consummate the Sub Merger unless all conditions to
the Parent Merger have been satisfied or waived.
(f) Amendment to Articles. The Articles of Incorporation of
Sub shall have been amended as described in Section 5.1(z).
7.2 Conditions to Obligations of Purchaser, Acquisition Sub One and
Acquisition Sub Two. The obligation of Purchaser, Acquisition Sub One and
Acquisition Sub Two to consummate the Sub Merger and Parent Merger is
further subject to the fulfillment of the following conditions, which may
be waived by Purchaser, Acquisition Sub One or Acquisition Sub Two:
(a) Compliance. The Parent and the Sub each shall have
performed and complied with, in all material respects, all obligations and
covenants required to be performed or completed with by it under,
respectively, this Agreement at or prior to the Sub Effective Time or
Parent Effective Time, as applicable, and Parent and Sub shall each have
delivered to Purchaser a certificate of an executive officer so certifying.
(b) Representations. Each of the representations and
warranties of Parent and of Sub made in this Agreement shall be true and
correct in all material respects as of the date when made and shall be
deemed to be made again at and as of the Sub Closing and the Parent Closing
and shall then be true and correct in all material respects, except to the
extent changes are required, permitted or contemplated pursuant to this
Agreement, and Parent and Sub shall each have delivered to Purchaser a
certificate of an executive officer so certifying.
(c) Opinion of Counsel. Purchaser shall have received an
opinion of counsel to Parent and Sub in form and substance substantially
the same as previously agreed by Purchaser, Parent and Sub.
(d) Proceedings. No action or proceeding shall have been
instituted and be pending before any court or governmental body to restrain
or prohibit, or to obtain substantial damages in respect of, the
consummation of this Agreement and the transactions contemplated hereby
which, in the reasonable opinion of Purchaser based upon advice of counsel
respecting the likelihood of an adverse outcome in such action or
proceeding, may reasonably be expected to result in a preliminary or
permanent injunction against such consummation or damages which would
constitute a Material Adverse Change.
(e) Material Adverse Change. There shall not have occurred a
Material Adverse Change.
(f) Liens. With the exception of the Security Interest of
IBMCC as disclosed in the Disclosure Letter, in all instances and respects
Parent (or the applicable Parent Subsidiaries as the case may be) shall
hold all shares of stock in all Parent Subsidiaries free and clear of any
restrictions, liens, claims and encumbrances whatsoever.
(g) Tax Consolidation. Each of the Parent Subsidiaries shall
be, and shall have been at all times from the date hereof to the Parent
Effective Time, a member of the consolidated group of companies of which
Parent is the common parent for Federal income tax purposes, it being
understood that compliance with Section 6.1(g)(iii) and (iv) will (for
purposes only of Sub Stock Rights) be deemed to satisfy this subparagraph
(g).
(h) Employment Agreements. The employees of Sub previously
identified in writing by Purchaser shall be employees of Sub and shall have
entered into employment agreements on terms and conditions previously
identified in writing by Purchaser to Parent and Sub, and such employment
agreements shall be in full force and effect..
(i) Letter from Auditors. Purchaser shall have received a
letter (the "Agreed Upon Procedures Letter") from Parent's independent
certified public accountants substantially in the form previously agreed by
Purchaser, Parent and Sub.
(j) Stock Issuance, etc. Neither Parent, Sub nor any Parent
Subsidiary shall (I) after the date of this Agreement have granted, amended
or modified any Stock Rights (except as required pursuant to Section
6.1(g)(iii) or (iv)) or issued any capital stock (except, in the case of
Parent, but not Sub, upon the exercise of Stock Rights outstanding as of
the date of this Agreement), or (II) after December 1, 1997 have purchased
or otherwise acquired any shares of common stock of Sub for a per share
price in excess of the Sub Share Conversion Price.
(k) Stock Rights. There shall be outstanding no Stock Right
which by its terms does not either terminate upon the completion of the Sub
Merger or the Parent Merger or convert into the right to receive only the
Sub Option Conversion Price or the Parent Option Conversion Price, as the
case may be.
(l) Dividends, etc. After the date of this Agreement, neither
Parent nor Sub shall have declared, set aside or paid any dividend or
distribution with respect to its capital stock (whether in cash or in
kind), or shall have redeemed, repurchased or otherwise acquired any of its
capital stock or, except as required by this Agreement, any Stock Rights.
(m) XLSource Transition. Those portions of the XLSource
Transition Plan to have been implemented prior to the Sub Effective Time
shall have been implemented on a timely basis in all material respects, and
there shall not have occurred a material adverse effect on the ability of
Parent or any Parent Subsidiary to implement the XLSource Transition Plan
on a timely basis.
7.3 Conditions to Obligations of Parent. The obligation of Parent
to consummate the Parent Merger and of Parent and Sub to consummate the Sub
Merger is further subject to the fulfillment of the following conditions,
which may be waived by Parent and Sub:
(a) Compliance. Purchaser, Acquisition Sub One and Acquisition
Sub Two each shall have performed and complied with, in all material
respects, all obligations and covenants required to be performed or
completed with by it under this Agreement at or prior to the Sub Effective
Time or Parent Effective Time, as applicable, and Purchaser shall have
delivered to Parent and Sub a certificate of an officer of Purchaser so
certifying.
(b) Representations. Each of the representations and
warranties of Purchaser, Acquisition Sub One and Acquisition Sub Two made
in this Agreement shall be true and correct in all material respects as of
the date when made and shall be deemed to be made again at and as of the
Sub Closing and the Parent Closing and shall then be true and correct in
all material respects, except to the extent changes are required, permitted
or contemplated pursuant to this Agreement, and Purchaser shall have
delivered to Parent and Sub a certificate of an officer of Purchaser so
certifying.
(c) Opinion of Counsel. Parent shall have received an opinion
of counsel to Purchaser in form and substance substantially the same as
previously agreed by Purchaser, Parent and Sub.
ARTICLE VIII
Termination
-----------
8.1 Termination by Mutual Consent. This Agreement may be terminated
and the Sub Merger and the Parent Merger may be abandoned at any time prior
to consummation thereof, before or after the approval by the stockholders
of Parent or Sub, by the written mutual consent of Purchaser, Sub and
Parent.
8.2 Termination by Purchaser, Sub or Parent. This Agreement may be
terminated and the Merger may be abandoned by Purchaser, Sub or Parent if
(i) the Sub Merger or the Parent Merger shall not have been consummated by
July 31, 1998 (unless the failure to consummate by such date is due to the
wrongful action or failure to act of the party seeking to terminate), or
(ii) the stockholders of Parent disapprove the Parent Merger at the Parent
Stockholder Meeting, or (iii) any Order shall have become final and non-
appealable.
8.3 Termination by Purchaser. This Agreement may be terminated by
Purchaser and the Sub Merger and the Parent Merger may be abandoned at any
time prior to consummation thereof, before or after the approval by
stockholders of Parent or Sub if (a) the Parent Board shall have withdrawn
or modified in a manner adverse to Purchaser its approval or recommendation
of this Agreement, or the Parent Board, upon request by Purchaser, shall
fail to reaffirm its approval or recommendation, or shall have resolved to
do any of the foregoing, or at the Sub Stockholders' Meeting all shares of
Sub Common Stock owned directly or indirectly by Parent shall not have been
voted in favor of the Sub Merger and in favor of the amendment to Sub's
Articles of Incorporation described in Section 5.1(z) hereof; or (b) Parent
shall have failed to perform in any material way any of its covenants under
this Agreement in a manner so as not to satisfy the condition to closing in
Section 7.2(a), which failure to perform is incapable of being cured or has
not been cured within twenty (20) days after the giving of notice thereof
to Parent; or (c) Parent shall have breached any of its representations or
warranties in any material respect in a manner so as not to satisfy the
condition to closing in Section 7.2(b), which breach is incapable of being
cured or has not been cured within twenty (20) days after the giving of
notice thereof to Parent; or (d) the Board of Directors of Sub, or the
Independent Committee thereof, shall have withdrawn or modified in a manner
adverse to Purchaser its approval or recommendation of this Agreement, or
the Board of Directors of Sub, or the Independent Committee thereof, upon
request by Purchaser, shall fail to reaffirm its approval or
recommendation, or shall have resolved to do any of the foregoing; or (e)
Sub shall have failed to perform in any material way any of its covenants
under this Agreement in a manner so as not to satisfy the condition to
closing in Section 7.2(a), which failure to perform is incapable of being
cured or has not been cured within twenty (20) days after the giving of
notice thereof to Sub; or (f) Sub shall have breached any of its
representations or warranties in any material respect in a manner so as not
to satisfy the condition to closing in Section 7.2(b), which breach is
incapable of being cured or has not been cured within twenty (20) days
after the giving of notice thereof to Sub.
8.4 Termination by the Parent. This Agreement may be terminated by
Parent and the Sub Merger and the Parent Merger may be abandoned at any
time (i) prior to the consummation thereof, before or after the approval by
stockholders of Parent or Sub, by action of the Parent Board if the Parent
Board receives an unsolicited written offer with respect to a Superior
Proposal, or if an unsolicited tender or exchange offer for the Parent
Shares (with respect to a Superior Proposal) is commenced, and the Parent
Board determines to accept such Superior Proposal or recommend that its
shareholders accept such tender or exchange offer, but only after the
Parent Board has been advised by counsel that approval, acceptance or
recommendation of such transaction is necessary in order for the Parent
Board to act in a manner consistent with its fiduciary obligations under
applicable law, in accordance with clause "(y)" of Section 6.1(b)(2)
provided that Parent has complied with all provisions thereof, including
the notice provisions therein, and that Parent and Sub comply with
applicable requirements relating to the payment (including the timing of
any payment) of the Termination Fee, or (ii) before the Parent Effective
Time, if Purchaser shall have breached or failed to perform in any material
way any of its representations, warranties or covenants under this
Agreement which breach or failure to perform is incapable of being cured or
has not been cured within twenty (20) days after the giving of notice
thereof to Purchaser.
8.5 Termination by the Sub. This Agreement may be terminated by Sub
and the Sub Merger and the Parent Merger may be abandoned at any time (i)
prior to the consummation thereof, before or after the approval by
stockholders of Parent or Sub, by action of the Sub Board if the Sub Board
receives an unsolicited written offer with respect to a Superior Proposal,
or if an unsolicited tender or exchange offer for the Sub Shares (with
respect to a Superior Proposal) is commenced, and the Sub Board determines
to accept such Superior Proposal or recommend that its shareholders accept
such tender or exchange offer, but only after the Sub Board has been
advised by counsel that approval, acceptance or recommendation of such
transaction is necessary in order for the Sub Board to act in a manner
consistent with its fiduciary obligations under applicable law, in
accordance with clause "(y)" of Section 6.1(b)(2) provided that Sub has
complied with all provisions thereof, including the notice provisions
therein, and that Parent and Sub comply with applicable requirements
relating to the payment (including the timing of any payment) of the
Termination Fee, or (ii) before the Sub Effective Time, if Purchaser shall
have breached or failed to perform in any material way any of its
representations, warranties or covenants under this Agreement in a manner
so as not to satisfy the condition to closing in Section 7.3(a) or (b)
which breach or failure to perform is incapable of being cured or has not
been cured within twenty (20) days after the giving of notice thereof to
Purchaser.
8.6 Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to
this Article 8, no party thereto (or any of its directors or officers)
shall have any liability or further obligation to any other party to this
Agreement, except as provided in Sections 9.1 and 9.2. No termination of
this Agreement shall result in the termination of the obligations of the
parties under Sections 5.1(k), 5.2(f), 6.2(a) or 9.1.
ARTICLE IX
Miscellaneous and General
-------------------------
9.1 Payment of Expenses.
(a) Except as set forth in subsection (b) below, whether or not
the Merger shall be consummated, each Party hereto shall pay its own
expenses incident to preparing for, entering into and carrying out this
Agreement and the consummation of the Merger, except that and provided the
Merger is consummated, the expenses of Sub shall be borne by Parent.
(b) In the event that this Agreement is terminated by Purchaser
pursuant to Section 8.3(a), (b), (d) or (e), Parent and Sub shall pay
Purchaser an aggregate fee equal to $12,300,000 (the "Termination Fee"),
payable by wire transfer in immediately available funds, within one (1)
business day of the date of such termination in the respective proportions
set forth below, and such payment shall constitute Purchaser's and its
affiliates' exclusive remedy and be a limit on any damages to which
Purchaser and such affiliates may be entitled for any loss or injury
incurred with respect to any such termination. In the event that this
Agreement is terminated by Purchaser pursuant to Section 8.3(c) or (f), and
if the applicable breach of representation by Parent or Sub was
intentional, reckless or grossly negligent, Parent and Sub shall pay
Purchaser the Termination Fee, payable by wire transfer in immediately
available funds, within one (1) business day of the date of such
termination in the respective proportions set forth below, and such
payment shall constitute Purchaser's and its affiliates' exclusive remedy
and be a limit on any damages to which Purchaser and such affiliates may be
entitled for any loss or injury incurred with respect to any such
termination. Prior to any termination of this Agreement by Parent pursuant
to Section 8.4(i) or by Sub pursuant to Section 8.5(i), Parent and Sub
shall pay Purchaser the Termination Fee, payable by wire transfer of
immediately available funds in the respective proportions set forth below,
and such payment shall constitute Purchaser's and its affiliates exclusive
remedy and be a limit on any damages to which Purchaser and such affiliates
may be entitled for any loss or injury incurred with respect to any such
termination. Parent and Sub acknowledge that the agreements contained in
this Section 9.1(b) are an integral part of the transactions contemplated
by this Agreement, that Parent and Sub will derive substantial benefits
from the transactions involving Sub contemplated by this Agreement, and
that, without the agreements contained in this Section 9.1(b), Purchaser
would not enter into this Agreement; accordingly, if Parent or Sub fails to
promptly pay any amount due pursuant to this Section 9.1(b), and, in order
to obtain such payment, Purchaser commences a suit which results in a
judgment against Parent or Sub for the applicable portion of the
Termination Fee or damages in excess thereof (to the extent permitted
hereunder), Parent or Sub, as applicable, shall also pay to Purchaser its
costs and expenses (including reasonable attorneys' fees) in connection
with such suit, together with interest on the amount of the Termination Fee
at the prime rate of Citibank N.A. in effect on the date such payment was
required to be made. If Purchaser terminates this Agreement pursuant to
Section 8.3(a), (b), (d) or (e), or if Purchaser terminates this Agreement
pursuant to Section 8.3(c) or (f) and is entitled to be paid the
Termination Fee, or if Parent terminates this Agreement pursuant to Section
8.4(i), or if Sub terminates this Agreement pursuant to Section 8.5(i),
then 80% of the Termination Fee shall be paid to Purchaser by Parent and
20% of the Termination Fee shall be paid to Purchaser by Sub.
Notwithstanding the foregoing, if the breach by Parent which gave rise to
the ability to terminate this Agreement under Section 8.3(b) or (c) or if
the breach by Sub which gave rise to the ability to terminate this
Agreement under Section 8.3(e) or (f) constituted a bad faith attempt by
Parent or Sub to avoid its contractual obligations under this Agreement,
nothing in this Agreement shall limit the relief (in addition to the
Termination Fee) which Purchaser shall be entitled to recover under
applicable law. A good faith dispute as to whether the Termination Fee is
payable shall not constitute evidence of such bad faith.
(c) In the event that this Agreement is terminated by Parent
pursuant to Section 8.4(ii) or by Sub pursuant to Section 8.5(ii),
Purchaser shall pay Parent and Sub an aggregate amount equal to the
Termination Fee, payable by wire transfer in immediately available funds,
within one (1) business day of the date of such termination, payable 80% to
Parent and 20% to Sub, and such payment shall constitute Parent's and Sub's
any of their respective affiliates' exclusive remedy and be a limit on any
damages to which Parent or any such affiliate may be entitled for any loss
or injury incurred with respect to any such termination or breach or
failure to perform that gave rise to such termination. Notwithstanding the
foregoing, if the breach by Purchaser which gave rise to the ability to
terminate this Agreement under Section 8.4(ii) or 8.5(ii) constituted a bad
faith attempt by Purchaser to avoid its contractual obligations under this
Agreement, nothing in this Agreement shall limit the relief (in addition to
the Termination Fee) which Parent or Sub shall be entitled to recover under
applicable law. A good faith dispute as to whether the Termination Fee is
payable shall not constitute evidence of such bad faith. Purchaser
acknowledges that the agreements contained in this Section 9.1(c) are an
integral part of the transactions contemplated by this Agreement, that
Purchaser will derive substantial benefits from the transactions
contemplated by this Agreement, and that, without the agreements contained
in this Section 9.1(c), Parent and Sub would not enter into this Agreement;
accordingly, if Purchaser fails to promptly pay any amount due pursuant to
this Section 9.1(c), and, in order to obtain such payment, Parent or Sub
commences a suit which results in a judgment against Purchaser for the
Termination Fee or damages in excess thereof (to the extent permitted
hereunder), Purchaser shall also pay to Parent or Sub, as applicable, its
costs and expenses (including reasonable attorneys' fees but only for the
attorneys of either Parent or Sub, as the case may be, and not both) in
connection with such suit, together with interest on the amount of the
Termination Fee at the prime rate of Citibank N.A. in effect on the date
such payment was required to be made.
9.2 Survival. The representations, warranties, agreements and
covenants in this Agreement shall not survive the consummation of the Sub
Merger and the Parent Merger or the termination of this Agreement unless
the terms of a specific agreement or covenant specify otherwise, in which
case it shall survive in accordance with its terms. Without limiting the
foregoing, the provisions of Section 6.2(f) shall survive the consummation
of the Sub Merger and the Parent Merger.
9.3 Cooperation. The Parties will cooperate with one another in
effecting the transactions contemplated hereby, in the making of all
necessary governmental filings (including, without limitation, filings with
any applicable taxing authority) and in connection with the prosecution or
defense of any investigation, claim, suit, arbitration or other proceeding
brought by or against any governmental authority or other third party.
9.4 Modification or Amendment. Subject to the applicable provisions
of the PABCL, at any time prior to the Parent Effective Time or Sub
Effective Time, as applicable, the Parties hereto may modify or amend this
Agreement, by written agreement executed and delivered by duly authorized
officers of the respective Parties.
9.5 Waiver of Conditions. The conditions to each of the Parties'
obligations to consummate the transactions contemplated hereby are for the
sole benefit of such Party and may be waived by such Party in whole or in
part to the extent permitted hereby and by applicable law.
9.6 Counterparts and Facsimile Signatures. For the convenience of
the Parties hereto, this Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement. Execution of this Agreement may be made by facsimile signature
which, for all purposes, shall be deemed to be an original signature.
9.7 GOVERNING LAW; JURISDICTION; AND SERVICE OF PROCESS. EXCEPT AS
EXPRESSLY SET FORTH BELOW, THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF. IN ADDITION, EACH OF THE PARENT,
THE PURCHASER AND ACQUISITION SUB HEREBY AGREE THAT ANY DISPUTE ARISING OUT
OF THIS AGREEMENT OR THE MERGER SHALL BE HEARD IN THE COURT OF COMMON
PLEAS, COUNTY OF ▇▇▇▇▇▇▇, OF THE COMMONWEALTH OF PENNSYLVANIA, OR IN THE
UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA AND,
IN CONNECTION THEREWITH, EACH PARTY TO THIS AGREEMENT HEREBY CONSENTS TO
THE JURISDICTION OF SUCH COURTS AND AGREES THAT ANY SERVICE OF PROCESS IN
CONNECTION WITH ANY DISPUTE ARISING OUT OF THIS AGREEMENT OR THE MERGER MAY
BE GIVEN TO ANY OTHER PARTY HERETO BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, AT THE RESPECTIVE ADDRESSES SET FORTH IN SECTION 9.8 BELOW.
9.8 Notices. Any notice, request, instruction or other document to
be given hereunder by any party to the others shall be in writing and shall
be deemed delivered upon receipt, if to Purchaser, Acquisition Sub One or
Acquisition Sub Two, addressed to Purchaser, Acquisition Sub One or
Acquisition Sub Two, as the case may be, Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇.▇.
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, facsimile: (203) 968-
3633 (with a copy to Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, facsimile: (▇▇▇) ▇▇▇-▇▇▇▇;
and with a copy to Nixon, Hargrave, Devans & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., facsimile
(▇▇▇) ▇▇▇-▇▇▇▇); and if to the Parent, addressed to the Parent c/o ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇ (with a copy to ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III, Esq., facsimile (▇▇▇) ▇▇▇-▇▇▇▇); and if
to the Sub, addressed to the Sub at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇
(with a copy to ▇▇▇▇▇▇▇▇▇▇, Keen & ▇▇▇▇▇▇▇, Radnor Court, 259 Radnor-
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attention ▇▇▇▇▇▇
▇. ▇▇▇▇▇, facsimile (▇▇▇) ▇▇▇-▇▇▇▇); or to such other Persons or addresses
as may be designated in writing by the party to receive such notice.
9.9 Entire Agreement, etc. This Agreement (including any schedules,
exhibits or Annexes hereto) and the Confidentiality Agreement (i)
constitute the entire agreement, and supersede all other prior agreements,
understandings, representations and warranties both written and oral among
the parties, with respect to the subject matter hereof, (ii) shall not be
assignable by operation of law or otherwise and are not intended to create
any obligations to, or rights in respect of, any Persons other than the
parties hereto; provided, however, Purchaser may cause Acquisition Sub One
and/or Acquisition Sub Two to assign its rights and obligations hereunder
to Purchaser or any other wholly-owned subsidiary of Purchaser, but no such
assignment shall relieve Purchaser, Acquisition Sub One and Acquisition Sub
Two of their obligations hereunder.
9.10 Obligation of Purchaser. Whenever this Agreement requires
Acquisition Sub One or Acquisition Sub Two to take any action (including,
without limitation, the making of payment for the Parent Shares or the Sub
Shares), such requirement shall be deemed to include an undertaking on the
part of Purchaser to cause Acquisition Sub One and/or Acquisition Sub Two
to take such action.
9.11 Captions. The Article, Section and paragraph captions herein
are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions hereof.
9.12 Specific Performance. The parties hereto agree that if any of
the provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, irreparable damage would occur,
no adequate remedy at law would exist, and damages would be difficult to
determine, and that the parties shall be entitled to specific performance
of the terms hereof, in addition to any other remedy at law or equity.
9.13 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of any other provisions of this Agreement, which shall remain in full force
and effect except to the extent that the enforcement of such remaining
provisions would be inequitable.
9.14 Certain Definitions. (a) As used herein, the term "knowledge"
of a particular Person shall mean the actual knowledge of any such
individual or the actual knowledge of the executive officers (which, or
purposes hereof, shall mean those individuals who are required to file
reports under Section 16(a) of the Exchange Act) of any Person which is a
corporation or other entity.
(b) As used in this Agreement, the following terms shall have
the meanings set forth below:
"Acquisition Agreement" is defined in Section 6.1(b)(2).
"Acquisition Proposal" is defined in Section 6.1(b)(1).
"Acquisition Sub One" means TDC Subsidiary Corporation, a Pennsylvania
corporation.
"Acquisition Sub Two" means TDC Two Subsidiary Corporation, a
Pennsylvania corporation.
"Agreed Upon Procedures Letter" is defined in Section 7.2(j).
"Auditors" is defined in Section 7.2(j).
"Confidentiality Agreement" is defined in Section 6.2(a).
"D & O Insurance" is defined in Section 6.2(f)(iv).
"Disclosure Letter" is defined in Section 5.1.
"Employee Benefit Plans" is defined in Section 5.1(r)(II).
"Environmental Laws" is defined in Section 5.1(o).
"ERISA" is defined in Section 5.1(r)(II).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" is defined in Section 5.1(f).
"HSR Act" is defined in Section 5.1(d).
"IBMCC" is defined in Section 6.1(
"Indemnification Agreements" is defined in Section 6.2(f)(i).
"Indemnified Parties" is defined in Section 6.2(f)(i).
"Independent Committee" means the Independent Committee of the Sub
Board.
"Intellectual Property" is defined in Section 5.1(q).
"IRC" is defined in Section 5.1(r)(IV).
"January 1998 Financial Statements" is defined in Section 7.2(j).
"Lazard" is defined in Section 5.1(k).
"Material Adverse Change" means a material adverse effect on the
assets, property, prospects, business condition (financial or
otherwise) or results of operations of either Parent and the Parent
Subsidiaries (including Sub and the Sub Subsidiaries) taken as a
whole or Sub and the Sub Subsidiaries taken as a whole, or on the
ability of the Parties to consummate the transactions contemplated by
this Agreement. Whenever a representation, warranty, covenant,
agreement or condition involves a determination as to whether there
has been a Material Adverse Change, the market price of Parent Common
Stock and Sub Common Stock on NASDAQ shall not constitute evidence as
to whether or not a Material Adverse Change has occurred.
"Maximum Premium" is defined in Section 6.2(f)(iv).
"▇▇▇▇▇▇▇▇▇▇" is defined in Section 5.1(k).
"Most Recent Financial Statements" is defined in Section 7.2(j).
"NASDAQ" is defined in Section 6.1(d).
"Order" is defined in Section 7.1(d).
"PABCL" is defined in Section 1.1.
"Parent" means Intelligent Electronics, Inc., a Pennsylvania
corporation.
"Parent Articles of Merger" is defined in Section 2.8.
"Parent Board" is defined in the recitals.
"Parent Closing" is defined in Section 2.7.
"Parent Common Stock" is defined in Section 5.1(b)(I).
"Parent Dissenting Shares" is defined in Section 2.9.
"Parent Effective Time" is defined in Section 2.8.
"Parent Fairness Opinion" is defined in Section 5.1(l).
"Parent Merger" is defined in the recitals.
"Parent Most Recent Quarter End" is defined in Section 5.1(f)(I).
"Parent Option Conversion Price" is defined in Section 2.4.
"Parent Options" is defined in Section 2.2(ii).
"Parent-Owned Sub Shares" is defined in Section 1.2(i).
"Parent Preferred Stock" is defined in Section 5.1(b).
"Parent Share Conversion Price" is defined in Section 2.3.
"Parent Shares" is defined in Section 2.2(i).
"Parent Subsidiaries" is defined in Section 5.1(a).
"Parent Surviving Corporation" is defined in Section 2.1.
"Parent 10-K" is defined in Section 5.1(f)(I).
"Parent 10-Q" is defined in Section 5.1(f)(I).
"Party" is defined in the introduction.
"Paying Agent" is defined in Section 1.5.
"Payment Funds" is defined in Section 5.2(e).
"Permits" is defined in Section 5.1(a).
"Person" means an individual, a partnership (general or limited), a
joint venture, a corporation, a trust, an unincorporated
organization, a limited liability company, a group and a government
or other department or agency thereof.
"Proxy Statement" is defined in Section 6.1(c).
"Public Reports" is defined in Section 5.1(e).
"Purchaser" means Xerox Corporation, a New York corporation.
"Purchaser Companies" means Purchaser and all direct and indirect
subsidiaries thereof.
"Rights Agreement" means the Rights Agreement dated as of March 22,
1996 between Parent and Chemical Mellon Shareholder Services L.L.C.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Interest" is defined in Section 5.1(d).
"Stock Rights" is defined in Section 5.1(b)(I).
"Stockholders Meeting" is defined in Section 6.1(c).
"Sub" means XLConnect Solutions, Inc., a Pennsylvania corporation.
"Sub Articles of Merger" is defined in Section 1.8.
"Sub Board" is defined in the recitals.
"Sub Closing" is defined in Section 1.7.
"Sub Common Stock" is defined in Section 5.1(b)(II).
"Sub Dissenting Shares" is defined in Section 1.9.
"Sub Effective Time" is defined in Section 1.8.
"Sub Fairness Opinion" is defined in Section 5.1(l).
"Sub Merger" is defined in the recitals.
"Sub Most Recent Quarter End" is defined in Section 5.1(f)(II).
"Sub Option Conversion Price" is defined in Section 1.4.
"Sub Options" is defined in Section 1.2(ii).
"Sub Plan" is defined in Section 5.1(r)(I).
"Sub Preferred Stock " is defined in Section 5.1(b)(II).
"Sub Share Conversion Price" is defined in Section 1.3.
"Sub Shares" is defined in Section 1.2(i).
"Sub Subsidiaries" means all direct and indirect subsidiaries of Sub.
"Sub Surviving Corporation" is defined in Section 1.1.
"Sub 10-K" is defined in Section 5.1(f)(II).
"Sub 10-Q" is defined in Section 5.1(f)(II).
"Superior Proposal" is defined in Section 6.1(b)(2).
"Takeover Statutes" is defined in Section 6.1(f).
"Taxes" is defined in Section 5.1(j)(I).
"Termination Fee" is defined in Section 9.1(b).
"XLC Plan" is defined in Section 6.1(g)(iii).
"XLSource Transition Plan" means the plan Parent has previously
delivered to Purchaser regarding the pending transition of certain
business of XLSource, Inc.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties hereto on the date
first hereinabove written.
INTELLIGENT ELECTRONICS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: Chairman and CEO
XLCONNECT SOLUTIONS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: Chairman
XEROX CORPORATION
By: /s/ ▇. ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: Executive Vice President
TDC SUBSIDIARY CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: President
TDC TWO SUBSIDIARY CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
Title: President