View:
As filed with the Securities and Exchange Commission
on August 29, 1996
Registration No. 33-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________________
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
___________________
CUC International Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 06-0918165
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
___________________
707 Summer Street
Stamford, Connecticut 06901
(203) 324-9261
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
___________________
Cosmo Corigliano
Senior Vice President and Chief Financial Officer
CUC International Inc.
707 Summer Street
Stamford, Connecticut 06901
(203) 324-9261
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
Copy to:
Amy N. Lipton, Esq.
Senior Vice President and General Counsel
CUC International Inc.
707 Summer Street
Stamford, Connecticut 06901
(203) 324-9261
___________________
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of the Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box.
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box.
CALCULATION OF REGISTRATION FEE
Amount Proposed Proposed
to be Maximum Maximum Amount of
Title of Shares to be Registered Aggregate Aggregate Registration
Registered (1) Price Offering Fee
Per Unit Price (1)
Common Stock, par value
$.01 per share 120,000 N/A $4,000,000 $1,379.31
(1) 120,000 shares represents the approximate number of shares expected to
be issued to the Selling Stockholder named herein in connection with the
acquisition by the Registrant from such Selling Stockholder of all
outstanding shares of capital stock of Book Stacks Unlimited, Inc., an Ohio
corporation; the actual number of shares will be based on $4,000,000
divided by an average of the trading prices of such shares prior to such
acquisition (as more fully described herein). The registration fee has
been calculated based on $4,000,000, the proposed maximum aggregate
offering price, pursuant to Rule 457(o) promulgated under the Securities
Act of 1933, as amended.
____________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the
Securities and Exchange Commission, acting pursuant to said Section 8(a),
may determine.
Information contained herein is subject to completion or
amendment. A registration statement relating to these securities
has been filed with the Securities and Exchange Commission.
These securities may not be sold nor may offers to buy be
accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell
or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED AUGUST 29, 1996
[120,000] SHARES
_________________
CUC INTERNATIONAL INC.
COMMON STOCK
($.01 par value per share)
The shares (the "Shares") of common stock, $.01 par value
("Common Stock"), of CUC International Inc., a Delaware
corporation ("CUC" or the "Company") offered hereby may be
offered for sale from time to time by and for the account of
Charles Stack, a resident of Ohio (the "Selling Stockholder").
See "Selling Stockholder." The Selling Stockholder is acquiring
the Shares in connection with the acquisition by the Company of
all of the issued and outstanding capital stock of Book Stacks
Unlimited, Inc. ("Book Stacks") pursuant to the merger (the
"Merger") of BSU Acquisition Corporation, an Ohio corporation and
a wholly-owned subsidiary of the Company ("Merger Sub"), with and
into Book Stacks upon the terms and conditions of a Merger
Agreement dated as of August 7, 1996 (the "Merger Agreement"), by
and among CUC, Merger Sub, Book Stacks and the Selling
Stockholder (the closing date of such acquisition, the "Closing
Date"). Pursuant to Section 1.7(c) of the Merger Agreement, the
actual number of shares to be issued by the Company to the
Selling Stockholder pursuant to the Merger is based on $4,000,000
divided by an average of the last reported sale prices of such
shares on the New York Stock Exchange during the period of the
ten most recent trading days ending on the second business day
prior to the Closing Date. Pursuant to the Merger Agreement and
an escrow agreement to be dated as of the Closing Date (the
"Escrow Agreement") among the Company, the Selling Stockholder
and Robert T. Tucker, Esq., as escrow agent (the "Escrow Agent"),
one-eighth of the total number of Shares to be issued to the
Selling Stockholder pursuant to the Merger will be held initially
in escrow by the Escrow Agent following the closing of the
Merger, as partial security for the Selling Stockholder's
indemnity obligations under the Merger Agreement. The Selling
Stockholder may direct the Escrow Agent to sell all or part of
such escrowed Shares with the proceeds thereof remaining in
escrow.
The Company is registering the Shares as required by Section
1.10 of the Merger Agreement (the "Merger Agreement Registration
Provisions"). The Company will not receive any of the proceeds
from the sale of the Shares by the Selling Stockholder, but has
agreed to bear certain expenses of registration of the Shares.
See "Plan of Distribution." The Common Stock is listed on the
New York Stock Exchange under the symbol "CU." On August 27,
1996, the last reported sale price of Common Stock on the New
York Stock Exchange was $35.625 per share.
The Selling Stockholder may from time to time offer and sell
the Shares directly or through agents or broker-dealers on terms
to be determined at the time of sale. To the extent required,
the names of any agents or broker-dealers, and applicable
commissions or discounts and any other required information with
respect to any particular offer, will be set forth in an
accompanying Prospectus Supplement. See "Plan of Distribution."
The Selling Stockholder and any agents or broker-dealers that
participate with the Selling Stockholder in the distribution of
the Shares may be deemed to be "underwriters" within the meaning
of the Securities Act of 1933, as amended (the "Securities Act"),
and, in such event, any commissions received by them and any
profit on the resale of Shares may be deemed underwriting
commissions or discounts under the Securities Act. See "Plan of
Distribution" herein for a description of certain indemnification
arrangements between the Company and the Selling Stockholder.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1996.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange
Commission (the "Commission"). In addition, in July and August
of 1996, the Company acquired three entities, namely Ideon Group,
Inc. ("Ideon"), Davidson & Associates, Inc. ("Davidson") and
Sierra On-Line, Inc. ("Sierra"), each of which was subject to the
informational requirements of the Exchange Act prior to their
acquisition by the Company, and each of which had filed reports,
proxy statements and other information with the Commission prior
to their acquisition by the Company. Such reports, proxy
statements and other information filed with the Commission by the
Company, Ideon, Davidson and Sierra can be inspected and copied
at the public reference facilities maintained by the Commission
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Regional Offices located at 7 World Trade Center, Suite
1300, New York, New York 10048, and Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-
2511. Copies of such materials can be obtained upon written
request addressed to the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the Common Stock is listed on the
New York Stock Exchange, and reports, proxy statements and other
information concerning the Company may be inspected at the
offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005.
The Company has filed with the Commission a registration
statement on Form S-3 (together with any amendments, the
"Registration Statement") under the Securities Act, covering the
shares of Common Stock being offered by this Prospectus. This
Prospectus, which is part of the Registration Statement, does not
contain all of the information and undertakings set forth in the
Registration Statement and reference is made to such Registration
Statement, including exhibits, which may be inspected and copied
in the manner and at the locations specified above, for further
information with respect to the Company and the Common Stock.
Statements contained in this Prospectus concerning the provisions
of any document are not necessarily complete and, in each
instance, reference is made to the copy of such document filed as
an exhibit to the Registration Statement or otherwise filed with
the Commission. Each such statement is qualified in its entirety
by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Incorporation by Reference to Certain Publicly-Filed
Documents. The following documents previously filed with the
Commission by the Company are incorporated by reference into this
Prospectus:
(i) The Company's Annual Report on Form 10-K for
the fiscal year ended January 31, 1996 (the "CUC 10-
K");
(ii) The Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended April 30, 1996;
(iii) The Company's Current Reports on Form 8-K, as
filed with the Commission on February 21, 1996,
February 22, 1996, March 12, 1996, April 22, 1996,
August 5, 1996, August 14, 1996 and August __, 1996 and
all other reports filed pursuant to Section 13(a) or
15(d) of the Exchange Act since January 31, 1996 and
prior to the date of this Prospectus; and
(iv) The description of Common Stock in the
Company's registration statements on Form 8-A, as filed
with the Commission on July 27, 1984 and August 15,
1989.
Incorporation by Reference to Certain Other Publicly-Filed
Documents. In addition, all documents filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act subsequent to the date of this Prospectus and prior to the
termination of the offering made pursuant to the Registration
Statement shall be deemed to be incorporated by reference into
and to be a part of this Prospectus from the date of filing of
such documents. Any statement contained in a document so
incorporated by reference shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a
statement contained in this Prospectus, or in any other
subsequently filed document which is also incorporated by
reference, modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus except as so modified or
superseded.
Obtaining Copies of Documents Incorporated by Reference.
The Company will provide, without charge, to each person to whom
this Prospectus is delivered, upon the written or oral request of
any such person, a copy of any or all of the documents
incorporated by reference (not including exhibits to such
documents unless such exhibits are specifically incorporated by
reference in such documents). Requests for copies of such
documents should be directed to the Company, 707 Summer Street,
Stamford, Connecticut 06901, Attention: Secretary, telephone:
(203) 324-9261.
THE COMPANY
General
The Company is a leading technology-driven membership
services company. The Company operates its businesses through
two separate business segments, namely the membership-based
consumer services segment and the computer software segment.
Membership-Based Consumer Services Segment. The Company's
primary line of business is providing membership-based consumer
services. The Company currently has approximately 61 million
members in its various services. The Company provides these
services as individual, wholesale or discount program memberships
("Memberships"). These Memberships include such components as
shopping, travel, auto, dining, home improvement, vacation
exchange, lifestyle clubs, credit card and checking account
enhancement packages, financial products and discount programs.
The Company also administers insurance package programs which
generally are combined with discount shopping and travel for
credit union members, distributes welcoming packages which
provide new homeowners with discounts for local merchants and
provides travelers with value-added tax refunds. The Company
believes it is the leading provider of membership-based consumer
services of these types in the United States. The Company's
activities in this area are conducted principally through its
Comp-U-Card division and certain of the Company's wholly-owned
subsidiaries, including FISI*Madison Financial Corporation,
Benefit Consultants, Inc., Interval International Inc. and
Entertainment Publications, Inc.
The Company derives revenues from such membership-based
consumer services principally from membership fees. Membership
fees vary depending upon the particular membership program, and
annual fees to consumers generally range from $6 to $250 per
year. Most of the Company's memberships are for one-year
renewable terms, and members generally are entitled to unlimited
use during the membership period of the service for which the
member has subscribed. Members generally may cancel their
membership and obtain a full refund at any point during the
membership term.
Computer Software Segment. As noted below under "Recent
Developments," the Company recently acquired Davidson, which is a
publisher and distributor of educational and entertainment
software, and Sierra, which is an entertainment software company.
See "Recent Developments," set forth below, for a more complete
description of the respective businesses of Davidson and Sierra.
Further Information. For a more detailed description of the
various businesses of the Company, see the descriptions set forth
in the CUC 10-K and the other documents referred to above under
"Incorporation of Certain Documents by Reference" which were
previously filed with the Commission by the Company (each of
which is incorporated herein by reference).
Location of Executive Offices. The Company's executive
offices are located at 707 Summer Street, Stamford, Connecticut
06901, and its telephone number is (203) 324-9261.
RECENT DEVELOPMENTS
Book Stacks Acquisition. On August 7, 1996, the Company
entered into the Merger Agreement, which provides for the
acquisition by the Company of Book Stacks pursuant to the Merger.
Pursuant to Section 1.7(c) of the Merger Agreement, upon
consummation of the Merger, the Company will deliver to the
Selling Stockholder (x) a cash amount equal to $852,000.00 and
(y) a number of shares of Common Stock equal to $4,000,000
divided by an average of the last reported sale prices of such
shares on the New York Stock Exchange during the period of the
ten most recent trading days ending on the second business day
prior to the Closing Date. Pursuant to the Merger Agreement, the
consummation of the Merger is conditioned upon, among other
things, the Registration Statement having been declared effective
by the Commission. The parties anticipate that the Merger will
be consummated on or shortly after the date on which the
Registration Statement is declared effective by the Commission.
The acquisition of Book Stacks will be accounted for by the
Company as a purchase. Book Stacks, which is based in Cleveland,
Ohio, is an Internet-based retailer of books and related
materials. The Company's decision to acquire Book Stacks was
motivated by, among other reasons, the Company's desire to
further its long-term strategic objectives and to broaden the
Company's Internet-based and other interactive product offerings.
Ideon Acquisition. On August 7, 1996, the Company acquired
all of the outstanding stock of Ideon. The acquisition of Ideon
was effected pursuant to the terms of an Agreement and Plan of
Merger dated as of April 19, 1996 among Ideon, the Company and IG
Acquisition Corp., a wholly-owned subsidiary of the Company. The
acquisition of Ideon was accounted for as a pooling-of-interests.
Ideon, which was based in Jacksonville, Florida, is a holding
company with three principal business units, namely SafeCard
Services, Incorporated ("SafeCard"), Wright Express Corporation
("Wright Express") and National Leisure Group, Inc. ("NLG").
SafeCard, which is the largest subsidiary of Ideon, is a provider
of credit card enhancement and continuity products and services.
Wright Express is a provider of information processing,
information management and financial services to commercial car,
van and truck fleets in the United States. NLG is a provider of
vacation travel packages and cruises directly to consumers in
association with established retailers and warehouse clubs
throughout New England, New York and New Jersey and with credit
card issuers and travel club members nationwide. The Company
acquired Ideon, among other reasons, to further the Company's
long-term strategic objectives and to enhance the Company's
product offerings and complement its client and membership bases.
Davidson Acquisition. On July 24, 1996, the Company
acquired all of the outstanding stock of Davidson. The
acquisition of Davidson was effected pursuant to the terms of an
Agreement and Plan of Merger dated as of February 19, 1996 among
Davidson, the Company and Stealth Acquisition II Corp., a wholly-
owned subsidiary of the Company. The acquisition of Davidson was
accounted for as a pooling-of-interests. Davidson, which is
based in Torrance, California, develops, publishes, manufactures
and distributes high-quality educational and entertainment
software products for home and school use. The Company acquired
Davidson, among other reasons, to further the Company's long-term
strategic objectives and to broaden the Company's Internet-based
and other interactive product offerings.
Sierra Acquisition. In addition, on July 24, 1996, the
Company acquired all of the outstanding stock of Sierra. The
acquisition of Sierra was effected pursuant to the terms of an
Agreement and Plan of Merger dated as of February 19, 1996 among
Sierra, the Company and Larry Acquisition Corp., a wholly-owned
subsidiary of the Company. The acquisition of Sierra was
accounted for as a pooling-of-interests. Sierra, which is based
in Bellevue, Washington, is a leading publisher and distributor
of interactive entertainment, education and personal productivity
software titles for multimedia personal computers, including CD-
ROM-based personal computer systems, and selected emerging
platforms. The Company acquired Sierra, among other reasons, to
further the Company's long-term strategic objectives and to
broaden the Company's Internet-based and other interactive
product offerings.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the
sale of the Shares. All of the proceeds from the sale of the
Shares will be received by the Selling Stockholder.
SELLING STOCKHOLDER
Ownership of the Shares. All the Shares offered hereby are
owned, both beneficially and of record, by the Selling
Stockholder. As of the date of this Prospectus, other than the
Shares offered hereby, the Selling Stockholder does not own any
other shares of Common Stock or any other shares of the capital
stock of the Company. Immediately prior to giving effect to the
Merger, the Selling Stockholder was the sole stockholder of Book
Stacks. The Shares are being acquired by the Selling Stockholder
in connection with the Merger, subject to the provisions of the
Merger Agreement, and represent less than one percent (1%) of the
total outstanding shares of Common Stock. The Shares offered by
this Prospectus may be offered from time to time by the Selling
Stockholder. Since the Selling Stockholder may sell all, some or
none of its Shares, no estimate can be made of the aggregate
number of Shares that are to be offered hereby or that will be
owned by the Selling Stockholder upon completion of the offering
to which this Prospectus relates.
Merger Agreement Registration Provisions. As required by
the Merger Agreement Registration Provisions, the Company has
filed the Registration Statement, of which this Prospectus forms
a part, with respect to the sale of the Shares, and has agreed to
use its commercially reasonable efforts to keep the Registration
Statement current and effective through eighteen (18) months from
the effective date of the Registration Statement, with certain
exceptions. In addition, pursuant to the terms of the Merger
Agreement Registration Provisions, the Company will bear certain
costs of registering the Shares under the Securities Act and the
Company and the Selling Stockholder have agreed to indemnify each
other and certain other parties for certain liabilities,
including liabilities under the Securities Act, with respect to
certain inaccuracies which might be contained in this Prospectus
and the Registration Statement and the amendments and supplements
thereto. See "Plan of Distribution" below for a more complete
description of the Merger Agreement Registration Provisions.
Employment and Other Special Relationships. The parties
anticipate that the Selling Stockholder will enter into an
employment agreement with the Company to be dated as of the
Closing Date (the "Employment Agreement"), which will provide,
subject to the terms and conditions thereof, for the employment
of the Selling Stockholder by the Company for a period of three
years following the consummation of the Merger. To the best
knowledge of the Company, except for the employment of the
Selling Stockholder pursuant to the Employment Agreement, neither
the Selling Stockholder nor any of the affiliates of the Selling
Stockholder is, or has in the past three years been, a director
or officer of the Company or, to the best knowledge of the
Company, any of the Company's affiliates. Except for the
transactions contemplated pursuant to the Merger Agreement, the
Employment Agreement and the Escrow Agreement, to the best
knowledge of the Company, there is not, and there has not in the
past three years been, any material relationship between the
Company and its affiliates, on the one hand, and the Selling
Stockholder and its affiliates, on the other.
PLAN OF DISTRIBUTION
The Selling Stockholder has advised the Company that the
Shares may be sold by him from time to time on the New York Stock
Exchange or any national securities exchange or automated
interdealer quotation system on which shares of Common Stock are
then listed, or through negotiated transactions or otherwise.
The Shares will not be sold in an underwritten public offering.
The Shares will be sold at prices and on terms then prevailing,
at prices related to the then-current market price, or at
negotiated prices. The Selling Stockholder may effect sales of
the Shares directly or by or through agents, brokers or dealers
and the Shares may be sold by one or more of the following
methods: (a) ordinary brokerage transactions, (b) purchases by a
broker-dealer as principal and resale by such broker-dealer for
its own account pursuant to this Prospectus, and (c) in "block"
sales. At the time a particular offer is made, a Prospectus
Supplement, if required, will be distributed that sets forth the
name or names of agents or broker-dealers, any commissions and
other terms constituting compensation and any other required
information. In effecting sales, broker-dealers engaged by the
Selling Stockholder and/or the purchasers of the Shares may
arrange for other broker-dealers to participate. Broker-dealers
will receive commissions, concessions or discounts from the
Selling Stockholder and/or the purchasers of the Shares in
amounts to be negotiated prior to the sale. Sales will be made
only through broker-dealers registered as such in a subject
jurisdiction or in transactions exempt from such registration.
Although there are no definitive selling arrangements between the
Selling Stockholder and any broker or dealer as of the date of
this Prospectus, the Selling Stockholder has advised the Company
that he is currently considering retaining Merrill Lynch & Co. to
act on his behalf as a broker-dealer in connection with selling
and other transactions in respect of Shares.
In connection with the distribution of the Shares, the
Selling Stockholder may enter into hedging transactions with
broker-dealers. In connection with such transactions, broker-
dealers may engage in short sales of the Shares in the course of
hedging the positions they assume with the Selling Stockholder.
The Selling Stockholder may also sell the Shares short and
redeliver the Shares to close out the short positions. The
Selling Stockholder may also enter into option or other
transactions with broker-dealers which require the delivery to
the broker-dealer of the Shares. The Selling Stockholder may
also loan or pledge the Shares to a broker-dealer and the broker-
dealer may sell the Shares so loaned or upon a default the broker-
dealer may effect sales of the pledged shares. In addition to
the foregoing, the Selling Stockholder may, from time to time,
enter into other types of hedging transactions.
In offering the Shares covered by this Prospectus, the
Selling Stockholder and any brokers, dealers or agents who
participate in a sale of the Shares by the Selling Stockholder
may be considered "underwriters" within the meaning of Section
2(11) of the Securities Act, and the compensation of any
broker/dealers may be deemed to be underwriting discounts and
commissions.
As required by the Merger Agreement Registration Provisions,
the Company has filed the Registration Statement, of which this
Prospectus forms a part, with respect to the sale of the Shares.
The Company has agreed to use its commercially reasonable efforts
to keep the Registration Statement current and effective through
eighteen (18) months from the effective date of the Registration
Statement, with certain exceptions.
The Company will not receive any of the proceeds from the
sale of the Shares by the Selling Stockholder. The Company will
bear certain costs of registering the Shares under the Securities
Act, including the registration fee under the Securities Act, all
other registration and filing fees, all fees and disbursements of
counsel and accountants retained by the Company and all other
expenses incurred by the Company in connection with the Company's
performance of or compliance with the Merger Agreement
Registration Provisions. The Selling Stockholder will bear
certain other costs relating to the registration of the Shares
under the Securities Act, including all underwriting discounts
and commissions, all transfer taxes and all costs of any separate
legal counsel or other advisors retained by the Selling
Stockholder.
Pursuant to the terms of the Merger Agreement Registration
Provisions, the Company and the Selling Stockholder have agreed
to indemnify each other and certain of their respective
representatives for certain liabilities, including liabilities
under the Securities Act, with respect to certain inaccuracies
which might be contained in this Prospectus and the Registration
Statement and the amendments and supplements thereto.
LEGAL MATTERS
The legality of the issuance of the Shares will be passed
upon for the Company by Peter McGonagle, a Vice President of the
Company. Mr. McGonagle holds options to acquire shares of the
Company's Common Stock.
EXPERTS
The consolidated financial statements of the Company
appearing in the Company's Annual Report (Form 10-K) for the year
ended January 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by
reference in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim
financial information for the three-month periods ended April 30,
1996 and April 30, 1995, incorporated by reference in this
Prospectus, Ernst & Young LLP have reported that they have
applied limited procedures in accordance with professional
standards for a review of such information. However, their
separate report, included in the Company's Quarterly Report on
Form 10-Q for the quarter ended April 30, 1996, incorporated
herein by reference, states that they did not audit and they do
not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their report on such
information should be restricted in light of the limited nature
of the review procedures applied. Ernst & Young LLP are not
subject to the liability provisions of Section 11 of the
Securities Act for their report on the unaudited interim
financial information because that report is not a "report" or a
"part" of the Registration Statement prepared or certified by the
auditors within the meaning of Sections 7 and 11 of the
Securities Act.
The consolidated financial statements and related financial
statement schedules of Ideon incorporated in this Prospectus by
reference to the Company's Current Report on Form 8-K filed with
the Commission on August ___, 1996, have been audited by Price
Waterhouse LLP, independent accountants, as stated in their
report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements and related financial
statement schedules of Davidson incorporated in this Prospectus
by reference to the Company's Current Report on Form 8-K filed
with the Commission on August ___, 1996 have been audited by KPMG
Peat Marwick LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements and related financial
statement schedules of Sierra incorporated in this Prospectus by
reference to the Company's Current Report on Form 8-K filed with
the Commission on August ___, 1996 have been audited by Deloitte
& Touche LLP, independent auditors, as stated in their report,
which is incorporated herein by reference, and has been so
incorporated in reliance upon the report of such firm given upon
their authority as experts in accounting and auditing.
The consolidated financial statements and the related
financial statement schedules of Advance Ross Corporation
incorporated in this Prospectus by reference to the Company's
Current Report on Form 8-K filed with the Commission on August
___, 1996, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
No dealer, salesperson or other
individual has been authorized to [120,000] SHARES
give any information or to make
any representation not contained
in this Prospectus and, if given
or made, such information or
representation must not be relied
upon as having been authorized by
the Company or the Selling CUC International Inc.
Stockholder. This Prospectus does
not constitute an offer to sell or
a solicitation of an offer to buy
the securities offered hereby in
any jurisdiction or to any person
to whom it is unlawful to make
such offer or solicitation.
Neither the delivery of this
Prospectus nor any sale made
hereunder shall, under any
circumstances, create any
implication that the information
contained herein is correct as of
any date subsequent to the date COMMON STOCK
hereof. ($.01 par value per share)
_____________
TABLE OF CONTENTS
___________________
Page
PROSPECTUS
Available Information 2 ____________________
Incorporation of Certain
Documents By Reference 2
The Company 3
Recent Developments 4
Use of Proceeds 4 , 1996
Selling Stockholder 4
Plan of Distribution 5
Legal Matters 6
Experts 6
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14.Other Expenses of Issuance and Distribution
Securities and Exchange Commission Registration Fee $1,379.31
*Accounting Fees and Expenses 7,500.00
*Legal Fees and Expenses 0.00
*Miscellaneous 0.00
Total $8,879.31
As noted above under "Plan of Distribution", the Company has
agreed to bear certain costs of registering the Shares under the
Securities Act, including the registration fee under the
Securities Act, all other registration and filing fees, all fees
and disbursements of counsel and accountants retained by the
Company and all other expenses incurred by the Company in
connection with the Company's performance of or compliance with
the Merger Agreement Registration Provisions; such costs (or
estimates thereof) have been set forth above. The Selling
Stockholder will bear certain other costs relating to the
registration of the Shares under the Securities Act, including
all underwriting discounts and commissions, all transfer taxes
and all costs of any separate legal counsel or other advisors
retained by the Selling Stockholder.
* Estimated
Item 15.Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law empowers
a Delaware corporation to indemnify any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that
such person is or was a director, officer, employee or agent of
such corporation or is or was serving at the request of such
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection
with such action, suit or proceeding, provided that such person
acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's
conduct was unlawful. A Delaware corporation may indemnify
directors, officers, employees and other agents of such
corporation in an action by or in the right of the corporation
under the same conditions, except that no indemnification is
permitted without judicial approval if the person to be
indemnified has been adjudged to be liable to the corporation.
Where a director, officer, employee or agent of the corporation
is successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to above or in defense of any
claim, issue or matter therein, the corporation must indemnify
such person against the expenses (including attorneys' fees)
which he or she actually and reasonably incurred in connection
therewith.
The registrant's By-Laws contains provisions that provide for
indemnification of officers and directors and their heirs and
distributees to the full extent permitted by, and in the manner
permissible under, the General Corporation Law of the State of
Delaware.
As permitted by Section 102(b)(7) of the General Corporation
Law of the State of Delaware, the registrant's Amended and
Restated Certificate of Incorporation contains a provision
eliminating the personal liability of a director to the
registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director, subject to certain exceptions.
Pursuant to the Merger Agreement Registration Provisions, the
Selling Stockholder has agreed to indemnify the Company and its
officers, directors and controlling persons against certain
liabilities.
The registrant maintains policies insuring its officers and
directors against certain civil liabilities, including
liabilities under the Securities Act.
Item 16.Exhibits
2.1 Form of Merger Agreement dated as of August 7, 1996 by
and among CUC, BSU Acquisition Corporation, Book Stacks and the
Selling Stockholder.
5 Opinion of Peter McGonagle as to the legal issuance of
the Common Stock to be registered.
15 Letter re: Unaudited Interim Financial Information.*
23.1 Consent of Peter McGonagle (included in Exhibit 5).
23.2 Consent of Ernst & Young LLP.*
23.3 Consent of Price Waterhouse LLP.*
23.4 Consent of KPMG Peat Marwick LLP.*
23.5 Consent of Deloitte & Touche LLP (relating to the
Sierra financial statements).*
23.6 Consent of Deloitte & Touche LLP (relating to the
Advance Ross Corporation financial statements).*
24 Power of Attorney (included as part of the Signature Page
of this Registration Statement).
________________
* To be filed by amendment.
Item 17.Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement to include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
2. That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
3. To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
4. That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in this Registration Statement shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
5. Insofar as indemnification for liabilities arising under
the Securities Act, may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements for filing on Form
S-3 and has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in
the City of Stamford, State of Connecticut, on this 29th day of
August, 1996.
CUC INTERNATIONAL INC.
By:/s/Walter A. Forbes
Walter A. Forbes
Chief Executive Officer and Chairman
of the Board of Directors
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints Walter A.
Forbes and E. Kirk Shelton, and each and either of them, his or
her true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign any
and all amendments (including, without limitation, post-effective
amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act, this
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
/s/ Walter A. Forbes Chief Executive Officer August 29, 1996
Walter A. Forbes and Chairman of the Board
(Principal Executive Officer)
/s/ Cosmo Corigliano Senior Vice President August 29, 1996
Cosmo Corigliano and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Bartlett Burnap Director August 29, 1996
Bartlett Burnap
/s/T. Barnes Donnelley Director August 29, 1996
T. Barnes Donnelley
/s/Stephen A. Greyser Director August 29, 1996
Stephen A. Greyser
/s/Christopher K. McLeod Director August 29, 1996
Christopher K. McLeod
/s/ Burton C. Perfit Director August 29, 1996
Burton C. Perfit
Robert P. Rittereiser Director
/s/Stanley M. Rumbough, Jr. Director August 29, 1996
Stanley M. Rumbough, Jr.
/s/ E. Kirk Shelton Director August 29, 1996
E. Kirk Shelton
Kenneth A. Williams Director
Janice G. Davidson Director
Robert M. Davidson Director
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit Page
2.1 Form of Merger Agreement dated as of August 7, 1996 by and
among CUC, BSU Acquisition Corporation, Book Stacks and
the Selling Stockholder.
5 Opinion of Peter McGonagle as to the legal issuance of the
Common Stock to be registered.
15 Letter re: Unaudited Interim Financial Information.*
23.1 Consent of Peter McGonagle (included in Exhibit 5).
23.2 Consent of Ernst & Young LLP.*
23.3 Consent of Price Waterhouse LLP.*
23.4 Consent of KPMG Peat Marwick LLP.*
23.5 Consent of Deloitte & Touche LLP (relating to the Sierra
financial statements).*
23.6 Consent of Deloitte & Touche LLP (relating to the Advance
Ross Corporation financial statements).*
24 Power of Attorney (included as part of the Signature Page of
this Registration Statement).
________________
* To be filed by amendment.
Exhibit 2.1
MERGER AGREEMENT
among
CUC INTERNATIONAL INC.,
BSU ACQUISITION CORPORATION,
BOOK STACKS UNLIMITED, INC.,
and
CHARLES STACK
Dated as of August 7, 1996
MERGER AGREEMENT
Merger Agreement dated as of August 7, 1996 (the
"Agreement"), by and among Book Stacks Unlimited, Inc., an Ohio
corporation (the "Company"), Charles Stack, a resident of Ohio (the
"Shareholder"), CUC International Inc., a Delaware corporation
("Parent"), and BSU Acquisition Corporation, an Ohio corporation and a
wholly-owned subsidiary of Parent ("Merger Sub").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Merger Sub
and the Company have each determined that the merger of Merger Sub
with and into the Company (the "Merger"), upon the terms and subject
to the conditions set forth in this Agreement, would be fair to and in
the best interests of their respective shareholders;
WHEREAS, the respective Boards of Directors of Parent,
Merger Sub and the Company have each approved and adopted this
Agreement and the transactions contemplated hereby;
WHEREAS, Parent, as the sole shareholder of Merger Sub, has
approved this Agreement and the transactions contemplated hereby;
WHEREAS, the Shareholder owns 100 shares of the Common Stock
(no par value) of the Company (each such share, a "Share" and
collectively, the "Shares"), representing all of the issued and
outstanding capital stock of the Company, and desires to enter into
this Agreement and consummate the transactions contemplated hereby;
WHEREAS, simultaneously with the Closing, (x) the
Shareholder and Camille Tillman, a current employee of the Company,
each intend to enter into an Employment Agreement with the Company,
each in the form attached hereto as Exhibits A and B, respectively
(the "Employment Agreements"), and (y) Parent, the Shareholder and
Robert T. Tucker, Esq., as escrow agent (the "Escrow Agent") each
intend to enter into an Escrow Agreement in the form attached hereto
as Exhibit C (the "Escrow Agreement" and, collectively with the
Employment Agreements and all other agreements which are entered into
by the parties hereto pursuant to this Agreement or in connection with
any of the transactions contemplated hereby, the "Related Agreements);
and
WHEREAS, the parties hereto desire to make certain
representations, warranties, covenants and agreements in connection
with this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein
contained, the parties hereto agree as follows:
MERGER
1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the
Ohio General Corporation Law (the "Ohio Statute"), Merger Sub shall be
merged with and into the Company at the Effective Time (as defined in
Section 1.3). As a result of the Merger, the separate corporate existence
of Merger Sub shall cease, and the Company shall continue as the
surviving corporation of the Merger (the "Surviving Corporation").
The name of the Surviving Corporation shall be "Book Stacks Unlimited,
Inc.".
2 Time and Place of Closing . Unless this Agreement
shall have been terminated and the transactions herein contemplated shall
have been abandoned pursuant to Section 8.1, and subject to the
satisfaction or waiver of the conditions set forth in Article 7, the
closing of the Merger (the "Closing") shall take place at 10:00 a.m.,
New York time, on the later to occur of (a) August 30, 1996 and
(b) the second business day after satisfaction of the conditions set
forth in Section 7.1 (or as soon as practicable thereafter following
satisfaction or waiver of the conditions set forth in Article 7),
unless another date or time is agreed to in writing by the parties
hereto (the day on which the Closing takes place being the "Closing
Date"). Except for the filings provided for by Section 1.3 below, the
Closing shall take place by the transmittal of documents to the
respective recipients thereof via telecopy (with the originals of such
documents sent via overnight courier) or by such other means as the
parties may mutually agree upon.
3 Effective Time of the Merger. Subject to the provisions
of this Agreement, the parties hereto shall cause the Merger to be
consummated by filing a Certificate of Merger or other appropriate
documents (the "Certificate of Merger") with the Secretary of State of
the State of Ohio in such form as required by, and executed in
accordance with, the relevant provisions of the Ohio Statute, as soon
as practicable on or after the Closing Date. The Merger shall become
effective upon the later of (i) the time at which such Certificate of
Merger is filed with the Secretary of State of the State of Ohio, or
(ii) such other time as the parties may agree to provide in the
Certificate of Merger (the "Effective Time").
4 Effects of the Merger. At the Effective Time, the
effects of the Merger shall be as provided in the Certificate of Merger
and the applicable provisions of the Ohio Statute.
5 Directors and Officers. The directors of Merger Sub
immediately prior to the Effective Time shall be, from and after the
Effective Time, the initial directors of the Surviving Corporation
until their successors have been duly elected or appointed and
qualified, or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's articles of incorporation
and code of regulations. The officers of the Company immediately
prior to the Effective Time shall be, from and after the Effective
Time, the officers of the Surviving Corporation until their successors
have been duly elected or appointed and qualified, or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's articles of incorporation and code of regulations.
6 Articles of Incorporation; Code of Regulations. At
the Effective Time, the articles of incorporation and the code of
regulations of the Company immediately prior to the Effective Time
shall be the articles of incorporation and the code of regulations of
the Surviving Corporation, until duly amended in accordance with
applicable law.
7 Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of Merger Sub,
the Company or the holders of any Shares or the holders of any capital
stock of Merger Sub:
(a) Conversion of Merger Sub Shares. Each share of
the common stock of Merger Sub issued and outstanding immediately
prior to the Effective Time shall be converted into and become one
fully paid and non-assessable share of voting common stock of the
Surviving Corporation and shall constitute the only shares of capital
stock of the Surviving Corporation.
(b) Shares Owned by the Company, etc. Each Share that
is owned by the Company and any Shares owned by Parent, Merger Sub or
any other wholly-owned subsidiary of Parent or the Company shall be
canceled and retired and shall cease to exist and no consideration
shall be delivered or deliverable in exchange therefor.
(c) Shares Owned by the Shareholder. Subject to the
other provisions of this Article 1, each Share issued and outstanding
immediately prior to the Effective Time (other than shares owned,
directly or indirectly, by the Company or any direct or indirect
wholly-owned subsidiary of the Company or by Parent, Merger Sub or any
other direct or indirect wholly-owned subsidiary of Parent) shall no
longer be outstanding and shall automatically be cancelled and retired
and shall cease to exist and the Shares held by the Shareholder shall
be converted into the right to receive the following:
(i) Cash Payment - a cash payment (such cash
consideration, the "Cash Consideration") equal to $852,500.00;
(ii) Shares to be Delivered - a number of shares
of Parent Common Stock (as defined below), rounded down to the nearest
whole number of shares, equal to the quotient of (A) $4,000,000,
divided by (B) the Average Stock Price (as defined below); provided
that a number of shares (such share consideration, the "Escrowed
Consideration") of Parent Common Stock, rounded down to the nearest
whole number of shares, equal to the quotient of (A) $500,000, divided
by (B) the Average Stock Price (as defined below), will be held in
escrow by the Escrow Agent pursuant to the terms and conditions of the
Escrow Agreement; and
(iii) Fractional Share Cash Amount - cash in lieu
of fractional shares of Parent Common Stock to which such holder is
entitled pursuant to Section 1.8(c) of this Agreement.
For purposes of this Agreement, the capitalized terms set forth below
shall have the following meanings: (i) "Parent Common Stock" shall
mean shares of common stock, par value $.01 per share, of Parent, (ii)
"Closing Price" shall mean, on any day, the last reported sale price
of one share of Parent Common Stock on the NYSE, (iii) "Average Stock
Price" shall mean, with respect to one share of Parent Common Stock,
the average Closing Price for such a share during the period of the
ten (10) most recent trading days ending on the second business day
prior to the Closing Date (as defined in Section 1.3), and (iv) "NYSE"
shall mean the New York Stock Exchange, Inc.
8 Delivery of Certificates. (a) Delivery Procedures.
At the Closing, the Shareholder shall surrender to Parent all certificates
which immediately prior to the Effective Time evidenced outstanding
Shares (including, without limitation, all certificates evidencing the
100 Shares currently held by the Shareholder) (the "Certificates").
Upon surrender of the Certificates to Parent, duly endorsed to Parent
(or accompanied by duly executed stock powers), the Shareholder (or
such other holder of the Certificates) shall be entitled to receive in
exchange therefor (i) a cash amount equal to the Cash Consideration,
(ii) certificates evidencing the shares of Parent Common Stock to be
delivered pursuant to Section 1.7(c)(ii) above (other than the shares
of Parent Common Stock which are included within the Escrowed
Consideration), and (iii) cash in lieu of fractional shares of Parent
Common Stock to which such holder is entitled pursuant to Section
1.8(c), and the Certificates so surrendered shall forthwith be
cancelled.
(b) No Further Rights in Shares. All shares of Parent
Common Stock issued and any cash paid in lieu of fractional shares as
contemplated by Section 1.8(c) upon conversion of the Shares in
accordance with the terms hereof shall be deemed to have been issued
or paid in full satisfaction of all rights pertaining to such Shares
(except as otherwise expressly provided in this Agreement).
(c) Fractional Shares. No fractional shares of Parent
Common Stock shall be issued in the Merger. Each holder of Shares
shall be entitled to receive in lieu of any fractional shares of
Parent Common Stock to which such holder otherwise would have been
entitled pursuant to Section 1.7 (after taking into account all Shares
then held of record by such holder) a cash payment in an amount equal
to the product of (i) the fractional interest in a share of Parent
Common Stock to which such holder otherwise would have been entitled
and (ii) the Average Stock Price.
9 Escrowed Consideration. The shares of Parent Common Stock
constituting the Escrowed Consideration shall be held in escrow by the
Escrow Agent pursuant to the terms and conditions of the Escrow
Agreement (it being understood and agreed that such shares will be
held by the Escrow Agent for a period of at least nine (9) months
after the Closing Date and shall constitute a non-exclusive indemnity
pool to serve as partial security for the indemnification obligations
of the Shareholder under Article 9 of this Agreement). In the event
that, pursuant to the terms and conditions of the Escrow Agreement,
there are any remaining shares of Parent Common Stock (or other
assets) constituting the Escrowed Consideration which have not been
set-off against as a result of the Shareholder's indemnification
obligations under Article 9 of this Agreement (as more fully discussed
in the Escrow Agreement and Section 9.2(d) hereof), then the parties
will take such actions as may be necessary to cause the Escrow Agent
to deliver to the Shareholder such amount of Escrowed Consideration.
10 Registration of Parent Common Stock.
(a) Registration Provisions in General. Parent shall
take all corporate action necessary to reserve for issuance a
sufficient number of shares of Parent Common Stock to satisfy Parent's
obligations to deliver such shares to the Shareholder under this
Agreement. Upon the terms and subject to the conditions of this
Section 1.10, (x) Parent shall prepare and, within ten (10) business
days following the date hereof, cause to be filed with the Securities
and Exchange Commission (the "SEC") a registration statement on Form S-
3 (or any successor form or, in Parent's sole discretion, on any other
appropriate form under the Securities Act as may then be available to
Parent) (such registration statement, the "Registration Statement")
relating to the resale of shares of Parent Common Stock to be received
by the Shareholder at the Closing and in connection with the Escrowed
Consideration (such shares, the "Registrable Shares"; provided that
the term "Registrable Shares" shall not include any shares when (i)
such shares have been sold or otherwise transferred by the Shareholder
or (ii) such shares shall have ceased to be outstanding), (y) Parent
shall use its commercially reasonable efforts to cause the
Registration Statement to be declared effective by the SEC prior to
the Closing, and (z) Parent shall, subject to the terms and conditions
of this Agreement, use its commercially reasonable efforts to maintain
the effectiveness of such Registration Statement (and maintain the
current status of the prospectus or prospectuses contained therein)
for the duration of the Registration Period (as defined below).
Parent shall not be prohibited from adding shares of Parent Common
Stock of other Parent shareholders to the registration statement so
long as the addition of such shares does not significantly delay the
preparation, filing or effectiveness of such registration statement.
Parent will pay all registration and filing fees, all fees and
disbursements of counsel and accountants retained by Parent and all
other expenses incurred by Parent in connection with Parent's
performance of or compliance with this Section 1.10 (excluding
underwriting discounts and commissions, transfer taxes and excluding
the cost of any separate legal counsel or other advisors retained by
the Shareholder). The term "Registration Period" shall mean the
period which shall run from the date on which the Registration
Statement has been declared effective by the SEC and shall expire on
the earlier of (x) 18 months after the date on which the Registration
Statement has been declared effective by the SEC (provided that such
18-month period shall be subject to extension as provided in Section
1.10 (c)), (y) the first date on which the Shareholder is permitted to
resell the Registrable Shares pursuant to the provisions of Rule 144
promulgated under the Securities Act, or (z) the date upon which there
shall cease to be any Registrable Shares.
(b) Registration Procedure. Upon the terms and
subject to the conditions of this Section 1.10, Parent shall, in
effecting any registration of the Registrable Shares pursuant to this
Section 1.10:
(i) Prior to the initial filing of the
Registration Statement with the SEC, furnish to one counsel selected
by the Shareholder copies of all such documents proposed to be filed,
and such counsel shall be given the opportunity to communicate any
comments they may have on such documents (which comments will be
limited to information concerning the Shareholder and its plan of
distribution and other issues reasonably related to the Shareholder);
(ii) Prepare and file with the SEC such amendments
and supplements to such Registration Statement and the prospectus used
in connection with such registration statement as may be necessary to
keep such Registration Statement effective for the Registration
Period;
(iii) Furnish to the Shareholder copies of the
registration statement, each amendment and supplement thereto (in each
case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus) in
conformity with the requirements of the Securities Act and such other
documents as the Shareholder may reasonably request in order to
facilitate the disposition of the Registrable Shares owned by it;
(iv) Use its commercially reasonable efforts to
register or qualify the Registrable Shares under such other securities
or blue sky laws of such jurisdictions as shall be reasonably
requested by the Shareholder and do any and all other acts and things
which may be reasonably necessary or advisable to enable the
Shareholder to consummate the disposition in such jurisdictions of the
Registrable Shares owned by each such Shareholder; provided that
Parent shall not be required in connection therewith or as a condition
thereto to (A) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this
clause (iv), (Bi) subject itself to taxation in any such jurisdiction,
or (C) file a general consent to service of process in any such
jurisdiction;
(v) Use its commercially reasonable efforts to
cause the Registrable Shares to be authorized for listing on the NYSE,
subject to official notice of issuance;
(vi) Notify the Shareholder, at any time when a
prospectus relating to the Registration Statement is required to be
delivered under the Securities Act, as soon as reasonably practicable
after such time as Parent discovers any facts or circumstances which
cause the prospectus included in the Registration Statement to contain
an untrue statement of a material fact or to omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of circumstances then
existing; as soon as reasonably practicable after the date of such
notification to Shareholder, Parent will prepare and furnish to such
Shareholder a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Shares,
such prospectus will not contain an untrue statement of material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
circumstances then existing;
(vii) Subject to such confidentiality
requirements as Parent may reasonably impose, make available for
inspection by the Shareholder and any attorney, accountant or other
agent retained by the Shareholder (collectively, the "Inspectors"),
during the normal business hours of Parent, all financial and other
records, pertinent corporate documents and properties of Parent as
shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause Parent's officers, directors and
employees to supply all information reasonably requested by any such
Inspector in connection with such registration statement;
(viii) Notify the Shareholder of any stop order
issued or threatened by the SEC and take all reasonable actions
required to prevent the entry of such stop order or to remove it if
entered.
(c) Certain Additional Covenants of Parent and the
Shareholder
(i) Parent may require the Shareholder to furnish
to Parent such information regarding the Shareholder and the
distribution of such Registrable Shares as Parent may from time to
time reasonably request. Shareholder and its representatives shall
cooperate with Parent and its representatives to the extent reasonably
required, and shall take such other actions as may be reasonably
necessary or appropriate or as may be reasonably requested by Parent,
in connection with the performance by Parent of its obligations under
this Section 1.10. Shareholder shall notify Parent, as soon as
reasonably practicable after such time as Shareholder discovers any
facts or circumstances which cause the prospectus included in the
Registration Statement to contain an untrue statement of a material
fact or to omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of circumstances then existing.
(ii) The Shareholder agrees that, upon receipt of
any notice from Parent of the happening of any event of the kind
described in Section 1.10(b)(vi) or upon the delivery of a similar
notice to Parent by Shareholder pursuant to Section 1.10(c)(i) above,
such Shareholder will forthwith discontinue disposition of Registrable
Shares pursuant to the registration statement covering such
Registrable Shares until such Shareholder's receipt of the copies of
the supplemented or amended prospectus contemplated by such Section
1.10(b)(vi), and, if so directed by Parent, such Shareholder will
deliver to Parent all copies, other than permanent file copies then in
such Shareholder's possession, of the prospectus covering such
Registrable Shares current at the time of receipt of such notice. In
the event of the giving of any such notice contemplated pursuant to
Sections 1.10(b)(vi) or 1.10(c)(i) above, the Registration Period
shall be extended by the number of days during the period from and
including the date of the giving of such notice, to and including the
date when the Shareholder shall have received the copies of such
supplemented or amended prospectus.
(iii) With respect to any registration
statement filed or to be filed pursuant to this Section 1.10, if the
Board of Directors of Parent determines that, in its good faith
judgment, it would (because of the existence of, or in anticipation
of, any acquisition involving Parent or any subsidiary or any
financing activity, or the unavailability for reasons substantially
beyond Parent's control of any required financial statements, or any
other event or condition of similar significance to Parent or any
subsidiary) be significantly disadvantageous (a "Disadvantageous
Condition") to Parent or any subsidiary or its stockholders for such
registration statement to become effective or to be maintained
effective or for sales of Registrable Shares to continue pursuant to
the registration statement, Parent shall, notwithstanding any other
provisions of this Section 1.10, be entitled, upon the giving of a
written notice (a "Delay Notice") to such effect to the Shareholder
included or to be included in such registration statement, (x) to
cause sales of Registrable Shares by the Shareholder pursuant to such
registration statement to cease, (y) to cause such registration
statement to be withdrawn and the effectiveness of such registration
statement terminated or (z) in the event no such registration
statement has yet been filed, to delay filing any such registration
statement, until, in the good faith judgment of the Board of
Directors, such Disadvantageous Condition no longer exists (notice of
which Parent shall promptly deliver to the Shareholder with respect to
which any such registration statement has been filed). Parent will
disclose to the Shareholder the general nature of such Disadvantageous
Condition, but only to the extent reasonably practicable in light of
any confidentiality concerns relating to such Disadvantageous
Condition. Notwithstanding the foregoing provisions of this clause
(iii): (A) Parent shall not be entitled to cause sales of Registrable
Shares to cease or to delay any registration of Registrable shares
required pursuant to Section 1.10 by reason of any existing or
anticipated Disadvantageous Condition, for a period of more than one
hundred (100) consecutive days from the giving of its Delay Notice to
the Shareholder with respect to such Disadvantageous Condition; (B) in
the event a registration statement is filed and subsequently withdrawn
by reason of any existing or anticipated Disadvantageous Condition,
Parent shall cause a new registration statement covering the
Registrable Shares to be filed with the SEC as soon as reasonably
practicable after such Disadvantageous Condition expires or, if
sooner, as soon as such one hundred (100) day period expires, and the
Registration Period for such new registration statement shall be the
greater of thirty days or the number of days that remained in the
Registration Period with respect to the withdrawn registration
statement at the time it was withdrawn; and (C) in the event Parent
elects not to withdraw or terminate the effectiveness of any such
registration statement but to cause Shareholder to refrain from
selling Registrable Shares for any period during the Registration
Period, the Registration Period with respect to such Shareholder shall
be extended by the number of days during the Registration Period that
such Shareholder is required to refrain from selling Registrable
Shares.
(d) Indemnification
(i) Indemnification by Parent. In connection
with the registration of the Registrable Shares under the Securities
Act pursuant to this Section 1.10, Parent will, and it hereby does,
indemnify and hold harmless, to the fullest extent permitted by law,
the Shareholder and each other person who participates as an
underwriter or otherwise on behalf of the Shareholder in the offering
or sale of such securities (collectively, the "Shareholder
Indemnitees"), against any and all losses, claims, damages or
liabilities, joint or several, and expenses (including any amounts
paid in any settlement effected with Parent's prior consent (which may
not be unreasonably withheld) and reasonable attorneys fees and
disbursements) to which such Shareholder Indemnitees may become
subject under the Securities Act, common law or otherwise, insofar as
such losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) or expenses arise out of or are based upon (A) any
untrue statement or alleged untrue statement of any material fact
contained in any Registration Statement, any preliminary, final or
summary prospectus contained therein, or any amendment or supplement
thereto, or (B) any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and Parent will reimburse such
Shareholder Indemnitees for any legal or any other expense reasonably
incurred by them in connection with investigating or defending such
loss, claim, liability, action or proceedings; provided that Parent
shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof)
or expenses arose out of or was based upon any untrue statement or
alleged untrue statement or omission or alleged omission which was
made or done in such registration statement or amendment or supplement
thereto or in any such preliminary, final or summary prospectus, in
reliance upon and conformity with information furnished to Parent in
writing by the Shareholder or any of the other Shareholder Indemnitees
or by any of their respective representatives; provided further that
Parent will not be liable to any such Shareholder Indemnitees with
respect to any preliminary prospectus as then amended or supplemented,
as the case may be, to the extent that any such loss, claim, damage or
liability of such Shareholder Indemnitees results from the fact that
such Shareholder Indemnitees sold Registrable Shares to a person to
whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the final prospectus (including
any documents incorporated by reference therein), whichever is most
recent, if Parent has previously furnished copies thereof to such
Shareholder Indemnitees and such final prospectus, as then amended and
supplemented, has corrected any such misstatement or omission. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Shareholder Indemnitees and
shall survive the transfer of such securities by the Shareholder.
(ii) Indemnification by the Shareholder. In
connection with the registration of the Registrable Shares under the
Securities Act pursuant to this Section 1.10, the Shareholder will,
and it hereby does, indemnify and hold harmless, to the fullest extent
permitted by law, Parent or any affiliate of Parent or any other
person who participates in the offering or sale of such securities on
Parent's behalf, against any and all losses, claims, damages or
liabilities, joint or several, and expenses (including any amounts
paid in any settlement effected with Shareholder's prior consent
(which may not be unreasonably withheld) and reasonable attorneys fees
and disbursements) to which Parent or any affiliate of Parent or any
such other person may become subject under the Securities Act, common
law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) or expenses
arise out of or are based upon (A) any untrue statement or alleged
untrue statement of any material fact contained in any Registration
Statement, any preliminary, final or summary prospectus contained
therein, or any amendment or supplement thereto, or (B) any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading (but only to the extent that such misstatements or
omissions referred to in clauses (A) and (B) above were done or
omitted, etc. in reliance upon and in conformity with information
furnished to Parent in writing by the Shareholder or its affiliates or
by such underwriter); the Shareholder shall reimburse Parent, its
affiliates and such other persons for any legal or any other expense
reasonably incurred by them in connection with investigating or
defending such loss, claim, liability, action or proceedings. Such
indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of Parent or the Shareholder and
shall survive the transfer of such securities by the Shareholder. In
no event will the aggregate amounts payable by the Shareholder under
this Section 1.10(d)(ii) exceed $4,000,000.00.
(iii) Notices of Claims, Etc. Promptly after
receipt by an indemnified party hereunder of written notice of the
commencement of any action or proceeding with respect to which a claim
for indemnification may be made pursuant to this Section 1.10, such
indemnified party will, if a claim in respect thereof is to be made
against an indemnifying party, promptly give written notice to the
latter of the commencement of such action; provided that the failure
of any indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under the preceding
subsections of this Section 1.10, except to the extent that the
indemnifying party is actually materially prejudiced by such failure
to give notice. In case any action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified party and indemnifying
parties may exist in respect of such claim, the indemnifying party
will be entitled to participate in and to assume the defense thereof,
jointly with any other indemnifying parties similarly notified to the
extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof, unless in such
indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties arises in respect of such
claim after the assumption of the defense thereof, and the
indemnifying party will not be subject to any liability for any
settlement made without its consent (which consent shall not be
unreasonably withheld). No indemnifying party will consent to entry
of judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to
such indemnified party of a release from all liability in respect to
such claim or litigation. An indemnifying party who is not entitled
to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for
all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party
a conflict of interest may exist between such indemnified party and
any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the fees
and expenses of only one additional counsel.
(iv) Other Indemnification. Indemnification
similar to that specified in the preceding subsections of this Section
1.10 (with appropriate modifications) shall be given by Parent and the
Shareholder with respect to any required registration or other
qualification of securities under any federal or state law or
regulation of governmental authority other than the Securities Act.
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY AND THE SHAREHOLDER
The Company and the Shareholder hereby jointly and severally
represent and warrant to Parent and Merger Sub as follows:
1 Organization, Standing and Power. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation and has all requisite
corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. The Company is
duly qualified and in good standing to conduct business in each
jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification
necessary, except where the failure to be so qualified would not
result in a Company Material Adverse Effect (as defined below). For
purposes of this Agreement, the term "Company Material Adverse Effect"
means any material adverse change in, or material adverse effect on,
the business, assets, prospects, results of operations, value or
financial or other condition of the Company, or any event or
circumstance which would likely prevent, hinder or materially delay
the consummation of any of the transactions contemplated by this
Agreement.
2 Authority and Enforceability.
(a) The Company has all requisite corporate power and
authority to execute and deliver this Agreement and each Related
Agreement to which it is a party and to perform fully its obligations
hereunder and thereunder. The execution and delivery of this
Agreement and the Related Agreements and the consummation of the
transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of the Company. The
Board of Directors of the Company (at a meeting duly called and held)
has by requisite vote of all directors present, and all of the
Shareholders of the Company have by written consent, (x) determined
that the Merger is advisable and in the best interests of the Company
and the Shareholder, (y) authorized the execution, delivery and
performance by the Company of this Agreement and the Related
Agreements and (z) approved this Agreement and the Related Agreements
to which it is a party, and the transactions contemplated hereby and
thereby, including the Merger. This Agreement and each of the Related
Agreements has been duly executed and delivered by the Company and,
assuming this Agreement and each of the Related Agreements constitute
the valid and binding agreement of the other parties hereto and
thereto, this Agreement and each of the Related Agreements constitute
the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors'
rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(b) The Shareholder has all requisite legal right,
power and authority to enter into this Agreement and each Related
Agreement to which he is a party and to agree to the transactions
contemplated hereby and thereby and to perform all of their
obligations hereunder and thereunder. This Agreement and each of the
Related Agreements to which the Shareholder is a party has been duly
executed and delivered by the Shareholder and, assuming this Agreement
and each of the Related Agreements to which such Shareholder is a
party constitute the valid and binding agreement of the other parties
hereto and thereto, this Agreement and each of the Related Agreements
constitute the legal, valid and binding obligations of the
Shareholder, enforceable against the Shareholder in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights and remedies generally and
subject, as to enforceability, to general principles of equity
(regardless of whether enforceability is considered in a proceeding at
law or in equity).
3 Subsidiaries. The Company does not (i) own
beneficially or of record any shares of capital stock or any other security
of any other entity or (ii) have any other investment in any other entity.
4 Capital Structure . The authorized capital stock of
the Company consists solely of seven hundred and fifty (750) Shares.
There are issued and outstanding one hundred (100) Shares and no other
Shares are issued and outstanding; no Shares are held by the Company
in its treasury. All outstanding Shares are validly issued, fully
paid and non-assessable and are not subject to preemptive or other
similar rights. There are not as of the date hereof, and there will
not be at the Closing, (x) any outstanding or authorized options,
warrants, calls, rights (including preemptive rights), commitments or
any other agreements of any character which the Company or the
Shareholder is a party to, or may be bound by, requiring it to issue,
transfer, dispose of, sell, purchase, redeem or otherwise acquire (or
to refrain from doing any of the foregoing) any Shares or any shares
of capital stock or any of the Company's securities or rights
convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of capital stock or other securities of, or
other ownership interests in, the Company, and (y) any stockholders'
agreements, voting trusts or other agreements or understandings to
which the Company or the Shareholder is a party or by which it is
bound relating to the voting of, or placing any restrictions on, any
shares of the capital stock of the Company. The Company has not
granted any options, warrants or rights to purchase Shares. The
Shareholder owns beneficially and of record, and has good and
marketable title to, one hundred (100) Shares (which constitute all of
the issued and outstanding capital stock of the Company), free and
clear of any Encumbrance (as defined below). During the period in
which this Agreement remains in effect and prior to the Effective
Time, the Shareholder will retain both record and beneficial ownership
of all Shares, free and clear of any Encumbrance, and will not
transfer any of the Shares to any party or otherwise grant any
Encumbrance with respect to such Shares. For purposes of this
Agreement, the term "Encumbrance" means any mortgage, pledge, claim,
charge, lien, encumbrance, interest, option, restriction, condition,
violation, security interest or assessment of any nature affecting in
any way the assets or property involved (other than those restrictions
arising under generally applicable federal and state securities laws).
5 Corporate Records. The copies of the articles of
incorporation and code of regulations of the Company attached hereto
as Schedule 2.5 are true, correct and complete. The minute books of
the Company, and the stock certificate books and similar records of
the Company, previously made available to Parent, are true, correct
and complete in all material respects.
6 No Violations Resulting From Transactions. Except for
those matters which in the aggregate would not result in a Company Material
Adverse Effect, the execution and delivery of this Agreement and each
of the Related Agreements and the consummation of the transactions
contemplated hereby and thereby by either the Company or the
Shareholder will not (a) conflict with, or result in any violation of,
or result in a Default (as defined in Section 2.18(b) below) under, or
the creation of an Encumbrance on assets or property, or result in any
right of first refusal with respect to any asset or property (any such
conflict, violation, Default, creation or right of first refusal, a
"Violation"), pursuant to any provision of the articles of
incorporation or code of regulations of the Company, or (b) result in
any Violation of, or require any consent or approval of or notice to
any person pursuant to (i) any of the Contracts listed in Schedule
2.18 or any other material agreement of the Company or (ii) any
permit, franchise, license, judgment, order, decree, statute, law,
ordinance, rule, regulation or administrative ruling, whether federal,
state, local or foreign (collectively, "Laws"), applicable to the
Company or their respective properties or assets. Other than the
filings provided for by Section 1.3, no consent, approval, order or
authorization of, or registration, declaration or filing with, notice
to, or permit from any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign
(a "Governmental Entity"), is required by or with respect to the
Company or the Shareholder in connection with the execution and
delivery by the Company or the Shareholder of this Agreement and each
Related Agreement to which it is a party, or the consummation by the
Company or the Shareholder of the transactions contemplated hereby or
thereby.
7 Compliance with Laws. Except as set forth in Schedule
2.7 and except for those matters which in the aggregate would not result
in a Company Material Adverse Effect, (x) the Company is, and at all
times has been, in material compliance with all Laws applicable to the
Company or to the conduct of the business or operations of the Company
or the use of its properties (including any leased properties) and
assets, and (y) the Company has not received, and does not know of the
issuance or threatened issuance by any Governmental Entity, of any
notices of violation or alleged violation of any Law applicable to the
Company.
8 Litigation. There are no actions, suits, investigations
or proceedings ("Legal Proceedings") pending or, to the best knowledge of
the Company and the Shareholder, threatened that question the validity
of this Agreement or the Related Agreements or any action taken or to
be taken by the Company or the Shareholder in connection with the
consummation of the transactions contemplated hereby or thereby.
Schedule 2.8 sets forth a true, correct and complete list of all
material Legal Proceedings pending or, to the best knowledge of the
Company and the Shareholder, threatened against or affecting the
Company or any properties or assets of the Company, at law or in
equity, and, to the best knowledge of the Company and the Shareholder,
there is no basis for any such Legal Proceeding not so listed. None
of the matters listed on such Schedule 2.8 could, if adversely
determined, either individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect. Except as listed
on such Schedule 2.8, there is no basis for the assertion by any third
party of any claim or legal action which could reasonably be expected
to result in a Company Material Adverse Effect. There is no
outstanding or, to the best knowledge of the Company and the
Shareholder, threatened order of any Governmental Entity against,
affecting or naming the Company or affecting any of its properties or
assets.
9 Taxes. (a) Except for those matters which in the
aggregate would not result in a Company Material Adverse Effect, (i)
all Taxes (as defined below) shown as due or payable on any Tax Return (as
defined below) by (A) the Company, (B) the Shareholder based on his
ownership interest in the Company, or (C) any other person, firm or
corporation which are liabilities of the Company, for all periods
ending on or before the Closing Date, have been paid in full, (ii) no
Taxes remain outstanding, and the Company has established current
accruals that are adequate for the payment of all Taxes not yet due
and payable with respect to the results of operations through the date
hereof, (iii) the Company and the Shareholder (to the extent required
to do so based on his ownership interest in the Company) has filed all
Tax Returns required to have been filed by it prior to the date hereof
and no extension of time for filing a Tax Return (other than with
respect to the tax year ended December 31, 1995) is presently in
effect, (iv) the Tax Returns that have been filed have been accurately
prepared, duly and timely filed and are correct and complete in all
respects and (v) the Company has withheld and paid all Taxes required
to have been withheld and paid by it in connection with amounts paid
to or owing to any employee, independent contractor, creditor or any
other third party. There has been no examination by any Tax authority
of any return of the Company or of the Shareholder (to the extent
based on his ownership interest in the Company), during the past three
(3) years, and there are no audits, actions, suits, proceedings,
investigations or claims now pending or threatened against the Company
or the Shareholder, based on his ownership interest in the Company, in
respect of any Taxes. The Company is not a party to, is bound by or
has any obligation under any tax sharing agreement or similar
agreement or arrangement. The Company has never been a member of any
affiliated group (within the meaning of the Code (such term, as
defined below)) for federal income tax purposes, or any affiliated,
consolidated, combined or unitary group for state or local tax
purposes other than the affiliated group of which the Company is the
common parent.
(b) For purposes of this Agreement, (i) "Code" shall
mean the Internal Revenue Code of 1986, as amended (including without
limitation any successor internal revenue law), and the rules and
regulations promulgated thereunder, and any reference to a specific
provision of the Code shall include any predecessor of such provision;
(ii) "Taxes" shall mean (A) all taxes, charges, fees, levies, or other
similar assessments, including without limitation, income, gross
receipts, ad valorem, premium, excise, real property, personal
property, windfall profit, sales, use, transfer, licensing,
withholding, employment, payroll, estimated and franchise taxes
imposed by the United States, any state, local, or foreign government,
or any subdivision, agency, or other similar entity of the United
States, or any such government, and any interest, fines, penalties,
assessments, or additions to tax resulting from, attributable to, or
incurred in connection with any such tax or any contest or dispute
thereof, and (B) any Taxes (as defined in clause (A)) for which the
Company is liable as a transferee, indemnitor, guarantor, surety or in
a similar capacity under any contract, arrangement, understanding or
commitment, whether oral or written, or by reason of having been a
member of any affiliated, consolidated, combined or unitary group;
(iii) "Tax Return" shall mean any report, return, statement, or other
information required to be supplied to a federal, state, local or
foreign taxing authority in connection with Taxes; and (iv) any
reference to the Company shall include any corporation which merged
with or into or was liquidated into the Company or a subsidiary of the
Company or otherwise is a predecessor of the Company or such
subsidiary.
10 Pension and Benefit Plans. All employees of the Company
are set forth on Schedule 2.10, and all Contracts and other agreements
with such employees are set forth on Schedule 2.18. Except as set
forth in Schedule 2.10, there are no employee benefit, pension, profit
sharing, deferred compensation, welfare or similar plans of Company
with respect to its employees.
11 Financial Advisors. No person or entity has acted
directly or indirectly as a broker, finder or financial advisor for or
to the Company or the Shareholder in connection with the negotiations
relating to or the transactions contemplated by this Agreement or the
Related Agreements. No person or entity is entitled to any fee or
commission or like payment, or expense reimbursement, in respect
thereof based in any way on agreements, arrangements or understandings
made by or on behalf of the Company or the Shareholder.
12 Financial Statements. Attached hereto as Schedule
2.12(a) are true, correct and complete copies of (x) the balance sheet of
the Company as at December 31, 1995, and the related statements of
earnings, stockholders' equity (deficit) and cash flows of the Company
for the year then ended (including the related notes and schedules
thereto, the "Annual Financial Statements"), as compiled by Saltz,
Shamis & Goldfarb, Inc., certified public accountants, and (y) the
balance sheet (the "Balance Sheet") of the Company as at May 31, 1996
(the "Balance Sheet Date") and the related statements of earnings and
stockholders' equity (deficit) for the five-month period then ended
(the "Interim Financial Statements", and together with the Annual
Financial Statements, the "Financial Statements"). Except as set
forth on Schedule 2.12(b) attached hereto, the Financial Statements
were prepared in accordance with the books and records of the Company,
are complete and correct in all material respects, have each been
prepared in accordance with U.S. generally accepted accounting
principles applied consistently with the past practices of the Company
("GAAP") and present fairly the consolidated financial position,
results of operations and changes in financial position or cash flows,
whichever is applicable, of the Company as at the dates and for the
periods indicated (subject, in the case of the Interim Financial
Statements, to normal year-end adjustments).
13 No Undisclosed Liabilities. Except as set forth in
Schedule 2.13 and except for those matters which in the aggregate would not
result in a Company Material Adverse Effect, as of the Balance Sheet
Date, the Company has not had any indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or
otherwise, and whether due or to become due or asserted or
unasserted), and, to the best knowledge of the Company and the
Shareholder, there was no basis for the assertion of any claim or
liability of any nature against the Company, which was not fully
reflected in, reserved against or otherwise described in the Balance
Sheet that would be required to be disclosed on a balance sheet
prepared as of the Balance Sheet Date in conformity with GAAP applied
on a consistent basis. Since the Balance Sheet Date and except as set
forth in Schedule 2.13, the Company has not incurred any indebtedness,
obligations or liabilities of any kind (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted
or unasserted) that would be required to be disclosed on a balance
sheet prepared as of the date hereof in conformity with GAAP applied
on a consistent basis, other than those which (x) are incurred in the
ordinary course of business consistent with past practice, and (y)
would not, in the aggregate, result in a Company Material Adverse
Effect.
14 Absence of Certain Developments. Since December 31,
1995, (a) there has been no event, condition or state of facts of any
character that has had or could have a Company Material Adverse
Effect, (b) neither the Company nor the Shareholder has taken any
action that would have been prohibited by Section 5.1 of this
Agreement had that section been effective since December 31, 1995, (c)
there has not been any damage, destruction or loss, whether or not
covered by insurance, with respect to the property and assets of the
Company having a replacement cost of more than $25,000 for any single
loss or $100,000 for all such losses, and (d) the Company has not
entered into any transaction or contract or conducted its business,
other than in the ordinary course consistent with past practice
(except for those matters which in the aggregate would not result in a
Company Material Adverse Effect).
15 Intellectual Property.
(a) Schedule 2.15(a) sets forth a list of all
Intellectual Property (as defined below in paragraph (d)) which is
either owned by the Company, licensed by the Company or otherwise used
in its business (other than commonly-used computer software which is
generally available to the public and the use rights to which were
legally acquired by the Company either for free or through established
retail facilities) and indicates, with respect to each item of
Intellectual Property listed thereon, the owner thereof and, if
applicable, the name of the licensor and licensee thereof and the
terms of such license or other contract relating thereto. The Company
possesses all Intellectual Property necessary for the conduct of its
business as now conducted.
(b) Except as set forth in Schedule 2.15(b), (i) the
Company has full legal and beneficial ownership (free and clear of any
and all Encumbrances) of, or a valid right to use (free of any
material restriction not entered into in the ordinary course of
business), all Intellectual Property listed on Schedule 2.15(a), and
neither the Company nor the Shareholder has received any notice or
claim (whether written, oral or otherwise) challenging the Company's
ownership or rights in such Intellectual Property or suggesting that
any other entity has any claim of legal or beneficial ownership with
respect thereto, (ii) to the best knowledge of the Company and the
Shareholder, all Intellectual Property listed on Schedule 2.15(a) is
legally valid and enforceable without any material qualification,
limitation or restriction on its use, and neither the Company nor the
Shareholder has received any notice or claim (whether written, oral or
otherwise) challenging the validity or enforceability of any such
Intellectual Property, (iii) to the best knowledge of the Company and
the Shareholder, with respect to any Intellectual Property listed on
Schedule 2.15(a) which may be registered with any private or
governmental entity, but which has not yet been registered, all
applications are pending and in good standing and are without
challenge of any kind, (iv) to the best knowledge of the Company and
the Shareholder, neither the use of any of the Intellectual Property
listed on Schedule 2.15(a) nor any other Intellectual Property used by
the Company will conflict with, infringe upon, violate or interfere
with or constitute an appropriation of any right, title or interest
held by any other person or entity, and there have been no claims made
with respect thereto, and (v) to the best knowledge of the Company and
the Shareholder, no other person or entity is infringing in any
material respect on any part of the Intellectual Property listed on
Schedule 2.15(a). To the best knowledge of the Company and the
Shareholder, the Company has not conducted its business, and has not
used or enforced (or failed to use or enforce) such Intellectual
Property, in a manner that would result in the abandonment,
cancellation or unenforceability of any item of the Intellectual
Property, and the Company has not taken or failed to take any action
that would result in the forfeiture or relinquishment any such
Intellectual Property used in the conduct of its business as now
conducted. The Company has, and after giving effect to the Merger
will have, a valid registration and full rights (free of any material
restriction) with respect to all Internet domain names which are used
by the Company in its business (including, without limitation,
"www.books.com", "www.bookstack.com" and "www.bookstacks.com").
(c) Except as set forth in Schedule 2.15(c), (i) the
Company has taken all reasonable steps to (x) protect the Company's
rights to the Intellectual Property listed on Schedule 2.15(a) and (y)
to prevent the unauthorized use thereof by any other person or entity,
in each case in accordance with standard industry practice, and (ii)
the Company shall use all reasonable efforts to maintain, or cause to
be maintained, the Intellectual Property listed on Schedule 2.15(a) in
full force and effect through the Closing and, without limitation, has
renewed or has made, and will make within an applicable renewal period
ending on or prior to the Closing, application to renew all of the
Intellectual Property subject to expiration on or prior to the
Closing. Except as set forth in Schedule 2.15(c), neither the Company
nor the Shareholder has granted to any other person or entity any
rights or permissions to use any of the Intellectual Property listed
on Schedule 2.15(a).
(d) For purposes of this Agreement, the term
"Intellectual Property" means any patent, copyright, trademark, trade
name, service mark, service name, brand mark, brand name, logo,
Internet domain name or industrial design, any registrations thereof
and pending applications therefor (to the extent applicable), any
other intellectual property right (including, without limitation, any
know-how, trade secret, trade right, formula, confidential or
proprietary report or information, customer list or membership list,
and any computer program, software, database or data right), any
license or other contract relating to any of the foregoing, and any
goodwill associated with any business owning, holding or using any of
the foregoing.
16 Real Property. The Company does not own or have the
right to acquire, pursuant to any agreement, arrangement or understanding,
any real property. The Company has a good and valid leasehold
interest in each parcel of real property leased by it, free and clear
of all Encumbrances, except those Encumbrances which do not materially
interfere with the Company's use and enjoyment of such real property
or materially detract from or diminish the value thereof.
17 Insurance. The Company currently maintains insurance
policies, which policies provide adequate coverage for the operations
conducted by the Company.
18 Material Contracts.
(a) Except as set forth in Schedule 2.18(a), the
Company is not a party to, nor are any of its properties or assets
bound by, any (i) contract not made in the ordinary course of business
or the performance of which will extend over a period greater than
thirty (30) days and which is not cancelable by the Company without
penalty; (ii) employment, consulting, independent contractor, non-
competition, severance, golden parachute or indemnification contract
(including, without limitation, any agreement or arrangement with any
computer software developer previously retained or used by the
Company); (iii) advertising, public relations, franchise,
distributorship or sales agency contract; (iv) contract involving the
commitment or payment in excess of $50,000 for the future purchase of
services, properties, materials or equipment; (v) contract among
stockholders or granting a right of first refusal or for a partnership
or for a joint venture or for the acquisition, sale or lease of any
properties or assets of the Company; (vi) mortgage, pledge,
conditional sales contract, security agreement, factoring agreement or
other similar contract with respect to any property of the Company;
(vii) loan agreement, credit agreement, promissory note, guarantee,
subordination agreement, letter of credit or any other similar type of
contract; (viii) retainer contract with investment bankers, attorneys,
accountants, actuaries, appraisers or other professional advisers;
(ix) lease, sublease or other agreement under which the Company uses
or occupies or has the right to use or occupy, now or in the future,
any real property, (x) contract or agreement with any Governmental
Entity; (xi) contract which would be reasonably likely to limit or
restrain the Company, or any owner or affiliate of the Company, from
engaging in any line of business, competing with any person, firm,
corporation or other entity, or conducting business in any particular
geographic area, or (xii) commitment or agreement to enter into any of
the foregoing (collectively, the "Contracts"). The Company has
delivered or otherwise made available to Parent true, correct and
complete copies of the Contracts listed in Schedule 2.18(a), together
with all amendments, modifications and supplements thereto and side
letters to which the Company is a party affecting the obligations of
any party thereunder. No person or entity holds a power of attorney
to act on behalf of the Company.
(b) Except as set forth in Schedule 2.18(b) and except
for those matters which in the aggregate would not result in a Company
Material Adverse Effect: (i) to the knowledge of the Company and the
Shareholder, each of the Contracts listed in Schedule 2.18(a) is valid
and enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity), (ii) no
Default (as defined below) exists under any Contract listed in
Schedule 2.18(a) either by the Company or, to the best knowledge of
the Company and the Shareholder, by any other party thereto; (iii)
neither the Company nor the Shareholder is aware of the assertion by
any third party of any claim of Default or breach under any of the
Contracts listed in Schedule 2.18(a), and (iv) with respect to those
Contracts listed in Schedule 2.18(a) that were assigned or subleased
to the Company by a third party, to the best knowledge of the Company
and the Shareholder, all necessary consents to such assignments or
subleases have been obtained. In addition, neither the Company nor
the Shareholder is aware of any present intention on the part of any
significant supplier of the Company to either (x) terminate or
significantly change its existing business relationship with the
Company, either now or in the foreseeable future, or (y) fail to renew
or extend its existing business relationship with the Company at the
end of the term of any existing contractual arrangement such customer
may have with the Company. For purposes of this Agreement, the term
"Default" means, with respect to any Contract, (x) any breach of or
default under such Contract, (y) any event which could (either with or
without notice or lapse of time or both) give rise to any right of
termination, cancellation or acceleration or any obligation to repay
with respect to such Contract, or (z) any event which could result in
either an increase in the obligations or liabilities of, or a loss of
any benefit to which, the party in question or any of its affiliates
may be entitled or subject to under such Contract.
19 Related Party Transactions. Except as set forth in Schedule
2.19 hereto, no director, officer, partner, employee, "affiliate" or
"associate" (as such terms are defined in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), of
the Company or the Shareholder (a) since January 1, 1993, has borrowed
any monies from or has outstanding any indebtedness or other similar
obligations to the Company; (b) owns any direct or indirect interest
of any kind in, or is a director, officer, employee, partner,
affiliate or associate of, or consultant or lender to, or borrower
from, or has the right to participate in the management, operations or
profits of, any person or entity which is (i) a competitor, supplier,
customer, distributor, lessor, tenant, creditor or debtor of the
Company, (ii) engaged in a business related to the business of the
Company or (iii) participating in any transaction to which the Company
is a party or (c) is otherwise a party to any contract, arrangement or
understanding with the Company.
20 Sufficiency of the Assets Included Within the Company.
After giving effect to the Merger and all other transactions contemplated
as of the Closing Date, the Company will (y) have all right, title, and
interest in and to, or will have a valid right to use (or, with
respect to any employees, subcontractors, software developers and
other similar persons, will employ), substantially all of the assets
(including, without limitation, Intellectual Property), properties,
employees, subcontractors, software developers and other persons and
items owned, used, employed or retained by the Company in the conduct
of its business prior to the date hereof, and (y) will have sufficient
assets (including, without limitation, Intellectual Property),
properties, employees, subcontractors, software developers and other
persons and items to conduct the Company's business after the Closing
Date in substantially the same manner as presently conducted by the
Company.
21 No Misrepresentation. Neither this Agreement (including
the schedules hereto) or any Related Agreement or any information supplied
by or on behalf of the Company or the Shareholder to Parent in
connection with this Agreement, the Related Agreements or the
transactions contemplated hereby or thereby contains or will contain
any untrue statement of a material fact or omits or will omit to state
a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which they were made, not
misleading. Neither the Company nor the Shareholder knows of any
facts which are reasonably likely to cause a Company Material Adverse
Effect (including after giving effect to the consummation of the
transactions contemplated pursuant to this Agreement), which have not
been set forth in the Financial Statements or disclosed in a schedule
attached to this Agreement; provided that the the provisions of this
sentence shall not be deemed to be a representation or warranty as to
any events or circumstances occurring after the date hereof which
affect generally companies which operate in the same industry as the
Company.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SHAREHOLDER
1 Shareholder Representations and Covenants. The
Shareholder hereby represents, warrants, acknowledges, covenants and agrees
as follows:
(a) except to the extent otherwise provided for in
connection with, or otherwise not applicable in light of, the
registration provisions of Section 1.10 hereof, the shares of Parent
Common Stock are being acquired pursuant to the terms and subject to
the conditions of this Agreement for such Shareholder's own account
for investment purposes only and not with a view to any public resale,
public distribution or public offering thereof within the meaning of
the Securities Act of 1933, as amended (the "Securities Act") or any
state securities or "blue sky" law;
(b) except to the extent otherwise provided for in
connection with, or otherwise not applicable in light of, the
registration provisions of Section 1.10 hereof, (i) the shares of
Parent Common Stock, at the time of issuance, will not be registered
under the Securities Act or any state securities or "blue sky" law and
(ii) such shares may not be sold or otherwise disposed of except in
compliance with the Securities Act or in reliance upon an exemption
therefrom;
(c) such Shareholder has such knowledge and experience
in financial and business matters that such Shareholder is capable of
evaluating the merits and risks of the prospective investment in the
shares of Parent Common Stock and able to bear the economic
consequences thereof and that such Shareholder qualifies as an
"accredited investor" as such term is defined in Rule 501(a) under the
Securities Act; and
(d) in making such Shareholder's decision to invest in
the shares of Parent Common Stock, such Shareholder has relied upon
the Parent SEC Reports (as defined in Section 4.6 below) and
independent investigations made by such Shareholder and, to the extent
believed by such Shareholder to be appropriate, such Shareholder's
representatives, including such Shareholder's own professional, tax
and other advisors, and has not relied upon any representation or
warranty from Parent or any of its directors, officers, employees,
agents, affiliates or representatives with respect to the value of the
shares of Parent Common Stock or the tax consequences of the
transactions contemplated by this Agreement or the Related Agreements.
2 Restrictions on Transfer.
(a) Subject to the provisions of Section 3.2(d) below,
the Shareholder agrees that he will not sell, assign, transfer or
otherwise dispose of (each, a "Transfer") any of the shares of Parent
Common Stock (or any interest therein) except upon the terms and
conditions specified in this Section 3.2, and the Shareholder will
cause any subsequent holder of such Shareholder's shares of Parent
Common Stock to agree to take and hold the shares of Parent Common
Stock subject to the terms and conditions of this Agreement.
(b) Subject to the provisions of Section 3.2(d) below,
each certificate representing the shares of Parent Common Stock issued
to the Shareholder or to any subsequent shareholder shall include a
legend in substantially the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
STATE SECURITIES LAW, AND MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM. SUCH SHARES MAY BE TRANSFERRED ONLY IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THE MERGER AGREEMENT
DATED AUGUST 7, 1996, AMONG THE ISSUER AND THE OTHER PARTIES
THERETO, A COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER AND WILL BE
FURNISHED TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT
CHARGE."
(c) Subject to the provisions of Section 3.2(d) below,
prior to any proposed Transfer of any shares of Parent Common Stock by
the Shareholder (except with respect to any shares which have been
registered under a Registration Statement), the Shareholder shall give
written notice to Parent of the Shareholder's intention to effect such
Transfer, which notice shall set forth the date of such proposed
Transfer. The Shareholder also shall furnish to Parent (i) a written
agreement by the proposed transferee that it is taking and holding the
same subject to the terms and conditions specified in this Agreement,
except with respect to any such shares which are being sold in
connection with a public offering of securities registered under the
Securities Act and (ii) except with respect to any shares of Parent
Common Stock which have been registered under the Securities Act, a
written opinion of the Shareholder's counsel, in form and substance
reasonably satisfactory to Parent, to the effect that the proposed
Transfer may be effected without registration under the Securities
Act.
(d) The restrictions set forth in this Section 3.2
shall terminate and cease to be effective with respect to shares of
Parent Common Stock (i) upon the sale of any such shares of Parent
Common Stock, if the shares of Parent Common Stock in respect of which
such sale occurs have been registered under the Securities Act and the
seller thereof complies with, and certifies to the Parent, upon
Parent's request, that it has complied with, the prospectus delivery
requirements of the Securities Act, (ii) upon receipt by Parent of an
opinion of counsel (which counsel is reasonably acceptable to Parent),
in form and substance reasonably satisfactory to Parent, to the effect
that compliance with such restrictions is not necessary in order to
comply with the Securities Act with respect to the Transfer of such
shares of Parent Common Stock, or (iii) upon the expiration of the
applicable holding period referred to in Rule 144(k) under the
Securities Act (as such Rule may be amended from time to time), if,
pursuant to Rule 144(k), the Shareholder was not, and certifies to
Parent that he was not, an "affiliate" of Parent at the time of the
sale of the securities and had not been an "affiliate" of Parent
during the preceding three months.
3 Non-Competition and Other Covenants of the Shareholder.
Based on the consideration set forth in this Agreement, for the period
beginning on the Closing Date and ending on the fifth anniversary of
the Closing Date, the Shareholder shall not (except as may be
explicitly required in the Employment Agreement to which he is a
party), directly or indirectly, in any state, province or jurisdiction
located within North America (as well as outside of North America with
respect to those business or other activities which are directed
towards persons or entities located within North America):
(a) No Competitive Activities - own, operate, manage
or control, or participate in the ownership, operation, management or
control of, or be connected with or have any interest in, whether as
employee, consultant, advisor, agent, owner, partner, co-venturer,
principal, director, stockholder, affiliate, associate,
representative, lender or otherwise, any enterprise, person, firm,
corporation or business that (x) is substantially similar in whole or
in part to the business of the Company, as such business is conducted
on the date hereof, or (y) competes in any manner with the business of
the Company, as such business is conducted on the date hereof (any of
the foregoing activities, a "Competitive Business Activity"), or
otherwise engage in any Competitive Business Activity or render
advisory or other services to or for any person engaged in any
Competitive Business Activity; provided that this covenant shall not
prohibit the Shareholder from having legal or equitable ownership of
not more than one percent (1%) of any class of equity security in a
publicly-held company which may engage in such activity; provided
further that, for so long as Parallax MicroSystems, Inc. ("Parallax")
does not engage in any Competitive Business Activity, this covenant
shall not prohibit the Shareholder from (i) owning any of the capital
stock of Parallax or (ii) serving as a director of Parallax and
performing normal director duties on behalf of Parallax in connection
therewith;
(b) No Solicitation of Employees - either (i) solicit,
engage, compensate, induce away or hire for employment or other
representation, any employee, agent, representative or independent
contractor (other than any agent, representative or independent
contractor which devotes less than 20% of its total work time working
on behalf of the Company or any of its affiliates) known by the
Shareholder to be employed or retained by any Protected Party (for
purposes of this Agreement, the term "Protected Party" shall mean and
include the Company and each of its subsidiaries), (ii) solicit or
induce any such person to terminate any relationship such person may
have with any Protected Party, or (iii) encourage any third party
(including any employee of Company) to do any of the foregoing
(provided that the Shareholder shall not be prevented from hiring any
such person who contacts the Shareholder (x) on his or her own
initiative without direct or indirect solicitation from the
Shareholder or any of the Shareholder's representatives, or (y) as a
result of a public advertisement or any form of general solicitation
which is not targeted towards officers or employees of any Protected
Party);
(c) No Solicitation of Current Customers - either (i)
solicit any members or customers or the then current clients of any
Protected Party, or (ii) persuade or attempt to persuade any member,
customer or client, or any other person, to cease doing business with
any Protected Party or to reduce the amount of business it does with
any Protected Party; or
(d) No Injurious Acts - either (i) make any public
statements critical of any Protected Party or otherwise maligning the
business or reputation of any Protected Party, or (ii) make any
statements or perform any acts which are either intended to advance
the interest of any existing or prospective competitors of any
Protected Party or which would likely injure the interests of any
Protected Party.
4 Confidentiality. From and after the Closing, the
Shareholder shall not, directly or indirectly, except at the request
of Parent and as expressly permitted under the Employment Agreement to
which he is a party, disclose or reveal to anyone, or otherwise use,
at any time or for any reason, any confidential or proprietary
information relating to the Company or any products or services
offered by the Company or by Parent or any of its affiliates, to any
person, firm, corporation, association or other entity, nor shall it
make use of any such confidential or proprietary information for its
own purpose or for the benefit of any person, firm, corporation or
other entity except Parent and its affiliates. The term "confidential
or proprietary information," for the purpose of this Section 3.4,
shall mean all information which relates to confidential or
proprietary matters or matters which are not in the public domain,
including, but not limited to, Intellectual Property, business plans,
research and development activities, and pricing information.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each represents and warrants to the
Company and the Shareholder as follows:
1 Organization, Standing and Power. Each of Parent and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation or organization
and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being
conducted. Each of Parent and Merger Sub is duly qualified and in
good standing to conduct business in each jurisdiction in which the
business it is conducting, or the operation, ownership or leasing of
its properties, makes such qualification necessary, except where the
failure to be so qualified would not result in a Parent Material
Adverse Effect (as defined below). For purposes of this Agreement,
the term "Parent Material Adverse Effect" means any material adverse
change in, or material adverse effect on, the business, assets,
prospects, results of operations, value or financial or other
condition of Parent and its subsidiaries (taken as a whole), or any
event or circumstance which would likely prevent, hinder or delay the
consummation of any of the transactions contemplated by this
Agreement.
2 Authority. Each of Parent and Merger Sub has all
requisite corporate power and authority to execute and deliver this
Agreement and each of the Related Agreements to which it is a party and to
perform fully its obligations hereunder and thereunder. The execution
and delivery of this Agreement and each of the Related Agreements to
which it is a party, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of Each of Parent and Merger
Sub. This Agreement and each of the Related Agreements to which it is
a party has been duly executed and delivered by Parent and Merger Sub
and, assuming this Agreement and each of the Related Agreements
constitutes the valid and binding agreement of the other parties
hereto and thereto, this Agreement and each of the Related Agreements
to which it is a party constitute the legal, valid and binding
obligations of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
3 Capital Structure. As of the date hereof, the
authorized capital stock of Parent consists of (a) 600,000,000 shares of
Parent Common Stock of which 193,636,353 shares were issued and outstanding
as of June 30, 1996 and 3,979,111 shares were held in treasury, and
(b) 1,000,000 shares of preferred stock, $.01 par value per share,
none of which is issued or outstanding. All outstanding shares of
Parent Common Stock are validly issued, fully paid and non-assessable
and are not subject to preemptive or other similar rights.
4 Issuance of Shares by Parent. Prior to the Closing, Parent
will have taken all necessary action to permit it to issue the number of
shares of Parent Common Stock required to be issued pursuant to
Article 2 hereof. All shares of Parent Common Stock issued pursuant
to Article 2 will, when issued, be validly issued, fully paid and
nonassessable, and no person will have any preemptive right of
subscription or purchase in respect thereof. Assuming the accuracy of
the representations and warranties made by the Shareholder in this
Agreement, the issuance of such shares of Parent Common Stock pursuant
to this Agreement will be in compliance with the Securities Act and,
upon the registration of such shares pursuant to Section 1.10 hereof,
such shares will be listed on the NYSE, subject to official notice of
issuance.
5 No Violations Resulting From Transactions. Except for
those matters which in the aggregate would not result in a Parent Material
Adverse Effect, the execution and delivery of this Agreement and each
of the Related Agreements to which it is a party, and the consummation
of the transactions contemplated hereby and thereby, by Parent and
Merger Sub will not result in any Violation pursuant to any provision
of the certificate of incorporation or by-laws of Parent or Merger Sub
or result in any Violation of, or (except as required by Section 1.10
hereof) require any consent or approval of or notice to any person
(other than a Governmental Entity) pursuant to (i) any loan or credit
agreement, note, mortgage, indenture, material lease, Parent employee
benefit plan or other agreement, obligation or instrument to which
Parent or Merger Sub is a party or (ii) any Laws applicable to Parent
or Merger Sub or any of their respective properties or assets.
6 SEC Reports. Except for those matters which in the
aggregate would not result in a Parent Material Adverse Effect, (a) since
January 1, 1994, Parent has filed all forms, reports and documents
with the Securities and Exchange Commission ("SEC") required to be
filed by it pursuant to the federal securities laws and the SEC rules
and regulations thereunder, all of which have complied as of their
respective filing dates, or in the case of registration statements,
their respective effective dates, in all material respects with all
applicable requirements of the Securities Act and the Exchange Act and
the rules and regulations promulgated thereunder (collectively, the
"Parent SEC Reports"), and (b) none of such Parent SEC Reports,
including, without limitation, any exhibits, financial statements or
schedules included therein, at the time filed, or in the case of
registration statements, their respective effective dates, contained
any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. Parent is not aware, as of the date of
this Agreement, of any event or circumstance which currently exists or
which is reasonably likely to exist which would constitute a
Disadvantageous Condition (as defined in Section 1.10(c)(iii) hereof)
or cause the Registration Statement to not be declared effective by
the SEC on or prior to November 30, 1996.
7 Parent's Current Plans with respect to the Company. As
of the date hereof and as of the Closing Date, Parent has no current plan
or intention to effect any of the following transactions within one
year following the Effective Time: (i) permit the Company to issue
additional shares of its stock to the extent that such issuance would
result in Parent losing control of the Company within the meaning of
Section 368(c) of the Code, (ii) reacquire any of its stock issued
pursuant to this Agreement (except as otherwise expressly provided or
contemplated pursuant to this Agreement), or (iii) liquidate the
Company or merge the Company (except for transfers of stock to
corporations controlled by Parent), or to cause to sell or otherwise
dispose of any of its assets, except for dispositions made in the
ordinary course of business or transfers of assets to a corporation
controlled by the Company. In addition, Parent presently intends, and
as of the Closing Date it will then presently intend, to cause the
Company to continue its historic business or use a significant portion
of its historic business assets in a business for a period of at least
one year following the Effective Time.
COVENANTS RELATING TO CONDUCT OF BUSINESS
During the period from the date of this Agreement and
continuing until the Closing, the Company agrees that (except as
expressly contemplated or permitted by this Agreement, or to the
extent that Parent shall otherwise consent in writing):
1 Conduct of the Company's Business Pending the Closing.
Except in those circumstances where the failure of the Company to
comply with the following provisions would not, either individually or
in the aggregate, result in a Company Material Adverse Effect, the
Company shall be obligated to:
(a) conduct the business of the Company only in the
ordinary course consistent with past practice;
(b) not (i) declare, authorize, set aside, pay or
distribute any dividend, or other distribution, or any option,
warrant, call or right (including preemptive rights), (ii) issue,
transfer, dispose, sell, purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its securities or
rights convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of capital stock or other securities of, or
other ownership interests in, the Company or (iii) enter into any
agreement of any character requiring the Company to take any of the
actions in (i) and (ii) above;
(c) not effect any recapitalization, reclassification,
stock split or like change in the capitalization of the Company;
(d) not amend the articles of incorporation or code of
regulations of the Company;
(e) use its best efforts to (i) preserve the present
business operations, organization (including, without limitation,
management and the sales force) and goodwill of the Company and
(ii) preserve the present relationship of the Company with persons
having business dealings with the Company;
(f) not, other than in the ordinary course of business
consistent with past practice and without materially increasing the
benefits or the costs thereof, (i) increase the compensation payable
or to become payable by the Company to any of their respective
directors, officers, employees, agents or representatives,
(ii) increase the coverage or benefits available under any (or create
any new) severance pay, termination pay, vacation pay, company awards,
salary continuation for disability, sick leave, deferred compensation,
bonus or other incentive compensation, insurance, pension or other
employee benefit plan, payment or arrangement made to, for, or with
any of the directors, officers, employees, agents or representatives
of the Company, (iii) award or pay any bonus to any such person or
(iv) enter into any employment, deferred compensation, severance,
consulting, non-competition or similar agreement (or amend any such
agreement) to which the Company is a party or involving a director,
officer or employee of the Company in his or her capacity as a
director, officer or employee of the Company;
(g) comply with all Laws and comply with all
contractual and other obligations applicable to the Company;
(h) not subject to any Encumbrance (except for leases
that do not materially impair the use of the property subject thereto
in their respective businesses as presently conducted), any of the
properties or assets (whether tangible or intangible) of the Company;
(i) not acquire any material properties or assets and
not sell, assign, transfer, convey, lease or otherwise dispose of any
of the material properties or assets (except for fair consideration in
the ordinary course of business consistent with past practice) of the
Company;
(j) not cancel or compromise any debt or claim or
waive or release any material right of the Company except for in the
ordinary course of business consistent with past practice;
(k) not enter into any commitment for capital
expenditures of the Company in excess of $50,000 for any individual
commitment and $100,000 for all commitments in the aggregate;
(l) promptly notify Parent of (i) the occurrence of
any Company Material Adverse Effect, and (ii) any material Legal
Proceeding commenced by or against the Company or any Legal Proceeding
commenced or threatened against the Company relating to the
transactions contemplated by this Agreement;
(m) not agree to do anything prohibited by Articles 5
or 6 of this Agreement or anything which would make any of the
representations and warranties of the Company and the Shareholder in
this Agreement or the Related Agreements untrue or incorrect in any
material respect; and
(o) not agree to take any action which would be
prohibited by this Section 5.1.
2 No Solicitation. From and after the date hereof until
the termination of this Agreement, neither the Company nor any of its
respective officers, directors, employees, representatives, agents
(including, without limitation, any investment banker, attorney or
accountant retained by or for the Company or its affiliates) or
affiliates, nor the Shareholder will, directly or indirectly,
initiate, solicit or knowingly encourage (including by way of
furnishing non-public information or assistance), or take any other
action to facilitate knowingly, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to,
any Acquisition Proposal (as defined below), or enter into or maintain
or continue discussions or negotiate with any person or entity in
furtherance of such inquiries or to obtain an Acquisition Proposal or
agree to or endorse any Acquisition Proposal, or authorize or permit
any of the officers, directors or employees of the Company or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or the Shareholder to take any
such action. For purposes of this Agreement, "Acquisition Proposal"
shall mean any of the following (other than the transactions between
or among the Company, the Shareholder and Parent contemplated
hereunder) involving the Company or the Shareholder: (i) any merger,
consolidation, share exchange, recapitalization, business combination,
or other similar transaction; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 10% or more of the
assets of the Company in a single transaction or series of
transactions; or (iii) any acquisition or offer to acquire 10% or more
of the outstanding shares of capital stock of the Company.
3 Advice of Changes; Governmental Filings. The Company
shall confer on a regular and frequent basis with Parent, report on
operational matters and promptly advise Parent orally and in writing
of any change or event having, or which, insofar as reasonably can be
foreseen, could have, a Company Material Adverse Effect. The Company
shall promptly provide Parent (or its counsel) with copies of all
filings made by the Company with any state or federal Governmental
Entity in connection with this Agreement and the transactions
contemplated hereby.
ADDITIONAL AGREEMENTS AND
REPRESENTATIONS
1 Access to Information; Confidentiality. The Company
agrees that, prior to the Closing Date, Parent shall be entitled, through
its officers, employees and representatives (including, without
limitation, its legal advisors and accountants), to make such
investigation of the properties, businesses and operations and
financial condition of the Company and examination of its books and
records as Parent may reasonably request, and to make extracts and
copies of such books and records. Any such investigation and
examination shall be conducted during regular business hours and under
reasonable circumstances, and the Company shall cooperate fully
therein. In order that Parent may have full opportunity to make such
physical, business, accounting and legal review, examination or
investigation as it may reasonably request of the affairs of the
Company, the Company shall use its best efforts to cause the officers,
employees, consultants, agents, accountants, attorneys and other
representatives of the Company to cooperate fully with such
representatives in connection with such review and examination. Parent
and its affiliates shall treat as confidential and keep secret the
affairs of the Company in accordance with all of the terms and
conditions of that certain Confidentiality Agreement, dated May 30,
1996, between Parent and the Company (the "Confidentiality
Agreement"); provided, however, that such obligations with respect to
Parent and the Company shall terminate at the Closing.
Notwithstanding the foregoing, Parent or such other entity shall be
free to disclose any such confidential information or data (i) if
Parent or such other entity is advised by counsel that such disclosure
must be made to comply with applicable Law or (ii) to the extent
necessary to establish Parent's or such entity's position in any Legal
Proceeding based upon or in connection with the subject matter of this
Agreement.
2 Additional Agreements. Each of the parties hereto
agrees to use its respective best efforts to (i) take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations
to consummate and make effective the transactions contemplated by this
Agreement and the Related Agreements, (ii) obtain all licenses,
permits, consents, approvals, authorizations, qualifications and
orders of Governmental Entities and parties to contracts with the
Company as are necessary for consummation of the transactions
contemplated by this Agreement, and (iii) fulfill all conditions
precedent applicable to such party pursuant to this Agreement. In
case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement or the Related
Agreements, the proper officers and directors of each party to this
Agreement shall use commercially reasonable efforts to take all such
necessary action.
3 Publicity. Parent and the Shareholder will consult
with each other and will mutually agree upon any press release or public
announcement pertaining to this Agreement and shall not issue any such
press release or make any such public announcement prior to such
consultation and agreement, except that Parent may issue any such
release or make any such public announcement as it determines, in its
reasonable discretion, is required by applicable law or by obligations
pursuant to any listing agreement with any national securities
exchange, in which case Parent shall use reasonable efforts to consult
in good faith with the Company (but shall not be required to obtain
the agreement of the Company) before issuing any such press release or
making any such public announcement.
4 Notification of Certain Matters. The Company shall
give prompt notice to the Parent of (a) any notice of, or other
communication relating to, a default or event which, with notice or
lapse of time or both, would become a default, received by it
subsequent to the date of this Agreement and prior to the Closing,
under any contract material to the financial condition, properties,
businesses or results of operations of the Company to which it is a
party or is subject, (b) any notice or other communication from any
third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this
Agreement or any of the Related Agreements, or (c) any material
adverse change in its financial condition, properties, businesses or
results of operations, taken as a whole, other than changes resulting
from general economic conditions.
CONDITIONS PRECEDENT
1 Conditions to Obligations of Parent and the Shareholder.
The respective obligations of each party under this Agreement shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Approvals. Other than the filings provided for by
Section 1.3, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity, requisite to the transactions
contemplated hereby, shall have been filed, occurred or been obtained,
as the case may be.
(b) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint
or prohibition preventing the consummation of the transactions
contemplated by this Agreement shall be in effect; provided, however,
that prior to invoking this condition, each party shall use all
commercially reasonable efforts to have any such decree, ruling,
injunction or order vacated.
2 Conditions of Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to effect the transactions
contemplated by this Agreement are subject to the satisfaction of the
following conditions (which are for the exclusive benefit of Parent
and Merger Sub), any or all of which may be waived in whole or in part
by Parent and Merger Sub (provided that such waiver, to be binding
upon Parent and Merger Sub, must be in a writing duly executed by
Parent and Merger Sub):
(a) Representations and Warranties. The
representations and warranties of the Company and the Shareholder set
forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date, except
as otherwise contemplated by this Agreement, and Parent shall have
received a certificate of the Shareholder certifying on behalf of both
the Shareholder and the Company to such effect.
(b) Performance of Obligations. The Company and the
Shareholder shall have performed in all material respects all
obligations required to be performed by each such party under this
Agreement at or prior to the Closing Date, and Parent shall have
received a certificate of the Shareholder certifying on behalf of both
the Shareholder and the Company to such effect.
(c) No Material Adverse Change. Since the date of
this Agreement, there shall have been no change, occurrence or
circumstance resulting in, or which could reasonably likely result in,
individually or in the aggregate, a Company Material Adverse Effect.
(d) Related Agreements. Each of the Related
Agreements to which the Shareholder is a party shall have been duly
executed and delivered by the Shareholder.
3 Conditions of Obligations of the Shareholder. The
obligations of the Shareholder to effect the transactions contemplated
by this Agreement are subject to the satisfaction of the following
conditions (which are for the exclusive benefit of the Shareholder),
any or all of which may be waived in whole or in part by the
Shareholder (provided that such waiver, to be binding upon the
Shareholder, must be in a writing duly executed by the Shareholder):
(a) Representations and Warranties. The
representations and warranties of Parent and Merger Sub set forth in
this Agreement shall be true and correct in all material respects as
of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date, except as
otherwise contemplated by this Agreement.
(b) Performance of Obligations. Parent and Merger Sub
shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing
Date.
(c) Related Agreements. Each of the Related
Agreements to which Parent and Merger Sub is a party shall have been
duly executed and delivered by Parent and Merger Sub.
(d) Registration Statement Declared Effective. The
Registration Statement shall have been declared effective by the SEC
and shall not be the subject of a stop order issued by the SEC and no
proceedings for such purpose shall be pending or threatened by the
SEC; provided that no waiver of this condition, if any, by Shareholder
shall diminish any party's registration obligations under Section 1.10
hereof, which shall survive the Closing.
TERMINATION AND AMENDMENT
1 Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual written consent of the Shareholder and
Parent;
(b) by (i) either (A) the Shareholder, if there has
been a material breach of any representation, warranty, covenant or
agreement on the part of Parent and Merger Sub or (B) Parent, if there
has been a material breach of any representation, warranty, covenant
or agreement on the part of the Company or the Shareholder, in each
case, which breach has not been cured within five business days
following receipt by the breaching party of notice of such breach (or,
if such breach is not curable within five business days but is curable
within a reasonable period thereafter, a cure of such breach has not
been diligently pursued), or (ii) either the Shareholder or Parent, if
any permanent injunction or other order of a court or other competent
authority preventing the consummation of the transactions contemplated
by this Agreement shall have become final and non-appealable;
(c) by either the Shareholder or Parent, so long as
the Company and the Shareholder, on the one hand, and Parent, on the
other hand, have not breached their respective obligations hereunder,
if the Closing shall not have occurred on or before November 30, 1996;
provided, that the right to terminate this Agreement under this
Section 8.1(c) shall not be available to (x) Parent if Parent has
breached any of its representations, warranties or covenants hereunder
in any material respect and such breach has been the cause of or
resulted in the failure of the Closing to occur on or before such date
or (y) the Shareholder if it has breached any of its respective
representations, warranties or covenants hereunder in any material
respect and such breach has been the cause of or resulted in the
failure of the Closing to occur on or before such date.
2 Effect of Termination. In the event of termination
of this Agreement by either the Shareholder or Parent as provided in
Section 8.1, this Agreement shall forthwith become void and there shall
be no liability or obligation on the part of Parent and Merger Sub, or the
Shareholder or Parent's affiliates, officers, directors or
shareholders except (i) with respect to Section 10.10, (ii) for any
obligations under either (A) the Confidentiality Agreement or (B) the
letter agreement dated as of the date hereof between the Company, the
Shareholder and Parent (the "Side Agreement"), and (iii) to the extent
that such termination results from the willful breach by a party
hereto of any of its representations or warranties, or of any of its
covenants or agreements, in each case, as set forth in this Agreement.
3 Amendment. Subject to applicable law, this Agreement
may be amended, modified or supplemented only by written agreement of Parent
and the Shareholder at any time prior to the Closing Date with respect
to any of the terms contained herein.
4 Extension; Waiver. At any time prior to the Closing
Date, the Shareholder and Parent may: (i) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant
hereto; and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement to any such extension or
waiver shall be valid only if set forth in a written instrument signed
by the Shareholder and Parent. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of
such rights.
SURVIVAL; INDEMNIFICATION
1 General Survival. The parties hereto agree that (a)
except as set forth in clauses (b) and (c) below and notwithstanding the
provisions of Section 10.1, the representations, warranties, covenants
and agreements of Parent, the Company and the Shareholder contained in
this Agreement shall survive the execution and delivery hereof for a
period of eighteen (18) months following the Closing Date, regardless
of any investigation made by the parties thereto (provided that the
representations and warranties set forth in Sections 2.1, 2.2, 2.4,
2.9, 2.20, 4.1, 4.2, 4.3 and 4.4 hereof shall survive until the end of
any applicable statute of limitations in respect thereof), (b) the
Shareholder's representations and warranties contained in Article 3 of
this Agreement shall survive until the end of any applicable statute
of limitations in respect thereof, and (c) those covenants and
agreements set forth in this Agreement which by their terms are to be
performed after the Closing Date shall survive until such covenants
and agreements are fully performed or satisfied (all of the periods
set forth above, collectively referred to as the "Survival Period").
Notwithstanding anything to the contrary contained herein, no claim,
suit or proceeding for breach of any representation or warranty,
covenant or agreement of Parent, the Company or the Shareholder set
forth in this Agreement, may be brought by any person unless written
notice of such claim shall have been given on or prior to the last day
of the applicable Survival Period (in which event each such
representation or warranty, covenant or agreement shall, with respect
to the specific claim made, survive the applicable Survival Period
until such claim is finally resolved and all obligations with respect
thereto are fully satisfied).
2 Indemnification.
(a) Subject to the provisions of Section 9.1, the
Shareholder hereby agrees to indemnify, defend and hold harmless
Parent and, from and after the Closing, the Company from and against
and in respect of any and all Losses (as defined below) resulting
from, arising out of, relating to, imposed upon or incurred by Parent
or the Company by reason of (i) any inaccuracy in or breach of any of
the Company's representations, warranties, covenants or agreements
contained in this Agreement or in any other agreement or document
entered into or delivered on or after the date hereof in connection
with this Agreement or any of the transactions contemplated hereby and
thereby and (ii) any inaccuracy in or breach by the Shareholder of any
of his representations, warranties, covenants or agreements contained
in this Agreement, any of the Related Agreements or in any other
agreement or document entered into or delivered on or after the date
hereof in connection with this Agreement or any of the transactions
contemplated hereby and thereby; provided that in no event shall the
Shareholder be liable for any such Losses until the amount of all such
Losses incurred by Parent or the Company, in the aggregate, exceeds
$75,000, in which event the Shareholder shall be responsible for all
such Losses, but only to the extent by which such Losses exceed
$75,000; provided further that, except with respect to any breach of
the representations and warranties set forth in Sections 2.1, 2.2 and
2.4 hereof, the Shareholder shall only be obligated to indemnify
Parent with respect to such Losses in an aggregate amount of up to
$3,000,000. For purposes of this Agreement, the term "Losses" means
any and all deficiencies, judgments, settlements, demands, claims,
actions or causes of action, assessments, liabilities, losses, damages
(whether direct, indirect, incidental or consequential), interest,
fines, penalties, costs and expenses (including, without limitation,
reasonable legal, accounting and other costs and expenses incurred in
connection with investigating, defending, settling or satisfying any
and all demands, claims, actions, causes of action, suits,
proceedings, assessments, judgments or appeals, and in seeking
indemnification therefor).
(b) Subject to the provisions of Section 9.1, the
Parent hereby agrees to indemnify, defend and hold harmless the
Shareholder from and against and in respect of any and all Losses
resulting from, arising out of, relating to, imposed upon or incurred
by the Shareholder by reason of any inaccuracy in or breach by the
Parent of any of its representations, warranties, covenants or
agreements contained in this Agreement, any of the Related Agreements
or in any other agreement or document entered into or delivered on or
after the date hereof in connection with this Agreement or any of the
transactions contemplated hereby and thereby; provided that, except
with respect to any breach of the representations and warranties set
forth in Sections 4.1 and 4.2 hereof or in the first two sentences of
Section 4.4 hereof, the Parent shall only be obligated to indemnify
the Shareholder with respect to such Losses in an aggregate amount of
up to $3,000,000.
(c) For purposes of indemnification in respect of
Losses, any inaccuracy in or breach of a representation of warranty
shall be deemed to constitute a breach of a representation or warranty
notwithstanding any limitation or qualification as to materiality set
forth in such representation or warranty on the scope, accuracy or
completeness thereof, it being the intention of the parties that,
subject to the first proviso in Sections 9.2(a) and 9.2(b) above, an
indemnified party under this Section 9.2 shall be indemnified and held
harmless from and against any and all Losses arising out of or based
upon or with respect to the failure of any such representation or
warranty to be true, correct and complete in any respect.
(d) Notwithstanding anything contained herein to the
contrary, for all purposes of this Agreement, Losses shall be reduced
by (i) the amount of any insurance proceeds (minus all reasonably
allocable costs, charges and expenses incurred by the indemnified
party in obtaining such recovery) actually recovered in respect
thereof and (ii) any tax-related benefits if and when actually
realized or received (but only after taking into account the tax
benefits to which the indemnified party would be entitled without
regard to such item). Any insurance recovery or tax-related benefits
referred to in the previous sentence shall be promptly repaid by the
indemnified party to the indemnifying party following the time at
which such amounts are actually recovered or realized or received;
provided that in the event that any such insurance recovery or tax-
related benefit is set aside or disallowed and the indemnified party
had paid any amounts to the indemnifying party in respect thereof (or
the amount by which the indemnified party was indemnified was reduced
in respect thereof), then the obligation of the indemnifying party to
indemnify with respect to such amounts shall be reinstated immediately
and such amounts shall be paid promptly to the indemnified party in
accordance with the provisions of this Agreement. No investigation by
an indemnified party prior to or after the date of this Agreement
shall affect or impair such party's rights with respect to any of the
representations, warranties, covenants or agreements of the
indemnifying party contained in this Agreement or the Related
Agreements; provided that in the event that the senior management of a
particular indemnified party has actual knowledge of any material
inaccuracy in any representation or warranty set forth in this
Agreement, such indemnified party shall not be entitled to seek
indemnification under this Section 9.2 for any Losses which directly
relate to such known inaccuracy. Any rights of indemnification,
contribution, subrogation or otherwise which the Shareholder may have
against the Company (whether pursuant to the Company's charter
documents, by contract, by operation of law or otherwise), shall,
effective at the time of the Closing, be deemed to be hereby expressly
and knowingly waived.
(e) The exercise by an indemnified party under this
Section 9.2 of, or its ability to exercise, any of its
indemnification rights hereunder shall not adversely affect its right
to seek any other remedy available to it (which in the case of Parent
shall include without limitation the right to offset against the
Escrowed Consideration pursuant to the terms and conditions of the
Escrow Agreement). Parent and the Company shall be entitled to offset
any amounts owed to it pursuant to this Section 9.2 by the amount of
any shares of Parent Common Stock held by the Escrow Agent in escrow,
pursuant to the terms and conditions of the Escrow Agreement, in
addition to seeking any other remedy available to Parent and the
Company. Notwithstanding the foregoing, in the event that any offset
against the Escrowed Consideration results in Parent taking back
shares of Parent Common Stock and such action would reasonably
jeopardize the tax-free treatment of the consideration to be received
by the Shareholder pursuant to the Merger, the Shareholder may request
that Parent accept, in lieu of taking such shares of Parent Common
Stock, cash having a fair market value equal to such shares of Parent
Common Stock (based on the last reported sale price of one share of
Parent Common Stock on the NYSE as of the date of any such offset);
provided that the Shareholder shall only be entitled to exercise such
right to the extent that the Shareholder pays in cash at such time all
amounts then owing to Parent (whether pursuant to the indemnification
provisions of this Article 9 or otherwise).
3 Notice. If any claims in respect of Losses shall be
asserted against a party hereto or any of its successors in respect of
which such party proposes to demand indemnification under Section 9.2
hereof, the party seeking indemnification shall notify in a reasonably
prompt manner the party from whom it is seeking indemnification;
provided that failure to give such reasonably prompt notice shall not
release, waive or otherwise affect the indemnifying party's
obligations with respect thereto except to the extent such
indemnifying party can demonstrate actual loss or prejudice as a
result thereof. In addition, the rights and obligations of the
respective indemnifying parties and indemnified parties under Section
9.2 hereof with respect to the handling of any third party claim shall
be determined in a manner similar to the provisions set forth in
Section 1.10(d)(iii) (other than the first sentence of such
paragraph). The Company shall not be deemed to have notice of any
claim or of any breach by the Company or the Shareholder of any
representation, warranty, covenant or agreement under this Agreement
by virtue of knowledge acquired on or prior to the date of the Closing
by an employee of the Company.
GENERAL PROVISIONS
1 Nonsurvival of Representations, Warranties and Agreements.
Except as set forth in Article 9, none of the representations,
warranties and agreements in this Agreement shall survive the Closing.
2 Notices. Any notice or communication required or
permitted hereunder shall be in writing and either delivered personally,
telecopied or sent by overnight courier, or by certified or registered
mail, postage prepaid, and shall be deemed to be given, dated and
received when so delivered personally or by courier or telecopied, or,
if mailed, five business days after the date of mailing to the
following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice given
hereunder:
(a) if to Parent or Merger Sub (or, after the Closing, the
Company), to:
CUC International Inc.
707 Summer Street
Stamford, Connecticut 06901
Telephone: (203) 324-9261
Facsimile: (203) 348-1982
Attention: Amy N. Lipton, Esq.
(b) if to the Shareholder (or, prior to Closing, the Company)
to:
Book Stacks Unlimited, Inc.
200 Public Square, Suite 26-4600
Cleveland, Ohio 44114
Telephone: (216) 861-4611
Facsimile:
Attention: Mr. Charles Stack
with a copy to:
Benesch, Friedlander, Coplan & Aronoff
2300 BP America Building, 200 Public Square
Cleveland, Ohio 44114-2378
Telephone: (216) 363-4607
Facsimile: (216) 363-4588
Attention: David Inglis, Esq.
3 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be considered an original and
all of which shall be considered one and the same agreement and shall
become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
4 Entire Agreement; No Third Party Beneficiaries; Rights
of Ownership. This Agreement (together with the Related Agreements, the
Confidentiality Agreement, the Side Agreement and any other documents
and instruments referred to herein) constitutes the entire agreement
and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereto
and is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder. The parties hereby
acknowledge that no party shall have the right to acquire or shall be
deemed to have acquired shares of common stock of any other party
until consummation of the transactions contemplated by this Agreement.
5 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law thereof.
6 Arbitration. Any controversy, dispute or claim arising
out of or relating to this Agreement or the breach hereof which cannot be
settled by mutual agreement (except for actions by Parent or the
Company seeking equitable, injunctive or other relief under Section
10.9) shall be finally settled by arbitration as follows: Any party
who is aggrieved shall deliver a notice to other party setting forth
the specific points in dispute. Any points remaining in dispute
twenty (20) days after the giving of such notice shall be submitted to
arbitration in Cleveland, Ohio, to JAMS/Endispute, before a single
arbitrator appointed in accordance with JAMS/Endispute's Arbitration
Rules, modified only as herein expressly provided. The arbitrator may
enter a default decision against any party who fails to participate in
the arbitration proceedings. The decision of the arbitrator on the
points in dispute will be final, unappealable and binding and judgment
on the award may be entered in any court having jurisdiction thereof.
The arbitrator will be authorized to apportion its fees and expenses
and the reasonable attorney's fees and expenses of Parent and the
Shareholder as the arbitrator deems appropriate. In the absence of
any such apportionment, the fees and expense of the arbitrator will be
borne equally by each party, and each party will bear the fees and
expenses of its own attorney. The parties agree that this clause has
been included to rapidly and inexpensively resolve any disputes
between them with respect to this Agreement, and that this clause
shall be grounds for dismissal of any court action commenced by either
party with respect to this Agreement, other than post-arbitration
actions seeking to enforce an arbitration award. The parties shall
keep confidential, and shall not disclose to any person, except as may
be required by law, the existence of any controversy hereunder, the
referral of any such controversy to arbitration or the status or
resolution thereof.
7 Severability. If any term or other provision of this
Agreement is invalid, illegal or unenforceable, all other provisions
of this Agreement shall remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is
not affected in any manner materially adverse to any party. In the
event that the enforceability of any non-competition or other covenant
contained in this Agreement or in any Related Agreement is called into
question (whether by a court, arbitrator or other authority) as the
result of any time, geographical or other applicable limitation(s)
specified (or not specified) in such covenant, such time, geographical
or other applicable limitation(s) shall be deemed modified to the
minimum extent necessary to render the applicable provisions of such
covenant enforceable.
8 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties; provided that Parent may
assign its rights and obligations to any affiliate, but no such
assignment shall relieve Parent of its respective obligations
hereunder if such assignee does not perform such obligations. Subject
to the preceding sentence, this Agreement will be binding upon, inure
to the benefit of and be enforceable by the parties and their
respective successors and assigns.
9 Specific Performance. The parties hereto acknowledge
that irreparable damage would result if this Agreement (including, without
limitation, Section 1.10) were not specifically enforced, and they
therefore consent that the rights and obligations of the parties under
this Agreement may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall,
however, not be exclusive and shall be in addition to any other
remedies which any party may have under this Agreement or otherwise.
The Shareholder acknowledges that its failure (and the failure of any
of its partners, employees, agents or representatives) to comply with
any of the provisions of Sections 3.3 and 3.4 hereof will result in
irreparable harm for which there is no adequate remedy at law and that
Parent shall be entitled, without the necessity of proving actual
damages, to injunctive relief in addition to damages and all other
remedies which may otherwise be available to Parent.
10 Fees and Expenses. Except as otherwise set forth
herein or in any of the Related Agreements, all costs and expenses,
including all fees and expenses of attorneys, investment bankers, lenders,
financial advisers and accountants, in connection with the
negotiation, execution and delivery of this Agreement, the Related
Agreements and the consummation of the transactions contemplated
hereby and thereby, shall be paid by the party incurring such costs
and expenses.
11 Certain Obligations. Whenever this Agreement requires
the Company to take any action or to refrain from taking any action, such
requirement shall be deemed to include an undertaking on the part of
the Shareholder to cause the Company to take such action or to refrain
from taking such action, as the case may be.
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by or on behalf of each of the parties hereto as of the date
first above written.
CUC INTERNATIONAL INC.
By: /s/ Cosmo Corigliano
Name: Cosmo Corigliano
Title: Senior Vice President and
Chief Financial Officer
BSU ACQUISITION CORPORATION
By: /s/ Cosmo Corigliano
Name: Cosmo Corigliano
Title: Vice President
BOOK STACKS UNLIMITED, INC.
By: /s/ Charles M. Stack
Name: Charles M. Stack
Title: President
/s/ Charles M. Stack
CHARLES STACK
Exhibit 5
August 29, 1996
CUC International Inc.
707 Summer Street
Stamford, Conn. 06901
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
I have examined the Registration Statement on Form S-3
(the "Registration Statement") to be filed by CUC International
Inc., a Delaware corporation (the "Company"), with the Securities
and Exchange Commission (the "Commission") in connection with the
registration under the Securities Act of 1933, as amended, of
approximately 120,000 shares of common stock, par value $.01 per
share, of the Company (the "Common Stock"). The Registration
Statement is being filed in connection with a proposed secondary
offering and sale of the Company's Common Stock, which is being
effected pursuant to the provisions of Section 1.10 of the Merger
Agreement dated as of August 7, 1996 (the "Merger Agreement"), by
and among CUC, BSU Acquisition Corporation, a wholly-owned
subsidiary of the Company, Book Stacks Unlimited, Inc. and
Charles Stack.
In connection with the foregoing, I have examined
originals or copies, certified or otherwise identified to my
satisfaction, of the Registration Statement and the Merger
Agreement and of such corporate records, certificates of public
officials and other documents as I have deemed relevant and
necessary as a basis for the opinion hereinafter expressed. In
such examination, I have assumed the genuineness of all
signatures, the legal capacity of natural persons, the
authenticity of all documents submitted to me as original
documents, the conformity to original documents of all documents
submitted to me as certified or photostatic copies and the
authenticity of the originals of such copies.
As to any facts material to this opinion which I did
not independently establish or verify, I have relied upon
statements and representations of the Company and its officers
and agents (including (x) representations made to me by the
Company's Secretary as to certain corporate action taken by the
Board of Directors of the Company in relation to the issuance of
shares of Common Stock pursuant to the Merger Agreement and (y)
statements included in the various public filings made by the
Company with the Commission prior to the date hereof) and on
certain certificates of public officials (including those of the
Delaware Secretary of State).
Based upon and subject to the foregoing, I am of the
opinion that the shares of the Company's Common Stock being
registered pursuant to the Registration Statement, when issued
pursuant to the provisions of the Merger Agreement, will be
legally issued and fully paid and non-assessable.
I hereby consent to the filing of a copy of this
opinion as an exhibit to the Registration Statement and to the
use of my name wherever appearing in such Registration Statement,
including any amendment thereto.
Very truly yours,
/s/ Peter G. McGonagle
Peter G. McGonagle
Vice President