Exhibit 99.1
____________________________________
AGREEMENT AND PLAN OF MERGER
Dated as of July 2, 2001
among
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.,
SYSTEMS HOLDING, INC.
AND
SYSTEMS MERGER SUB, INC.
____________________________________
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER 2
1.1 The Merger 2
1.2 Effect of Merger 3
1.3 Certificate of Incorporation
and By-Laws 3
1.4 Effective Time of Merger 3
1.5 ERS Directors and Officers 3
1.6 Taking of Necessary Action;
Further Action 3
ARTICLE II CONVERSION OF SHARES 4
2.1 Merger Sub Common Stock 4
2.2 ERS Series A-1 Stock 4
2.3 ERS Common Stock 4
2.4 ERS Class B Common Stock 4
2.5 Options to Purchase Shares of
ERS Common Stock 5
2.6 ERS Warrants. 5
2.7 Holdco Common Stock 6
ARTICLE III DISSENTING SHARES;
EXCHANGE OF CERTIFICATES 6
3.1 Dissenting Shares 6
3.2 Deposit of Funds 6
3.3 Exchange of Shares for Cash 7
3.4 ERS Stock Transfer Ledger 8
3.5 Exchange of Warrants 8
ARTICLE IV CLOSING 8
4.1 Time and Place of Closing 8
4.2 Certificate of Merger 9
4.3 Other Certificates 9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF ERS 9
5.1 Incorporation 9
5.2 Authorization 10
5.3 Conflicts 10
5.4 Capitalization 11
5.5 Subsidiaries; Additional Interests 12
5.6 Securities Filings 12
5.7 Disputes and Litigation 12
5.8 Brokers and Finders 13
ARTICLE VI REPRESENTATIONS AND WARRANTIES
OF HOLDCO AND MERGER SUB 13
6.1 Incorporation 13
6.2 Authorization 14
6.3 Conflicts 14
6.4 Capitalization 15
6.5 Brokers or Finders. 15
6.6 Sufficient Funds 16
ARTICLE VII CERTAIN COVENANTS 16
7.1 Information/Going Private Transaction
Statement 16
7.2 Other Governmental and Judicial Filings 17
7.3 Conduct of Business of ERS 18
7.4 ERS Capitalization 18
7.5 Action by Holdco Stockholders 18
7.6 Due Diligence; SEC Filings;
Confidentiality 19
7.7 Notification of Certain Matters 19
7.8 Forbearance 20
7.9 Indemnification 20
7.10 Additional Agreements 21
ARTICLE VIII PUBLICITY 22
8.1 Publicity 22
ARTICLE IX CONDITIONS TO OBLIGATIONS
OF EACH PARTY 22
9.1 Information/Going Private Transaction
Statement 22
9.2 Reclassification Amendment. 22
9.3 No Prohibition on Consummation 23
ARTICLE X CONDITIONS TO OBLIGATIONS OF ERS 23
ARTICLE XI CONDITIONS TO OBLIGATIONS OF HOLDCO
AND MERGER SUB 23
ARTICLE XII TERMINATION 24
12.1 Termination 24
12.2 Effect of Termination 24
ARTICLE XIII MISCELLANEOUS 24
13.1 Notices 24
13.2 Entire Agreement 25
13.3 Modification 26
13.4 Further Action 26
13.5 Expenses 26
13.6 Governing Law 26
13.7 Captions 26
13.8 Accounting Terms 26
13.9 Waiver 26
13.10 Assignment 27
13.11 No Third Party Beneficiary 27
13.12 Partial Invalidity 27
13.13 Counterparts 27
Exhibit A - Certificate of Amendment to Certificate
of Incorporation
INDEX OF DEFINED TERMS
Agreement........................................ Recitals
AIM Rules........................................ Section 5.3
business day..................................... Section 4.1
Certificate of Merger............................ Section 2.4
Closing.......................................... Section 4.1
Closing Date..................................... Section 4.1
Code............................................. Section 3.3
Constituent Corporations......................... Recitals
Dissenting Shares................................ Section 3.1
Effective Time................................... Section 2.4
ERS.............................................. Recitals
ERS' business or condition....................... Section 5.5
ERS Preferred Stock.............................. Recitals
ERS Class B Common Stock......................... Section 1.1
ERS Common Stock................................. Recitals
ERS Form 10-K................................... Section 5.6
ERS SEC Documents................................ Section 5.6
ERS Option Plans................................. Section 3.3(a)
ERS Options...................................... Section 3.3(a)
ERS Preferred Stock.............................. Recitals
ERS Principal Shares............................. Recitals
ERS Series A-1 Stock............................. Recitals
ERS Warrants..................................... Section 2.6
ESL Determination................................ Section 7.2
Exchange Act..................................... Section 5.3
Exchange Agent................................... Section 3.2(a)
Financial Advisor................................ Recitals
GCL.............................................. Recitals
Holdco .......................................... Recitals
Holdco Common Stock.............................. Recitals
Holdco Stockholders.............................. Recitals
Indemnification Agreements....................... Section 7.9(a)
Information/Going Private Transaction Statement.. Section 7.1
knowledge........................................ Section 5.7
Lien............................................. Section 5.7
Material Adverse Effect.......................... Section 5.1(b)(i)
Merger........................................... Recitals
Merger Consideration............................. Section 2.3
Merger Sub....................................... Recitals
Merger Sub Common Stock.......................... Recitals
NewCheck Agreements............................. Section 5.5
Preliminary Information/Going Private
Transaction Statement.......................... Section 7.1
Reclassification................................. Recitals
Reclassification Amendment....................... Section 9.2
Schedule 13E-3................................... Section 7.1
Subsidiaries..................................... Section 5.1(b)(ii)
SEC.............................................. Section 4.1
Securities Act................................... Recitals
Significant Subsidiary........................... Section 5.3
Special Committee................................ Recitals
Surviving Corporation............................ Section 1.1
Warrant Agreement................................ Section 3.4
Warrant Agent.................................... Section 3.4
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of this 2nd day of
July, 2001 (hereinafter referred to as this "Agreement"), by and
among ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC., a
corporation organized and existing under the laws of the State of
Delaware (hereinafter referred to as "ERS"), SYSTEMS HOLDING,
INC., a corporation organized and existing under the laws of the
State of Delaware (hereinafter referred to as "Holdco"), and
SYSTEMS MERGER SUB, INC., a corporation organized and existing
under the laws of the State of Delaware and a wholly-owned
subsidiary of Holdco (hereinafter referred to as "Merger Sub" and,
together with ERS, as the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, ERS, pursuant to its certificate of incorporation
(as filed in the office of the Secretary of State of the State of
Delaware on February 12, 1993, as subsequently amended), has an
authorized capital stock consisting of: (x) 2,000,000 shares of
preferred stock, $1.00 par value (hereinafter referred to as the
"ERS Preferred Stock"), of which 40,000 shares have been
designated as Series A-1 Convertible Preferred Stock (hereinafter
referred to as "ERS Series A-1 Stock") and of which 39,985 shares
are issued and outstanding; and (y) 35,000,000 shares of common
stock, $.01 par value (hereinafter referred to as the "ERS Common
Stock"), of which 21,345,383 shares are presently issued and
outstanding; and
WHEREAS, the holders (hereinafter referred to as the "Holdco
Stockholders") of the common stock, $.01 par value (hereinafter
referred to as the "Holdco Common Stock"), of Holdco,
collectively, own in excess of a majority of the outstanding
shares of ERS Common Stock, and have entered into agreements
whereby all such shares (hereinafter referred to as the "ERS
Principal Shares") will be contributed to Holdco as hereinafter
set forth;
WHEREAS, Merger Sub has been duly organized as a corporation
under the laws of the State of Delaware, and, pursuant to its
certificate of incorporation (as filed in the office of the
Secretary of State of the State of Delaware on June 4, 2001), has
an authorized capital stock consisting of 10,000 shares of common
stock, $.01 par value (hereinafter referred to as the "Merger Sub
Common Stock"), of which 1,000 shares are issued and outstanding
and held by Holdco;
WHEREAS, a special committee of the Board of Directors of ERS
(hereinafter referred to as the "Special Committee"), consisting
entirely of the non-management director of ERS who is not an
affiliate (as defined under Rule 405 of the Securities Act of 1933
[the "Securities Act"]) of Holdco or the Holdco Stockholders, was
established for, among other purposes, the purpose of evaluating
the transactions contemplated by this Agreement and making a
recommendation to the Board of Directors of ERS with regard to the
transactions contemplated by this Agreement;
WHEREAS, the Special Committee has received the opinion of
BNY Capital Markets, Inc. (hereinafter referred to as the
"Financial Advisor"), financial advisor to the Special Committee,
which was selected by it, that the consideration to be received by
the holders of ERS Common Stock, other than holders of ERS
Principal Shares, pursuant to the Merger (as hereinafter defined)
is fair to such holders from a financial point of view;
WHEREAS, the Special Committee, has, after consultation with
the Financial Advisor and legal counsel selected by the Special
Committee, and in light of and subject to the terms and conditions
set forth herein: (i) determined that (x) the Merger Consideration
(as hereinafter defined), is fair to the holders of ERS Common
Stock, other than holders of ERS Principal Shares, and (y) the
Merger is advisable and in the best interests of ERS and the
holders of ERS Common Stock, other than holders of ERS Principal
Shares, (ii) approved, and declared the advisability of, this
Agreement and (iii) determined to recommend that the Board of
Directors of ERS adopt this Agreement;
WHEREAS, the respective Boards of Directors of Merger Sub and
of Holdco and, based on the recommendation and approval of the
Special Committee, of ERS have deemed it advisable and in the best
interests of such corporations and their stockholders,
respectively, that: (x) following the reclassification
(hereinafter referred to as the "Reclassification") of the ERS
Principal Shares as shares of the class B common stock, $.01 par
value (hereinafter referred to as "ERS Class B Common Stock"), of
ERS, Merger Sub shall be merged into and with ERS (hereinafter
referred to as the "Merger"), and (y) pursuant to the Merger, all
remaining shares of ERS Common Stock shall be converted into and
represent the right to receive cash as set forth herein; and
WHEREAS, the Holdco Stockholders have, by written consent
dated this date in accordance with the applicable provisions of
the Delaware General Corporation Law (hereinafter referred to as
the "GCL"), authorized, approved, adopted and ratified the Merger,
the Reclassification and this Agreement, constituting, for all
purposes of the GCL, the act of the stockholders of ERS;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereby agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger.
At the Effective Time (as hereinafter defined), in accordance
with this Agreement and the GCL, Merger Sub shall be merged into
and with ERS, the separate corporate existence of Merger Sub shall
cease and ERS shall continue as the surviving corporation,
governed by the laws of the State of Delaware, under the corporate
name it possesses immediately prior to the Effective Time. ERS,
from and after the Effective Time, is hereinafter sometimes
referred to as the "Surviving Corporation."
1.2 Effect of Merger.
The effects of the Merger shall be as set forth in Sections
251 and 259 of the GCL.
1.3 Certificate of Incorporation and By-Laws.
The certificate of incorporation and the by-laws of ERS, as
in effect immediately prior to the Effective Time, shall be the
certificate of incorporation and by-laws of the Surviving
Corporation and thereafter shall continue to be its certificate of
incorporation and by-laws until changed as provided therein and
under the laws of the State of Delaware. The first annual meeting
of the stockholders of the Surviving Corporation held after the
Effective Time shall be the next annual meeting of stockholders
provided for in the by-laws of ERS.
1.4 Effective Time of Merger.
The Merger shall become effective at the time of filing of a
certificate of merger with respect to the Merger (hereinafter
referred to as the "Certificate of Merger") in the office of the
Secretary of State of the State of Delaware, as required by the
GCL or such later time as is agreed on by the parties and
specified in the Certificate of Merger. Such time is herein
referred to as the "Effective Time."
1.5 ERS Directors and Officers.
At the Effective Time and until their successors have been
duly elected and have qualified, the Board of Directors of the
Surviving Corporation shall consist of five members, and the
members of the Board of Directors of ERS shall constitute the
directors of the Surviving Corporation; and at the Effective Time
and until their successors have been duly elected and have
qualified, the officers of ERS shall constitute the officers of
the Surviving Corporation, all in accordance with the Surviving
Corporation's certificate of incorporation and by-laws or as
otherwise provided by the GCL.
1.6 Taking of Necessary Action; Further Action.
ERS, Holdco and Merger Sub, respectively, shall take all such
lawful action as may be necessary or appropriate in order to
effectuate the transactions contemplated by this Agreement. In
case at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement
and to vest the Surviving Corporation with full title to all
assets, rights, privileges, powers, immunities, purposes and
franchises of either of the Constituent Corporations, the officers
and directors of such corporation shall take all such lawful and
necessary action.
ARTICLE II
CONVERSION OF SHARES
The manner and basis of converting in the Merger the
outstanding shares of the capital stock of each of the Constituent
Corporations into shares of the capital stock of the Surviving
Corporation are as follows:
2.1 Merger Sub Common Stock.
Each share of the shares of Merger Sub Common Stock issued
and outstanding immediately prior to the Effective Time, shall, by
virtue of the Merger and without any action by the holder thereof,
be deemed cancelled and converted into and shall represent the
right to receive one share of the class B common stock, $.01 par
value, of the Surviving Corporation.
2.2 ERS Series A-1 Stock.
Each share of the outstanding shares of ERS Series A-1 Stock
issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action by the
holder thereof, continue unchanged and remain outstanding as one
share of the Series A-1 Convertible Preferred Stock, $1.00 par
value, of the Surviving Corporation.
2.3 ERS Common Stock.
Each share of ERS Common Stock issued and outstanding
immediately prior to the Effective Time (other than Dissenting
Shares, as defined and to the extent provided in Section 3.1
hereof, if any), shall, by virtue of the Merger and without any
action by the holder thereof, be deemed cancelled and converted
into and be exchanged for and represent the right to receive
$0.26, without interest (herein referred to as the "Merger
Consideration"), in cash, payable by Holdco in the manner
hereinafter set forth under Article III. All such shares of ERS
Common Stock, when so converted, shall no longer be outstanding
and shall automatically be cancelled and retired and shall cease
to exist, and each holder of a certificate which immediately prior
to the Effective Time represented any such shares shall cease to
have any rights with respect thereto, except the right to receive
the Merger Consideration upon the surrender of such certificate in
accordance with Section 3.3 hereof. Each share of ERS Common Stock
held in the treasury of ERS shall be cancelled, and no payment
shall be made in respect thereof.
2.4 ERS Class B Common Stock.
Each share of ERS Class B Common Stock issued and outstanding
immediately prior to the Effective Time, shall, by virtue of the
Merger and without any action by the holder thereof, continue
unchanged and remain outstanding as one share of the class B
common stock, $.01 par value, of the Surviving Corporation.
2.5 Options to Purchase Shares of ERS Common Stock.
(a) All options (hereinafter referred to as the "ERS
Options") to acquire ERS Common Stock outstanding, whether or not
exercisable at the Effective Time, under the Electronic Retailing
Systems International, Inc. 1993 Employee Stock Option Plan and
the Electronic Retailing Systems International, Inc. 1993 Director
Stock Option Plan (hereinafter, collectively, referred to as the
"ERS Option Plans"), shall remain outstanding following the
Effective Time. At the Effective Time, the ERS Options shall, by
virtue of the Merger and without any further action on the part of
ERS or the holder thereof, be assumed by Holdco and shall be
exercisable for a number of shares of Holdco Common Stock equal to
the number of shares of ERS Common Stock subject to such ERS
Option immediately prior to the Effective Time (at an option price
per share of Holdco Common Stock equal to the exercise price per
share of ERS Common Stock subject to such ERS Option in effect
immediately prior to the Effective Time). From and after the
Effective Time: (i) all references to ERS in the ERS Option Plans
and the applicable stock option agreements issued thereunder shall
be deemed to refer to Holdco, (ii) each reference to the name of
such plans, respectively, therein shall be deemed a reference to
the "Systems Holding, Inc. Subsidiary Employee Stock Option Plan"
or the "Systems Holding Inc. Subsidiary Director Stock Option
Plan", as the case may be, and (iii) each reference to ERS Common
Stock in the ERS Option Plans or any stock option agreements
thereunder shall be deemed a reference to Holdco Common Stock.
Subject to the foregoing, each ERS Option assumed by Holdco shall
be exercisable upon the same terms and conditions as under the ERS
Option Plans and the applicable option agreement issued
thereunder.
(b) The assumption of ERS Options pursuant hereto shall not
confer on any holder thereof any additional benefits which such
holder did not have immediately prior to the Effective Time,
result in any acceleration of any vesting or exercise schedule for
any ERS Option, or release any holder of any ERS Option of any
obligations or restrictions applicable to his option or the shares
obtainable upon exercise of such option. At the Effective Time,
the ERS Option Plans shall, by virtue of the Merger and without
any further action on the part of ERS, be deemed terminated,
except for the rights of the holders of outstanding ERS Options
subject to the terms and provisions hereinbefore set forth, and no
further options shall be granted thereunder.
2.6 ERS Warrants.
All warrants (hereinafter referred to as the "ERS Warrants")
to acquire ERS Common Stock outstanding at the Effective Time and
issued pursuant to the Warrant Agreement dated January 24, 1997
(hereinafter referred to as the "Warrant Agreement") between ERS
and American Stock Transfer & Trust Company, as warrant agent
(hereinafter referred to as the "Warrant Agent"), subsequent to
the Effective Time shall, by virtue of Section 4.05(b) of the
Warrant Agreement and without any action by any holder thereof, be
converted into and represent the right to receive, in lieu of each
share of ERS Common Stock issuable pursuant thereto prior to the
Effective Time, an amount, if any, equal to the amount by which
the Merger Consideration exceeds the Exercise Price attendant
thereto (as defined in the Warrant Agreement).
2.7 Holdco Common Stock.
The Merger shall effect no change in any shares of Holdco
Common Stock issued by Holdco prior to the Effective Time.
ARTICLE III
DISSENTING SHARES;
EXCHANGE OF CERTIFICATES
3.1 Dissenting Shares.
Notwithstanding anything in this Agreement to the contrary,
shares of ERS Common Stock which are issued and outstanding
immediately prior to the Effective Time and which are held by
stockholders who have not voted such shares in favor of the Merger
or consented thereto in writing and, if entitled to elect to
demand the appraisal of such shares pursuant to Section 262 of the
GCL, shall have delivered a written demand for payment of the fair
value of such shares within the time and in the manner provided in
said Section 262 (herein referred to as "Dissenting Shares") shall
not be converted into or be exchangeable for the right to receive
the Merger Consideration provided for in Section 2.3 of this
Agreement, unless and until such holder shall have failed to
perfect or shall have effectively withdrawn or lost his right to
appraisal and payment under the GCL. If any such holder shall have
so failed to perfect or shall have effectively withdrawn or lost
such right, such holder's shares of ERS Common Stock shall
thereupon be deemed to have been converted into and to have become
exchangeable for, at the Effective Time, the right to receive the
Merger Consideration specified under Section 2.3 hereof, without
any interest thereon.
3.2 Deposit of Funds.
Prior to the Effective Time, Holdco shall designate American
Stock Transfer & Trust Company, and/or, at its election, such
additional or alternative banks or trust companies or similar
entities, reasonably satisfactory to ERS, which are authorized to
exercise corporate trust or stock powers, to act as exchange
agents for ERS Common Stock (hereinafter referred to,
collectively, as the "Exchange Agent") in the Merger, pursuant to
an agreement providing for the matters set forth in this Section
3.2 and such other matters as may be appropriate and the terms of
which shall be reasonably satisfactory to the Special Committee
and Holdco. Immediately prior to the Effective Time, Holdco shall
deliver to the Exchange Agent, to be held for a period of 180 days
following the Effective Time in a segregated account for the
former holders of ERS Common Stock, cash in an amount equal to the
aggregate amount to which the holders of shares of ERS Common
Stock shall be entitled pursuant to Article II hereof.
3.3 Exchange of Shares for Cash.
(a) As soon as practicable after the Effective Time,
but in no event later than ten days thereafter, the Exchange Agent
shall send a notice and transmittal form to each holder of a
certificate theretofore evidencing shares of ERS Common Stock,
other than with respect to shares of ERS Common Stock cancelled
pursuant to Section 2.3 hereof or Dissenting Shares, advising such
holders of the terms of the exchange effected by the Merger and
the procedure for surrendering to the Exchange Agent (who may
appoint forwarding agents with the approval of Holdco) such record
holder's certificate(s) evidencing ERS Common Stock in exchange
for the Merger Consideration to which it is entitled. Each holder
of a certificate theretofore evidencing shares of ERS Common
Stock, upon surrender of the same to the Exchange Agent in
accordance with such transmittal form, shall be entitled to
receive, in exchange for such certificate, an amount equal to the
Merger Consideration as contemplated in Section 2.3 hereof
multiplied by the number of shares of ERS Common Stock theretofore
represented by the certificate (such Merger Consideration to be
mailed within ten business days of receipt of such certificate and
transmittal form), and the certificate so surrendered shall
forthwith be cancelled.
(b) If any payment for shares of ERS Common Stock is
to be made in cash to any person other than the registered holder
thereof, it shall be a condition of such payment that the
certificate so surrendered shall be properly endorsed and
otherwise in proper form for transfer and that the payment amount
of any stock transfer or similar taxes (whether imposed on the
registered holder, transferee or otherwise) payable on account of
the transfer to such person shall be deducted from the amount paid
by the Exchange Agent, or otherwise paid in full to the Exchange
Agent, or the Exchange Agent may refuse to make payment of the
Merger Consideration, unless satisfactory evidence of any
exemption from such taxes is submitted.
(c) In the event any certificate representing any
shares of ERS Common Stock shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming such certificate to be lost, stolen or destroyed,
the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed certificate the Merger Consideration pursuant to
Section 2.3. The Exchange Agent or the Surviving Corporation may,
in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed
certificate to give the Exchange Agent a bond in such reasonable
sum as it may direct as indemnity against any claim that may be
made against the Surviving Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
(d) One hundred eighty days following the Effective
Time, Holdco shall be entitled to require the Exchange Agent to
deliver to Holdco any funds (including any interest and dividends
received with respect thereto) not theretofore disbursed to
holders of certificates representing shares of ERS Common Stock
outstanding immediately prior to the Effective Time, and
thereafter the former holders of such shares shall be entitled to
look to Holdco (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to
the cash which would have been exchanged therefor, without any
interest thereon, and Holdco shall be obligated to pay such cash
as provided in this Section 3.3.
3.4 ERS Stock Transfer Ledger.
At the Effective Time, it shall be deemed that the stock
transfer books of ERS are closed, and no transfer of ERS Common
Stock on the books of ERS shall thereafter be made or consummated.
Until surrendered and exchanged in accordance with the provisions
of Section 3.3 hereof, the outstanding certificates evidencing
shares of ERS Common Stock immediately prior to the Effective Time
shall, from and after the Effective Time, be deemed for all
corporate purposes to evidence the right to receive the Merger
Consideration as provided for in Section 2.3, into which the
shares of ERS Common Stock theretofore evidenced by such
certificate or certificates shall have been so converted, as
though such surrender and exchange had taken place. If, after the
Effective Time, certificates representing shares of ERS Common
Stock are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Article
III.
3.5 Exchange of Warrants.
As soon as is practicable after the Effective Time, Holdco
shall notify the Warrant Agent of the occurrence thereof and of
the amount, if any, calculated by subtracting the Exercise Price
per share of ERS Common Stock pursuant to the Warrant Agreement
from the Merger Consideration, and that thereafter each holder of
ERS Warrants shall, upon surrender of his certificate in evidence
thereof pursuant to Section 4.05(b) of the Warrant Agreement, be
entitled to such amount in lieu of a share of ERS Common Stock
thereunder.
ARTICLE IV
CLOSING
4.1 Time and Place of Closing.
ERS, Holdco and Merger Sub shall regularly communicate and
consult with each other with respect to the fulfillment of the
various conditions to the obligations under this Agreement of the
parties hereto. The exchange of certificates and other documents
contemplated by this Agreement (hereinafter referred to as the
"Closing") shall be held at the offices of Krugman & Kailes LLP,
Park 80 West-Plaza Two, Xxxxxx Xxxxx, Xxx Xxxxxx 00000, at 10:00
A.M., local time, at such time and date (hereinafter referred to
as the "Closing Date") as the parties may determine, such date to
fall within five business days after the satisfaction or waiver of
the last of the conditions set forth in Articles IX, X and XI
hereof to be satisfied or waived (other than conditions with
respect to actions the parties shall take at the Closing), or such
other time and date as may be agreed upon by the parties hereto.
For purposes of this Agreement, "business day" shall mean any day
on which the principal offices of the Securities and Exchange
Commission (hereinafter referred to as the "SEC") in Washington,
D.C. are open to accept filings, or, in the case of determining a
date when any payment is due, any day on which banks are not
required or authorized to close in the City of New York.
4.2 Certificate of Merger.
In the event that, at or prior to the Closing, none of the
parties has exercised any right it may have to terminate this
Agreement, and no condition to the obligations of the parties
exists that is not waived, the parties shall, on the Closing Date
or as soon thereafter as is practicable cause an appropriate
Certificate of Merger to be executed by the Constituent
Corporations and filed with the Secretary of State of the State of
Delaware in accordance with the GCL.
4.3 Other Certificates.
Each of the parties shall cooperate with each other party in
delivering at Closing such additional certificates, instruments
and other documents, in form and substance satisfactory to such
other party or parties reasonably requesting such certificates,
instruments and other documents in connection with the
transactions contemplated hereunder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ERS
ERS represents, warrants and covenants that:
5.1 Incorporation.
(a) ERS is duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full
corporate power and authority to own or hold under lease the
assets and properties which it owns or holds under lease, to
conduct its business as currently conducted, to perform all its
obligations under the agreements to which it is a party,
including, without limitation, this Agreement, and to consummate
the Merger. ERS is in good standing in each other jurisdiction
wherein the failure so to qualify, individually or in the
aggregate, would have a Material Adverse Effect (as hereinafter
defined). The copies of ERS's certificate of incorporation and
by-laws, each as currently in effect, which have been delivered to
Holdco and Merger Sub are complete and correct.
(b) For purposes of this Agreement:
(i) "Material Adverse Effect" with respect to a party shall
mean any change in, or effect on such party or any "subsidiary"
thereof (as hereinafter defined) which is, or is reasonably likely
to be, materially adverse to: (x) the business or financial
condition of such party and its subsidiaries, taken as a whole, or
(y) such party's ability to consummate the transactions
contemplated hereby, other than any event or effect relating (I)
to general political or economic conditions, (II) to the industry
in which any of the parties or any of their subsidiaries operates
or (III) with respect to ERS only, the ESL Determination (as
hereinafter defined); and the term "Material Adverse Effect" used
without a specific reference to a party shall mean a Material
Adverse Effect with respect to ERS and its subsidiaries, taken as
a whole; and
(ii) each reference to a "subsidiary" or "subsidiaries" of
any person means any corporation, partnership, joint venture or
other legal entity of which such person (either alone or through
or together with any other subsidiary), owns, directly or
indirectly, more than 50% of the stock or other equity interests
the holder of which are generally entitled to vote for the
election of the board of directors or other governing body of such
corporation or other legal entity; except, that, neither ERS, nor
any subsidiary of ERS, shall, for purposes of this agreement, be
construed as a "subsidiary" of Holdco.
5.2 Authorization.
The execution and delivery of this Agreement, the performance
by ERS of its covenants and agreements hereunder and the
consummation by ERS of the transactions contemplated hereby have
been duly authorized by all necessary corporate action of ERS.
When duly executed and delivered by the other parties hereto, this
Agreement shall constitute the valid and legally binding
obligation of ERS, enforceable against ERS in accordance with its
terms, except as may be limited by bankruptcy, insolvency or other
laws affecting generally the enforceability of creditors' rights
and by limitations on the availability of equitable remedies.
5.3 Conflicts.
Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated herein, will (i)
violate any provision of ERS's certificate of incorporation or
by-laws, as currently in effect, or, subject to compliance with
the regulatory requirements hereinafter specified in this Section
5.3, any law, rule, regulation, writ, judgment, injunction,
decree, determination, award or other order of any court,
government or governmental agency or instrumentality, domestic or
foreign, binding upon ERS or any of its Significant Subsidiaries
(as hereinafter defined), except for such violations which would
not have a Material Adverse Effect, or (ii) subject to obtaining
third party consents or other approvals and except for any such
conflicts, breaches, creation, imposition or termination which
would not have a Material Adverse Effect, conflict with or result
in any breach of any of the terms of or the creation or imposition
of any mortgage, deed of trust, pledge, lien, security interest or
other charge or encumbrance of any nature pursuant to, or create
any cause for termination under, the terms of any contract or
agreement to which ERS or any of its Significant Subsidiaries is a
party or by which ERS or any of its Significant Subsidiaries or
any of their respective properties or assets is bound. Except for
(i) compliance (x) with the federal Securities Exchange Act of
1934, as amended (hereinafter referred to as the "Exchange Act"),
including, without limitation, with respect to the
Information/Going Private Transaction Statement (as hereinafter
defined), and (y) with the admission rules (hereinafter referred
to as the "AIM Rules") of the Alternative Investment Market of the
London Stock Exchange Limited, and (ii) the filing of the
Reclassification Amendment (as hereinafter defined) and the
Certificate of Merger with the Secretary of State of Delaware, and
except for any such consents, approvals, authorizations, filings
or registrations with or notices to any such person or entity
other than any governmental agency or instrumentality the failure
to effectuate which would not have a Material Adverse Effect, no
consents, approvals or authorizations, or registrations with any
governmental agency or authority or any other person or entity
and, filings with or notices to any such person or entity, are
required in connection with the execution and delivery of this
Agreement by ERS or the consummation by ERS of the transactions
contemplated hereby. For purposes of this Agreement, the term
"Significant Subsidiary" shall have the meaning given to such term
in Rule 405 under the Securities Act.
5.4 Capitalization.
The authorized capital stock of ERS, prior to the filing of
the Reclassification Amendment, consists of: (x) 2,000,000 shares
of ERS Preferred Stock, of which 40,000 shares have been
designated as ERS Series A-1 Stock, and of which 39,985 shares are
issued and outstanding on the date hereof; and (y) 35,000,000
shares of ERS Common Stock, of which 21,345,383 shares are issued
and outstanding on the date hereof. No shares of any class or
series of the capital stock of ERS are held as treasury stock. All
of the outstanding shares of ERS Common Stock are, and all
outstanding shares of ERS Common Stock issuable upon exercise of
ERS Options and upon exercise of ERS Warrants in accordance with
their respective terms will be, duly authorized, validly issued
and fully paid and non-assessable, issued without violation of the
preemptive rights of any person. There are no subscriptions,
warrants, options, calls, commitments by or agreements to which
ERS is bound relating to the issuance, conversion, or purchase of
any shares of ERS Common Stock, or any other capital stock of ERS,
except for: (i) the rights under ERS' certificate of incorporation
provided to holders of ERS Series A-1 Stock; (ii) the ERS Options
granted by ERS pursuant to the ERS Option Plans, covering an
aggregate of 3,003,884 shares of ERS Common Stock; and warrants to
purchase 2,538,258 shares of ERS Common Stock, and except for this
Agreement. ERS has delivered, or made available to Holdco and
Merger Sub true and complete copies of each form of certificate or
agreement evidencing options granted and outstanding under the ERS
Option Plans. ERS is not a party to any agreement or arrangement
relating to the voting or control of any of its capital stock.
5.5 Subsidiaries; Additional Interests.
(a) Except for Significant Subsidiaries and NewCheck
Corporation d/b/a Productivity Solutions, Inc., there is no
corporation, partnership, joint venture, business trust or other
legal entity in which ERS, directly or indirectly, beneficially or
legally owns or holds any capital stock or other proprietary
interest representing "control" (as defined pursuant to the
Securities Act), material to the business or financial condition
of ERS and its subsidiaries, taken as a whole (hereinafter
referred to as "ERS' business or condition").
5.6 Securities Filings.
ERS has made all filings with the SEC that it has been
required to make under the Securities Act, and the rules and
regulations promulgated thereunder, and the Exchange Act, and the
rules and regulations promulgated thereunder. ERS has provided or
made available to Holdco and Merger Sub complete and correct
copies of all reports, registration statements, final
prospectuses, definitive proxy statements and other filings made
by ERS with the SEC, including all exhibits to such filings, since
January 1, 1999 (all such documents that have been filed with the
SEC, as amended, hereinafter referred to as the "SEC Documents"),
including, without limitation, ERS's Annual Report on Form 10-K
for the fiscal year ended December 31, 2000, as filed with the SEC
on April 2, 2001, and Amendment No. 1 thereto on Form 10K/A, as
filed with the SEC on April 24, 2001, ERS' Current Report on Form
8-K dated May 2, 2001, as filed with the SEC on such date, and
ERS' Quarterly Report on Form 10-Q for the three months ended
March 31, 2001, as filed with the SEC on May 21, 2001. The SEC
Documents comply in all material respects with the requirements of
the Securities Act or the Exchange Act, as the case may be, and,
to the knowledge (as hereinafter defined) of ERS, neither any of
the SEC Documents (as of the date of their respective filing with
the SEC), or any information relating to ERS contained in this
Agreement, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5.7 Disputes and Litigation.
There is no action, suit, proceeding, or claim, pending or
threatened, and no investigation by any court or government or, to
the knowledge of ERS, governmental agency or instrumentality,
domestic or foreign, pending or, to the knowledge of ERS,
threatened, against ERS or any of its Significant Subsidiaries,
before any court, government or governmental agency or
instrumentality, domestic or foreign, nor is there any outstanding
order, writ, judgment, stipulation, injunction, decree,
determination, award, or other order of any court or government or
governmental agency or instrumentality, domestic or foreign,
against ERS or any of its Significant Subsidiaries, except for any
such matter which, individually or in the aggregate, would not
have a Material Adverse Effect. For purposes of this Agreement:
(i) an individual will be deemed to have "knowledge" of a
particular fact or other matter if such individual is actually
aware of such fact or other matter and (ii) a corporate entity
will be deemed to have "knowledge" of a particular fact or other
matter if any individual who is serving as a director or senior
executive officer of such corporation or any subsidiary of it has
actual knowledge of such fact or other matter.
5.8 Brokers and Finders.
Except for the fee payable to the Financial Advisor pursuant
to the engagement letter between ERS and the Financial Advisor,
and the fee payable to ERS' nominated advisor in connection with
compliance under the AIM Rules pursuant to the engagement letter
between ERS and such nominated advisor, copies of which have been
provided to Holdco and Merger Sub prior to the execution of this
Agreement, ERS has not employed any broker or finder or has
incurred or will incur any broker's, finder's or similar fees,
commissions or expenses, in each case in connection with the
transactions contemplated by this Agreement.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
OF HOLDCO AND MERGER SUB
Holdco and Merger Sub hereby, jointly and severally,
represent, warrant, and covenant as follows:
6.1 Incorporation.
Each of Holdco and Merger Sub is a corporation duly
organized, validly existing, and in good standing under the laws
of the State of Delaware and has full corporate power and
authority to own or hold under lease the assets and properties
which it owns or holds under lease, to conduct its businesses as
currently conducted, to perform all its obligations under the
agreements to which it is a party, including, without limitation,
this Agreement and to consummate the Merger. Each is in good
standing in each other jurisdiction wherein the failure so to
qualify, individually or in the aggregate, would have a Material
Adverse Effect with respect to Holdco and Merger Sub, taken as a
whole.
6.2 Authorization.
(a) The execution and delivery of this Agreement by each of
Holdco and Merger Sub, the performance by each of them of their
covenants and agreements hereunder and the consummation by each of
the transactions contemplated hereby have been duly authorized by
all necessary corporate action of each of them. When duly executed
and delivered by ERS, this Agreement, shall constitute the valid
and legally binding obligations of Holdco and Merger Sub,
respectively, enforceable against Holdco and Merger Sub in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, or other laws affecting generally the enforceability
of creditors' rights and by limitations on the availability of
equitable remedies.
(b) Without limiting the generality of Paragraph (a) of
this Section 6.2, Holdco has received commitments from each holder
of ERS Principal Shares, copies of which were made available to
ERS prior to the execution of this Agreement, whereby such holder
shall take all such action as shall reasonably be requested by
Holdco to vote its ERS Principal Shares, and all shares of the
capital stock of ERS (x) into which such shares may be
reclassified or (y) distributed in respect of such shares or
received in exchange for such shares, and/or exercise any
consensual rights with respect thereto, to approve this Agreement,
and the consummation of the transactions contemplated by this
Agreement, including, without limitation, the approval of the
Reclassification Amendment, and against any proposal inconsistent
with the foregoing transactions; and Holdco holds the irrevocable
proxy of each such holder with respect to its ERS Principal Shares
in furtherance thereof.
6.3 Conflicts.
Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated herein, will (i)
violate any provision of the certificate of incorporation or of
the by-laws of Holdco or Merger Sub, as currently in effect, or,
subject to compliance with the regulatory requirements hereinafter
specified in this Section 6.3, any law, rule, regulation, writ,
judgment, injunction, decree, determination, award, or other order
of any court, government or governmental agency or
instrumentality, domestic or foreign, binding upon Holdco or
Merger Sub, except for such violations which would not have a
Material Adverse Effect with respect to Holdco and Merger Sub,
taken as a whole, or (ii) subject to obtaining third party
consents or other approvals and except for any such conflicts,
breaches, creation, imposition or termination which would not have
a Material Adverse Effect with respect to Holdco and Merger Sub,
taken as a whole, conflict with or result in any breach of any of
the terms of or constitute a default under or result in the
termination of or the creation or imposition of any mortgage, deed
of trust, pledge, lien, security interest or other charge or
encumbrance of any nature pursuant to the terms of any contract or
agreement to which Holdco or Merger Sub are parties to or by which
Holdco's or Merger Sub's or any of Holdco's or Merger Sub's assets
and properties are bound. Except for compliance (x) with the
Exchange Act, including, without limitation, with respect to the
Information/Going Private Transaction Statement, and (y) with the
AIM Rules, and except for any such consents, approvals,
authorizations, filings or registrations with or notices to any
such person or entity other than any governmental agency or
instrumentality the failure to effectuate which would not have a
Material Adverse Effect with respect to Holdco and Merger Sub,
taken as a whole, no consents, approvals or authorizations, or
filings or registrations with, or notices to, any governmental
agency or authority or any other person or entity are required in
connection with the execution and delivery of this Agreement by
Holdco or Merger Sub or the consummation by Holdco or Merger Sub
of the transactions contemplated hereby.
6.4 Capitalization.
(a) The authorized capital stock of Holdco consists of: (x)
2,000,000 shares of preferred stock, $1.00 par value, none of
which are issued and outstanding; and (y) 35,000,000 shares of
Holdco Common Stock, of which 21,345,383 shares are issued and
outstanding. No shares of any class or series of the capital stock
of Holdco are held as treasury stock. The shares of Holdco Common
Stock to be issued upon exercise of ERS Options to be assumed by
Holdco in accordance with this Agreement will, upon exercise
thereof in accordance with the terms thereof, be duly authorized,
validly issued and fully-paid and non-assessable, issued without
violation of the preemptive rights of any person. There are no
subscriptions, warrants, options calls, commitments by or
agreements to which Holdco is bound relating to the issuance,
conversion, or purchase of any shares of Holdco Common Stock, or
any other capital stock of Holdco, except as contemplated by this
Agreement and except insofar as inuring to the benefit of holders
of instruments of indebtedness of ERS.
(b) The authorized capital stock of Merger Sub consists of
10,000 shares of Merger Sub Common Stock, of which 1,000 shares
are issued and outstanding. No shares of any class or series of
the capital stock of Merger Sub are held as treasury stock. The
shares of Merger Sub Common Stock to be converted in the Merger
are duly authorized, validly issued and fully-paid and non-
assessable, issued without violation of the preemptive rights of
any person. There are no subscriptions, warrants, options, calls,
commitments by or agreements to which Merger Sub is bound relating
to the issuance, conversion, or purchase of any shares of Merger
Sub Common Stock, or any other capital stock of Merger Sub, except
as contemplated by this Agreement.
6.5 Brokers or Finders.
Neither Holdco nor Merger Sub has employed any broker or
finder or has incurred or will incur any broker's, finder's or
similar fees, commissions or expenses, in each case in connection
with the transactions contemplated by this Agreement.
6.6 Sufficient Funds.
Holdco has commitments with respect to, and will have at the
Effective Time, sufficient funds to enable Holdco to pay for all
shares of ERS Common Stock converted into cash pursuant to the
Merger, to perform Holdco's and Merger Sub's obligations under
this Agreement and to pay all fees and expenses related to the
transactions contemplated by this Agreement payable by them.
ARTICLE VII
CERTAIN COVENANTS
7.1 Information/Going Private Transaction Statement.
(a) As soon as practicable after the date hereof, ERS and
Holdco will collaborate in the preparation and filing with the SEC
of a preliminary information statement (hereinafter referred to as
the "Preliminary Information/Going Private Transaction
Statement"), to be distributed to each holder of ERS Common Stock,
containing the information required of ERS under Schedule 14C
promulgated by the SEC and, to the extent appropriate, of Holdco,
the Holdco Stockholders and ERS required under Schedule 13E-3
promulgated by the SEC, and further containing or accompanied by
such other material as shall be necessary or appropriate to
consummate the transactions contemplated hereunder. The parties
hereto shall use all reasonable efforts to have such Preliminary
Information/Going Private Transaction Statement and other
materials, and any subsequent amendments or supplements thereto
required to consummate the transactions contemplated hereunder,
cleared by the SEC under the Exchange Act as promptly as
practicable, and thereafter ERS shall, as promptly as practicable
after such clearance, distribute a definitive information
statement prepared as aforesaid (as so cleared, herein referred to
as the "Information/Going Private Transaction Statement") and
other materials, and any subsequent amendments or supplements
thereto, to such holders. If at any time prior to the distribution
of the Information/Going Private Transaction Statement any
information relating to any party hereto or any of their
respective officers, directors, stockholders or subsidiaries,
should be discovered by any party hereto which should be set forth
in an amendment or supplement to the Information/Going Private
Transaction Statement so that the Information/Going Private
Transaction Statement would not include any untrue statement of a
material fact or omit to state any material fact necessary to make
the statements therein, in light of the circumstances under which
they were made, not misleading, the party which discovers such
information shall promptly notify the other party hereto and an
appropriate amendment or supplement describing such information
shall be promptly prepared, filed with the SEC and, to the extent
required by law, disseminated to the holders of ERS Common Stock.
(b) Without limiting the generality of the foregoing
provisions of this Section 7.1, the parties shall use their
respective reasonable efforts to respond to any comments of the
SEC or its staff with respect to the Preliminary Information/Going
Private Transaction Statement (or the Information/Going Private
Transaction Statement), and in connection therewith each party
shall: (x) notify the other parties promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC
or its staff for amendments or supplements to the Preliminary
Information/Going Private Transaction Statement (or the
Information/Going Private Transaction Statement) or for additional
information, (y) supply the other parties with copies of all
correspondence with the SEC or its staff with respect to the
Preliminary Information/Going Private Transaction Statement (or
the Information/Going Private Transaction Statement) or the Merger
and (z) permit the other parties and their counsel to participate
in all communications with the SEC and its staff, including all
meetings and telephone conferences, relating to the Preliminary
Information/Going Private Transaction Statement, the Information/
Going Private Transaction Statement, the Merger or this Agreement.
(c) As soon as practicable after the date hereof, ERS and
Holdco will collaborate in the preparation and filing with the SEC
by ERS, Holdco and the Holdco Stockholders of a Rule 13E-3
Transaction Statement on Schedule 13E-3, incorporating by
reference, as appropriate, the Information/Going Private
Transaction Statement (hereinafter referred to as the "Schedule
13E-3"), and subsequently with respect to any amendments thereto
required to consummate the transactions contemplated hereunder.
(d) Neither the Preliminary Information/Going Private
Transaction Statement nor the Information/Going Private
Transaction Statement, nor any supplement or amendment thereto,
nor the Schedule 13E-3, shall contain any information, nor be in a
form, not approved by ERS and Holdco, which approval shall not be
unreasonably withheld or delayed. Holdco and ERS each represents
and warrants to the other that, at the time each or any of the
Preliminary Information/Going Private Transaction Statement, the
Information/Going Private Transaction Statement, the Schedule 13E-
3 or any other material as aforesaid is filed with the SEC or is
cleared thereby, as the case may be, and at all times subsequent
thereto up to and including the Effective Time, (in the case of
ERS) none of the information set forth therein (to the extent
provided by ERS) with respect to ERS, its directors, officers or
stockholders (other than any directors, officers or stockholders
of Holdco) or any of its subsidiaries or (in the case of Holdco)
none of the information set forth therein (to the extent provided
by Holdco) with respect to Holdco, its directors, officers,
stockholders or any of its subsidiaries, will contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein in light of the circumstances under which they
are made, not misleading.
7.2 Other Governmental and Judicial Filings.
As soon as practicable after the date hereof, ERS, Holdco and
Merger Sub will cooperate in the preparation and filing of all
materials necessary or desirable to obtain the approval of the
transactions contemplated hereby or the disclaimer of jurisdiction
with respect thereto by any regulatory body or other governmental
or judicial authority that has jurisdiction over the transactions
contemplated hereby.
7.3 Conduct of Business of ERS.
ERS covenants and agrees that, except as consented to in
writing by Holdco, from and after the date of this Agreement and
until the Effective Time, ERS and its Significant Subsidiaries
shall operate in the ordinary course of business (but consistent
with the determination of the Board of Directors of ERS made on
April 17, 2001 regarding the winding-down of ERS' electronic shelf
label business [herein referred to as the "ESL Determination"]).
7.4 ERS Capitalization.
Except as consented to in writing by Holdco, from and after
the date of this Agreement and until the Effective Time:
(a) No change shall be made or proposed in the
certificate of incorporation or by-laws of ERS or of ERS-
Connecticut, except for the Reclassification Amendment.
(b) Neither ERS nor any of its Significant Subsidiaries
shall: (i) issue, grant, sell or encumber any shares of its
capital stock, (ii) issue, grant, sell or encumber any security,
option, warrant, put, call, subscription or other right of any
kind, fixed or contingent, that directly or indirectly calls for
the acquisition, issuance, sale, pledge or other disposition of
any shares of capital stock or other equity interests of ERS or
any of its Significant Subsidiaries, (iii) enter into any
agreement, commitment or understanding calling for any transaction
referred to in clause (i) or (ii) of this Paragraph (b), or (iv)
make any other changes in its equity capital structure except, in
all such cases under this Paragraph (b), for the issuance of
shares of ERS Common Stock upon exercise of the ERS Options or the
ERS Warrants which are outstanding prior to the execution and
delivery of this Agreement.
(c) Neither ERS nor any of its Significant Subsidiaries
shall split, combine or reclassify any shares of its capital
stock, except pursuant to the Reclassification Amendment, or
declare, set aside or pay any dividend or other distribution
(whether in cash, stock, securities, indebtedness, rights or
property or any combination thereof) in respect of any shares of
its capital stock or other equity interests, or redeem or
otherwise acquire any shares of the capital stock or other equity
interests.
7.5 Action by Holdco Stockholders.
Holdco shall not and will cause its directors, officers and
the Holdco Stockholders not to take any actions which would be
reasonably likely to cause ERS to breach its covenants and
agreements contained in Sections 7.3 and 7.4.
7.6 Due Diligence; SEC Filings; Confidentiality.
(a) ERS shall afford Holdco and its officers, employees,
accountants, counsel and other authorized representatives
reasonable access, during ordinary business hours, to its
properties, books and records, and those of its Significant
Subsidiaries, and shall use its reasonable best efforts to cause
its representatives to, furnish to Holdco such additional
financial and operating data and other information as to its and
its Significant Subsidiaries' respective businesses and properties
as Holdco may from time to time reasonably request. ERS shall
furnish Holdco with copies of all filings with the SEC by it
subsequent to the date hereof, which shall be prepared in all
material respects in accordance with the rules and regulations
promulgated by the SEC if any such filings are made prior to the
Effective Time.
(b) Between the date of this Agreement and the Effective
Time, ERS, Holdco and Merger Sub will maintain in confidence, and
will cause their respective representatives to maintain in
confidence and not divulge to any third party, and take reasonable
precautions to protect (including, without limitation, all
precautions any such party employs with respect to its
confidential materials) and not make any use whatsoever at any
time (except to evaluate internally its relationship with the
disclosing party), any written, oral or other information obtained
from any other party in connection with this Agreement or the
contemplated Transactions. The foregoing will not apply with
respect to any information that the receiving party can document
(i) is or becomes (through no improper action or inaction by the
receiving party or any representative thereof) generally available
to the public, (ii) was in its possession or known by it without
restriction prior to receipt from the disclosing party, provided
the receiving party complies with restrictions imposed thereon by
third parties, or (iii) was rightfully disclosed to it by a third
party without restriction, provided the receiving party complies
with restrictions imposed thereon by third parties.
Notwithstanding the foregoing, the receiving party may make
disclosures required by applicable law provided the receiving
party uses reasonable efforts to limit disclosure and to obtain
confidential treatment or a protective order and has allowed the
disclosing party to participate in the proceeding. The provisions
of this Paragraph (b) shall not in any manner operate to limit in
any respect the use by any director or officer of ERS of any
information or material consistent with his duties in such
capacity.
7.7 Notification of Certain Matters.
(a) Between the date hereof and the Effective Time,
each party will give prompt notice in writing to the other
parties, of: (i) the occurrence, or failure to occur, of any
event, which occurrence or failure would be likely to cause any of
its representations or warranties contained in this Agreement to
be untrue or inaccurate in any material respect from the date
hereof to the Effective Time, (ii) any notice or other
communication from any person alleging that the consent of such
person is or may be required in connection with the transactions
contemplated by this Agreement, (iii) any notice or other
communication from any governmental or regulatory agency or
authority in connection with the transactions contemplated by this
Agreement, and (iv) any material failure of the notifying party or
any officer, director, employee or agent thereof to comply with or
satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
(b) The giving of any such notice under this Section
7.7 shall in no way change or modify the representations and
warranties or the conditions to any party's obligations contained
herein or otherwise affect the remedies available to any party
hereunder.
7.8 Forbearance.
ERS agrees that, from and after the date hereof and until the
Effective Time, it shall not, and shall not permit any of its
Significant Subsidiaries, or any officers, directors, employees,
agents or representatives of ERS or of any of its Significant
Subsidiaries to, directly or indirectly, initiate or solicit
discussions, inquiries or proposals, or participate in any
negotiation or discussion for the purpose or with the intention of
leading to any proposal, concerning any merger, consolidation or
other business combination involving ERS or any of its Significant
Subsidiaries, or any acquisition of 20% or more of the equity
interest in ERS or any equity interest in any of its Significant
Subsidiaries, or 20% or more of the assets of ERS and its
Significant Subsidiaries, taken as a whole, or any similar
transaction, or effectuate any such transaction, in each case,
except for the Merger. Notwithstanding the foregoing, ERS may
furnish information concerning its business, properties or assets,
and may engage in negotiations and discussions in connection with
such a transaction, if the Board of Directors of ERS, after
consultation with counsel, determines that the exercise of its
fiduciary responsibilities requires that such information be
furnished or such negotiations be commenced. ERS shall use
reasonable efforts to notify Holdco immediately of any such
inquiry (including the material terms thereof and the person
making such inquiry) which it may receive in respect of any
possible such transaction.
7.9 Indemnification.
(a) From and after the Effective Time, Holdco and the
Surviving Corporation shall, to the extent permitted by the GCL
and other law, honor all obligations of ERS pursuant to Paragraph
SIXTH of ERS's certificate of incorporation, and those
indemnification agreements with directors, in each case in effect
on the date hereof, which provide for indemnification of officers
and directors of ERS with respect to events occurring prior to the
Effective Time (hereinafter referred to as the "Indemnification
Agreements"). With respect to the procedure determining
entitlement of indemnification under the Indemnification
Agreements, a "Change of Control" (as defined in the
Indemnification Agreements) shall have been deemed to occur at the
Effective Time.
(b) The Surviving Corporation shall maintain in effect for
six years from the Effective Time, the current directors' and
officers' liability insurance policies maintained by ERS (provided
that the Surviving Corporation may substitute therefor policies of
at least the same coverage containing terms and conditions which
are not materially less favorable) with respect to matters
occurring prior to the Effective Time; provided, however, that (i)
if the existing policies expire, are terminated or cancelled
during such period, the Surviving Corporation will use
commercially reasonable efforts to obtain substantially similar
policies, (ii) the Surviving Corporation shall not be required to
spend as an annual premium therefor an amount in excess of 200% of
the annual premium therefor as of the date of this Agreement and
(iii) if, during such six-year period, such insurance coverage
cannot be obtained at all or can only be obtained for an amount in
excess of 200% of the current annual premium therefor, Holdco
shall use commercially reasonable efforts to cause to be obtained
as much directors' and officers' liability insurance coverage as
can be obtained for an amount equal to 200% of the current annual
premium therefor, on terms and conditions substantially similar to
the existing directors' and officers' liability insurance.
(c) The provisions of this Section 7.9 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified
Party, his or her heirs and his or her personal representatives
and shall be binding on the Surviving Corporation and its
successors and assigns.
7.10 Additional Agreements.
Subject to the terms and conditions of this Agreement, each
of the parties hereto shall cooperate with one another and use its
reasonable efforts to complete in a timely manner the transactions
contemplated by this Agreement, including (i) using its reasonable
efforts to comply with any and all applicable rules and
regulations, and to send all notices to, make all declarations,
filings and registrations with, and obtain all consents,
authorizations, approvals and waivers from third parties and
governmental and regulatory bodies required to consummate the
transactions contemplated hereby or comply with any and all
applicable rules and regulations governing such transactions,
including, without limitation, the AIM Rules, (ii) furnishing the
other parties with all information necessary or advisable for the
matters referred to in Section 7.1 hereof and any other statements
or applications made by or on behalf of any party to any
governmental or regulatory body in connection with the
transactions contemplated by this Agreement, and (iii) using all
reasonable efforts to lift or rescind any injunction or
restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby
and using all reasonable efforts to defend any litigation seeking
to enjoin, prevent or delay the consummation of the transactions
contemplated hereby or seeking material damages.
ARTICLE VIII
PUBLICITY
8.1 Publicity.
None of the parties hereto shall, nor shall any such party
cause or allow any affiliate, directly or indirectly, to issue any
press release or otherwise make any public announcement or
statement with respect to the matters contemplated hereby without
the prior approval of all parties (which consent shall not be
unreasonably withheld or delayed); provided that nothing herein
shall prohibit any party hereto or any of their affiliates from
making any announcement or disclosure required to be made by it or
them under applicable law if it or its affiliates determines in
good faith that it is appropriate to do so and, if practicable,
gives prior notice to the other parties hereto of such
determination.
ARTICLE IX
CONDITIONS TO OBLIGATIONS
OF EACH PARTY
The obligations of each of Holdco, Merger Sub and ERS to
consummate the Merger and the Closing are subject to the following
conditions precedent, any or all of which may be waived by such
party at its sole discretion:
9.1 Information/Going Private Transaction Statement.
The Information/Going Private Transaction Statement shall
have been filed with the SEC and distributed to holders of ERS
Common Stock; prior to the first date on which the
Information/Going Private Transaction Statement is mailed to
stockholders the Schedule 13E-3 shall have been filed with the
SEC; and all applicable notice periods under the requirements of
Rule 13e-3 and Rule 14C-2(b) shall have expired.
9.2 Reclassification Amendment.
The ERS Principal Shares shall have been reclassified as an
equivalent number of shares of ERS Class B Common Stock pursuant
to the provisions of an amendment to the certificate of
incorporation of ERS (herein referred to as the "Reclassification
Amendment") in the form set forth in the certificate attached
hereto as Exhibit A duly filed with the Secretary of State of
Delaware in accordance with the requirements of the GCL
immediately prior to the Effective Time.
9.3 No Prohibition on Consummation.
No order, stay, judgment, injunction or decree shall have
been issued and be in effect by any court restraining or
prohibiting the consummation of the transactions contemplated
hereby. No statute, rule or regulation shall have been promulgated
or enacted by any foreign or United States federal or state
government, governmental authority or governmental agency, which
would prevent or make illegal the consummation of the transactions
contemplated hereby, including the Merger.
ARTICLE X
CONDITIONS TO OBLIGATIONS OF ERS
Subject to waiver by ERS, at its sole discretion, the
obligation of ERS to consummate the Merger and the Closing is
subject to the representations and warranties of Holdco and Merger
Sub contained in this Agreement being true and correct in all
respects at and as of the Closing Date with the same effect as
though all such representations and warranties are made at and as
of the Closing Date (except for representations and warranties
which are as of a specific date or which relate to a specific
period other than or not including the Closing Date, as the case
may be, and except for changes therein contemplated or permitted
by this Agreement) and the compliance by Holdco and Merger Sub
with their respective covenants contained under this Agreement in
all respects, except (i) where the failure of the representations
and warranties set forth in the Agreement to be true and correct
does not, individually or in the aggregate, have a Material
Adverse Effect with respect to Holdco and Merger Sub, taken as a
whole, or (ii) where the failure to perform or comply with the
covenants contained in this Agreement does not, individually or in
the aggregate, have a Material Adverse Effect with respect to
Holdco and Merger Sub, taken as a whole; and the delivery by
Holdco and Merger Sub to ERS of a certificate to that effect,
dated the Closing Date, signed by its Chairman of the Board, its
President and Chief Executive Officer or one of its Vice
Presidents.
ARTICLE XI
CONDITIONS TO OBLIGATIONS OF HOLDCO AND MERGER SUB
Subject to waiver by Holdco, at its sole discretion, the
obligations of each of Holdco and Merger Sub to consummate the
Merger and the Closing are subject to the representations and
warranties of ERS contained in this Agreement being true and
correct in all respects at and as of the Closing Date with the
same effect as through all such representations and warranties are
made at and as of the Closing Date (except for representations and
warranties which are as of a specific date or which relate to a
specific period other than or not including the Closing Date, as
the case may be, and except for changes therein contemplated or
permitted by this Agreement) and the compliance by ERS with all of
its covenants contained in this Agreement in all respects, except
(i) where the failure of the representations and warranties set
forth in the Agreement to be true and correct, does not,
individually or in the aggregate, have a Material Adverse Effect,
or (ii) where the failure to perform or comply with the covenants
contained in this Agreement does not, individually or in the
aggregate, have a Material Adverse Effect; and ERS shall have
delivered to Holdco a certificate to that effect, dated the
Closing Date, signed by its Chairman of the Board, its President
or one of its Vice Presidents.
ARTICLE XII
TERMINATION
12.1 Termination.
This Agreement may be terminated and the Merger abandoned at
any time prior to the Effective Time: (a) by the consent of all
parties hereto; or (b) by either ERS or Holdco if: (i) a permanent
injunction is entered, enforced or deemed applicable to this
Agreement which prohibits the consummation of the transactions
contemplated hereby and all appeals of such injunction shall have
been taken and shall have been unsuccessful, (ii) any governmental
entity, the consent of which is a condition to the obligation of
such party to consummate the transactions contemplated hereby,
shall have determined not to grant its consent and all appeal of
such determination shall have been taken and shall have been
unsuccessful, or (iii) the Closing shall not have occurred on or
prior to December 1, 2001; or (c) by ERS, if the Board of
Directors of ERS determines in good faith that termination of this
Agreement is necessary for the Board of Directors to act in a
manner consistent with its fiduciary duties to the stockholders of
ERS, other than the holders of ERS Principal Shares, under
applicable law by reason of an alternative proposal referred to in
Section 7.8 having been made.
12.2 Effect of Termination.
In the event of termination of this Agreement pursuant to
Section 12.1 hereof, all rights of all parties hereto shall cease
and terminate, except for such rights as any party may otherwise
have for breach of contract (other than breaches which are not
willful), including, without limitation, rights for any such
breaches of any representations, warranties or covenants contained
herein, and, provided that the provisions of this Section 12.2 and
Sections 7.6(b), 13.5 and 13.6 shall survive any such termination.
ARTICLE XIII
MISCELLANEOUS
13.1 Notices.
All notices, requests or instruction hereunder shall be in
writing and delivered personally, sent by registered or certified
mail, postage prepaid, by telecopy (or like transmission) or by
express mail by a reputable courier, as follows:
(1) if to ERS:
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: President
Fax: (000) 000-0000
with a copy to:
Xxxxxxx Xxxxxxxxx, Esq.
Xxxxxx Xxxxxxx & Xxxx LLP
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
(2) if to Holdco or Merger Sub:
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Chief Executive Officer
Fax: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxx, Esq.
Krugman & Kailes LLP
Park 00 Xxxx - Xxxxx Xxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
Fax: (000) 000-0000
Any of the above addresses may be changed at any time by notice
given as provided above; provided, however, that any such notice
of change of address shall be effective only upon receipt. All
notices and other communications given to any party hereto in
accordance with the provisions hereof shall be deemed to have been
given on the date of receipt, provided that any notice or other
communication that is received other than during regular business
hours of the recipient shall be deemed to have been given at the
opening of business on the next business day of the recipient.
13.2 Entire Agreement.
This Agreement and the documents referred to herein contain
the entire agreement between the parties hereto with respect to
the transactions contemplated hereby, and supersede all prior
understandings, arrangements and agreements with respect to the
subject matter hereof. No modification hereof shall be effective
unless in writing and signed by the party against which it is
sought to be enforced.
13.3 Modification.
At any time prior to the Effective Time, the parties hereto
may, by written agreement, make any modification or amendment of
this Agreement approved by their respective Boards of Directors;
provided however, that any and all such modifications and
amendments shall conform to the requirements of the GCL.
13.4 Further Action.
Each of the parties hereto shall use such party's reasonable
best efforts to take such actions as may be necessary or
reasonably requested by the other parties hereto to carry out and
consummate the transactions contemplated by this Agreement.
13.5 Expenses.
Each of the parties hereto shall bear such party's own
expenses in connection with this Agreement and the transactions
contemplated hereby.
13.6 Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable in
the case of agreements made and to be performed entirely within
such State.
13.7 Captions.
The captions appearing herein are for the convenience of the
parties only and shall not be construed to affect the meaning of
the provisions of this Agreement.
13.8 Accounting Terms.
All accounting terms used herein which are not expressly
defined in this Agreement shall have the respective meanings given
to them in accordance with generally accepted accounting
principles on the date hereof.
13.9 Waiver.
At any time prior to the Effective Time, the parties hereto
may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive
any inaccuracies in the representations and warranties contained
herein in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions contained
herein, to the extent permitted by applicable law. Any agreement
on the part of a party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed on
behalf of such party. Except as otherwise expressly provided in
this Agreement, neither the failure nor any delay on the part of
any party to exercise any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise or waiver of any such right, power or privilege preclude
any other or further exercise thereof, or the exercise of any
other right, power, or privilege available to each party at law or
in equity.
13.10 Assignment.
This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but neither
this Agreement nor any of the rights, interests, or obligations
hereunder may be assigned by any of the parties hereto without the
prior written consent of the other parties and any such attempted
assignment without consent shall be void.
13.11 No Third Party Beneficiary.
This Agreement is not intended, and shall not be construed,
to confer any rights or remedies hereunder upon any party other
than the parties hereto and those parties designated as directors
and entitled to indemnification under Section 7.9, which parties
shall be entitled to enforce their rights under such provisions to
which they are entitled to benefits.
13.12 Partial Invalidity.
Any term or provision of this Agreement that is invalid or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement, or any such
terms in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, such provision shall
be interpreted to be only so broad as is enforceable.
13.13 Counterparts.
This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, this Agreement has duly executed by
the parties hereto as of the date first above written.
ATTEST: ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
s/Xxxxxx Xxxxxx By s/Norton Xxxxxxxxx
Assistant Secretary Chairman of the Board
ATTEST: SYSTEMS HOLDING, INC.
s/Xxxxxx Xxxxxx By s/Norton Xxxxxxxxx
Assistant Secretary Chairman of the Board
ATTEST: SYSTEMS MERGER SUB, INC.
s/Xxxxxx Xxxxxx By s/Norton Xxxxxxxxx
Assistant Secretary Chairman of the Board
EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC.
ELECTRONIC RETAILING SYSTEMS INTERNATIONAL, INC., a
corporation organized and existing under the General Corporation
Law of the State of Delaware (the "Corporation") pursuant to the
provisions of the General Corporation Law of the State of
Delaware (the "GCL") does hereby certify as follows:
FIRST: The Certificate of Incorporation is hereby amended by
deleting the first sentence of the first paragraph of Article
FOURTH in its present form and substituting therefor the
following:
"FOURTH: The total number of shares of capital
stock which the corporation shall have the authority to
issue is 37,000,000 shares of capital stock, consisting
of 2,000,000 shares of preferred stock, $1.00 par value
per share ("Preferred Stock"), 20,000,000 shares of
common stock, $.01 par value per share (the "Common
Stock"), and 15,000,000 shares of class B common stock,
$.01 par value (the "Class B Common Stock"). Each
outstanding share of Common Stock and each outstanding
share of Class B Common Stock shall be of equal rank,
and shall have identical powers, preferences,
qualifications, restrictions and other rights (and,
without limiting the generality of the foregoing, shall
vote together as a single class with all other
outstanding shares of Common Stock and all other
outstanding shares of Class B Common Stock on all
matters to be voted on by the stockholders of the
Corporation, and shall not be split, divided or
combined unless, at the same time, the Corporation
splits, divides or combines, as the case may be, the
shares of both the Common Stock and the Class B Common
Stock in the same proportion and manner), in each event
subject to the operation of the immediately succeeding
sentence. Effective immediately prior to the Effective
Time (as defined pursuant to the Agreement and Plan of
Merger dated as of July 2, 2001 among the Corporation,
Systems Holding, Inc. ["Holdco"] and Systems Merger
Sub, Inc.), and contemporaneously with the contribution
to Holdco of the ERS Principal Shares (as defined
thereunder), and without any further action on the part
of the Corporation or its stockholders, each share of
the Corporation's Common Stock contributed to Holdco
shall be reclassified, changed and converted into one
share of Class B Common Stock, and each certificate
representing shares of Common Stock contributed to
Holdco shall be deemed to represent the number of
shares of Class B Common Stock resulting from the
foregoing reclassification; and thereafter, in the
event of any merger or consolidation of the Corporation
with or into another entity (whether or not the
Corporation is the surviving entity), the holders of
Common Stock and the holders of Class B Common Stock
shall be entitled to the per share consideration
allocated to them, respectively, in such merger or
consolidation.
SECOND: The amendment to the certificate of
Incorporation of the Corporation set forth in this
Certificate of Amendment has been duly adopted in
accordance with the applicable provisions of Section
242 of the GCL (a) the Board of Directors of the
Corporation having duly adopted resolutions setting
forth such amendment and declaring it advisability at a
meeting of the Board of Directors of the Corporation
duly called and held on July 2, 2001 in conformity with
the By-laws of the Corporation, and (b) the
stockholders of the Corporation having duly adopted
such amendment by the written consent of the holders of
the majority of the outstanding stock entitled to vote
thereon on July 2, 2001 in accordance with Section 228
of the GCL.
IN WITNESS WHEREOF, ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC. has caused this certificate to be signed and
attested by duly authorized officers as of the _____ day of
, 2001.
ELECTRONIC RETAILING SYSTEMS
INTERNATIONAL, INC.
By
ATTEST:
corp\ers\agreemnt\merger2
corp\ers\agreemnt\merger2
