-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BuJvGNdm9m3WLx0/Y5qvBzqTzoCFKY5yPGUNIytLzqEzqCeb5/r4HRVOfdyBfS+x 5xPmaDvPD5u8tkJCmmm0ig== 0000950134-99-011317.txt : 19991222 0000950134-99-011317.hdr.sgml : 19991222 ACCESSION NUMBER: 0000950134-99-011317 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19991221 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ELITE INFORMATION GROUP INC CENTRAL INDEX KEY: 0000885533 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 411522214 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-43506 FILM NUMBER: 99778217 BUSINESS ADDRESS: STREET 1: 5100 WEST GOLDLEAF CIRCLE STREET 2: SUITE 100 CITY: LOS ANGELES STATE: CA ZIP: 90056 BUSINESS PHONE: 7043724281 MAIL ADDRESS: STREET 1: 128 SOUTH TRYON STREET CITY: CHARLOTTE STATE: NC ZIP: 28202 FORMER COMPANY: FORMER CONFORMED NAME: BROADWAY & SEYMOUR INC DATE OF NAME CHANGE: 19930328 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: EIG ACQUISITION CORP CENTRAL INDEX KEY: 0001101293 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752850905 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: TOWN HALL HOUSE LEVEL 21 STREET 2: 456 KENT ST CITY: NEW S. WALES AUSTRAL BUSINESS PHONE: 01161292780702 MAIL ADDRESS: STREET 1: TOWN HALL HOUSE LEVEL 21 STREET 2: 456 KENT ST CITY: NEW S. WALES AUSTRAL SC 14D1 1 SCHEDULE 14D1 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )* - -------------------------------------------------------------------------------- ELITE INFORMATION GROUP, INC. (Name of Subject Company [Issuer]) - -------------------------------------------------------------------------------- EIG ACQUISITION CORP., an indirect wholly-owned subsidiary of SOLUTION 6 HOLDINGS LIMITED (Bidders) - -------------------------------------------------------------------------------- Common Stock, $.01 Par Value Per Share (Title of Class of Securities) - -------------------------------------------------------------------------------- 28659M (CUSIP Number of Class of Securities) - -------------------------------------------------------------------------------- Copy To: EIG Acquisition Corp. Richard F. Dahlson, Esquire Town Hall House Jackson Walker L.L.P. Level 21, 456 Kent Street 901 Main Street, Suite 6000 Sydney, New South Wales Dallas, Texas 75202-3797 Australia 2000 Telephone: (214) 953-6000 Telecopier No.: 011-612-9278-0702 Telecopier No.: (214) 953-5722 (Name, Address and Telephone Numbers of Person Authorized to Receive Notices and Communications on Behalf of Bidder) CALCULATION OF FILING FEE Transaction Valuation* Amount of Filing Fee $100,259,955 $20,052 * For the purpose of calculating the fee only. This amount assumes the purchase of all of the issued and outstanding shares of Common Stock, par value $.01 per share, of Elite Information Group, Inc. (the "Company") at $11.00 per share. Such number of shares represents all of the shares of Common Stock outstanding as of December 13, 1999, plus the number of shares of Common Stock issuable upon the exercise of outstanding options to purchase 705,165 shares of Common Stock, in each case as represented by the Company. 2 [ ] Check Box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid........................................ Not Applicable Form or Registration No. ..................................... Not Applicable Filing Party:................................................. Not Applicable Dated Filed:.................................................. Not Applicable
3 This Tender Offer Statement on Schedule 14D-1 (the "Statement") relates to a tender offer by EIG Acquisition Corp., a Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Solution 6 Holdings Limited, a New South Wales, Australia corporation (the "Parent"), to purchase all of the issued and outstanding shares of the common stock, par value $.01 per share, of Elite Information Group, Inc., a Delaware corporation (the "Company"), at a purchase price of $11.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 21, 1999 (the "Offer to Purchase"), and in the related Letter of Transmittal, copies of which are filed as Exhibits (a)(1) and (a)(2) hereof, respectively, and which are incorporated herein by reference. The outstanding shares of the Company's common stock, par value $.01 per share, are referred to herein collectively as "Shares" and individually as a "Share." ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Elite Information Group, Inc., and the address of its principal executive offices is 5100 West Goldleaf Circle, Suite 100, Los Angeles, California 90056. (b) This Statement relates to the offer by the Purchaser to purchase all of the issued and outstanding Shares, at a price of $11.00 per share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Information concerning the number of outstanding Shares is set forth in the Introduction of the Offer to Purchase and is incorporated herein by reference. (c) Information concerning the principal markets in which the Shares are traded, and the high and low sales price of the Shares for each quarterly period during the past two years is set forth in Section 6 ("Price Range of the Shares; Dividends on the Shares") of the Offer to Purchase and is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d) and (g) This Statement is being filed by the Purchaser and Parent. Information concerning the principal business and the address of the principal offices of the Purchaser and Parent is set forth in Section 9 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase and is incorporated herein by reference. This Statement shall not be construed as an admission that Parent is, for purposes of Regulation 14D under the Securities Exchange Act of 1934, as amended, a bidder on whose behalf this tender offer is being made. The names, citizenship, business addresses, present principal occupation or employment, material occupations, positions, offices or employment during the last five years of the directors and executive officers of the Purchaser and Parent are set forth in Schedule I of the Offer to Purchase and are incorporated herein by reference. (e) and (f) During the last five years, none of the Purchaser or Parent, or, to the best knowledge of the Purchaser or Parent, any of the persons listed in Schedule I of the Offer to Purchase, has (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a) and (b) The information set forth in the Introduction, Section 9 ("Certain Information Concerning the Purchaser and Parent"), Section 11 ("Contacts and Transactions with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; the Merger Agreement; the Stockholders Agreement; Other Agreements; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. 4 ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a) and (b) The information set forth in the Introduction and Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a) - (e) The information set forth in the Introduction and Section 12 ("Purpose of the Offer; the Merger Agreement; the Stockholders Agreement; Other Agreements; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. (f) and (g) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares; Stock Quotation; Registration Under the Exchange Act; Margin Regulations") of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b) The information set forth in the Introduction, Section 9 ("Certain Information Concerning the Purchaser and Parent"), Section 11 ("Contacts and Transactions with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; the Merger Agreement; the Stockholders Agreement; Other Agreements; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction, Section 9 ("Certain Information Concerning the Purchaser and Parent"), Section 11 ("Contacts and Transactions with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; the Merger Agreement; the Stockholders Agreement; Other Agreements; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and in Section 16 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 9 ("Certain Information Concerning the Purchaser and Parent") of the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in Section 12 ("Purpose of the Offer; the Merger Agreement; the Stockholders Agreement; Other Agreements; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. (b) and (c) The information set forth in Section 15 ("Certain Legal Matters and Regulatory Approvals") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares; Stock Quotation; Registration Under the Exchange Act; Margin Regulations") of the Offer to Purchase is incorporated herein by reference. (e) None. (f) The information set forth in the Offer to Purchase, the Letter of Transmittal, the Agreement and Plan of Merger dated as of December 14, 1999 by and among the Parent, Purchaser and the Company 5 (the "Merger Agreement") and the Stockholders Agreement dated as of December 14, 1999 by and among the Parent, Purchaser and certain stockholders of the Company, copies of which are attached hereto as Exhibits (a)(1), (a)(2), (c)(1) and (c)(2), respectively, is incorporated herein by reference. The Merger Agreement provides that the Purchaser may assign, in its sole discretion, any and all of its rights (including the right to purchase Shares in the Offer), interests and obligations under the Merger Agreement to Parent or to any affiliate of Parent, but no such assignment shall relieve the Purchaser of its obligations under the Merger Agreement. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS. (a) (1) Offer to Purchase, dated December 21, 1999. (a) (2) Letter of Transmittal. (a) (3) Letter from Dealer Manager to Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a) (4) Letter from Brokers, Dealers, Banks, Trust Companies and Other Nominees to Clients. (a) (5) Notice of Guaranteed Delivery. (a) (6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a) (7) Press Release issued by Parent and Company on December 15, 1999. (b) (1) Commitment Letter dated December 14, 1999 between Warburg Dillon Read Australia Limited ("WDRAL") and Parent. (b) (2) Commitment Letter dated December 17, 1999 between WDRAL and Parent. (b) (3) Committed Acquisition Bridge Facility Terms Sheet. (c) (1) Agreement and Plan of Merger dated as of December 14, 1999 by and among the Parent, Purchaser and the Company. * (c) (2) Stockholders Agreement dated as of December 14, 1999 between the Parent, Purchaser and certain stockholders of the Company. (d) None. (e) Not applicable. (f) None. * Schedules to this Agreement have been omitted but description of such schedules may be found in the Agreement where referred to. The Company hereby undertakes to provide copies of such omitted schedules to the staff of the Securities and Exchange Commission upon request. 6 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: December 21, 1999 EIG ACQUISITION CORP., a Delaware corporation By: /s/ Thomas A. Montgomery ------------------------------------- Name: Thomas A. Montgomery --------------------------------- Title: Vice President, Treasurer and Secretary --------------------------------- SOLUTION 6 HOLDINGS LIMITED, a New South Wales, Australia corporation By: /s/ Thomas A. Montgomery ------------------------------------- Name: Thomas A. Montgomery --------------------------------- Title: Chief Financial Officer --------------------------------- 7 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- (a) (1) Offer to Purchase, dated December 21, 1999. (a) (2) Letter of Transmittal. (a) (3) Letter from Dealer Manager to Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a) (4) Letter from Brokers, Dealers, Banks, Trust Companies and Other Nominees to Clients. (a) (5) Notice of Guaranteed Delivery. (a) (6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a) (7) Press Release issued by Parent and Company on December 15, 1999. (b) (1) Commitment Letter dated December 14, 1999 between Warburg Dillon Read Australia Limited ("WDRAL") and Parent. (b) (2) Commitment Letter dated December 17, 1999 between WDRAL and Parent. (b) (3) Committed Acquisition Bridge Facility Terms Sheet. (c) (1) Agreement and Plan of Merger dated as of December 14, 1999 by and among the Parent, Purchaser and the Company. * (c) (2) Stockholders Agreement dated as of December 14, 1999 between the Parent, Purchaser and certain stockholders of the Company. (d) None. (e) Not applicable. (f) None.
* Schedules to this Agreement have been omitted but description of such schedules may be found in the Agreement where referred to. The Company hereby undertakes to provide copies of such omitted schedules to the staff of the Securities and Exchange Commission upon request. EX-99.(A)(1) 2 OFFER TO PURCHASE 1 EXHIBIT 99(a)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ELITE INFORMATION GROUP, INC. AT $11.00 NET PER SHARE BY EIG ACQUISITION CORP., AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF SOLUTION 6 HOLDINGS LIMITED THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 20, 2000, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF SHARES OF COMMON STOCK THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS AND (II) THE EXPIRATION OR TERMINATION OF ALL APPLICABLE WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS. THE BOARD OF DIRECTORS OF ELITE INFORMATION GROUP, INC. (THE "COMPANY") HAS UNANIMOUSLY APPROVED THE OFFER AND MERGER REFERRED TO HEREIN AND DETERMINED THAT THE OFFER AND MERGER, TAKEN TOGETHER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES. --------------------- IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's shares of common stock, par value $.01 per share, of the Company ("Shares") should either (i) complete and sign the Letter of Transmittal or a facsimile copy thereof in accordance with the instructions in the Letter of Transmittal, have such stockholder's signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal or such facsimile, or, in the case of a book-entry transfer effected pursuant to the procedure set forth in Section 2, an Agent's Message (as defined herein), and any other required documents to the Depositary (as defined herein) and either deliver the certificates for such Shares to the Depositary along with the Letter of Transmittal or facsimile thereof or deliver such Shares pursuant to the procedure for book-entry transfer set forth in Section 2 or (ii) request such stockholder's broker, dealer, bank, trust company or other nominee to effect the transaction for such stockholder. A stockholder having Shares registered in the name of a broker, dealer, bank, trust company or other nominee must contact such broker, dealer, bank, trust company or other nominee if such stockholder desires to tender such Shares. A stockholder who desires to tender Shares and whose certificates for such Shares are not immediately available or who cannot comply in a timely manner with the procedure for book-entry transfer, or who cannot deliver all required documents to the Depositary prior to the expiration of the Offer, may tender such Shares by following the procedure for guaranteed delivery set forth in Section 2, including the Notice of Guaranteed Delivery. Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. December 21, 1999 THE INFORMATION AGENT FOR THE OFFER IS: THE DEALER MANAGER FOR THE OFFER IS: [MACKENZIE PARTNERS LOGO] [WARBURG DILLON READ LOGO]
2 TABLE OF CONTENTS 1. Terms of the Offer....................................... 2 2. Procedure for Tendering Shares.......................... 4 3. Withdrawal Rights....................................... 7 4. Acceptance for Payment and Payment...................... 7 5. Certain Federal Income Tax Consequences................. 8 6. Price Range of the Shares; Dividends on the Shares...... 9 7. Effect of the Offer on the Market for the Shares; Stock Quotation; Registration Under the Exchange Act; Margin Regulations............................................. 10 8. Certain Information Concerning the Company.............. 11 9. Certain Information Concerning the Purchaser and Parent.................................................. 14 10. Source and Amount of Funds.............................. 15 11. Contacts and Transactions with the Company; Background of the Offer............................................ 17 12. Purpose of the Offer; the Merger Agreement; the Stockholders Agreement; Other Agreements; Plans for the Company................................................. 20 13. Dividends and Distributions............................. 30 14. Certain Conditions of the Offer......................... 30 15. Certain Legal Matters and Regulatory Approvals.......... 32 16. Fees and Expenses....................................... 33 17. Miscellaneous........................................... 34
i 3 To the Holders of Common Stock of Elite Information Group, Inc.: INTRODUCTION EIG Acquisition Corp., a Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Solution 6 Holdings Limited, a New South Wales, Australia corporation (the "Parent"), hereby offers to purchase all outstanding shares of common stock, par value $.01 per share, of Elite Information Group, Inc., a Delaware corporation (the "Company"), at $11.00 per share (the "Offer Price"), net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). The outstanding shares of the Company's common stock, par value $.01 per share, are referred to herein collectively as the "Shares" and individually as a "Share." The Offer is being made pursuant to the Agreement and Plan of Merger dated as of December 14, 1999 (the "Merger Agreement"), among Parent, the Purchaser and the Company pursuant to which, as soon as practicable following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company (the "Merger"), with the Company (the "Surviving Corporation") surviving the Merger as an indirect wholly-owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each outstanding Share (other than the Shares held by stockholders who perfect their appraisal rights under Delaware law, Shares owned by the Company as treasury stock and Shares owned by Parent or any direct or any indirect wholly-owned subsidiary of Parent or of the Company) will be converted into the right to receive $11.00 in cash (the "Per Share Merger Consideration"), without interest thereon. The Merger Agreement provides that the Purchaser may assign, in its sole discretion, any and all of its rights (including the right to purchase Shares in the Offer), interests and obligations under the Merger Agreement to Parent or to any affiliate of Parent, but no such assignment shall relieve the Purchaser of its obligations under the Merger Agreement. The Merger is subject to a number of conditions, including the adoption of the Merger Agreement by stockholders of the Company, if required by applicable law. In the event the Purchaser acquires 90% or more of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser would be able to effect the Merger pursuant to the short-form merger provisions of the Delaware General Corporation Law (the "DGCL"), without prior notice to, or any action by, any other stockholder of the Company. In such event, the Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other stockholder of the Company. See Section 12. Simultaneously with entering into the Merger Agreement, Parent and the Purchaser entered into a Stockholders Agreement dated as of December 14, 1999 (the "Stockholders Agreement") with certain stockholders of the Company (the "Stockholders"), pursuant to which each Stockholder has agreed, among other things, to sell to the Purchaser all the Shares that he or it beneficially owns at a price per Share equal to the Offer Price. The Stockholders have also agreed to tender such Shares in the Offer at a price per Share equal to the Offer Price if directed to do so by the Purchaser. The Stockholders collectively own approximately 20% of all outstanding Shares. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of tendered Shares pursuant to the Offer. Stockholders who own their Shares through their broker or bank should consult with such institution as to whether there are any fees applicable to a tender of Shares. Parent will pay all fees and expenses of Warburg Dillon Read LLC, which is acting as Dealer Manager (the "Dealer Manager" or "Warburg Dillon Read"), Citibank, N.A., which is acting as the Depositary (the "Depositary"), and MacKenzie Partners, Inc., which is acting as the Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT THE OFFER AND THE MERGER, TAKEN TOGETHER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT STOCK- 1 4 HOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. The factors considered by the Board in arriving at its decision to approve the Offer and the Merger and to recommend that the Company's stockholders accept the Offer and tender their Shares are described in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is also being mailed to stockholders of the Company. The Company's financial advisor, the Prudential Volpe Technology Group of Prudential Securities Incorporated, formerly known as Volpe Brown Whelan & Company, LLC ("PVTG"), has delivered its opinion to the Board dated December 14, 1999 that, as of such date, and subject to the conditions and limitations set forth therein, the consideration to be received by holders of Shares in the Offer and Merger is fair, from a financial point of view. Such opinion is set forth in full as an exhibit to the Schedule 14D-9. The Company has advised Parent and Purchaser that, to the best of its knowledge, each member of the Board and each of the Company's executive officers intend to tender all Shares owned by such persons pursuant to the Offer, except to the extent of any restrictions created by Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Offer is conditioned, among other things, (a) there being validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares which would represent at least a majority of all outstanding Shares on a fully diluted basis (the "Minimum Condition") and (b) any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), applicable to the purchase of Shares pursuant to the Offer having expired or been terminated (the "HSR Act Condition"). The Purchaser reserves the right (subject to the terms of the Merger Agreement and applicable rules and regulations of the Securities and Exchange Commission (the "SEC")) to waive or reduce the Minimum Condition and to elect to purchase, pursuant to the Offer, fewer than the number of Shares necessary to satisfy the Minimum Condition. For purposes herein, Shares on a fully diluted basis means all outstanding Shares, after giving effect to the exercise or conversion of all options, warrants, rights and securities exercisable or convertible into Shares. The Merger Agreement provides that Purchaser may not waive the Minimum Condition without the consent of the Company. See Sections 1 and 14. The Company has represented to the Purchaser that, as of December 13, 1999, there were 8,409,380 Shares issued and outstanding and 705,165 Shares authorized for issuance pursuant to the exercise of outstanding options to purchase Shares ("Stock Options"). As a result, as of such date, the Minimum Condition would be satisfied if the Purchaser acquired 4,566,388 shares. Certain federal income tax consequences of the sale of Shares pursuant to the Offer are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND SHOULD BE READ IN THEIR ENTIRETY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 1. TERMS OF THE OFFER Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 3. The term "Expiration Date" means 12:00 Midnight, New York City time, on Thursday, January 20, 2000, unless and until the Purchaser shall have extended the period of time during which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, will expire. The Purchaser expressly reserves the right to modify the terms of the Offer, except that without the consent of the Company, the Purchaser shall not (a) reduce the number of Shares to be subject to the Offer, (b) reduce the Offer Price, (c) modify or add to the conditions to the Offer in any manner adverse to the holders of the Shares, (d) except as provided in the next paragraph, extend the Offer, (e) change the form of 2 5 consideration payable in the Offer or (f) otherwise amend the Offer in any manner adverse to the holders of Shares. Notwithstanding the foregoing, the Purchaser may, without the consent of the Company, (a) extend the Offer, if at the scheduled Expiration Date of the Offer (the initial scheduled Expiration Date being 20 business days following the commencement of the Offer), any of the conditions to the Purchaser's obligation to accept for payment, and pay for, Shares are not satisfied, until such time as such conditions are satisfied or waived; provided, however, that the Expiration Date shall not be later than the Termination Date (as defined herein) as a result of such extension, (b) extend the Offer for a period of not more than 10 business days beyond the latest Expiration Date that would otherwise be permitted under clause (a) of this sentence, if on the date of such extension (x) less than 90% of the outstanding Shares have been validly tendered and not properly withdrawn pursuant to the Offer and (y) the Purchaser has permanently waived all of the conditions to the Offer (other than the conditions that are not legally capable of being waived and conditions that have not been satisfied because of the willful or intentional action or inaction of the Company) and (c) extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer. If, on any scheduled Expiration Date, any of the conditions of the Offer have not been satisfied or waived and such unsatisfied conditions are still capable of being satisfied, the Company may require Purchaser to extend the Expiration Date for a period of not more than 10 business days; provided, however, that Purchaser shall not be required to extend the Expiration Date later than the Termination Date. Subject to the terms of the Merger Agreement and applicable rules and regulations of the SEC, the Purchaser reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events or facts set forth in Section 14 hereof shall have occurred, to (a) extend the period of time during which the Offer is open and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (b) except as set forth above, amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. Under no circumstances will interest be paid on the purchase price for tendered Shares, whether or not the Purchaser exercises its right to extend the Offer. If by 12:00 Midnight, New York City time, on Thursday, January 20, 2000 (or any date or time then set as the Expiration Date), any of or all of the conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the SEC, to (a) terminate the Offer and not accept for payment or pay for any Shares and return all tendered Shares to tendering stockholders, (b) except as set forth above with respect to the Minimum Condition, waive all the unsatisfied conditions and accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (c) extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (d) amend the Offer. There can be no assurance that the Purchaser will exercise its right to extend the Offer, except if required to do so. Any extension, amendment or termination will be followed as promptly as practicable by public announcement. In the case of an extension, Rule 14e-1(d) under the Exchange Act requires that the announcement be issued no later than 9:00 a.m., New York City time on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change), and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If the Purchaser extends the Offer or if the Purchaser is delayed in its acceptance for payment of Shares (whether before or after its acceptance for payment of Shares) or it is unable to accept for payment or pay for 3 6 Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after termination or withdrawal of a tender offer, and the terms of the Merger Agreement), the Depositary may nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including, subject to the Merger Agreement, a waiver of the Minimum Condition), the Purchaser will disseminate additional tender offer materials and extend the Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in the percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. With respect to a change in price or a change in the percentage of securities sought, a minimum period of 10 business days is generally required to allow for adequate dissemination to stockholders. The Company has provided or will provide the Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and will be furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list, or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. PROCEDURE FOR TENDERING SHARES Valid Tender. For a stockholder validly to tender Shares pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with any required signature guarantees and any other required documents, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer set forth below (and a confirmation of such delivery, including an Agent's Message (as defined below), must be received by the Depositary), in each case prior to the Expiration Date or (b) the tendering stockholder must comply with the guaranteed delivery procedures set forth below. The Depositary will establish accounts with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in the Book-Entry Transfer Facility's system may make book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and any other required documents, must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that the Book- 4 7 Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING STOCKHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (a) if the Letter of Transmittal is signed by the registered holder(s) of Shares (which term for purposes of this Section, includes any participant in any of the Book-Entry Transfer Facility's system whose name appears on a security position listing as the owner of the Shares) tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (b) if such Shares are tendered for the account of a firm that is a participant in the Security Transfer Agents Medallion Program or the New York Stock Exchange Guarantee Program or the Stock Exchange Medallion Program or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Exchange Act (each, an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be returned to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed in the manner described above. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all such Shares), together with a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the Nasdaq National Market (the "Nasdaq National Market") operated by the National Association of Securities Dealers, Inc. (the "NASD") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (a) certificates for (or a timely 5 8 Book-Entry Confirmation with respect to) such tendered Shares, (b) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message and (c) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to such Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL ANY INTEREST BE PAID ON THE PURCHASE PRICE OF THE TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. Appointment. By executing a Letter of Transmittal as set forth above, the tendering stockholder will irrevocably appoint designees of the Purchaser as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after December 14, 1999. All such proxies will be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such stockholder as provided herein. Upon such appointment, all prior powers of attorney, proxies and consents given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights in respect of any annual, special or adjourned meeting of the Company's stockholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares and other securities or rights, including voting at any meeting of stockholders. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in the tender of any Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, Parent, the Depositary, the Information Agent, the Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Backup Withholding. In order to avoid "backup withholding" of federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner 6 9 satisfactory to the Purchaser and the Depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 to the Letter of Transmittal. 3. WITHDRAWAL RIGHTS Except as otherwise provided in this Section 3, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after February 18, 2000. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedure for book-entry transfer as set forth in Section 2, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent, Dealer Manager or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 4. ACCEPTANCE FOR PAYMENT AND PAYMENT Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date, and not properly withdrawn in accordance with Section 3, promptly after the Expiration Date. All questions as to the satisfaction of such terms and conditions will be determined by the Purchaser in its sole discretion, which determination will be final and binding. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law, including, without limitation, the HSR Act. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after termination or withdrawal of a tender offer. Parent will file a Notification and Report Form with respect to the Offer under the HSR Act. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the 15th day after day such form is filed, unless early termination of the waiting period is granted. However, the Antitrust Division of the Department of Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC") may extend the waiting period by requesting additional information or documentary material from Parent. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the 10th day after substantial compliance by Parent with such request. See Section 15. 7 10 In all cases, payment for tendered Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (c) any other documents required by the Letter of Transmittal. The per Share consideration paid to any stockholder pursuant to the Offer will be the highest per Share consideration paid to any other holder of Shares pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares. Payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF ANY TENDERED SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If the Purchaser extends the Offer or if the Purchaser is delayed in its acceptance for payment of or payment for Shares (whether before or after its acceptance for payment of Shares) or it is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after termination or withdrawal of a tender offer, and the terms of the Merger Agreement), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3. If any tendered Shares are not purchased pursuant to the Offer for any reason, certificates for any such Shares will be returned without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedure set forth in Section 2, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent, or to an affiliate of Parent, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following is a general discussion of certain United States federal income tax consequences of the receipt of cash by a holder of Shares pursuant to the Offer or the Merger. Except as specifically noted, this discussion applies only to a U.S. Holder. A "U.S. Holder" means a holder of Shares that is (i) a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any political subdivision thereof or therein, (iii) an estate the income of which is subject to United States federal income taxation regardless of its source or (iv) a trust if (x) a court within the United States is able to exercise primary supervision over the administration of the trust and (y) one or more United States fiduciaries have the authority to control all substantial decisions of the trust. A "Non-U.S. Holder" is a holder of Shares that is not a U.S. Holder. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also be a 8 11 taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for federal income tax purposes, a U.S. Holder will recognize gain or loss equal to the difference between the amount of cash received by the U.S. Holder pursuant to the Offer or the Merger and the aggregate tax basis in the Shares purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain or loss will be calculated separately for each block of Shares purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain (or loss) will be capital gain (or loss), assuming that such Shares are held as a capital asset. Capital gains of individuals, estates and trusts generally are subject to a maximum federal income tax rate of (i) 39.6% if, at the time the Purchaser accepts the Shares for payment (or the Shares are canceled pursuant to the Merger) the stockholder held the Shares for not more than one year and (ii) 20% if the stockholder held such Shares for more than one year at such time. Capital gains of corporations generally are taxed at the federal income tax rates applicable to corporate ordinary income. In addition, under present law, the ability to use capital losses to offset ordinary income is limited. A stockholder that tenders Shares pursuant to the Offer or surrenders Shares pursuant to the Merger may be subject to 31% backup withholding unless the stockholder provides its TIN and certifies that such number is correct or properly certifies that it is awaiting a TIN, or unless an exemption applies. A stockholder that does not furnish its TIN may be subject to a penalty imposed by the IRS. See "-- Backup Withholding" under Section 2. If backup withholding applies to a stockholder, the Depositary is required to withhold 31% from payments to such stockholder. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder upon filing an income tax return. THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE WITH RESPECT TO SHARES RECEIVED PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION OR WITH RESPECT TO HOLDERS OF SHARES WHO ARE SUBJECT TO SPECIAL TAX TREATMENT UNDER THE CODE, SUCH AS NON-U.S. HOLDERS, LIFE INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, FINANCIAL INSTITUTIONS, DEALERS IN SECURITIES OR CURRENCIES, PERSONS WHO HOLD SHARES AS A POSITION IN A "STRADDLE" OR AS PART OF A "HEDGING" OR "CONVERSION" TRANSACTION AND PERSONS THAT HAVE A FUNCTIONAL CURRENCY OTHER THAN THE U.S. DOLLAR, AND MAY NOT APPLY TO A HOLDER OF SHARES IN LIGHT OF INDIVIDUAL CIRCUMSTANCES. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER. 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES The Shares are traded on the Nasdaq National Market ("NNM") under the symbol "ELTE." The following table sets forth, for each of the periods indicated, the range of reported high and low sales prices per 9 12 Share as reported on the NNM as stated in the Company's documents filed with the SEC ("Commission Documents").
SALES PRICE --------------- LOW HIGH ------ ------ 1997 First Quarter............................................. $10.38 $13.25 Second Quarter............................................ $10.67 $13.13 Third Quarter............................................. $ 9.50 $14.38 Fourth Quarter............................................ $ 7.38 $11.75 1998 First Quarter............................................. $ 7.13 $ 9.06 Second Quarter............................................ $ 5.25 $ 8.00 Third Quarter............................................. $ 3.25 $ 7.63 Fourth Quarter............................................ $ 2.25 $ 3.75 1999 First Quarter............................................. $ 2.25 $ 4.00 Second Quarter............................................ $ 3.63 $ 5.94 Third Quarter............................................. $ 4.94 $ 6.44 Fourth Quarter (through December 17, 1999)................ $ 4.66 $10.31
On December 14, 1999, the last full day of trading before the public announcement of the execution of the Merger Agreement, the reported closing sales price of the Shares on the NNM was $8.375 per Share. The Offer Price of $11.00 represents a 31% premium over this closing price. On December 20, 1999, the last full day of trading before commencement of the Offer, the reported closing sales price of the Shares on the NNM was $10.25 per Share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES. The Purchaser has been advised by the Company that the Company has never paid any cash dividends on the Shares, and has no present plans to make any distributions to its stockholders. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION; REGISTRATION UNDER THE EXCHANGE ACT; MARGIN REGULATIONS Market for Shares. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. Stock Quotation. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NASD for continued inclusion in the NNM, which among other things require that an issuer have either (i) at least 750,000 publicly held shares, held by at least 400 stockholders of round lots, with a market value of at least $5,000,000 and net tangible assets of at least $4,000,000 and at least two registered and active market makers for the shares or (ii) at least 1,100,000 publicly held shares, held by at least 400 stockholders of round lots, with a market value of at least $15,000,000 and either (x) a market capitalization of at least $50,000,000 or (y) total assets and total revenue of at least $50,000,000 each for the most recently completed fiscal year or two of the last three most recently completed fiscal years and at least four registered and active market markers. The Shares might nevertheless continue to be included in the NASD's Nasdaq Stock Market (the "Nasdaq Stock Market") with quotations published in the Nasdaq "additional list" or in one of the "local lists," but if the number of holders of the Shares were to fall below 300, or if the number of publicly held Shares were to fall below 500,000 or if the market value of the Shares were to fall below $1,000,000 or there were not at least two registered and active market makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for Nasdaq Stock Market reporting and the Nasdaq Stock Market would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not 10 13 considered as being publicly held for this purpose. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NASD for continued inclusion in the NNM or in any other tier of the Nasdaq Stock Market and the Shares are no longer included in the NNM or in any other tier of the Nasdaq Stock Market, as the case may be, the market for Shares could be adversely affected. In the event that the Shares no longer meet the requirements of the NASD for continued inclusion in any tier of the Nasdaq Stock Market, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the interest in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. Registration Under the Exchange Act. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the SEC if the Shares are not listed on a national securities exchange, quoted on an automated inter-dealer quotation system or held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and to the SEC and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated. The Purchaser intends to seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If public quotation and registration of the Shares is not terminated prior to the Merger, then the Shares will no longer be quoted and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. Margin Regulations. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. In any event, the Shares will cease to be "margin securities" if registration of the Shares under the Exchange Act is terminated. 8. CERTAIN INFORMATION CONCERNING THE COMPANY General. Except as otherwise set forth herein, the information concerning the Company contained in this Offer to Purchase, including financial information, has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the SEC and other public sources. Although neither the Purchaser nor Parent has any knowledge that would indicate that statements contained herein based upon such documents are untrue, none of the Purchaser or Parent assume any responsibility for the accuracy or completeness of the information concerning the Company or for any failure by the Company to disclose events that may have occurred or may affect the significance or accuracy of any such information but that are unknown to the Purchaser or Parent. According to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999, the Company is a Delaware corporation and provides integrated solutions to the financial, legal and 11 14 professional services markets in the computer software product and services industry. The Company primarily supplies an integrated suite of practice management software for the legal and professional services markets, and is focused primarily on time tracking, billing, internal accounting and other administrative functions, including marketing, records management, case management and conflicts of interest prevention. The Company's software products are often sold with related services to aid the customer in implementation, data conversion, user training, support and maintenance of those products. The Company's principal executive offices are located at 5100 West Goldleaf Circle, Suite 100, Los Angeles, California 90056. Financial Information. Set forth below is certain selected consolidated financial information with respect to the Company and its subsidiaries, which is excerpted from the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998, the Company's Quarterly Report on Form 10-Q for the nine months ended September 30, 1999, the Company's Quarterly Report on Form 10-Q for the nine months ended September 30, 1998, and the Company's Current Report on Form 8-K dated May 19, 1999. More comprehensive financial information is included in such reports and other documents filed by the Company with the SEC, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any related notes) contained therein. Such reports and other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information." ELITE INFORMATION GROUP, INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED) YEAR ENDED DECEMBER 31, ------------------- --------------------------------------- RESTATED 1999 1998 1998(A) 1998 1997 1996 -------- -------- -------- ------- ------- ------- Net revenue........................ $43,770 $31,578 $45,062 $69,035 $79,559 $89,351 Operating costs and expenses....... 40,700 33,463 45,416 82,948 76,208 99,609 ------- ------- ------- ------- ------- ------- Operating income (loss)............ 3,070 (1,885) (354) (13,913) 3,351 (10,258) Gain (loss) on disposition of non-strategic business unit...... (295) -- -- 1,917 1,155 9,652 Net interest income (expense)...... 777 730 857 857 832 (187) ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations before income taxes... 3,552 (1,155) 503 (11,139) 5,338 (793) Income tax (provision) benefit for continuing operations............ (1,548) 80 (425) 3,542 (2,399) (1,455) ------- ------- ------- ------- ------- ------- Income (loss) from continuing operations....................... 2,004 (1,075) -- -- -- -- ------- ------- ------- ------- ------- ------- Income (loss) from discontinued operations....................... (382) (4,304) -- -- -- -- ------- ------- ------- ------- ------- ------- Gain on sale of discontinued operations net of tax provision........................ 4,919 -- -- -- -- -- ------- ------- ------- ------- ------- ------- Net income (loss)........ $ 6,541 $(5,379) $ 78 $(7,597) $ 2,939 $(2,248) ======= ======= ======= ======= ======= ======= Net income (loss) per common share -- basic................... $ 0.79 $ (0.60) $ 0.01 $ (0.86) $ 0.32 $ (0.25) Net income (loss) per common share -- diluted................. $ 0.77 $ (0.60) $ 0.01 $ (0.86) $ 0.32 $ (0.25) Total assets....................... $63,178 $56,007 (b) $65,096 $67,343 $66,474 Total liabilities.................. $30,289 $28,770 (b) $40,077 $29,970 $34,284 Total stockholders' equity......... $32,889 $27,237 (b) $25,019 $37,373 $32,190
12 15 - --------------- (a) Restated 1998 results reflect the Company's sale during the second quarter of 1999 of its Customer Relationship Management business ("CRM") and elimination of certain overhead costs along with estimated income tax effects, as disclosed by the Company in its Current Report on Form 8-K dated May 19, 1999. The operating results for CRM are presented in the table above for the nine months ended September 30, 1999 as discontinued operations and the prior period has been restated to reflect the Company's continued operations. The results above for the years ended 1996, 1997 and 1998 (before restatement) do not reflect any adjustment for the sale of CRM. (b) Not available in the Company's SEC filings. Available Information. The Company is currently subject to the reporting requirements of the Exchange Act and, in accordance therewith, is required to file reports and other information with the SEC relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options and other matters, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company stockholders and filed with the SEC. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC located in the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York 10049. Copies of such information should be obtainable, by mail, upon payment of the SEC's customary charges, by writing to the SEC's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material should also be available for inspection at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006. The SEC maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. Such reports, proxy and information statements and other information may be found on the SEC's web site address, http://www.sec.gov. Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been taken from or based upon publicly available documents on file with the SEC and other publicly available information. Although the Purchaser and Parent do not have any knowledge that any such information is untrue, none of the Purchaser or Parent takes any responsibility for the accuracy or completeness of such information or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information. Certain Company Projections. During the course of discussions between representatives of Parent and the Company, the Company provided Parent or its representatives with certain non-public business and financial information about the Company. The following is a summary of selected projected financial information provided by the Company.
PROJECTIONS FOR YEAR ENDING DECEMBER 31, --------------------- 1999 2000 --------- --------- (IN THOUSANDS) Total revenue............................................... $57,325 $61,751 Cost of revenue............................................. 31,813 34,001 Net earnings................................................ 6,863 9,150
The Company has advised the Purchaser and Parent that it does not as a matter of course make public any projections as to future performance or earnings, and the projections set forth above are included in this Offer to Purchase only because the information was provided to Parent. The projections were not prepared with a view to public disclosure or compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants regarding projections or forecasts. The Company's internal operating projections are, in general, prepared solely for internal use and capital budgeting and other management decisions and are subjective in many respects and thus susceptible to various interpretations and periodic revision based on actual experience and business developments. The projections 13 16 were based on a number of assumptions that are beyond the control of the Company, the Purchaser or Parent or their respective financial advisors, including economic forecasting (both general and specific to the Company's business), which is inherently uncertain and subjective. None of the Purchaser or Parent or their respective financial advisors assumes any responsibility for the accuracy of any of the projections. The inclusion of the foregoing projections should not be regarded as an indication that the Company, the Purchaser or Parent or any other person who received such information considers it an accurate prediction of future events. None of the Company, the Purchaser or Parent intends to update, revise or correct such projections if they become inaccurate (even in the short term). 9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND PARENT Purchaser. The Purchaser, a Delaware corporation, was recently incorporated for the purpose of acting as an acquisition vehicle. It has not conducted any unrelated activities since its incorporation. The principal executive office of the Purchaser is located at Town Hall House, Level 21, 456 Kent Street, Sydney, New South Wales, Australia 2000. All outstanding shares of common stock of Purchaser are owned by Solution 6 US Inc., which is 100% owned by Parent. Parent. The principal executive office of Parent, a corporation organized under the laws of New South Wales, Australia, is located at Town Hall House, Level 21, 456 Kent Street, Sydney, New South Wales, Australia 2000. Parent, its subsidiaries and associated companies are principally engaged in the provision and support of software and related services to the accounting profession worldwide and Applications Service Provider ("ASP") services. The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser and Parent are set forth in Schedule I hereto. Parent currently beneficially owns and has sole voting and dispositive power of 147,200 Shares, and such Shares are held in the name of Linwar Nominees. In addition, Parent may be deemed to beneficially own an additional 2,001,588 Shares by virtue of its entering into the Stockholders Agreement. Such 2,001,558 Shares may also be deemed to be beneficially owned by Purchaser. See Section 12 for a description of the terms and conditions of the Stockholders Agreement. No other person is known to have the right to receive or the power to direct the receipt of dividends from or the proceeds from the sale of, the Shares beneficially owned by Parent and Purchaser. Since October 21, 1999, Parent purchased the Shares set forth below through BNP Equities (Australia) Limited in broker's transactions. These shares are held in the name of Linwar Nominees.
DATE OF TRANSACTION NUMBER OF SHARES PRICE PER SHARE - ------------------- ---------------- --------------- November 11, 1999...................................... 16,400 $7.36737 November 8, 1999....................................... 22,000 $ 7.375 November 5, 1999....................................... 1,000 $ 7.375 November 4, 1999....................................... 4,100 $ 7.375 November 3, 1999....................................... 1,000 $ 7.375 November 2, 1999....................................... 2,300 $ 7.375 October 25, 1999....................................... 2,000 $ 5.75 October 22, 1999....................................... 5,300 $ 5.75
Except as set forth above or described elsewhere in this Offer to Purchase, none of the Purchaser or Parent (together, the "Corporate Entities") or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I or any associate or majority-owned subsidiary of the Corporate Entities or any of the persons so listed, beneficially owns any equity security of the Company, and none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. See Section 11. 14 17 Except as described in this Offer to Purchase, (a) there have not been any contacts, transactions or negotiations between the Corporate Entities, any of their respective subsidiaries or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I, on the one hand, and the Company or any of its directors, officers or affiliates, on the other hand, that are required to be disclosed pursuant to the rules and regulations of the SEC and (b) none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I has any contract, arrangement understanding or relationship with any person with respect to any securities of the Company. Financial Information. Because the Purchaser was recently organized to acquire the Company and has not conducted any unrelated activities since its organization, selected financial information regarding the Purchaser is unavailable. Because the only consideration in the Offer and Merger is cash and the Offer covers all outstanding Shares, the Purchaser believes the financial condition of Parent and its affiliates is not material to a decision by a holder of Shares whether to sell, tender or hold Shares pursuant to the Offer. 10. SOURCE AND AMOUNT OF FUNDS The Purchaser estimates that the amount of funds required to purchase all outstanding Shares pursuant to the Offer, to pay cash to holders of Stock Options pursuant to the Merger Agreement and to pay fees and expenses related to the Offer will be approximately $9.8 million. The Purchaser will obtain funds directly or indirectly from Parent. Such funds will be obtained from Parent from existing cash resources (including proceeds from the Private Placement (as discussed below)), proceeds from the exercise of an option held by Telstra Corp. ("Telstra") and from borrowings pursuant to an acquisition bridge facility by and among Warburg Dillon Read Australia Limited ("WDRAL") and Parent. WDRAL has committed to provide Parent with a maximum of US$60 million as an acquisition bridge facility (the "Facility") pursuant to an amended term sheet dated December 17, 1999. If drawn upon, the maturity date for the Facility will be the earlier of July 31, 2000 or 14 days after the consummation of the Merger. The Parent plans to repay the Facility from the proceeds from the first US$20 million received pursuant to the Private Placement (as discussed below), up to US$30 million pursuant to a dividend, return of capital or loan from the Company immediately upon consummation of the Merger and from working capital. WDRAL's commitment to provide the Facility will expire if the Minimum Condition has not been reached by May 2, 2000 and Purchaser has not terminated the Offer and accepted Shares for payment by that date. Additionally, WDRAL may terminate the commitment if Parent and WDRAL have not entered into definitive documentation and executed the Facility by February 15, 2000, and Purchaser may terminate the Facility at any time, with or without cause. The base interest rate (the "Base Rate") on the Facility shall be the average rate as displayed on Reuters screen LIBO for the relevant Interest Period (as defined below) set to London business days prior to drawing. In addition to the Base Rate, amounts drawn under the Facility will be subject to an additional 2.0% interest from the date of the draw until 45 days thereafter, and an additional 4.0% from 45 days after the date of the draw until July 31, 2000. Furthermore, interest shall be payable on any undrawn amounts under the Facility at 1.0% from March 31, 2000 until July 31, 2000, calculated on a daily basis and payable quarterly in arrears. Interest Periods shall be 30, 60 or 90 days, or as otherwise agreed. Interest is payable on the Facility at the end of the Interest Period. The Facility is secured by a first priority lien, unless a first priority lien is already in place in which case the Facility shall be secured by a second priority lien with second priority liens capped at A$10 million, on most of Parent's assets, proceeds from the issuances of Parent's securities, proceeds from any sale of the Shares or the Company's assets once the acquisition of the Company has been completed. Parent is obligated to pay certain fees in connection with the Facility. Upon execution of the commitment letter and the announcement of the Merger, an aggregate amount of US$523,000 as a commitment fee for the Facility was payable by Parent. A restructure fee in the amount of $78,000 was also payable by Parent in connection with an amendment to the facility on December 17, 1999. When Parent draws upon the Facility, an amount equal to 1.0% of the amount drawn will be payable to WDRAL as an additional fee. However, 15 18 WDRAL will rebate an amount equal to 0.5% of the amounts drawn if the Facility is repaid within 45 days of such draw down. As required as a condition to the Facility, Parent undertook a private placement of A$120 million of its ordinary shares at a price of A$9.75 per share (the "Private Placement"). Subscriptions for A$120 million were received on December 17, 1999 with settlement to occur on December 22, 1999. The joint lead managers of the Private Placement have assumed the underwriting risk from December 17, 1999 through the settlement date. Mandatory prepayment or reduction of outstanding commitments under the Facility will occur from funds received by Parent from any of the following sources: (1) the first US$20 million received pursuant to the Private Placement; (2) the placement of any other of Parent's securities (excluding the A$50 million issuance of shares to Telstra and any other share issuances to vendors used to fund acquisitions approved by WDRAL); (3) the sale of any of Parent's assets; (4) any return of capital or loan from the Company; and (5) the sale of any Shares of the Company. Additionally, if the transaction involving a specific potential acquisition candidate is not announced by January 31, 2000 and is not pursuant to the conditions required by WDRAL in the Facility, or if the offer to purchase that acquisition candidate is withdrawn, a further mandatory prepayment or reduction of US$13 million will be required at that time. Mandatory prepayments and reduced commitments cannot be redrawn and will be converted to US dollars at the exchange rate prevailing at the time of the prepayment or commitment reduction and as advised in good faith by WDRAL to Parent. There are several conditions precedent that Parent must satisfy prior to making any draws upon the Facility. All loan and security documentation must be completed to WDRAL's satisfaction, the fees described above must have been paid and Parent must have received at least A$50 million in connection with the issuance of shares to Telstra pursuant to the exercise of an option. The Telstra option has been exercised and the A$50 has been received by the Parent. Additionally, at least 50.1% of the Company's Shares must have been tendered to Parent at a cost to Purchaser of US$62.6 million for the Shares. With respect to the Facility, Parent has agreed to the following: (1) Parent shall not enter into an amendment or waive any conditions to the Offer or the Merger Agreement without the consent of WDRAL; (2) Parent shall not enter into a material amendment or waive any material conditions to the specific acquisition candidate's transaction without the consent of WDRAL; (3) Upon acquiring at least 50.1% of the Shares, Parent shall take control of the Company's board of directors, use its best efforts to acquire 100% of the Shares as soon as practicable and in any event by July 16, 2000; (4) Immediately upon the consummation of the Merger, Parent shall cause the Company to make a payment of at least US$30 million to Parent by way of a dividend, return of capital or loan and cause the Company to provide a guarantee and provide a lien over its assets in favor of WDRAL; (5) Upon the reasonable request from WDRAL, Parent shall enter into currency hedging arrangements acceptable to WDRAL with respect to the acquisition of the Company; (6) Parent has agreed to restrictions on any capital reductions (except in respect of an agreed level of ordinary dividends); 16 19 (7) Parent has agreed to restrictions on disposal of assets or undertakings other than disposals in the ordinary course of business (except as reasonably agreed to by WDRAL) and disposals for good value applied in prepayment of the Facility; (8) Parent has agreed to restrictions on further acquisitions in excess of A$5 million in the aggregate (except as reasonably agreed to by WDRAL); (9) Parent has agreed to restrictions on incurring further financial indebtedness or providing financial accommodation or guarantees (except as reasonably agreed with WDRAL); (10) Parent has agreed that it will have no dealings with any party except on arms length terms in the ordinary course of business; and (11) Parent has agreed to restrictions on the creations of security interests. 11. CONTACTS AND TRANSACTIONS WITH THE COMPANY; BACKGROUND OF THE OFFER In March 1999, the Company engaged PVTG to provide financial advisory services in connection with a variety of strategic initiatives, including, but not limited to, possible business combinations. In the spring and summer of 1999, the Company had informal contacts and introductory meetings with various parties, but did not entertain serious discussions regarding an acquisition of the Company. In early August 1999, Mr. Chris Tyler, Chief Executive Officer of Parent, left a phone message for Mr. Barry Emerson, Chief Financial Officer of the Company, regarding Parent's interest in a possible business combination with the Company. On September 5, 1999, Mr. Tyler and Mr. Christopher K. Poole, Chairman and Chief Executive Officer of the Company, had an initial meeting in Santa Monica, California in which they exchanged general information and Mr. Tyler expressed Parent's general interest in a possible merger with the Company. At about that same time, the Company also had preliminary discussions with a prospective financial buyer (the "First Financial Bidder"), which signed a confidentiality agreement and received certain financial information regarding the Company. On September 8, 1999, Mr. Tyler sent a message to Mr. Poole proposing a possible merger transaction in which Parent and the Company would exchange stock at "current market rates." On September 16, 1999, the Company held a Board meeting at which Mr. Poole provided an update on two possible interested parties. The Company's Board authorized Mr. Poole to proceed with discussions and provide further updates as discussions progressed. Following this Board meeting, additional financial information was provided to the First Financial Bidder. On September 18, 1999, Mr. Tyler sent a message to Mr. Poole at the Company indicating Parent's desire to proceed with a possible merger transaction and to discuss maximizing stockholder value. On October 1, 1999, Mr. Poole met with Mr. Tyler at the Company's offices in Los Angeles to further discuss Parent's interest in an acquisition. Later that day, Mr. Poole met in the Company's offices with a representative of a second prospective financial buyer (the "Second Financial Bidder"). On October 8, 1999, a conference call was held between Parent, Company and the respective advisors to discuss a possible transaction. Parent suggested an "at-market" bid of approximately $5.00 per share. The Company rejected this suggestion as inadequate, and negotiations between Parent and the Company stalled. On October 15, 1999, Mr. Tyler sent a message to PVTG revising Parent's indication of interest to $7.50 per share. On October 19, 1999, Mr. Poole sent the Board of Directors an update about the status of Parent's and the First Financial Bidder's expressions of interest in the range of $7.00 to $8.00. On October 27, 1999, the company's Board of Directors met to consider the status of discussions with potential buyers. The Board concluded that the indications of interest received to date were not high enough and that contacts with other potential buyers might yield higher values. The Board then directed PVTG to attempt to elicit higher price per share indications of interest from currently interested parties and to contact other potentially interested parties. Following this meeting, PVTG contacted a total of nine additional possible buyers. 17 20 On November 1, 1999, PVTG sent a message to Mr. Tyler stating that the Company was uncomfortable with Parent's proposed valuation and was unlikely to proceed unless Parent could propose a price that approached multiples paid in Parent's recent acquisition transactions. On November 1, 1999, representatives of PVTG also had a conversation with the First and Second Financial Bidders and instructed them that the Company was unlikely to proceed with the transaction unless these parties were able to significantly raise their indications of interest. On November 2, 1999, the Company received a written expression of interest from the Second Financial Bidder, raising its price per share to a range of $8.50 to $9.50. On November 2, 1999, Mr. Tyler sent a message to PVTG with an in indication of interest at $10.80 and sent the Company a revised letter proposing a merger transaction at $10.80 a share, consisting of 50% stock and 50% cash consideration. On November 4, 1999, PVTG sent Parent a confidentiality agreement for execution. On November 9, 1999, the Company received a revised expression of interest from the Second Financial Bidder proposing a price range of approximately $9.00 to $10.00 per share. On or about November 9, 1999, PVTG invited Parent and both Financial Bidders to set up due diligence visits. Parent proposed scheduling meetings immediately. Both Financial Bidders proposed scheduling meetings for late November. The Company and Parent entered into a confidentiality agreement on November 11, 1999. On November 15, 1999, the Company furnished certain due diligence documents to Parent. On November 17 though 19, 1999, Parent conducted due diligence in Los Angeles. The Company and Parent continued to negotiate price based on due diligence proceedings. On November 21, 1999, Mr. Tyler sent a message to PVTG indicating his interest in proceeding with an all-cash transaction at $10.80 per share and proposing other key terms. On November 22, 1999, the Company, together with PVTG, and Parent, together with its financial advisor and legal counsel, met in Los Angeles to discuss general terms regarding a possible merger transaction. The parties were unable to agree on certain material points. However, prior to leaving the meeting, Parent presented to the Company a draft of the Merger Agreement and the Stockholders Agreement. Over the next several days, Parent and the Company and their representatives exchanged numerous messages and had numerous discussions concerning price and other terms. On November 28, 1999, Mr. Tyler notified PVTG of Parent's proposal of an all-cash transaction at $11.00 per share. On November 29, 1999, the Company's Board of Directors held a telephonic meeting at which Parent's proposal was discussed. The Board discussed the specifics of Parent's proposal, and directed PVTG to reject certain aspects of Parent's proposal and to propose modifications to others. The Board was also updated on the status of discussions with the Financial Bidders, and directed its financial advisors to give guidance to the Financial Bidders regarding the type of bid necessary to stay competitive with Parent's proposal. On November 30, 1999, Mr. Poole, Mr. Emerson and other representatives of the Company met with a potential strategic buyer in the Company's offices in Los Angeles, at which time the potential strategic buyer executed a Confidentiality Agreement. On December 1, 1999, representatives of the First Financial Bidder conducted due diligence visits and met with Messrs. Poole and Emerson and representatives of PVTG. PVTG informed the First Financial Bidder that discussions between the Company and another bidder had progressed to an advanced stage and urged the First Financial Bidder to respond quickly with a firm proposal if it was interested in acquiring the Company. Later on December 1, 1999, the Company shipped due diligence materials to the strategic buyer it had met on November 30, 1999 and to the First Financial Bidder. On December 2, 1999, the First Financial Bidder sent the Company a letter stating an indication of interest, subject to due diligence and other conditions, of $11.00 per share. On December 3, 1999, a representative of PVTG left a message with a representative of the First Financial Bidder acknowledging the 18 21 December 2, 1999 letter and advising that the Company needed to see a formal proposal quickly in order to determine how to proceed with the First Financial Bidder. From December 2 through December 8, 1999, the Company and PVTG (together and alone) had numerous conversations with Parent and its financial advisors (together and alone) concerning the unresolved issues related to the possible transaction. During this period, several written demands, conditions, proposals and alternatives were exchanged. On December 3, 1999, counsel for Parent disseminated a revised daft of the Merger Agreement and Stockholders Agreement to all involved parties. On December 6, 1999, the Company's Board held a telephonic meeting, at which time it was updated on the status of discussion with all parties. Mr. Poole informed the Board that he had received a letter on December 6, 1999 from Mr. Tyler stating that Parent was prepared to withdraw its proposal unless the Company agreed to enter into exclusive negotiations with Parent within 24 hours. The Board of Directors weighed the relative merits and likelihood of completion of the transactions with Parent and the other interested buyers, including the Financial Bidders, and authorized the grant of a week-long exclusivity period to Parent. On December 6, 1999, Company and Parent signed a letter providing that the parties would negotiate exclusively until midnight December 14, 1999, Los Angeles, California time in order to reach a definitive agreement. From December 7 to December 14, 1999, Parent conducted due diligence on site in Los Angeles. During this time, Parent and their counsel also met in Los Angeles to negotiate the terms of the Merger Agreement. On December 9, 1999, the Second Financial Bidder sent Mr. Poole a letter expressing frustration at the Company's having entered into an exclusivity period with another bidder and stating that, subject to conducting its due diligence, it was interested in presenting an offer in a price range of $12.00 to $13.00 per share. On December 9 and 10, 1999, a representative from the Company met with representatives of the Parent in Sydney, Australia, while other representatives of the Company and their legal counsel met with a representative of the Parent and its legal counsel in Los Angeles to continue to negotiate terms of a possible transaction. On December 10, 1999, the representative of the Company who was in Sydney, Australia, flew back to Los Angeles and joined the meetings being held in Los Angeles. On December 11, 1999, counsel to the Purchaser circulated revised drafts of the Merger Agreement and the Stockholders Agreement. On December 12, 1999, the Company's Board of Directors held a telephonic meeting to discuss the status of negotiations with Parent and the receipt of the Second Financial Bidder's December 9, 1999 letter. The Board reviewed with counsel and representatives of PVTG the terms of this letter and weighed the relative risks of delaying negotiations with Parent, which had already threatened to withdraw its offer if the Company further delayed negotiations, to pursue the Second Financial Bidder's indication of interest, which included a due diligence contingency, at $12.00 to $13.00 per share. The Board considered the relative likelihood of completion of Parent's and the Second Financial Bidder's proposed transactions, noting that Parent's proposal did not include a due diligence contingency, and the potential effect on any proposal from the Second Bidder if the Company entered into a definitive agreement with Parent. The Board also considered, and concluded, that Parent's proposed termination fee of $3.0 million (or approximately $0.34 per fully diluted share (including "in the money" options)), coupled with the provision in the Merger Agreement allowing the Company to (i) respond to acquisition proposals offering greater consideration than $11.00 per share and (ii) terminate the Merger Agreement in favor of such a proposal if required by the fiduciary duties of the Board of Directors, should not preclude any bidder from making a superior proposal for the Board's consideration. The Board was also advised that negotiations with Parent had progressed to the level where only a few open negotiating points remained. The Board gave direction to counsel and PVTG regarding the open negotiating points and authorized management to proceed with negotiations with Parent in an effort to reach a definitive agreement. On December 13, 1999, Second Financial Bidder sent a second letter to members of the Company's Board of Directors indicating that, subject to due diligence review, it was prepared to offer a price of 19 22 $12.00 per share. The letter indicated that if the Company did not respond by December 14, 1999, the Second Financial Bidder would consider other alternatives for addressing its interest in the Company. On December 13 and 14, 1999, the Company, its legal advisors and PVTG, and Parent and its financial and legal advisors met together or individually with each other throughout these days and nights to finalize the terms of the Merger Agreement and Stockholders Agreement. On December 14, 1999, the Company's Board of Directors held a telephonic meeting at which they reviewed the status of all interested parties and proposals received to date. The Board considered whether to proceed with Parent's proposal in light of the Second Financial Bidder's renewed statement of interest, subject to due diligence, in presenting an offer at a higher price than Parent. After discussion, the Company's Board concluded, for the same reasons discussed at the December 12, 1999, meeting, that the preliminary nature of the Second Financial Bidder's stated interest did not warrant risking the loss of reaching a definitive agreement with Parent at $11.00 per share and that entering a definitive agreement with Parent on the terms proposed would not preclude the Second Financial Bidder from making a proposal superior to Parent's if it was indeed serious about its stated indication of interest in an acquisition at $12.00 per share. The Company's Board then reviewed in detail, with counsel, the proposed terms of the Merger Agreement and Stockholders Agreement with Parent. The Board also received a financial presentation regarding Parent's proposal from PVTG. The Board adjourned the meeting to review materials presented by PVTG and reconvened later that afternoon. PVTG presented these materials and at the conclusion, gave the Board its oral opinion (which was subsequently confirmed in writing later that day). The Board then approved the execution of the Merger Agreement and Stockholders Agreement and the proposed transactions with Parent. The Board also approved an amendment to the Company's Rights Agreement to exempt Purchaser, Parent and the transactions contemplated by the Merger Agreement and the Stockholders Agreement from the application of the Rights Agreement. On December 14, 1999, upon being advised that the Company's Board of Directors had approved the Merger, the Offer and the other transactions contemplated by the Merger Agreement, Parent's and Purchaser's Boards of Directors approved the Merger Agreement and Stockholders Agreement. Late in the evening of December 14, 1999, Parent, Purchaser and the Company executed the Merger Agreement and the Stockholders Agreement, and on the morning of December 15, 1999, the parties issued a press release announcing the transaction. On December 15, 1999, following the public announcement of the Offer and the Merger, a representative of the Second Financial Bidder called to congratulate Mr. Poole and indicated that the Second Financial Bidder had no interest in pursuing an offer to the Company. 12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; THE STOCKHOLDERS AGREEMENT; OTHER AGREEMENTS; PLANS FOR THE COMPANY Purpose. The purpose of the Offer is to acquire control of and the entire equity interest in the Company. Following the Offer, the Purchaser and Parent intend to acquire any remaining equity interest in the Company not acquired in the Offer by consummating the Merger. The Merger Agreement. The Merger Agreement provides that following the satisfaction of the conditions described below under "Conditions to the Merger," the Purchaser will be merged with and into the Company, and each outstanding Share (other than Shares held by stockholders who perfect their appraisal rights under Delaware law, Shares owned by the Company as treasury stock and Shares owned by Parent or any direct or indirect wholly-owned subsidiary of Parent or of the Company) will be converted into the right to receive the Per Share Merger Consideration, without interest. (a) Vote Required to Approve Merger. The DGCL requires, among other things, that the adoption of any plan of merger or consolidation of the Company be approved by the Board and generally by a majority of the holders of the Company's outstanding voting securities. The Board has approved the Offer and the Merger. Consequently, the only additional action of the Company that may be necessary to effect the Merger is approval by such stockholders if the "short-form" merger procedure described below is not available. Under the DGCL, the affirmative vote of holders of a majority of the outstanding Shares (including any Shares owned by the Purchaser), is generally required to approve the Merger. If the Purchaser acquires, through the Offer or otherwise, voting power with respect to at least a majority of the outstanding Shares (which would be 20 23 the case if the Minimum Condition were satisfied and the Purchaser were to accept for payment Shares tendered pursuant to the Offer), it would have sufficient voting power to effect the Merger without the vote of any other stockholder of the Company. However, the DGCL also provides that if a parent company owns at least 90% of each class of stock of a subsidiary, the parent company can effect a short-form merger with that subsidiary without the action of the other stockholders of the subsidiary. Accordingly, if, as a result of the Offer or otherwise, the Purchaser acquires or controls the voting power of at least 90% of the outstanding Shares, the Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other stockholder of the Company. (b) Conditions to Obligations of Each Party Under The Merger Agreement. The respective obligations of Parent, Purchaser and the Company to effect the Merger under the Merger Agreement are subject to the satisfaction at or prior to the Effective Time of the following conditions, any or all of which may be waived by each party, in whole or in part, to the extent permitted by applicable law: (a) the Merger Agreement and the Merger shall have been approved and adopted by the requisite vote of the stockholders of the Company, if required by applicable law; (b) no court of competent jurisdiction or governmental authority shall have enacted, issued, promulgated, enforced or entered any law or order (whether temporary, preliminary or permanent) which is in effect and which has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger; (c) the applicable waiting period under the HSR Act shall have expired or been terminated; and (d) the Purchaser, Parent or their affiliates shall have accepted for payment and purchased Shares pursuant to and subject to the conditions of the Offer. (c) Termination of the Merger Agreement. The Merger Agreement may be terminated and the Offer and the Merger may be abandoned at any time (notwithstanding approval of the Merger by the stockholders of the Company) prior to the Effective Time: (a) by mutual written consent of Parent, the Purchaser and the Company; (b) by Parent, the Purchaser or the Company if any court of competent jurisdiction or other governmental authority shall have issued a final order or taken any other final action restraining, enjoining or otherwise prohibiting the consummation of the Offer or the Merger and such order or other action is or shall have become nonappealable; (c) by Parent or the Purchaser if due to an occurrence or circumstance which would result in a failure to satisfy any of the conditions set forth in Section 14, the Purchaser shall have (i) failed to commence the Offer within the time required by Regulation 14D under the Exchange Act, (ii) terminated the Offer without purchasing any Shares pursuant to the Offer or (iii) failed to accept for payment Shares pursuant to the Offer prior to May 1, 2000, (the "Termination Date"); (d) by the Company if (i) there shall not have been (x) any breach or breaches of any representation or warranty or (y) any breach or breaches of a covenant or agreement on the part of the Company under this Agreement that, individually or in the aggregate, materially adversely affect (or materially delay) the consummation of the Offer and the Purchaser shall have (A) failed to commence the Offer within the time required by Regulation 14D under the Exchange Act, (B) terminated the Offer without purchasing any Shares pursuant to the Offer or (C) failed to accept for payment Shares pursuant to the Offer prior to the Termination Date, or (ii) prior to the payment for Shares pursuant to the Offer, concurrently with the execution of an Acquisition Agreement (as defined herein) under the circumstances described below under "Acquisition Proposals," provided that such termination under this clause (ii) shall not be effective unless the Company and the Board shall have complied with all their obligations described below under "Acquisition Proposals" and until payment of the Termination Fee (as defined herein); (e) by Parent or the Purchaser prior to the purchase of Shares pursuant to the Offer, if (i) the Purchaser is entitled to terminate the Offer pursuant to clause (a) under Section 14 ("Certain Conditions of the Offer"), (ii) there shall have been any breach of any covenant or agreement on the part of the Company under this Agreement which materially adversely affects (or materially delays) the consummation of the Offer, which shall not have been cured prior to the earlier of (A) 10 days following notice of such breach and (B) two business days prior to the date on which the Offer expires; provided, however, that the Company shall have no right to cure any breach of the provisions described below under "Acquisition Proposals," (iii) the Board or any committee thereof shall have withdrawn or modified (including by amendment of the Schedule 14D-9) in a manner adverse to the Purchaser its approval or recommendation of the Offer, the Merger or the Merger Agreement or shall have recommended to the Company's stockholders a Third Party Acquisition (as defined herein), or (iv) there shall not have been validly tendered and not withdrawn prior to the expiration of the Offer at least a majority of the Shares on a 21 24 fully diluted basis; or (f) by the Company prior to the purchase of any Shares pursuant to the Offer if (i) there shall have been a breach of any representation or warranty in the Merger Agreement on the part of Parent or the Purchaser which materially adversely affects (or materially delays) the consummation of the Offer or the Merger or (ii) there shall have been a breach of any covenant or agreement in the Merger Agreement on the part of Parent or the Purchaser which materially adversely affects (or materially delays) the consummation of the Offer or the Merger which shall not have been cured prior to the earlier of (A) 10 days following notice of such breach and (B) two business days prior to the date on which the Offer expires. (d) Acquisition Proposals. Pursuant to the Merger Agreement, the Company has agreed that it will not, and will not permit any of its subsidiaries, or any of its or their officers, directors, employees, representatives, agents or affiliates, including any investment banker, attorney or accountant retained by the Company or any of its subsidiaries (collectively, "Representatives") to, directly or indirectly, (a) initiate, solicit or encourage (including by way of furnishing information) or take any other action to facilitate, any inquiries with respect to or the making of any proposal or offer that constitutes, or may reasonably be expected to lead to, an Acquisition Proposal (as defined herein), (b) enter into or maintain or continue discussions or negotiate with any person regarding an Acquisition Proposal or in furtherance of such inquiries with respect to or to obtain an Acquisition Proposal, or (c) agree to, approve, recommend or endorse any Acquisition Proposal, or authorize or permit any of the Representatives of the Company or any of its subsidiaries to take any such action, and the Company shall promptly notify Parent of any such inquiries and proposals hereafter received by the Company or any of its subsidiaries or by any such Representative, relating to any of such matters; provided, however, that nothing contained in the Merger Agreement shall prohibit the Board, at any time prior to the payment of Shares pursuant to the Offer, from furnishing information (pursuant to a customary confidentiality agreement not materially more favorable to the party receiving information than the Confidentiality Agreement (as defined herein) and consistent with the Company's disclosure and other obligations under the Merger Agreement) to, or engaging in discussions or negotiations with, any person in response to an unsolicited (and the existence of discussions or negotiations with a person prior to the date of the Merger Agreement does not create a presumption that a proposal from a person was solicited) bona fide Acquisition Proposal of such person that the Board determines is reasonably likely to result in a Qualifying Proposal (as defined herein), if, and only to the extent that, (i) the Board, after consultation with outside legal counsel to the Company, determines in good faith that failure to do so would result in a breach of the fiduciary duty of the Board to the stockholders of the Company under applicable law, and (ii) prior to furnishing such information to, or entering into discussions or negotiations with, such person the Company provides written notice to Parent to the effect that it is furnishing information to, or entering into discussions or negotiations with, such person and the Company complies with certain notification provisions of the Merger Agreement. The Company has also agreed to cease and terminate any existing solicitation, initiation, encouragement, activity, discussion or negotiation with any persons conducted heretofore by it or its Representatives with respect to any Acquisition Proposal. It is understood that any violation of the restrictions described above by any Representative of the Company or any of its subsidiaries, whether or not such person is purporting to act on behalf of the Company or otherwise, shall be deemed to be a breach of the Merger Agreement by the Company. The Merger Agreement provides further that, except as described below (i) neither the Board nor any committee thereof shall (a) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent or the Purchaser, the approval or recommendation by the Board of the Offer or the Merger, (b) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal, or (c) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an "Acquisition Agreement") related to any Acquisition Proposal and (ii) the Company shall not enter into any Acquisition Agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the payment of Shares pursuant to the Offer, the Board may terminate the Merger Agreement but only (a) if the Board, after consultation with outside legal counsel to the Company, determines in good faith that failure to do so would result in a breach of the fiduciary duty of the Board to the stockholders of the Company under applicable law, (b) if the Company and the Board have complied with all the provisions described in this subsection on "Acquisition Proposals," (c) after the second business day following Parent's receipt of written notice advising Parent that the Board is prepared to accept a Qualifying Proposal, and after having received from the Company sufficient and accurate guidance in order to 22 25 enable Parent to make a bona fide counter proposal, it being understood and agreed that nothing contained in this paragraph shall require the Company to provide to Parent any of the details of such Qualifying Proposal, including the identity of the person making such Qualifying Proposal and the specific terms of such Qualifying Proposal (during which two day period the Company will negotiate in good faith with Parent or Purchaser concerning any amendments proposed by Parent or Purchaser) and (d) if concurrently with such termination, the Company enters into an Acquisition Agreement with respect to such Qualifying Proposal and pays to Parent the Termination Fee. In addition, under the Merger Agreement the Company has agreed to promptly advise Parent, orally and in writing, of any request for information or of any Acquisition Proposal. Nothing contained in the Merger Agreement shall prohibit the Company from taking and disclosing to the stockholders a position contemplated by Rule 14d-9, Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders which the Board, after consultation with outside legal counsel to the Company, determines in good faith is required by applicable law; provided that neither the Board nor any committee thereof approves or recommends, or publicly proposes to approve or recommend, an Acquisition Proposal unless the Company and the Board have complied with the terms of the Merger Agreement. Notwithstanding anything to the contrary, if the Purchaser has accepted for payment of, and paid for, any Shares pursuant to the Offer, the Company will duly call, give notice and hold the stockholders meeting, if required by the DGCL, for the purpose of considering and taking action upon the Merger Agreement and the Merger whether or not the Board has determined at any time after the date hereof it is no longer advisable for the stockholders of the Company to adopt the Merger Agreement. "Acquisition Proposal" means an inquiry, offer or proposal that is made after the date of the Merger Agreement regarding any of the following (other than the transactions contemplated by the Merger Agreement) involving the Company: (a) any merger, consolidation, share exchange, recapitalization, liquidation, dissolution, business combination or other similar transaction; (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of a substantial portion of the assets of the Company and its subsidiaries, taken as a whole, or of any Material Business (as defined herein) or of any subsidiary or subsidiaries responsible for a Material Business in a single transaction or series of related transactions; (c) any acquisition of 20% or more of the outstanding shares of capital stock of the Company or the filing of a registration statement under the Securities Act in connection therewith or any other acquisition or disposition the consummation of which would prevent or materially diminish the benefits to Parent of the Merger; or (d) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. "Qualifying Proposal" means any written proposal made by a third party after the date of the Merger Agreement to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or other similar transaction, all the Shares then outstanding or all or substantially all of the assets of the Company and its Subsidiaries as an entirety which the Board determines in good faith (x) (based on the advice of PVTG or another financial advisor of nationally recognized reputation) that such proposal has a reasonable likelihood of being consummated and (y) (based on the advice of PVTG or another financial advisor of nationally recognized reputation) that such proposal would, if consummated, be superior to the Company's stockholders from a financial point of view (taking into account any changes to the financial terms of the Merger Agreement proposed by Parent or Purchaser in response to such proposal) when compared to the Offer, the Merger and the transactions contemplated by the Merger Agreement, taken as a whole. "Material Business" means any business (or the assets needed to carry out such business) that contributed or represented 15% or more of the net sales, the net income or the assets (including equity securities) of the Company and its subsidiaries taken as a whole. "Third Party Acquisition" means (a) the acquisition of the Company by merger, consolidation, share exchange, recapitalization, liquidation, dissolution, business combination or other similar transaction by any person (which includes for these purposes a "person" as defined in Section 13(d)(3) of the Exchange Act) other than Parent, the Purchaser or any affiliate thereof (a "Third Party"); (b) the acquisition by a Third Party of more than 50% of the assets of the Company and its subsidiaries, taken as a whole; (c) the acquisition by a Third Party of 50% or more of the outstanding Shares or 50% or more of the aggregate ordinary voting power represented by the issued and outstanding capital stock 23 26 of the Company; (d) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (e) the purchase by the Company or any of its subsidiaries of more than 30% of the outstanding Shares. (e) Fees and Expenses. Except with respect to the circumstances described below, the Merger Agreement provides that each of Parent, the Purchaser and the Company will bear its own fees and expenses in connection with the Merger Agreement. The Merger Agreement provides that (a) if Parent or the Purchaser terminates the Merger Agreement pursuant to the provisions described above under clause (e)(i) of "Termination of the Merger Agreement" (other than a termination resulting from an event or circumstance that causes a material adverse effect with respect to the Company after the date of the Merger Agreement, which event or circumstance was not caused by the willful or intentional action or inaction by the Company), the provisions described above under clause (e)(ii) of "Termination of the Merger Agreement" (other than as a result of a breach of the provisions described above under "Acquisition Proposals"), and in any such case, any proposal for a Third Party Acquisition shall have been made on or prior to the date of such termination and in any such case, within 12 months thereafter the Company enters into an agreement with respect to the consummation of, or otherwise consummates, a Third Party Acquisition, (b) Parent or the Purchaser terminates the Merger Agreement pursuant to the provisions described above under clause (e)(ii) of "Termination of the Merger Agreement" as a result of a breach of the provisions described above under "Acquisition Proposals" or pursuant to the provisions described above under clause (e)(iii) of "Termination of the Merger Agreement," (c) the Company terminates the Merger Agreement pursuant to the provisions described above under clause (d)(ii) of "Termination of the Merger Agreement" or (d) if Parent or Purchaser terminates, or does not purchase any Shares under, the Offer, and prior to such termination an Acquisition Proposal is publicly announced, and within twelve months, after such termination, the transactions contemplated by such Acquisition Proposal (as may be modified or amended) are consummated, then, in each case, the Company shall pay to Parent, within two business days following the execution and delivery of such agreement or such occurrence, as the case may be, or simultaneously with such termination pursuant to the provisions described above under clause (d)(ii) of "Termination of the Merger Agreement," a fee, in cash, of $3 million (a "Termination Fee"). (f) Conduct of Business of the Company. Pursuant to the Merger Agreement, the Company has agreed that, prior to the Effective Time, unless otherwise expressly contemplated by the Merger Agreement or consented to in writing by Parent and, after such date on which Purchaser's designees constitute a majority of the Company's Board of Directors (the "Control Date"), also by a majority of the Independent Directors (defined below), it will and will cause each of its subsidiaries to: (a) operate its business in the usual and ordinary course consistent with past practices; (b) use reasonable efforts to preserve intact its business organization, maintain its material rights and franchises, retain the services of its respective key employees and maintain its relationships with its respective customers and suppliers and others having business dealings with it; (c) maintain and keep its properties and assets in as good repair and condition as at present, ordinary wear and tear excepted, and maintain supplies and inventories in quantities consistent with its customary business practice; and (d) use reasonable efforts to keep in full force and effect insurance and bonds comparable in amount and scope of coverage to that currently maintained. (g) Prohibited Actions by the Company. Under the Merger Agreement, the Company has agreed that, except as expressly contemplated by the Merger Agreement or otherwise consented to in writing by Parent and after the Control Date, also by a majority of the Independent Directors, which consents shall not be unreasonably withheld or delayed, from the date of the Merger Agreement until the Effective Time, it will not do, and will not permit any of its subsidiaries to do, any of the following: (a)(i) increase the compensation payable to or to become payable to any director or employee, except for increases in salary or wages of employees in the ordinary course of business and consistent with past practice or as required under any existing employment agreements, and except that the Company may pay annual bonuses for fiscal year 1999 as provided in the Company's disclosure letter (the "Disclosure Letter"); (ii) grant any severance or termination pay (other than pursuant to any existing employment agreements or the normal severance policy or practice of the Company or its subsidiaries as in effect on the date of the Merger Agreement) to, or enter 24 27 into or amend in any material respect any employment or severance agreement with, any employee; (iii) establish, adopt, enter into or amend in any material respect any collective bargaining agreement or Benefit Plan (as defined in the Merger Agreement) of the Company or its subsidiaries except as required by applicable law; or (iv) take any action to accelerate any rights or benefits, or make any material determinations not in the ordinary course of business consistent with past practice, under any collective bargaining agreement or Benefit Plan of the Company or its subsidiaries; (b) declare, set aside or pay any dividend on, or make any other distribution in respect of (whether in cash, stock or property), outstanding shares of capital stock, except for dividends by a wholly-owned subsidiary of the Company to the Company or another wholly-owned subsidiary of the Company; (c) redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire any outstanding shares of capital stock of, or other equity interests in, or any securities that are convertible into or exchangeable for any shares of capital stock of, or other equity interests in, or any outstanding options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, the Company or any of its subsidiaries (other than (i) any such acquisition by the Company or any of its wholly-owned subsidiaries directly from any wholly-owned subsidiary of the Company in exchange for capital contributions or loans to such subsidiary or (ii) any purchase, forfeiture or retirement of Shares or the Stock Options occurring pursuant to the terms (as in effect on the date of the Merger Agreement) of any existing Benefit Plan of the Company or any of its subsidiaries); (d) effect any reorganization or recapitalization, or split, combine or reclassify any of the capital stock of, or other equity interests in, the Company or any of its subsidiaries or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of such capital stock or such equity interests; (e) offer, sell, issue or grant, or authorize the offering, sale, issuance or grant of, any shares of capital stock of, or other equity interests in, any securities convertible into or exchangeable for any shares of capital stock of, or other equity interests in, or any options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, or any bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote or other voting securities, of the Company or any of its subsidiaries, or any "phantom" stock, "phantom" stock rights, stock appreciation rights or stock-based performance units, other than issuances of Shares upon the exercise of the Stock Options outstanding at the date of the Merger Agreement in accordance with the terms thereof (as in effect on the date of the Merger Agreement); (f) change the terms of any Stock Option; (g) acquire or agree to acquire by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or in any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets of any other person (other than the purchase of assets from suppliers or vendors in the ordinary course of business and consistent with past practice); (h) sell, lease, exchange or otherwise dispose of, or grant any lien with respect to, any of the properties or assets (including technological assets) of the Company or any of its subsidiaries, except for dispositions of excess or obsolete assets, sales of inventories in the ordinary course of business and consistent with past practice and the licensing of software to customers consistent with past practice; (i) adopt any amendments to its certificate of incorporation or bylaws or other organizational documents; (j) effect any change in any accounting methods, principles or practices of the Company, except as may be required by a change in generally accepted accounting principles, or any change in tax accounting; (k) (i) incur any indebtedness, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its subsidiaries, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowings pursuant to existing lines of credit incurred in the ordinary course of business consistent with past practice, or (ii) make any loans, advances or capital contributions to, or investments in, any other person other than to or in the Company or any direct or indirect wholly-owned subsidiary of the Company; (l) enter into any contract which, if such contract is entered into, would be a material contract; (m) make or agree to make any new capital expenditure or expenditures other than the capital expenditures contemplated by the Company's annual operating plan for 1999, a copy of which was furnished to Parent prior to the execution of the Merger Agreement, and except for capital expenditures from January 1, 2000 through May 1, 2000 not to exceed $732,335 in the aggregate, and the capital expenditures described in the Disclosure Letter; (n) make any non-routine tax election or settle or compromise any material tax liability or refund, except as provided in 25 28 the Disclosure Letter; (o) (i) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company included in the documents filed with the SEC prior to the date of the Merger Agreement or incurred in the ordinary course of business consistent with past practice or (ii) cancel any material indebtedness (individually or in the aggregate) or waive any claims or rights of substantial value; (p) enter into any new agreements with, or commitments to, insurance brokers or advisers extending beyond one year or extend any insurance policy beyond one year (including, for the avoidance of doubt, the directors' and officers' liability insurance policies described under "In demnification of Directors"); or (q) agree in writing or otherwise to do any of the foregoing. (h) Directors. The Merger Agreement provides that promptly upon the acceptance for payment of, and payment by the Purchaser for, any Shares pursuant to the Offer, the Purchaser shall be entitled to designate such number of directors on the Board as will give the Purchaser, subject to compliance with Section 14(f) of the Exchange Act, representation on the Board equal to at least that number of directors, rounded up to the next whole number, which is the product of (a) the total number of directors on the Board (giving effect to the directors elected pursuant to this sentence) multiplied by (b) the percentage that (i) such number of Shares so accepted for payment and paid for by the Purchaser plus the number of Shares otherwise owned by the Purchaser or any other subsidiary of Parent bears to (ii) the number of such Shares outstanding, and the Company shall, at such time, cause the Purchaser's designees to be so elected; provided, however, that in the event that the Purchaser's designees are appointed or elected to the Board, until the Effective Time the Board shall have at least two directors who are directors on the date of the Merger Agreement (the "Independent Directors"); and provided further that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall be entitled to designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of the Merger Agreement or, if no Independent Directors then remain, the other directors promptly shall designate two persons to fill such vacancies who shall not be officers, employees, stockholders or affiliates of Parent or the Purchaser, and such persons shall be deemed to be Independent Directors for purposes of the Merger Agreement. Subject to applicable law, the Company has agreed to take all action requested by Parent necessary to effect any such election, including mailing to its stockholders the information statement required under Rule l4f-1 containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, which information statement is attached as Schedule I to the Schedule 14D-9. Purchaser shall supply to the Company in a timely manner, and shall be solely responsible for, any information with respect to Purchaser's nominees, officers, directors and affiliates required by such Section 14(f) and 14f-1. The Purchaser's designees shall be divided between the classes of directors as necessary to comply with the requirements of the Company's bylaws. In connection with the foregoing, the Company shall, at the option of the Purchaser, either increase the size of the Board or obtain the resignation of such number of its current directors as is necessary to enable Purchaser's designees to be elected or appointed to the Board as provided above. (i) Stock Options. The Merger Agreement provides that upon consummation of the Merger, all then outstanding Stock Options and all Shares subject to a vesting requirement ("Restricted Stock") shall be canceled in exchange for a cash payment to the holder of a Stock Option or Restricted Stock award equal to (a) in the case of Stock Options, the product of (x) the difference between the Per Share Merger Consideration and the per share exercise price of the holder's Stock Option multiplied by (y) the number of Shares subject to the holder's Stock Option and (b) in the case of Restricted Stock, the number of shares of the holder's Restricted Stock multiplied by the Per Share Merger Consideration. Except as provided in the Merger Agreement or as otherwise agreed to by the parties, (a) the Stock Option Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant by the Company or any of its subsidiaries of any interest in respect of the capital stock of the Company or any of its subsidiaries shall be terminated as of the Effective Time, and (b) following the Effective Time no holder of Stock Options or Restricted Stock or any participant in such plans, programs or arrangements shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any 26 29 subsidiary thereof. Notwithstanding the first sentence of this paragraph or the section above entitled "Prohibited Actions by the Company," upon the acceptance of, and payment by Purchaser for, any Shares pursuant to the Offer, the Company shall redeem any Stock Options for the cash payment provided in the first sentence of this paragraph (assuming an agreement of redemption is made with the applicable option holder). (j) Indemnification of Directors and Officers. In the Merger Agreement, the Purchaser has agreed that all rights to indemnification or exculpation (to the extent provided in the certificate of incorporation of the Company) for acts or omissions occurring prior to the Effective Time in favor of the current or former directors, officers or employees of the Company and its subsidiaries as provided in their respective certificates of incorporation or bylaws shall survive the Merger and shall continue in full force and effect in accordance with their terms for a period of six years from the Effective Time. In addition, until the sixth anniversary of the Effective Time, Parent shall cause the Surviving Corporation to maintain in effect with respect to matters occurring prior to the Effective Time, to the extent available at less than 300% of current premiums, the policies of directors' and officers' liability insurance currently maintained by the Company (or policies substantially similar in amount and coverage) or, in the alternative, may cause similar coverage to be included in Parent's directors' and officers' liability coverage (if available). The Company shall not increase, amend or change any rights to indemnification or exculpation after the date hereof. If any claims for indemnification as provided in above cannot be satisfied by the Surviving Corporation (through its own means and/or directors' and officers' liability insurance) and the Surviving Corporation has distributed assets to Parent or any of Parent's affiliates or has otherwise transferred any assets to or for the benefit of Parent or any of Parent's affiliates (whether by loan, asset sale or otherwise), then Parent shall be liable for such unsatisfied indemnification claims to the extent of up to the fair market value of any such distributions or transfers (less, in the case of any transfer, the fair market value of any consideration received by the Company in such transfer). The Merger Agreement provides that if any claim or claims are made in writing subsequent to the Effective Time and within six years thereafter against any present or former director, officer or employee of the Company based on or arising out of the services of such person prior to the Effective Time in the capacity of such person as a director, officer or employee (and such director, officer or employee shall have given Parent written notice of such claim or claims within such six year period), the provision of the previous sentence respecting the rights to indemnity for current or former directors, officers or employees under the respective certificates of incorporation or bylaws of the Company and its subsidiaries shall continue in effect until the final disposition of all such claims. Notwithstanding anything to the contrary contained in the Merger Agreement, neither Parent nor the Surviving Corporation shall be liable for any settlement effected without its written consent, which shall not be unreasonably withheld. (k) Reasonable Efforts. The Merger Agreement provides that, subject to the terms of the Merger Agreement, each of the parties has agreed to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws to consummate and make effective as soon as reasonably practicable the transactions contemplated by the Merger Agreement. (l) Directors and Officers. The directors of the Purchaser immediately prior to the Effective Time and/ or any individuals designated by Parent shall be the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time and/or any individuals designated by Parent shall be the officers of the Surviving Corporation, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualify. (m) Employment Agreements. Pursuant to the Merger Agreement, Parent acknowledged and agreed that all employment agreements, severance agreements, deferred compensation agreements and supplemental retirement agreements with employees of the Company and its subsidiaries set forth in the Disclosure Letter will be binding and enforceable obligations of the Surviving Corporation to the same extent as they were binding and enforceable obligations of the Company and its subsidiaries as of the date of the Merger, except as the parties to the Merger Agreement may otherwise agree or as required by applicable law. 27 30 (n) Rights Agreement. Pursuant to the Merger Agreement, the Board has amended the Company's Rights Agreement dated as of April 14, 1999 between the Company and EquiServe Trust Company, N.A. (the "Rights Agreement") so that (i) none of the execution or delivery of this Agreement or the Stockholders Agreement or the making of the Offer or the exercise of Purchaser's rights under the Stockholders Agreement will cause (A) the "Rights" (as defined in the Rights Agreement) to become exercisable under the Rights Agreement, (B) Parent or Purchaser or any of their affiliates to be deemed an "Acquiring Person" (as defined in the Rights Agreement) or (C) the "Stock Acquisition Date" (as defined in the Rights Agreement) to occur upon any such event, (ii) none of the acceptance for payment or payment for Shares by Purchaser pursuant to the Offer, the consummation of the Merger or the exercise of Purchaser's rights under the Stockholders Agreement will cause (A) the Rights to become exercisable under the Rights Agreement or (B) Parent or Purchaser or any of their affiliates to be deemed an Acquiring Person or (C) the Stock Acquisition Date to occur upon any such event, and (iii) the "Expiration Date" (as defined in the Rights Agreement) shall occur no later than immediately prior to the purchase of shares pursuant to the Offer. (o) Representations and Warranties. The Merger Agreement contains various customary representations and warranties. (p) Procedure for Termination, Amendment, Extension or Waiver. The Merger Agreement provides that following the Control Date but prior to the Effective Time: (i) no amendment or waiver of the Merger Agreement on the Company's behalf, and no termination of this Agreement as described in subsection (a) under "Termination of the Merger Agreement" shall be valid; (ii) there shall be no amendment to the certificate of incorporation or bylaws of the Company; (iii) there shall be no extension of the time for the performance of any of the obligations or other acts of Parent or Purchaser (including any extension of the Closing pursuant to the Merger Agreement or the Effective Time of the Merger beyond filing of the Certificate of Merger); and (iv) no waiver of any provision in favor of the Company in the Confidentiality Agreement (defined below), unless, in each such case, there are Independent Directors in office and a majority of such Independent Directors approve such amendment, waiver, termination or action, as the case may be. The Stockholders Agreement. Pursuant to the Stockholders Agreement, each Stockholder has agreed, among other things, to sell to the Purchaser all the Shares that he or it beneficially owns at a price per Share equal to the Offer Price. The Stockholders have also agreed to tender such Shares in the Offer at a price per Share equal to the Offer Price if directed to do so by the Purchaser. In addition, each Stockholder has granted the Purchaser an option to purchase all his Shares at a price per Share equal to the Offer Price under certain circumstances and subject to certain conditions. Each Stockholder severally has agreed that: (a) such Stockholder will not (i) sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option or other arrangement (including any profit sharing arrangement) or understanding with respect to the sale, transfer, pledge, assignment or other disposition of such Stockholder's Shares to any person other than the Purchaser or the Purchaser's designee, (ii) enter into any voting arrangement, whether by proxy, voting agreement, voting trust, power-of-attorney or otherwise, with respect to such Stockholder's Shares or (iii) take any other action that would in any way restrict, limit or interfere with the performance of its obligations under the Stockholders Agreement or the transactions contemplated thereby, (b) until the Merger is consummated or the Merger Agreement is terminated, such Stockholder will not, nor will such Stockholder permit any investment banker, financial adviser, attorney, accountant or other representative or agent of such Stockholder to, directly or indirectly (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed or reasonably likely to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Acquisition Proposal or (ii) participate in any discussions or negotiations regarding any Acquisition Proposal, (c) at any meeting of stockholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, such Stockholder will, including by initiating a written consent solicitation if requested by Parent, vote (or cause to be voted) such Stockholder's Shares in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the other transactions contemplated by the Merger 28 31 Agreement and (d) at any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which such Stockholder's vote, consent or other approval is sought, such Stockholder will vote (or cause to be voted) such Stockholder's Shares against (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company or any other Acquisition Proposal (collectively, "Alternative Transactions") or (ii) any amendment of the Company's certificate of incorporation or bylaws or other proposal or transaction involving the Company or any of its subsidiaries, which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement (collectively, "Frustrating Transactions"). The Stockholders Agreement provides that each Stockholder executed the Stockholders Agreement solely in his or her capacity as the beneficial owner of such Stockholder's Shares and nothing therein shall limit or affect any actions taken by a Stockholder in its capacity as an officer or director of the Company or any subsidiary of the Company to the extent specifically permitted by the Merger Agreement. Under the Stockholders Agreement each Stockholder has irrevocably granted to, and appointed, Chris Tyler and Thomas A. Montgomery and any other individual who shall thereafter be designated by Parent, and each of them, such Stockholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Stockholder, to vote such Stockholder's Shares, or grant a consent or approval in respect of such Shares, at any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which their vote, consent or other approval is sought, in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement and against any Alternative Transaction or Frustrating Transaction. Confidentiality Agreement. Pursuant to the Confidentiality Agreement dated November 11, 1999, between Parent and the Company (the "Confidentiality Agreement"), the Company and Parent agreed to keep confidential certain information exchanged between such parties. The Confidentiality Agreement also contains customary non-solicitation and standstill provisions. The Merger Agreement provides that the provisions of the Confidentiality Agreement shall remain binding and in full force and effect and that the parties shall comply with and shall cause their respective representatives to comply with, all of their respective obligations under the Confidentiality Agreement until the Purchaser purchases a majority of the outstanding Shares pursuant to the Offer. Appraisal Rights. Holders of Shares do not have dissenters' rights as a result of the Offer. However, if the Merger is consummated, holders of Shares will have certain rights pursuant to the provisions of Section 262 of the DGCL to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. If the statutory procedures were complied with, such rights could lead to a judicial determination of the fair value required to be paid in cash to such dissenting holders for their Shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than or in addition to the Offer Price or the market value of the shares, including asset values and the investment value of the Shares. The fair value so determined could be more or less than the Offer Price or the Per Share Merger Consideration. If any holder of shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his right to appraisal, as provided in the DGCL, the Shares of such holder will be converted into the Per Share Merger Consideration in accordance with the Merger Agreement. The foregoing discussion is not a complete statement of law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL. Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of such rights. Going Private Transactions. The Merger would have to comply with any applicable federal law operative at the time of its consummation. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions. The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger unless the Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 29 32 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger and the consideration offered to minority stockholders be filed with the SEC and disclosed to minority stockholders prior to consummation of the Merger. Plans for the Company. Parent intends to conduct a detailed review of the Company and its assets, corporate structure, dividend policy, capitalization, operations, properties, policies, management and personnel and to consider, subject to the terms of the Merger Agreement, what, if any, changes would be desirable in light of the circumstances then existing, and reserves the right to take such actions or effect such changes as it deems desirable. Such changes could include changes in the Company's business, corporate structure, capitalization, management or dividend policy. Except as otherwise described in this Offer to Purchase, none of the Purchaser or Parent have any current plans or proposals that would relate to, or result in, any extraordinary corporate transaction involving the Company or any of its subsidiaries, such as a merger, reorganization or liquidation involving the Company, a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, any change in the Company's capitalization or dividend policy or any other material change in the Company's business, corporate structure or personnel. 13. DIVIDENDS AND DISTRIBUTIONS Pursuant to the terms of the Merger Agreement, from the date of the Merger Agreement to the Effective Time, neither the Company nor any of its subsidiaries will (a) declare, set aside or pay any dividend on, or make any other distribution in respect of (whether in cash, stock or property), outstanding shares of capital stock, except for dividends by a wholly-owned subsidiary of the Company to the Company or another wholly-owned subsidiary of the Company; (b) redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire any outstanding shares of capital stock of, or other equity interests in, or any securities that are convertible into or exchangeable for any shares of capital stock of, or other equity interests in, or any outstanding options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, the Company or any of its subsidiaries (other than (i) any such acquisition by the Company or any of its wholly-owned subsidiaries directly from any wholly-owned subsidiary of the Company in exchange for capital contributions or loans to such subsidiary or (ii) any purchase, forfeiture or retirement of Shares or the Stock Options occurring pursuant to the terms (as in effect on the date of the Merger Agreement) of any existing Benefit Plan of the Company or any of its subsidiaries); (c) effect any reorganization or recapitalization, or split, combine or reclassify any of the capital stock of, or other equity interests in, the Company or any of its subsidiaries or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of such capital stock or such equity interests; (d) offer, sell, issue or grant, or authorize the offering, sale, issuance or grant of, any shares of capital stock of, or other equity interests in, any securities convertible into or exchangeable for any shares of capital stock of, or other equity interests in, or any options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, or any bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote or other voting securities, of the Company or any of its subsidiaries, or any "phantom" stock, "phantom" stock rights, stock appreciation rights or stock-based performance units, other than issuances of Shares upon the exercise of the Stock Options outstanding at the date of the Merger Agreement in accordance with the terms thereof (as in effect on the date of the Merger Agreement). 14. CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provisions of the Offer, the Purchaser will not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless the Minimum Condition and the HSR Act Condition shall have been satisfied. Furthermore, notwithstanding any other term of the Offer or the Merger Agreement, the Purchaser shall not be required to commence the Offer, accept for payment, or subject as aforesaid, pay for any Shares not theretofore accepted for payment or paid for, and may terminate or amend the Offer, (i) with the consent of the Company or (ii) if, at any time on or 30 33 after the date of the Merger Agreement and before the acceptance of Shares for payment or the payment therefor, any of the following conditions exists: (a) any representation and warranty of the Company in the Merger Agreement that is qualified as to materiality shall not be true and correct or any such representation and warranty that is not so qualified shall not be true and correct in any material respect, as of the date of the Merger Agreement and as of such time, except to the extent such representation and warranty expressly relates to an earlier date (in which case on and as of such earlier date); (b) the Company shall have breached any of its covenants or agreements contained in the Merger Agreement which breaches, individually or in the aggregate, materially adversely affects (or materially delays) the consummation of the Offer; (c) there shall be threatened or pending any suit, action or proceeding by any governmental authority, or any suit, action or proceeding by any other person that has a reasonable likelihood of success, (i) challenging the acquisition by Parent or the Purchaser of any Shares, seeking to restrain or prohibit the making or consummation of the Offer or the Merger, or seeking to obtain from the Company, Parent or any of their respective subsidiaries or affiliates any damages in an amount that would result in a material adverse effect in respect of the Company, taken as a whole, and in the case of Parent or any of its subsidiaries or affiliates relating to the transactions contemplated by the Merger Agreement, (ii) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective subsidiaries or affiliates of any material portion of the business or assets of the Company, Parent or any of their respective subsidiaries or affiliates, or to compel the Company, Parent or any of their respective subsidiaries or affiliates to dispose of or hold separate any material portion of the business or assets of the Company, Parent or any of their respective subsidiaries or affiliates, as a result of the Offer, the Merger or any of the other transactions contemplated by the Merger Agreement or (iii) which otherwise is reasonably likely to have a material adverse effect on the Company; (d) there shall be any statute, rule, regulation, legislation, interpretation, judgment, order or injunction threatened, proposed, sought, enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, or any consent or approval withheld with respect to, (i) Parent, the Company or any of their respective subsidiaries or affiliates or (ii) the Offer or the Merger by any governmental authority that has or is reasonably likely to result, directly or indirectly, in any of the consequences referred to in paragraph (c) above; (e) since the date of the Merger Agreement there shall have occurred any event, change, effect or development that, individually or in the aggregate, has had or is reasonably likely to have, a material adverse effect on the Company; (f) there shall have occurred and be continuing (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States or in Australia (excluding any coordinated trading halt triggered solely as a result of a specified decrease in a market index), (ii) a declaration of a banking moratorium by any governmental authority or any suspension of payments by any governmental authority in respect of banks in the United States or in Australia, (iii) any general limitation (whether or not mandatory) by any governmental authority in the United States or in Australia on the extension of credit by banks or other lending institutions or (iv) in the case of any of the foregoing existing on the date of the Merger Agreement, a material acceleration or worsening thereof; (g) any person (which includes a "person" as such term is defined in Section 13(d)(3) of the Exchange Act) other than the Purchaser, any of its affiliates, or any group of which any of them is a member shall have acquired beneficial ownership of more than 20% of the outstanding Shares or shall have entered into a definitive agreement or any agreement in principle with the Company with respect to a tender offer or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Company or any of its subsidiaries; or 31 34 (h) the Merger Agreement shall have been terminated in accordance with its terms; which, in the sole judgment of the Purchaser or Parent, in any such case, and regardless of the circumstances giving rise to any such condition (including any action or inaction by Parent or any of its affiliates), makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of the Purchaser and Parent and may be asserted by the Purchaser or Parent regardless of the circumstances giving rise to such condition or may be waived by the Purchaser and Parent in whole or in part at any time and from time to time in their sole and reasonable judgment; provided that the Minimum Condition may be waived or modified only by the mutual written consent of the Purchaser and the Company. The failure by Parent, the Purchaser or any other affiliate of Parent at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS Except as described in this Section 15, based on a review of publicly available filings made by the Company with the SEC and other publicly available information concerning the Company, none of the Purchaser or Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares, and the indirect acquisition of the stock of the Company's subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries) as contemplated herein or of any approval or other action by any governmental entity that would be required for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, the Purchaser and Parent currently contemplate that such approval or the action will be sought, except as described below under "State Takeover Laws." While, except as otherwise expressly described in this Section 15, the Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could, subject to the terms and conditions of the Merger Agreement, decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer. State Takeover Laws. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that make the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that such laws were applicable only under certain circumstances. Subsequently, a number of federal courts ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside the state of enactment. Section 203 of the DGCL limits the ability of a Delaware corporation to engage in business combinations with "interested stockholders" (defined generally as any beneficial owner of 15% or more of the outstanding voting stock of the corporation) for a period of three years from the time such interested stockholders became the holders of 15% or more of such Shares unless, among other things, the corporation's board of directors had 32 35 given its prior approval to either the business combination or the transaction which resulted in the stockholder becoming an "interested stockholder." The Board has approved the Merger Agreement, the Stockholders Agreement, the Purchaser's acquisition of Shares pursuant to the Offer and the transactions contemplated by the Merger Agreement, the Stockholders Agreement and the Offer and, therefore, Section 203 of the DGCL is inapplicable to the Merger. Except as described herein, the Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer. The Purchaser reserves the right to challenge the validity of applicability of any state law allegedly applicable to the Offer and nothing in this Offer to Purchaser nor any action taken in connection with the Offer or the Merger is intended as a waiver of that right. In the event that any state takeover statute is found applicable to the Offer or the Merger, the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer or be delayed in continuing or consummating the Offer or the Merger. In such case, the Purchaser might not be obligated to accept for payment or pay for any Shares tendered. See Section 14. United States Antitrust Law. Under the provisions of the HSR applicable to the Offer, the acquisition of Shares under the Offer may be consummated following the expiration of a 15-calendar day waiting period following the filing by Parent of a Notification and Report Form with respect to the Offer, unless Parent receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. Parent is in the process of making such filing. If, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or material from Parent concerning the Offer, the waiting will be extended and would expire at 11:59 p.m., New York City time, on the tenth calendar day after the date of substantial compliance by Parent with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction which such negotiations continue. Expiration or termination of the applicable waiting period under the HSR Act is a condition to the Purchaser's obligation to accept for payment and pay for Shares tendered pursuant to the Offer. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's proposed acquisition of the Company. At any time before or after the Purchaser's acquisition of Shares pursuant to the Offer, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the consummation of the Merger or seeking the divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of the Company or its subsidiaries or Parent or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. Based upon a preliminary examination of information provided by the Company relating to the businesses in which Parent and the Company are engaged, Parent and the Purchaser believe that the acquisition of Shares by Purchaser will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if such a challenge is made, of the result thereof. 16. FEES AND EXPENSES Warburg Dillon Read is acting as Dealer Manager in connection with the Purchaser's acquisition of the Company and is acting as financial advisor to Parent in connection with the Offer. Warburg Dillon Read will receive customary compensation for its services as financial advisor and Dealer Manager in connection with the Offer. Parent has also agreed to reimburse Warburg Dillon Read for its reasonable out-of-pocket expenses related to such services, including the reasonable fees and expenses of its counsel, and to indemnify Warburg Dillon Read and certain related persons against certain liabilities and expenses, including certain liabilities and expenses under the federal securities laws. 33 36 The Purchaser has retained MacKenzie Partners, Inc. to act as the Information Agent and Citibank, N.A. to serve as the Depositary in connection with the Offer. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities and expenses under the federal securities laws. None of the Purchaser or Parent will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. To the extent the Purchaser or Parent becomes aware of any state law that would limit the class of offerees in the Offer, the Purchaser reserves the right to amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. In any jurisdiction the securities, blue sky or other laws of which require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. No person has been authorized to give any information or to make any representation on behalf of the Purchaser or Parent not contained in this Offer to Purchase or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. The Purchaser and Parent have filed with the SEC the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with exhibits, furnishing certain additional information with respect to the Offer, and may file amendments thereto. In addition, the Company has filed the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, setting forth its recommendation with respect to the Offer and the reasons for such recommendation and furnishing such additional related information. Such Schedules and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Section 8 (except that such material will not be available at the regional offices of the SEC). EIG ACQUISITION CORP. 34 37 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER DIRECTORS AND EXECUTIVE OFFICERS OF SOLUTION 6 HOLDINGS LIMITED. The following table sets forth the name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of Solution 6 Holdings Limited. All of the directors and officers listed below are citizens of Australia, except for Chris Tyler and Thomas A. Montgomery, who are citizens of the United States, and Kent Duston, David Maire and Richard McLean who are citizens of New Zealand. Directors are indicated by an asterisk.
POSITION WITH PURCHASER; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY - ------------------------- ------------------------------------------------------------ Brian Beattie Mr. Beattie has held the position of Chief Executive Officer London Meridien House, of Europe Solution 6 (UK) since September 10, 1999. Prior to 100 Hanger Lane that Mr. Beattie was the General Manager International Field Ealing, London W5 1EZ Operations Solution 6 from January 1995 through July 1998 and the National Sales Manager Solution 6 Australia from November 1994 through January 1995 (London Meridien House, 100 Hanger Lane, Ealing, London). Anthony Cianciolo Mr. Cianciolo has held the position Secretary of Solution 6 Level 21 Holdings Limited for the past 5 years (Level 21, 456 Kent 456 Kent Street Street, Sydney, New South Wales, Australia). Sydney, New South Wales, Australia Michael Fitzgerald Clarkin* Since July 1991 Mr. Clarkin has been the Managing Director 28 Tabalum Road of Assured Systems Australia, Ltd. and the Chairman Assured Clontare, New South Wales, Australia Systems New Zealand, Ltd. (28 Tabalum Road, Clontare, New 2093 South Wales, Australia). Andrew Morrison Day* Since September 1999 Mr. Day has been the Chief Executive Building 3 Officer of Pacific Access. From January 1998 through Greenwood Office Park September 1999 Mr. Day was the managing director of 301 Burwood Highway Commercial and Consumer Sales, Telstra, from September 1996 Burwood, Victoria 3125 through December 1998 the managing director of Telstra Operator Services and from July 1994 through September 1996 the NGM of Telstra Platform Technologies (Telstra's address is 231 Elizabeth Street, Sydney, New South Wales, Australia). Kent Duston Mr. Duston currently serves as the General Manager -- ASP Level 21 Services of Solution 6 Pty Ltd. From September 1996 through 456 Kent Street October 1999 Mr. Duston served as the Manager of Business to Sydney, New South Wales, Australia Business E-commerce at Telecom New Zealand (Manners St., Wellington, New Zealand), and from April 1996 through September 1996, as the Corporate Communications Manager of Melco Sales New Zealand Ltd. (Pharazyn St., Wellington, New Zealand). Martin Greenlees Mr. Greenless has served as the General Manager -- Products Level 21 of Solution 6 Holdings Limited since September 1997. From 456 Kent Street April 1990 through September 1997 Mr. Greenlees served as Sydney, New South Wales, Australia Development Manager -- CABS (234 Sussex Street, Sydney, New South Wales, Australia). David Maire Mr. Maire has served as the General Manager -- Internet of Level 21 Solution 6 Holdings Limited since September 1998. From 456 Kent Street September 1995 through September 1998. Mr. Maire was Sydney, New South Wales, Australia employed by Telecom New Zealand (Manners St., Wellington, New Zealand). Richard McLean Mr. McLean has been the General Manager of Sales and Level 21 Marketing of Solution 6 Holdings Limited since May 1998 and 456 Kent Street the President of Solution 6 North America since October Sydney, New South Wales, Australia 1999. Prior to that Mr. McLean was in Sales Management and Marketing Strategy at Telecom New Zealand Ltd. (Manners St., Wellington, New Zealand).
S-1 38
POSITION WITH PURCHASER; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY - ------------------------- ------------------------------------------------------------ Graham Mirabito Mr. Mirabito has been the Global General Level 21 Manager -- Enterprises of Solution 6 Pty Ltd. since October 456 Kent Street 1, 1999. From March 1999 through September 1999 Mr. Mirabito Sydney, New South Wales, Australia served as Chief Operating Officer of Ross Group (14 Martin Place, Sydney, New South Wales, Australia); from August 1998 through February 1999 as Vice President of Global Sales and Operations of Telstra Corporation (231 Elizabeth Street, Sydney, New South Wales, Australia); and from March 1995 through July 1998 the Chief Executive Officer of Telstra Europe, Telstra Corporation (14 Paul Street, London, England, United Kingdom). Thomas A. Montgomery Mr. Montgomery has served at the Chief Financial Officer of 5220 Spring Valley Rd. Solution 6 Holdings Limited since October, 1999. Mr. Suite 600 Montgomery has also been a general partner of Montgomery Dallas, Texas 75240 Baggett & Drews, LLP from November 1990 through the present. (5220 Spring Valley Road, Suite 600, Dallas, Texas 75240). Brendan Redden* For the past five years Mr. Redden has served as the Level 21 Chairman of the Board of Directors of Solution 6 Holdings 456 Kent Street Limited, Pracom Limited, and Mandata Investments Pty Ltd. Sydney, New South Wales, Australia Mr. Redden's business address is Level 21, 456 Kent Street, Sydney, New South Wales, Australia. Robert Lisle Stovold* Mr. Stovold has served as a non-executive director of the Level 10 following companies during the periods indicated: Blackmores 167 Macquaris Street Limited (1996 to present); Nuance Global Traders Sydney, New South Wales, Australia (1993-present); Port Douglas Reef Resorts (1997-present); DC 2000 International Limited (1994-present); Balfours PTY Limited (1996-present); Solution 6 Holdings Limited (1995-present). Mr. Stovold's private office address is Level 10, 167 Macquearie St., Sydney, New South Wales, Australia 2000. Telstra Corporation Limited Telstra Corporation Limited is organized under the laws of 242 Exhibition Street Australia and its principal business is the provision of Melbourne, Victoria, Australia, 3000 full service telecommunications in Australia. Chris Tyler* Mr. Tyler has served as the Chief Executive Officer and Level 21 Managing Director of Solution 6 Holdings Limited since April 456 Kent Street 1997. From 1995 through March 1997 Mr. Tyler served as the Sydney, New South Wales, Australia Managing Director -- of Extra Telecom New Zealand (Manners St., Wellington, New Zealand). Frank Woods Mr. Woods currently serves as the General Manager Asia Level 21 Pacific of Solution 6 Pty Ltd. and has been employed with 456 Kent Street Solution 6 Pty Ltd since January 1990 (456 Kent Street, Sydney, New South Wales, Australia Sydney, New South Wales, Australia). Lindsay Yelland* Mr. Yelland became the General Managing Director of Telstra Telstra Corporation Business Solutions during 1999. Prior to that time, from L14/231 Elizabeth St. 1996 to 1999 Mr. Yelland served as the General Managing Sydney, Australia Director of Telstra Products and Marketing and from 1992 to 1996 as the managing director of Telstra Corporate and Government. The address for Telstra is L14/231 Elizabeth St., Sydney, New South, Australia.
S-2 39 DIRECTORS AND EXECUTIVE OFFICERS OF EIG ACQUISITION CORP. The following table sets forth the name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of EIG Acquisition Corp. All of the directors and officers listed below are citizens of the United States. Directors are indicated by an asterisk.
POSITION WITH PURCHASER; PRINCIPAL OCCUPATION OR EMPLOYMENT; NAME AND BUSINESS ADDRESS 5-YEAR EMPLOYMENT HISTORY - ------------------------- ------------------------------------------------------------ Thomas A. Montgomery Mr. Montgomery has served at the Chief Financial Officer of 5220 Spring Valley Rd. Solution 6 Holdings Limited since October, 1999. Mr. Suite 600 Montgomery has also been a general partner of Montgomery Dallas, Texas 75240 Baggett & Drews, LLP from November 1990 through the present. (5220 Spring Valley Road, Suite 600, Dallas, Texas 75240). Chris Tyler* Mr. Tyler has served as the Chief Executive Officer and Level 21 Managing Director of Solution 6 Holdings Limited since April 456 Kent Street 1997. From 1995 through March 1997 Mr. Tyler served as the Sydney, New South Wales, Australia Managing Director -- of Extra Telecom New Zealand (Manners St., Wellington, New Zealand).
S-3 40 Manually signed facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: Citibank, N.A.
By Overnight Courier: By Mail Delivery: By Hand: Citibank, N.A. Citibank, N.A. Citibank, N.A. 915 Broadway P.O. Box 685 Corporate Trust Window 5th Floor Old Chelsea Station 111 Wall Street, 5th Floor New York, New York 10010 New York, New York 10113 New York, New York 10043
By Facsimile (for Eligible Institutions Only): (212) 505-2248 Confirmation by Telephone: (800) 270-0808 Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers listed below. You may also contact your broker, dealer, bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 Call Collect: (212) 929-5500 (800) 322-2885 The Dealer Manager for the Offer is: Warburg Dillon Read LLC 299 Park Avenue New York, New York 10171 Call: (212) 821-2881 EX-99.(A)(2) 3 LETTER OF TRANSMITTAL 1 EXHIBIT 99(a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF ELITE INFORMATION GROUP, INC. PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 21, 1999 BY EIG ACQUISITION CORP., AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF SOLUTION 6 HOLDINGS LIMITED THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 20, 2000, UNLESS EXTENDED. The Depositary for the Offer is: Citibank, N.A. By Overnight Courier: By Mail Delivery: By Hand: Citibank, N.A. Citibank, N.A. Citibank, N.A. 915 Broadway P.O. Box 685 Corporate Trust Window 5th Floor Old Chelsea Station 111 Wall Street, 5th Floor New York, New York 10010 New York, New York 10113 New York, New York 10043
By Facsimile (for Eligible Institutions Only): (212) 505-2248 Confirmation by Telephone: (800) 270-0808 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used either if certificates for Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined Section on 2 of the Offer to Purchase (as defined below)) is utilized, if delivery of Shares is to be made by book-entry transfer to an account maintained by the Depositary at the Book-Entry Transfer Facility (as defined in and pursuant to the procedures set forth in Section 2 of the Offer to Purchase). Stockholders who deliver Shares by book-entry transfer are referred to herein as "Book-Entry Stockholders" and other stockholders are referred to herein as "Certificate Stockholders." Stockholders whose certificates for Shares are not immediately available or who cannot deliver either the certificates for, or a Book-Entry Confirmation (as defined in of the Offer to Purchase) with respect to, their Shares and all other documents required hereby to the Depositary prior to the Expiration Date (as defined in the Offer to Purchase) must tender their Shares in accordance with the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2. Deliver of documents to a Book-Entry Transfer Facility does not constitute delivery to the Depositary. [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY, ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): 1 2 Name of Tendering Institution - --------------------------------------------------- Account Number -------------------------------------------------------------- Transaction Code Number --------------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY, ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s) ----------------------------------------------- Window Ticket Number (if any) ----------------------------------------------- Date of Execution of Notice of Guaranteed Delivery -------------------------- Name of Institution That Guaranteed Delivery ------------------------------------ Account Number -------------------------------------------------------------- Transaction Code Number ---------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF SHARES NUMBER CERTIFICATE REPRESENTED BY OF SHARES NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2) ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ ------------------------------------------------------ Total Shares - ------------------------------------------------------------------------------------------------------------------------ (1) Need not be completed by Book-Entry Stockholders. (2) Unless otherwise indicated, it will be assumed that all Shares described herein are being tendered. See Instruction 4. - ------------------------------------------------------------------------------------------------------------------------
2 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to EIG Acquisition Corp., a Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Solution 6 Holdings Limited, a New South Wales, Australia corporation (the "Parent"), the above described shares of common stock, par value $.01 per share (collectively, the "Shares"), of Elite Information Group, Inc., a Delaware corporation (the "Company"), upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated December 21, 1999 (the "Offer to Purchase"), and this Letter of Transmittal (which, together with any amendments or supplements thereto or hereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged. Upon the terms of the Offer, subject to, and effective upon, acceptance for payment of, and payment for, the Shares tendered herewith in accordance with the terms of the Offer (including, if the Offer is extended or amended, the terms or conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after December 14, 1999) and irrevocably constitutes and appoints Citibank, N.A. ("the Depositary") the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any such other Shares or securities or rights), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares (and any such other Shares or securities or rights) or transfer ownership of such Shares (and any such other Shares or securities or rights) on the account books maintained by the Book-Entry Transfer Facility together, in any such case, with all accompanying evidences of transfer and authenticity to, or upon the order of, the Purchaser, (b) present such Shares (and any such other Shares or securities or rights) for transfer on the Company's books and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any such other Shares or securities or rights), all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Shares (and any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after December 14, 1999) and, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good title thereto, free and clear of all liens, restrictions, claims and encumbrances and the same will not be subject to any adverse claim. The undersigned will, upon request, execute any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the tendered Shares (and any such other Shares or other securities or rights). All authority conferred or agreed to be conferred pursuant to this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned hereby irrevocably appoints Chris Tyler and Thomas A. Montgomery, and each of them, and any other designees of the Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of the Company's stockholders or otherwise in such manner as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, and to otherwise act as each such attorney-in-fact and proxy or his substitute shall in his sole discretion deem proper with respect to, all the Shares tendered hereby that have been accepted for payment by the Purchaser prior to the time any such action is taken and with respect to which the undersigned is entitled to vote (and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after December 14, 1999). This appointment is effective when, and only to the extent that, the Purchaser accepts for payment such Shares as provided in the Offer to Purchase. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall, without further action, revoke all prior powers of attorney and proxies appointed by the undersigned at any time with respect to such Shares (and any such other Shares or securities or rights) and no 3 4 subsequent powers of attorney, proxies, consent or revocations may be given (and, if given, will not be deemed effective) by the undersigned. The undersigned understands that the valid tender of Shares pursuant to any one of the procedures described in Section 2 of the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and any accompanying documents, as appropriate) in the name of, and deliver such check and/or return such certificates (and any accompanying documents, as appropriate) to, the person or persons so indicated. Please credit any Shares tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that the Purchaser has no obligation pursuant to the "Special Payment Instructions" to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares so tendered. 4 5 ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be issued in the name of someone other than the undersigned, or if Shares delivered by book-entry transfer that are not accepted for payment are to be returned by credit to an account maintained at the Book-Entry Transfer Facility other than the account indicated above. Issue check and/or certificate(s) to: Name ---------------------------------------------------- (PLEASE PRINT) Address -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ ------------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for the purchase price of Shares accepted for payment are to be sent to someone other than the undersigned or to the undersigned at an address other than that indicated above. Issue check and/or certificates to: Name ---------------------------------------------------- (PLEASE PRINT) Address -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ 5 6 SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (SIGNATURE(S) OF STOCKHOLDER(S)) Dated: - ------------------------ (Must be signed by registered holder(s) as name(s) appear(s) on the certificate(s) for the Shares or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information and see Instruction 5.) Name(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (PLEASE PRINT) Capacity (full title) - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone No. - -------------------------------------------------------------------------------- GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) Authorized Signature - -------------------------------------------------------------------------------- (PLEASE PRINT) Address - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) - -------------------------------------------------------------------------------- Area Code and Telephone No. - -------------------------------------------------------------------------------- Dated: - ------------------------ 6 7 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Instruction, includes any participant in the Book-Entry Transfer Facilities' system whose name appears on a security position listing as the owner of the Shares) of Shares tendered herewith, unless such registered holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal or (b) if such Shares are tendered for the account of a firm that is a participant in the Security Transfer Agents Medallion Program or the New York Stock Exchange Guarantee Program or the Stock Exchange Medallion Program or by any other "eligible guarantor institution," as such term is defined in Rule 17-Ad-15 under the Securities Exchange Act of 1934, as amended (each, an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. REQUIREMENTS OF TENDER. This Letter of Transmittal is to be completed by stockholders either if certificates are to be forwarded herewith or, unless an Agent's Message (as defined below) is utilized, if delivery of Shares is to be made pursuant to the procedures for book-entry transfer set forth in Section 2 of the Offer to Purchase. For a stockholder validly to tender Shares pursuant to the Offer, either (a) a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in the Offer to Purchase) and either certificates for tendered Shares must be received by the Depositary at one of such addresses or Shares must be delivered pursuant to the procedures for book-entry transfer set forth herein (and a Book-Entry Confirmation (as defined in the Offer to Purchase) must be received by the Depositary), in each case, prior to the Expiration Date, or (b) the tendering stockholder must comply with the guaranteed delivery procedures set forth below and in Section 2 of the Offer to Purchase. Stockholders whose certificates for Shares are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Pursuant to such procedures, (a) such tender must be made by or through an Eligible Institution, (b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided by the Purchaser must be received by the Depositary prior to the Expiration Date and (c) the certificates for all tendered Shares in proper form for transfer (or a Book-Entry Confirmation with respect to all such Shares), together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents, must be received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery as provided in Section 2 of the Offer to Purchase. A "trading day" is any day on which the Nasdaq National Market operated by the National Association of Securities Dealers, Inc. is open for business. "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, that states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against such participant. The method of delivery of Shares, this Letter of Transmittal and all other required documents, including delivery through any Book-Entry Transfer Facility, is at the election and risk of the tendering stockholder. Shares will be deemed delivered only when actually received by the Depositary (including, in the case of a book-entry transfer, by Book-Entry Confirmation). If delivery is by mail, registered mail, with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 7 8 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE STOCKHOLDERS ONLY). If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In any such case, new certificate(s) for the remainder of the Shares that were evidenced by the old certificate(s) will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal as soon as practicable after the acceptance of payment of, and payment for the Shares tendered herewith. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTERS OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder of the Shares tendered hereby, the signature must correspond with the name written on the face of the certificate(s) without any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to or certificates for Shares not tendered or accepted for payment are to be issued to a person other than the registered holder(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of certificates listed, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. 6. STOCK TRANSFER TAXES. The Purchaser will pay any stock transfer taxes with respect to the transfer and sale of Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares not tendered or accepted for payment are to be registered in the name of, any persons other than the registered holder(s), or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered owner(s) or such person(s)) payable on account of the transfer to such person(s) will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be returned to, a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. 8. WAIVER OF CONDITIONS. The Purchaser reserves the absolute right in its sole discretion to waive any of the specified conditions of the Offer, in whole or in part, in the case of any Shares tendered. 9. 31% BACKUP WITHHOLDING. In order to avoid backup withholding of federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below in 8 9 this Letter of Transmittal and certify under penalties of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a $50 penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. Backup withholding is not an additional income tax. Rather, the amount of the backup withholding can be credited against the federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder upon filing an income tax return. The stockholder is required to give the Depositary the TIN (i.e., social security number or employer identification number) of the record owner of the Shares. If the Shares are held in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% on all payments made prior to the time a properly certified TIN is provided to the Depositary. However, such amounts will be refunded to such stockholder if a TIN is provided to the Depositary within 60 days. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent or the Dealer Manager at their respective addresses set forth below. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify the Depositary by checking the box immediately preceding the special payment/special delivery instructions and indicating the number of Shares so lost, destroyed or stolen, or call the Company's Transfer Agent, EquiServe Trust Company, N.A., at (800) 633-4236. The stockholder will then be instructed by the Depositary as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE THEREOF) TOGETHER WITH ANY SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK- ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY. 9 10 - -------------------------------------------------------------------------------- SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX --------------------------------- FORM W-9 AT RIGHT AND CERTIFY BY SIGNING AND DATING Social Security Number or BELOW Employer Identification Number -------------------------------------------------------------------------------------- PART 2 -- CERTIFICATION -- Under penalties of perjury, I certify that: DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued for me) and PAYER'S REQUEST FOR TAXPAYER IDENTIFICATION NUMBER (TIN) (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to the backup withholding as a result of a failure to report all interest or dividends or (c) the IRS has notified me that I am no longer subject to backup withholding -------------------------------------------------------------------------------------- PART 3: Awaiting TIN - ------------------------------------------------------------------------------------------------------------------------ CERTIFICATION INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding, you received another notification from IRS that you are no longer subject to backup withholding, do not cross out such item (2). Signature: Date: ----------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. 10 11 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable payments made to me will be withheld, but that such amounts will be refunded to me if I then provide a Taxpayer Identification Number within sixty (60) days. Signature - ------------------------------------------- Date - ------------------------------------------------ Manually signed facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: Citibank, N.A. By Overnight Courier: By Mail Delivery: By Hand: Citibank, N.A. Citibank, N.A. Citibank, N.A. 915 Broadway P.O. Box 685 Corporate Trust Window 5th Floor Old Chelsea Station 111 Wall Street, 5th Floor New York, New York 10010 New York, New York 10113 New York, New York 10043
By Facsimile (for Eligible Institutions Only): (212) 505-2248 Confirmation by Telephone: (800) 270-0808 Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager at their respective telephone numbers and locations listed below. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: MacKenzie Partners, Inc. 156 Fifth Avenue New York, New York 10010 Call Collect: (212) 929-5500 (800) 322-2885 The Dealer Manager for the Offer is: Warburg Dillon Read LLC 299 Park Avenue New York, New York 10171 Call: (212) 821-2881 11 EX-99.(A)(3) 4 LETTER FROM DEALER MANAGER TO BROKER, DEALERS 1 EXHIBIT 99(a)(3) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ELITE INFORMATION GROUP, INC. AT $11.00 NET PER SHARE BY EIG ACQUISITION CORP., AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF SOLUTION 6 HOLDINGS LIMITED THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 20, 2000, UNLESS THE OFFER IS EXTENDED December 21, 1999 To Brokers, Dealers, Banks, Trust Companies and Other Nominees: We have been engaged by EIG Acquisition Corp., a Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Solution 6 Holdings Limited, a corporation organized under the laws of New South Wales, Australia ("Parent"), and Parent, to act as Dealer Manager in connection with the Purchaser's offer to purchase all outstanding shares of common stock, par value $.01 per share (the "Shares"), of Elite Information Group, Inc., a Delaware corporation (the "Company"), at $11.00 per Share (the "Offer Price"), net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated December 21, 1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any supplements or amendments thereto, collectively constitute the "Offer"). Please furnish copies of the enclosed materials to those of your clients for whom you hold Shares registered in your name or in the name of your nominee. Enclosed herewith are copies of the following documents: 1. Offer to Purchase dated December 21, 1999; 2. Letter of Transmittal to be used by stockholders of the Company in accepting the Offer; 3. The letter to stockholders of the Company from the Chairman of the Board of the Company accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9; 4. A printed form of letter that may be sent to your clients for whose account you hold Shares in your name or in the name of a nominee, with space provided for obtaining such client's instructions with regard to the Offer; 5. Notice of Guaranteed Delivery; 6. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to the Depositary. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (A) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS AND (B) ANY WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED. 1 2 WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 20, 2000, UNLESS EXTENDED. The Board of Directors of the Company has unanimously approved the Offer and Merger and determined that the Offer and Merger, taken together, are fair to, and in the best interests of, the stockholders of the Company and recommends that stockholders of the Company accept the Offer and tender their Shares pursuant to the Offer. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of December 14, 1999 (the "Merger Agreement"), among Parent, Purchaser and the Company pursuant to which, as soon as practicable following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser shall be merged with and into the Company (the "Merger"), with the Company surviving the Merger as an indirect wholly-owned subsidiary of Parent. At the effective time of the Merger, each outstanding Share (other than Shares held by stockholders who perfect their appraisal rights under Delaware law, Shares owned by the Company as treasury stock and Shares owned by the Parent or any direct or indirect wholly-owned subsidiary of Parent or the Company) will be converted into the right to receive $11.00 in cash, without interest thereon, as set forth in the Merger Agreement and described in the Offer to Purchase. The Merger Agreement provides that the Purchaser may assign any or all of its rights and obligations (including the right to purchase Shares in the Offer) to any affiliate of Parent, but no such assignment shall relieve the Purchaser of its obligations under the Merger Agreement. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates for (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to) such Shares, (b) a Letter of Transmittal (or a facsimile thereof), properly completed, and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer effected pursuant to the procedure set forth in Section 2 of the Offer to Purchase, an Agent's Message (as defined in the Offer to Purchase) and (c) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to Shares are actually received by the Depositary. Under no circumstances will interest by paid on the purchase price of the Shares to be paid by the Purchaser, regardless of any extension of the Offer or any delay in making such payment. None of the Purchaser or Parent will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager, the Depositary and the Information Agent as described in the Offer to Purchase) in connection with the solicitation of tenders of Shares pursuant to the Offer. You will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by you in forwarding the enclosed offering materials to your customers. Questions and requests for additional copies of the enclosed material may be directed to the Information Agent or to the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of the enclosed Offer to Purchase. Very truly yours, WARBURG DILLON READ LLC NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEPOSITARY, THE INFORMATION AGENT OR THE DEALER MANAGER OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL. 2 EX-99.(A)(4) 5 LETTER FROM BROKERS 1 EXHIBIT 99(a)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK OF ELITE INFORMATION GROUP, INC. AT $11.00 NET PER SHARE BY EIG ACQUISITION CORP., AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF SOLUTION 6 HOLDINGS LIMITED THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 20, 2000, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration is the Offer to Purchase dated December 21, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to the offer by EIG Acquisition Corp., a Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Solution 6 Holdings Limited, a corporation organized under the laws of New South Wales, Australia (the "Parent"), to purchase all outstanding shares of common stock, par value $.01 per share (the "Shares"), of Elite Information Group, Inc., a Delaware corporation (the "Company"), at $11.00 per Share (the "Offer Price"), net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer. Also enclosed is the Letter to Stockholders of the Company from the Chairman of the Board of the Company accompanied by the Company's Solicitation/Recommendation Statement on Schedule 14D-9. WE (OR OUR NOMINEES) ARE THE HOLDER OF RECORD OF SHARES HELD BY US FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to tender any of or all the Shares held by us for your account pursuant to the terms and conditions set forth in the Offer. Your attention is invited to the following: 1. The offer price is $11.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions of the Offer. 2. The Offer is being made for all outstanding Shares. 3. The Board of Directors of the Company has unanimously approved the Offer and the Merger (as defined below) and determined that the terms of the Offer and the Merger, taken together, are fair to, and in the best interests of, the stockholders of the Company and recommends that the stockholders of the Company accept the Offer and tender their Shares. 4. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of December 14, 1999 (the "Merger Agreement"), among Parent, the Purchaser and the Company pursuant to which, as soon as practicable following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company with the Company surviving the merger as an indirect wholly-owned subsidiary of Parent (the "Merger"). At the effective time of the Merger, each outstanding Share (other than Shares held by stockholders who perfect their appraisal rights under Delaware law, Shares owned by the Company as treasury stock 1 2 and Shares owned by Parent or any direct or indirect wholly owned subsidiary of Parent or the Company) will be converted into the right to receive $11.00 in cash, without interest, as set forth in the Merger Agreement and described in the Offer to Purchase. The Merger Agreement provides that the Purchaser may assign any or all of its rights and obligations (including the right to purchase Shares in the Offer) to any affiliate of Parent, but no such assignment shall relieve the Purchaser of its obligations under the Merger Agreement. 5. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, JANUARY 20, 2000 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED BY THE PURCHASER, IN WHICH EVENT THE TERM "EXPIRATION DATE" SHALL MEAN THE LATEST TIME ON WHICH THE OFFER, AS SO EXTENDED BY THE PURCHASER, WILL EXPIRE. 6. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn prior to the Expiration Date such number of Shares that would constitute at least a majority of all outstanding Shares on a fully diluted basis and (2) any waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, applicable to the purchase of Shares pursuant to the Offer having expired or been terminated. 7. Any stock transfer taxes applicable to a sale of Shares to the Purchaser will be borne by the Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal. 8. Tendering stockholders will not be obligated to pay brokerage fees or commissions to the Dealer Manager, the Depositary or the Information Agent or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. However, federal income tax backup withholding at a rate of 31% may be required, unless an exemption is provided or unless the required taxpayer identification information is provided. See Instruction 9 of the Letter of Transmittal. Your instructions to us should be forwarded promptly to permit us to submit a tender on your behalf prior to the Expiration Date. If you wish to have us tender any of or all the Shares held by us for your account, please so instruct us by completing. executing, detaching and returning to us the instruction form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the detachable part hereof. Your instructions should be forwarded to us in ample time to permit us to submit a tender on your behalf prior to the Expiration Date. Payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by Citibank, N.A. (the "Depositary") of (a) certificates for (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to) such Shares, (b) a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer effected pursuant to the procedure set forth in Section 2 of the Offer to Purchase, an Agent's Message and (c) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE OF THE SHARES TO BE PAID BY THE PURCHASER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. To the extent the Purchaser or Parent becomes aware of any state law that would limit the class of offerees in the Offer, the Purchaser reserves the right to amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by Warburg Dillon Read LLC, the Dealer Manager for the Offer, or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. 2 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE ALL OUTSTANDING SHARES OF COMMON STOCK OF ELITE INFORMATION GROUP, INC. The undersigned acknowledge(s) receipt of your letter, the Offer to Purchase of EIG Acquisition Corp. dated December 21, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal relating to shares of common stock, par value $.01 per share (the "Shares"), of Elite Information Group, Inc., a Delaware corporation. This will instruct you to tender the number of Shares indicated below held by you for the account of the undersigned, on the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal. Dated: - ----------------------------------------------------- NUMBER OF SHARES TO BE TENDERED* ------------ SHARES -------------------------------------- -------------------------------------- SIGNATURE(S) -------------------------------------- -------------------------------------- PLEASE PRINT NAME(S) -------------------------------------- -------------------------------------- ADDRESS (INCLUDE ZIP CODE) -------------------------------------- -------------------------------------- AREA CODE AND TELEPHONE NO. -------------------------------------- -------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO. -------------------------------------- DATE - --------------- * Unless otherwise indicated, it will be assumed that all your Shares are to be tendered. 3 EX-99.(A)(5) 6 NOTICE OF GUARANTEED DELIVERY 1 EXHIBIT 99(a)(5) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF ELITE INFORMATION GROUP, INC. (NOT TO BE USED FOR SIGNATURE GUARANTEES) As set forth in Section 2 of the Offer to Purchase (as defined below), this form or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates representing shares of common stock, par value $.01 per share (the "Shares"), of Elite Information Group, Inc., a Delaware corporation (the "Company"), are not immediately available or if the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date (as defined in the Offer to Purchase). This form may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution (as defined in the Offer to Purchase). See Section 2 of the Offer to Purchase. The Depositary for the Offer is: Citibank, N.A. By Overnight Courier: By Mail Delivery: By Hand: Citibank, N.A. Citibank, N.A. Citibank, N.A. 915 Broadway P.O. Box 685 Corporate Trust Window 5th Floor Old Chelsea Station 111 Wall Street, 5th Floor New York, New York 10010 New York, New York 10113 New York, New York 10043
By Facsimile (for Eligible Institutions Only): (212) 505-2248 Confirmation by Telephone: (800) 270-0808 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. 1 2 Ladies and Gentlemen: The undersigned hereby tenders to EIG Acquisition Corp., a Delaware corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Solution 6 Holdings Limited, a New South Wales, Australia corporation ("Parent"), upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated December 21, 1999 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares set forth below, all pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Number of Shares: - --------------------------------- Name(s) of Record Holder(s): - ------------------- - ------------------------------------------------------ (PLEASE PRINT) Certificate Nos. (if available): - ------------------------------------------------------ - ------------------------------------------------------ Address(es): - --------------------------------------- ZIP CODE Area Code and Tel. No.: - -------------------------- If Shares will be tendered by book-entry transfer, Account Number: - ---------------------------------- Signature(s): - --------------------------------------- - ------------------------------------------------------ Dated: - ---------------------------------------------- GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a participant in the Security Transfer Agents Medallion Program or the New York Stock Exchange Guarantee Program or the Stock Exchange Medallion Program or an "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended, hereby guarantees to deliver to the Depositary either the certificates representing the Shares tendered hereby, in proper form for transfer, or a Book-Entry Confirmation (as defined in Section 2 of the Offer to Purchase) with respect to such Shares, in any such case together with a properly completed and duly executed Letter of Transmittal, or a manually signed facsimile thereof, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase), and any other required documents within three trading days (as defined in the Offer to Purchase) after the date hereof. Name of Firm: - ------------------------------------- Address: - -------------------------------------------- - ------------------------------------------------------ ZIP CODE Area Code and Tel. No.: - -------------------------- - ------------------------------------------------------ (AUTHORIZED SIGNATURE) Title: - ----------------------------------------------- Dated: - ---------------------------------------------- NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 2 EX-99.(A)(6) 7 GUIDELINES FOR CERTIFICATION OF TAXPAYER ID NO. 1 EXHIBIT 99(a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER. Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ------------------------------------------------------------ GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF-- - ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, any one of the individuals(1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent minor, or incompetent person person(3) 7. a. The usual revocable savings The grantor- trust account (grantor is also trustee(1) trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under State law 8. Sole proprietorship account The Owner(4) - ------------------------------------------------------------ - ------------------------------------------------------------ GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF-- - ------------------------------------------------------------ 9. A valid trust, estate, or pension Legal entity (Do trust not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.)(5) 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club, or other tax- The organization exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. 1 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you do not have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution. - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust or a non-exempt trust described in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenant bonds under section 1451. - Payments made by certain foreign organizations. - Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends and patronage dividends, that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041(a), 6045 and 6050A. PRIVACY ACT NOTICE. Section 6109 requires most recipients of dividend, interest or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1984, payers must generally withhold 20% of taxable interest, dividend and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE 2 EX-99.(A)(7) 8 PRESS RELEASE 1 EXHIBIT 99(a)(7) [MACKENZIE PARTNERS, INC. LOGO] NEWS RELEASE: 15 DECEMBER 1999 OFFER BY SOLUTION 6 HOLDINGS LIMITED FOR ELITE INFORMATION GROUP, INC. The boards of Solution 6 Holdings Limited (SOH:ASX) and Elite Information Group, Inc. (Nasdaq: ELTE) announced today that they have entered into a merger agreement pursuant to which Solution 6 will acquire Elite for US$11.00 per share in cash. The merger will reinforce Solution 6's position as the world's largest player in practice management software for the time-based professional services industry. BACKGROUND ON ELITE Elite (formerly Broadway & Seymour, Inc.) is a software product and services company providing integrated solutions to the financial, legal and professional services market. Elite's products are focused primarily on time tracking, billing, internal accounting and other administrative functions including marketing, records management, case management and conflicts of interest prevention. Elite is a market leader in financial and practice management software for law firms in the US. Elite is increasingly expanding beyond the legal industry, and in 1998 approximately 10% of its new customers were other professional time based firms such as accounting firms, consulting practices and public relations organisations. In 1999, Elite introduced Elite.com, an internet-based provider of time and billing services to the professional services market. Elite is also a founding partner in Serengeti, the world's first application service provider (ASP) dedicated to serving the legal profession. THE OFFER A cash tender offer will be made by Solution 6 for all of the outstanding shares of common stock of Elite. The offer will be on the basis of US$11.00 in cash for each share in Elite. The offer is conditioned upon, among other things, Solution 6 acquiring a majority of the fully diluted share capital of Elite, and expiration of certain regulatory waiting periods. The transaction values Elite at approximately US$95.6 million (A$150.5 million), representing a 44% premium for Elite shareholders based on the average closing price of Elite over the last thirty trading days prior to the announcement of the transaction. Elite directors and officers representing approximately 20% of the fully diluted share capital of Elite have irrevocably agreed to tender their shares in the offer, vote in favour of the merger and have granted an option to Solution 6 to acquire their shares under certain circumstances. ACQUISITION FUNDING Telstra has advised it intends to invest a further A$50 million (US$31.7 million) in Solution 6 as a partial exercise of its option to acquire 25% of Solution 6. In addition to these funds, the transaction will be funded by Solution 6 cash reserves and a bridge facility provided by Warburg Dillon Read for US$60 million (A$95.2 million). 2 RATIONALE This transaction represents a major step forward in the implementation of Solution 6's strategy of becoming a market leader in the provision of software solutions to the time-based professional. Elite's operations will: o with the convergence of the accounting, legal and consulting industries, position Solution 6 as a global leader in the supply of practice management software to the time based professional services market; o strengthen Solution 6's position in the provision of legal practice management software in the US, to provide a market leading position in North America; o provide an opportunity for Solution 6 to leverage its legal practice management software leadership in the US into Australia, Asia and Europe. Elite has 25 employees in London and will be opening an office in Brussels in January 2000. Europe is Elite's primary focus outside of the United States; o provide a substantial distribution channel in the attractive North American market, as Elite derives 80% of its revenue from North America; o strengthen Solution 6's ASP strategy through Elite.com and through Elite's partnership with Serengeti, the world's first ASP dedicated to the legal profession; and o provide leading edge technology. R&D spending in the last three years has exceeded historical levels and has produced significant enhancements to the features and functionality of its product offerings. Warburg Dillon Read is acting as financial adviser to Solution 6 in relation to the acquisition of Elite. Elite is being advised by Volpe Brown & Whelan. ENQUIRIES SOLUTION 6 Chris Tyler, Chief Executive Officer 011 612 9278 6000 Tom Montgomery, Chief Financial Officer WARBURG DILLON READ Robert Rankin (Australia) 011 612 9324 2508 John McElroy (US) 212 821 2873 ELITE INFORMATION GROUP INC Christopher Poole, Chief Executive Officer 323 642 5270 VOLPE BROWN WHELAN & CO Bill Ruckelshaus 415 274 7913 3 INFORMATION ON ELITE BACKGROUND Established in 1947, Elite is the premier supplier of financial and practice management systems for legal professional services with installations in more than 650 firms internationally. Elite's business focus is to develop high-performance client/server software for law firm, financial, and practice management applications. For the past decade, Elite's focus has been on meeting the information needs of the legal industry, and more recently the professional service firm environment. In 1981, Elite Data Processing was formed to specialize in law firm accounting applications. From 1981 until 1988, Elite specialized in a timesharing solution that connected law firms online with Elite's central computer system. Thus, Elite gained valuable experience in installing and supporting a substantial number of legal systems in a wide range of practice areas. During 1989, the market shift to Open Systems Technology coupled with the expanding power of relational databases, offered a unique opportunity to provide a system designed to harness these powerful 4GL tools. Elite created a system based on these new tools and introduced the system throughout the United States in the early 1990s. In addition to strong product development, Elite's personnel contribute to the success of the company. Elite strives to hire and retain quality employees. As a result, the staff has the highest level of expertise of any company serving the legal market. Many of Elite's employees hold advanced accounting and technical degrees and approximately two-thirds of the employees are devoted to the support, training and the installation side of the business. Virtually all employees have prior law firm, accounting and/or technical experience, and understand the pressures, deadlines and requirements of professional service firms. In February 1994, Broadway & Seymour acquired Elite Data Processing and the company name was changed to Elite Information Systems, Inc. In April 1999, Elite became a wholly owned subsidiary of Elite Information Group, Inc., which was formerly called Broadway & Seymour. Elite Information Group is traded on the NASDAQ stock market under the symbol ELTE. Elite is committed to leading edge technology. Its R&D spending over the last 3 years has exceeded historical levels and has produced significant enhancements of the features and functionality of its product offerings. This has resulted in Microsoft SQL Server compatible versions and Microsoft Windows NT compatible versions of its product offerings. In addition, Elite has recently introduced Microsoft Outlook capabilities, Elite WebView, an Intranet product and TimeTrax(TM) a remote-entry and expense tracking product. Elite has also developed Elite Enterprise, its 32-bit version of the suite of practice management applications, which recently commenced beta testing. GLOBAL CORPORATION Elite has built strong European and Canadian operations and plans to further broaden its international operations. It has among its clients, several of the largest law firms in the United Kingdom, the largest law firm in Continental Europe and some of the largest law firms in Canada. Approximately 18% of total Elite revenue is generated from clients outside of the United States and therefore the importance of markets beyond the United States is crucial in developing future marketing and product strategies. 4 INTERNET / ASP STRATEGY Elite has formed Elite.com to provide web-based solutions to small professional service firms. Elite.com provides an opportunity to extend the services and value Elite provides to its large clients to clients of all sizes. Through Elite.com, it is proposed that Elite will move to the next level to be at the forefront of web initiatives, hosted applications and e-commerce developments. Elite, in conjunction with ELF, MeltingPoint and Punch Networks announced in September 1999 that it will offer software products and services on Serengeti, the world's only ASP dedicated to serving the legal profession. Software in categories such as case management, time and billing, electronic invoicing and litigation support will be provided through the Internet for a usage or flat fee. FINANCIAL INFORMATION
Consolidated Statement of Operations - ----------------------------------------------------------------------------------------------------------- Year ended 31 December RESTATED US$mm 1996 1997 1998 1998 (a) - ----------------------------------------------------------------------------------------------------------- Net revenue 89.4 79.6 69.0 45.1 Operating expenses: Cost of revenue 68.0 49.8 50.5 28.7 Research and development 5.8 5.9 7.5 3.1 Sales and marketing 12.3 11.1 13.2 8.9 General and administrative 11.2 10.2 11.1 4.8 Restructuring and impairment 2.3 (0.7) 0.6 -- ------ ------ ------ ------ Total operating expenses 99.6 76.2 82.9 45.4 Operating income (loss) (10.3) 3.4 (13.9) (0.4) Gain on disposition of non-strategic business units 9.7 1.2 1.9 -- Interest income 0.3 0.9 0.9 0.9 Interest expense (0.5) (0.1) (0.1) (0.1) ------ ------ ------ ------ Income (loss) before income taxes (0.8) 5.3 (11.1) 0.5 Income tax (provision) benefit (1.5) (2.4) 3.5 (0.4) ------ ------ ------ ------ Net income (loss) (2.2) 2.9 (7.6) 0.1 - -----------------------------------------------------------------------------------------------------------
(a) Restated 1998 results reflect the sale of Elite's CRM business and elimination of certain overhead costs along with estimated income tax effects, as disclosed by Elite on Form 8-K dated May 19, 1999. 5
Consolidated Statement of Operations - ----------------------------------------------------------------------------------- Nine Months ended 30 September US$mm 1998 1999 - ----------------------------------------------------------------------------------- Net Revenue 31.6 43.8 Operating expenses: Cost of revenue 20.6 25.3 Research and development 2.0 3.1 Sales and marketing 5.9 7.0 General and administrative 4.9 5.2 Restructuring and impairment -- -- ------ ------ Total operating expenses 33.5 40.7 Operating income (loss) (1.9) 3.1 Loss on disposition of non-strategic business unit -- (0.3) Interest income, net 0.7 0.8 ------ ------ Income (loss) from continuing operations before tax (1.2) 3.6 Income tax (provision) benefit for continuing operations 0.1 (1.5) ------ ------ Income (loss) from continuing operations net of tax (1.1) 2.0 Discontinued operations: Income (loss) from discontinued operations net of tax (4.3) (0.4) (provision) benefit Gain on sale of discontinued operations net of tax -- 4.9 ------ ------ Net income (loss) (5.4) 6.5 - -----------------------------------------------------------------------------------
For the nine month results and restated 1998 results presented, the consolidated financial statements of Elite Information Group reflect as continuing operations, the results of operations and financial position of Elite Information Group's wholly owned subsidiary, Elite Information Systems, Inc. During the third quarter of 1999, the Company began start-up operations of its new Elite.com subsidiary, the results for which are included in the Consolidated Statement of Operations for the nine months ended September 30, 1999. During the second quarter of 1999, the Company sold its Customer Relationship Management business ("CRM"). The operating results for CRM are presented in the Consolidated Statement of Operations for the nine months ended September 30, 1999 as discontinued operations and the prior period has been restated to reflect the Company's continuing operations. The Consolidated Statement of Operations for the years ended 1996, 1997 and 1998 (before restatement) do not reflect any adjustment for the sale of CRM. Also, effective March 5,1999 the Company sold all of the outstanding shares of The Minicomputer Company of Maryland, Inc. ("TMC") to a holding company owned by TMC management. Revenue growth during the 3rd quarter of 1999 and the first 9 months of 1999 was greatly influenced by the higher levels of orders received during 1998 which were 67% above the amount of orders signed during 1997. Elite management attributed the increase in contract signings in part to Elite's introduction of products utilising a wider variety of database platforms and enhancements to existing product functionality. Year 2000 considerations may have also focused an increasing number of professional services firms on replacing their existing systems by the end of 1999. Elite's signed contract backlog totalled US$13.7 million as of 30 September 1999, compared to a record US$26.4 million as of 31 December 1998. Backlog represents the amount of unearned software license and implementation revenue on signed customer contracts. Research and development expenses for the nine months ended 30 September 1999, increased US$1.1 million to US$3.1 million. Research and development expenses consist primarily of salaries and expenses of Elite's development personnel and outside consultants. The third quarter 1999 increase over the same 6 period can be attributed primarily to start-up costs related to Elite.com. The higher expenses also reflect ongoing efforts to develop the next version of the Elite suite of products based on an advanced object-oriented architecture with enhanced usability features. During the nine months to 30 September 1999, no software developments were capitalised.
Balance Sheet - ---------------------------------------------- US$mm AS AT 30/9/99 - ---------------------------------------------- ASSETS Current Assets: Cash 30.4 Receivables 21.1 Deferred income taxes 4.2 Other current assets 0.8 --------- Total current assets 56.6 Property and equipment 1.6 Software costs 1.0 Intangibles 3.8 Other 0.2 --------- TOTAL ASSETS 63.2 LIABILITIES Current Liabilities: Accounts payable - trade 4.7 Accrued compensation 2.9 Other accrued liabilities 4.9 Deferred revenue 15.9 Income taxes payable 0.8 --------- Total current liabilities 29.1 Deferred income taxes 0.9 Other liabilities 0.2 --------- TOTAL LIABILITIES 30.3 --------- SHAREHOLDERS' EQUITY 32.9 - ----------------------------------------------
ABOUT SOLUTION 6 Solution 6 is the world's leading supplier of business systems to the accounting profession. The company is a market leader in Australia, New Zealand, South Africa and the UK in the practice management, client accounting and taxation markets and it also has a strong presence in the US and Continental Europe. Solution 6 primarily focuses on practice management accounting, client accounting, taxation, accounting for business and insolvency software. Solution 6 is currently leading the market with its new application service provider (ASP) business. An ASP enables customers to operate business software via the Internet or through private networks. In this model, customers will rent the applications from Solution 6, and access the applications through a browser, rather than incurring substantial hardware costs to run full applications onsite. Solution 6 was established in 1981, became a publicly listed company in 1987 and currently has approximately 1,200 employees in 13 countries. Additional information on Solution 6 is available at http://www.solution6.com or by sending email to info@solution6.com. 7 FORWARD-LOOKING STATEMENTS Certain of the above statements are forward-looking statements, which involve risks and uncertainties. Actual results could differ materially as a consequence of a number of factors including: uncertainties relating to acquisitions, including operational disruptions, unexpected operating expenses and losses, and expenses associated with the integration of such acquisitions; fluctuations in the company's operating results due to product demand, length of sales cycle, size and timing of individual customer transactions and similar matters, changes in the client/server application software market including technology change, changes in customer requirements, frequent new product introductions by competitors and emerging standards; dependence on the legal services market; reliance on third-party resellers; dependence on Solution 6 and Elite key management and other factors set forth in the Australian Stock Exchange and Securities and Exchange Commission reports and filings of Solution 6 and Elite respectively. # # # EX-99.(B)(1) 9 COMMITMENT LETTER DATED DECEMBER 14, 1999 1 EXHIBIT 99(b)(1) [WARBURG DILLON READ AUSTRALIA LIMITED LETTERHEAD] 14 December 1999 Mr Chris Tyler Chief Executive Officer Solution 6 Holdings Limited Level 21 Town Hall House 456 Kent Street SYDNEY NSW 2000 STRICTLY PRIVATE & CONFIDENTIAL Dear Chris OFFER TO PROVIDE BRIDGE FACILITY FOR ACQUISITION OF ELITE INFORMATION GROUP, INC. INTRODUCTION We refer to our ongoing discussions regarding financing the acquisition of Elite Information Group, Inc. ("THE BUSINESS") by Solution 6 Holdings Limited ("SOLUTION 6"). COMMITMENT Warburg Dillon Read Australia Limited ("WDRAL") is pleased to confirm its commitment to Solution 6 to offer to provide an acquisition bridge facility (THE "FACILITY") of up to US$60 million, substantially in accordance with the terms of this letter and of the Terms Sheet accompanying this letter as Annexure A. All monetary amounts referred to in our proposal are in Australian dollars unless otherwise stated. All terms not specifically defined herein have the meaning assigned to them in the Terms Sheet. NATURE OF THE COMMITMENT The commitment contained herein is subject to: o The conditions set out in the attached Terms Sheet; and o The completion of documentation satisfactory to WDRAL. WDRAL and Solution 6 will negotiate such documentation in good faith on terms consistent with the attached Terms Sheet. It is not currently WDRAL's intention to syndicate the Facility to other financial institutions. However, WDRAL reserves the right to sell-syndicate the Facility to other financial institutions in consultation with Solution 6 once the transaction has been announced to the Australian Stock Exchange, subject to the provisions contained in the Terms Sheet. This commitment will lapse if not accepted by 11 pm on 14 December 1999 (in Sydney). 2 APPOINTMENT In making the commitment set out in this letter, we do so on the basis that WDRAL will have access to the services of any specialist consultants that are engaged by Solution 6 or the Borrower, including taxation, legal, accounting and other advisers. WDRAL will be entitled to rely on the accuracy and completeness of the material provided by these consultants and on the expertise of each. Costs of these consultants will be for the account of the Borrower. PROJECT TEAM The assignment will be conducted by WDRAL and any written or oral communications will be that of WDRAL itself and not that of individuals assisting WDRAL. The persons principally involved in the assignment will be Robert Rankin, Steve Bennett, Sarah Rennie and Kevin Bush. However, this may vary by other specialist persons being seconded and utilised as required. BASIS OF REMUNERATION As per the Terms Sheet. INDEMNITY The Company agrees with WDRAL (for itself and on trust for each other member of UBS AG, and its subsidiaries, branches and affiliates ("THE UBS GROUP") and all directors, officers, employees and agents of the UBS Group ("INDEMNIFIED PERSONS")) that: (a) the Company will indemnify and hold harmless the Indemnified Persons from and against all claims, actions, proceedings, demands, liabilities, losses, damages, costs and expenses arising out of, or in connection with, the Engagement or any other matter or activity referred to or contemplated by this letter which any Indemnified Person may suffer or incur in any jurisdiction; (b) all costs and expenses incurred by any Indemnified Person are to be reimbursed by the Company promptly on demand, including those incurred in connection with the investigation of, preparation for or defence of, any pending or threatened litigation or claim within the terms of this Indemnity or any matter incidental thereto; and (c) no Indemnified Person will have any liability whatsoever to the Company for or in connection with things done or omitted to be done pursuant to the Engagement; other than in respect of any liabilities, losses, damages, costs or expenses which are determined by a judgement of a court of competent jurisdiction to have resulted from the wilful default or gross negligence on the part of the Indemnified Person. Sums already paid by the Company under this Indemnity but which fall within this proviso will be reimbursed in full. The Company will notify WDRAL if the Company becomes aware of any claim which may give rise to a liability under this indemnity. Without prejudice to any claim the Company may have against the UBS Group, no proceedings may be taken against any director, officer, employee or agent of the UBS Group in respect of any claim the Company may have against the UBS Group. 3 TERMINATION WDRAL's commitment to provide the Facility may be terminated immediately with or without cause by Solution 6 or the Borrower at any time or by WDRAL in the event that the Borrower and WDRAL have not entered into definitive documentation and executed the Facility by 15 February 2000 (in each case by notice in writing to the other party hereto). Upon termination, this letter shall from that date have no further force or effect (except in the case of termination by you or the Borrower without reasonable cause, for WDRAL's right to fees and reimbursement of WDRAL's reasonable costs and expenses). It is agreed that WDRAL will be entitled to the Commitment Fee upon execution of this letter and announcement of the Merger Agreement despite such termination by you or the Borrower. COMPLETE AGREEMENT This letter and other terms as may be agreed in writing constitute the complete agreement between the parties and no duties or obligations of WDRAL, other than those agreed in writing between the parties, shall be implied. This letter is intended to constitute a legally binding and enforceable obligation of Solution 6 and WDRAL. This letter may be executed in any number of counterparts, with all such counterparts taken together to constitute the agreement. APPLICABLE LAW This agreement shall be governed in accordance with the laws of New South Wales and the parties to it submit to the exclusive jurisdiction of the courts of that State. CONFIRMATION OF ACCEPTANCE We trust that the arrangements proposed in this letter are acceptable to you. If so, would you please indicate your acceptance by signing the enclosed or faxed copy of this letter and returning it to this office 11 pm on 14 December 1999 (Sydney time). CONCLUSION If you would like to discuss any aspect of this letter, or if you require any further information, please do not hesitate to contact us on 9324 2575. We look forward to the successful completion of this transaction. Best regards, Warburg Dillon Read Australia Limited Robert Rankin Steve Bennett Executive Director Executive Director Encl. 4 Accepted for and on behalf of SOLUTION 6 HOLDINGS LIMITED Signature: Title: Date: (The signatory warrants that he/she is duly authorised by Solution 6 Holdings Limited to enter into this agreement on its behalf). EX-99.(B)(2) 10 COMMITMENT LETTER DATED DECEMBER 17, 1999 1 EXHIBIT 99(b)(2) [WARBURG DILLON READ AUSTRALIA LIMITED LETTERHEAD] 17 December 1999 Mr Tom Montgomery Chief Financial Officer Solution 6 Holdings Limited Level 21 Town Hall House 456 Kent Street SYDNEY NSW 2000 STRICTLY PRIVATE & CONFIDENTIAL WARBURG DILLON READ AUSTRALIA LIMITED Dear Tom AMENDMENT OF BRIDGE FACILITY FOR ACQUISITION OF ELITE INFORMATION GROUP, INC. INTRODUCTION We refer to the Commitment Letter dated 14 December 1999, pursuant to which Warburg Dillon Read Australia Limited ("WDRAL") offered to provide, and Solution 6 Holdings Limited ("SOLUTION 6") accepted, an acquisition bridge facility (the "FACILITY") of up to US$60 million. Solution 6 has now requested that the terms of the Facility be amended. AMENDMENT OF THE COMMITMENT WDRAL agrees to amend the terms of the Facility in accordance with the terms of this letter and of the Terms Sheet accompanying this letter as Annexure A. Except where amended by this letter and the attached Terms Sheet, all other terms remain the same as previously. RESTRUCTURE FEE A Restructure Fee of 0.60% of US$13 million will be payable by Solution 6 upon its written acceptance of the amended Facility terms as set out in this letter and the attached Terms Sheet. 2 TERMINATION WDRAL's commitment to provide the Facility may be terminated immediately with or without cause by Solution 6 or the Borrower at any time or by WDRAL in the event that the Borrower and WDRAL have not entered into definitive documentation and executed the Facility by 15 February 2000 (in each case by notice in writing to the other party hereto). Upon termination, this letter shall from that date have no further force or effect (except in the case of termination by you without reasonable cause, for WDRAL's right to fees and reimbursement of WDRAL's reasonable costs and expenses). It is agreed that WDRAL will be entitled to the Commitment Fee and Restructure Fee despite such termination by you. COMPLETE AGREEMENT This letter, the letter dated 14 December 1999, and other terms as may be agreed in writing constitute the complete agreement between the parties and no duties or obligations of WDRAL, other than those agreed in writing between the parties, shall be implied. This letter is intended to constitute a legally binding and enforceable obligation of Solution 6 and WDRAL. This letter may be executed in any number of counterparts, with all such counterparts taken together to constitute the agreement. APPLICABLE LAW This agreement shall be governed in accordance with the laws of New South Wales and the parties to it submit to the exclusive jurisdiction of the courts of that State. CONFIRMATION OF ACCEPTANCE We trust that the arrangements proposed in this letter are acceptable to you. If so, would you please indicate your acceptance by signing the enclosed or faxed copy of this letter and returning it to this office 1 pm on 17 December 1999 (Sydney time). CONCLUSION If you would like to discuss any aspect of this letter, or if you require any further information, please do not hesitate to contact us on 9324 2575. We look forward to the successful completion of this transaction. Best regards, Warburg Dillon Read Australia Limited Robert Rankin Steve Bennett Executive Director Executive Director Encl. Accepted for and on behalf of SOLUTION 6 HOLDINGS LIMITED Signature: Title: Date: (The signatory warrants that he/she is duly authorised by Solution 6 Holdings Limited to enter into this agreement on its behalf). EX-99.(B)(3) 11 COMMITTED ACQUISITION BRIDGE FACILITY TERMS SHEET 1 EXHIBIT 99(b)(3) COMMITTED ACQUISITION BRIDGE FACILITY TERMS SHEET ACQUISITION OF ELITE INFORMATION GROUP, INC. BY SOLUTION 6 HOLDINGS LIMITED - -------------------------------------------------------------------------------- BORROWER: Solution 6 Holdings Limited GUARANTORS: Material Entities LENDER: Warburg Dillon Read Australia Limited ("WDRAL") or such other entity agreed by the Borrower PURPOSE: To contribute finance for the acquisition of all of the shares of Elite Information Group, Inc. ("Elite") ASSUMED FUNDING STRUCTURE FOR ACQUISITION: A$ MILLION US$ MILLION Solution 6 Existing Cash Reserves 16.0 10.2 Proceeds from Telstra Share Issue 50.0 31.8 WDRAL Bridge Facility (US$) 92.6 58.8 --------- --------- Total Funding for Acquisition 158.6 100.8 The above assumes a purchase price of US$95.6 million (A$150.6 million) and US$5.1 million (A$8 million) transaction costs, based on an A$:US$ exchange rate of 0.635.
FACILITY: Committed Acquisition Bridge Facility FACILITY AMOUNT: The Facility amount will be capped at US$60 million, with the resultant currency exposure being the responsibility of the Borrower. DRAWINGS: US$ AGENT AND SECURITY AGENT: WDRAL or any associate of WDRAL MATURITY DATE: Earlier of 31 July 2000 and 14 days after consummation of the merger. COMMITMENT EXPIRY: The Facility commitment will expire if the 50.1% bid acceptance level in respect of Elite's fully diluted share capital has not been reached by 2 May 2000 and Solution 6 has not terminated the offer and accepted shares for payment by that date. MANDATORY PREPAYMENT: Mandatory prepayment of and/or reduction of outstanding commitments under the Bridge Facility will occur from: 1. The first US$20.0 million equivalent of the share placement referred to in point 1 of Security Issues below (with the converted A$ amount converted to US$ at the exchange rate prevailing at the time as advised in good faith by the Lender); 2. Any other Securities Issue (except the A$50 million issue of shares to Telstra and any share issues to vendors used to fund acquisitions agreed by the Lender, such agreement not to be unreasonably withheld); 3. Other asset sales; 4. Any return of capital or loan from Elite; or 5. Sale of shares in Elite. If the Hercules cash offer is not announced by 31 January 2000 or if the offer is withdrawn a further mandatory prepayment/reduction of US$13 million will be required at that time. Prepaid amounts and reduced commitments can not be redrawn. Prepayment and commitment reduction amounts will be converted to US$ as required at the exchange rate prevailing at the time of the prepayment or commitment reduction and as advised in good faith by the Lender to the Borrower. PREPAYMENTS: Permitted without penalty but subject to break costs if not at the end of an Interest Period. Amounts prepaid under the Bridge Facility cannot be redrawn. 2 SECURITIES ISSUES: 1. Solution 6 agrees that immediately following announcement of the Merger Agreement to the ASX, it will undertake a private placement of at least A$120 million of ordinary shares at a price of A$9.75 per share ("Offer Price") on a best endeavours basis. Solution 6 agrees that its management will assist with and be available for the roadshow. Solution 6 will accept all allottees for shares at or above the Offer Price put forward by WDRAL, BNP or Salomon Smith Barney. 2. At any time after the Merger Agreement has been entered into, and Solution 6 has not agreed a repayment plan acceptable to the Lender, the Lender will have the right to cause Solution 6 to undertake, via WDRAL, the following Securities issues: [ ] Up to the Australian dollar equivalent of US$33 million of Securities in the event that the private placement referred to in paragraph (1) above has not settled or is unlikely to settle by 24 December 1999 in the reasonable opinion of the Lender; and [ ] An additional amount of up to the Australian dollar equivalent of US$40 million of Securities if the Lender reasonably and in its sole discretion forms the opinion that the Facility is unlikely to be repaid from cash available within Elite and/or other sources of refinancing proposed by the Borrower; and [ ] In any event, the Securities issues will in total be of sufficient size to effect a repayment of the Facility. 3. The Securities issues referred to in paragraph (2) above will either comprise: [ ] a pro rata rights issue of ordinary equity or variable priced options at up to a 20% discount to the VWAP on the preceding day; [ ] a placement of ordinary equity at up to a 20% discount to the VWAP on the preceding day; or [ ] in the event that the above does not raise sufficient funds to repay the Facility, Solution 6 shall issue securities determined by WDRAL which may include amongst others the issuance of high yield notes or mezzanine notes in the Australian, US or European markets. 4. The Underwriting Agreements for such Securities issues referred to in paragraph (2) above will be executed as a condition precedent to execution of the Facility. COMMITMENT FEE: The sum of 1.0% of US$45.8 million and 0.5% of US$13 million will be payable upon execution of the Commitment Letter and announcement of the Merger Agreement. DRAWDOWN FEE: 1.0% of the drawndown amount will be payable upon drawdown of the Facility. The Lender will rebate an amount equivalent to 0.5% of the drawndown amount if the Facility is repaid within 45 days of drawdown. RESTRUCTURE FEE: 0.60% of US$13 million will be payable upon solution 6's written acceptance of the amended terms of the Facility. BASE INTEREST RATE: The average rate as displayed on Reuters screen LIBO for the relevant Interest Period set to London Business days prior to drawing. INTEREST PERIODS: 30, 60 or 90 days, or as otherwise agreed. INTEREST PAYMENT DATE: At maturity of the Interest Period. 3 INTEREST MARGINS: DRAWN MARGIN (payable in respect of the drawn % Per Annum amount) ----------- [ ] From Drawdown until 45 day thereafter 2.0% plus Base Interest Rate [ ] From 45 days after drawdown until 31 July 2000 4.0% plus Base Interest Rate UNDRAWN COMMITMENT FEE (payable from 31 March 2000 1.0% on any undrawn portion of the Facility and calculated on a daily basis and payable quarterly in arrears)
HERCULES TRANSACTION: In respect of Solution 6's acquisition of Hercules, this Facility will be conditional upon: 1. The total acquisition cost being no more than A$80 million; 2. To the extent necessary, a share placement to bring the total amount received by Solution 6 from share placements (including the share placement mentioned in point 1 of Securities Issues) to at least A$120 million; and 3. The Lender's satisfaction with the terms of the Hercules acquisition including its impact on Solution 6. SECURITY: Security to be to the reasonable satisfaction of the Lender and to be supported by a satisfactory legal opinion. Security to include: 1. First ranking charge over the assets, goodwill and undertakings of Solution 6 and its Material Entities except in instances where first ranking charges already exist in which case second ranking charges will be taken. First ranking charges ranking in priority to the Lender will be capped at A$10 million excluding the A$4 million Bill Facility secured by cash. 2. Sole first ranking charge over the proceeds of any Securities issues; 3. Sole first ranking charge over proceeds from the sale of the Elite shares acquired; 4. Sole first ranking charge over the proceeds of any return of capital or loan from Elite; and 5. Security and charge over Elite's and Hercules' assets and undertakings once the acquisitions have been completed. MATERIAL ENTITY: Elite, Hercules and any subsidiary of Solution 6 that contributes more than 5% of consolidated revenue or represents more than 5% of consolidated assets and any other subsidiaries necessary to ensure that security is provided by subsidiaries that represent at least 95% of consolidated revenue and more than 95% of consolidated assets. CLAIMS UNDER THE GUARANTEE: The Lender will be able to claim under the guarantee upon non-payment of a due amount by presentation of a notice to the guarantor. 4 CONDITIONS PRECEDENT: Conditions Precedent to drawdown of the Bridge Facility are as follows: 1. Satisfactory loan and security documentation, stamped and registered (as applicable) including the executed Securities underwriting agreements and supported by satisfactory legal opinions; 2. Receipt by Solution 6 of at least A$50 million in respect of the issuance of shares to Telstra; 3. Acquisition of at least 50.1% of Elite's fully diluted share capital by Solution 6; 4. Payment by Solution 6 of US$62.6 million for Elite shares; and 5. Receipt of fees as agreed in writing. SPECIFIC UNDERTAKINGS 1. No amendment of the Hercules Offer or Merger FROM AND RESTRICTIVE Agreement or waiver to the conditions of either COVENANTS IN RESPECT document without the consent of the Lender (such OF SOLUTION 6 AND ALL consent not to be unreasonable withheld); SUBSIDIARIES 2. No amendment of the Hercules or waiver to the conditions of such without the consent of the Lender (such consent not to be unreasonable withheld); 3. Solution 6's agreement that upon acquiring 50.1% of the fully diluted share capital of Elite it will: [ ] Promptly take board control of Elite; [ ] Use its best endeavours to proceed to compulsorily acquire 100% of Elite's share capital as soon as practicable thereafter and in any event by 16 July 2000; And immediately upon consummation of the merger: [ ] Cause Elite to make a payment of at least US$30 million to Solution 6 by way of dividend, return of capital or loan; and [ ] Cause Elite to provide a guarantee and charge over its assets and undertakings to the Lender; 4. Solution 6's agreement that upon the reasonable request of the Lender it will enter into currency hedging arrangements acceptable to the Lender in respect of the US$ acquisition commitment; 5. Restrictions on any capital reductions (except in respect of an agreed level of ordinary dividends); 6. Restrictions on disposal of assets or undertakings other than disposals in the ordinary course of the business (except as reasonably agreed with the Lender) and disposals for good value applied in prepayment of the Bridge Facility; 7. Restrictions on further acquisitions in aggregate in excess of A$5 million (except as reasonably agreed with the Lender). The Lender will give consideration to agreeing to the LP and AW acquisitions upon the Lender's acceptable review of the terms of the acquisitions, the funding of such and due diligence materials; 8. Restrictions on incurring further financial indebtedness or providing financial accommodation or guarantees (except as reasonably agreed with the Lender and except in respect of funding under the Hercules transaction which ranks pari passu with the Lender as set out previously in this Terms Sheet); 9. No dealings with any party except on arms length terms in the ordinary course of business; and 10. Restrictions on creation of security interests. 5 OTHER CONDITIONS: Representations and Warranties, Undertakings, Events of Default, Increased Costs, Illegality and Yield Protection customary for Facilities of this nature. GST on any taxable supplies by the Lender or its affiliates will be for the account of the Borrower. FEES AND EXPENSES: If any amount is borrowed under the Bridge Facility (or legal documents including the terms sheets and commitment letter are instructed by Solution 6 to be prepared), agreed legal expenses, fees and reasonable out-of-pocket expenses incurred in connection with the implementation of the Bridge Facility will be for the account of the Borrower. ASSIGNMENT: The Lender will be able to assign rights and substitute other debt providers into the Bridge Facility subject to (i) approval by the Borrower (such approval not to be unreasonably withheld); and (ii) 10 business days' notice is given to the Borrower (iii) the bid having been announced to the Australian Stock Exchange. The Borrower and Solution 6 will assist with provision of information reasonably requested by the Lender for achieving such syndication, including assistance with the preparation of, and approval for the release of, an Information Memorandum. Note: It is not the Lender's current intention to syndicate the Bridge Facility although it retains the right to do so. GOVERNING LAW: Law of New South Wales. EX-99.(C)(1) 12 AGREEMENT & PLAN OF MERGER 1 EXHIBIT 99(c)(1) AGREEMENT AND PLAN OF MERGER BY AND AMONG SOLUTION 6 HOLDINGS LIMITED, EIG ACQUISITION CORP. AND ELITE INFORMATION GROUP, INC. DATED AS OF DECEMBER 14, 1999 2 TABLE OF CONTENTS ARTICLE I Definitions................................................ 1 1.1. Definitions................................................. 1 1.2. Rules of Construction....................................... 1 ARTICLE II The Offer................................................. 1 2.1. The Offer................................................... 1 2.2. Company Actions............................................. 2 2.3. Stockholder Lists........................................... 3 2.4. Composition of the Board of Directors; Section 14(f)........ 3 ARTICLE III The Merger............................................... 4 3.1. The Merger.................................................. 4 3.2. Effective Time.............................................. 4 3.3. Effect of the Merger........................................ 4 3.4. Certificate of Incorporation; Bylaws........................ 4 3.5. Directors and Officers...................................... 5 3.6. Stock Options............................................... 5 3.7. Stockholders' Meeting....................................... 5 ARTICLE IV Conversion of Securities; Exchange of Certificates........ 6 4.1. Merger Consideration; Conversion and Cancellation of Securities.................................................. 6 4.2. Exchange of Certificates.................................... 6 4.3. Dissenting Shares........................................... 7 4.4. Closing..................................................... 8 4.5. Stock Transfer Books........................................ 8 ARTICLE V Representations and Warranties of the Company.............. 8 5.1. Organization and Qualification; Subsidiaries................ 8 5.2. Certificate of Incorporation and Bylaws..................... 8 5.3. Capitalization.............................................. 8 5.4. Authorization of Agreement.................................. 9 5.5. Approvals................................................... 10 5.6. No Violation................................................ 10 5.7. Reports and Financial Statements............................ 10 5.8. No Undisclosed Liabilities.................................. 11 5.9. No Material Adverse Effect; Conduct......................... 11 5.10. Schedule 14D-9; Offer Documents; Proxy Statement............ 12 5.11. Properties and Assets....................................... 12 5.12. Contracts................................................... 12 5.13. Litigation; Compliance with Laws............................ 12 5.14. Employee Benefit Plans...................................... 13 5.15. Labor Matters............................................... 14 5.16. Taxes....................................................... 14 5.17. Environmental Matters....................................... 15 5.18. Intellectual Property....................................... 16 5.19. Brokers..................................................... 17 5.20. Opinion of Financial Advisor................................ 17 5.21. Year 2000................................................... 18 5.22. Insurance................................................... 18 ARTICLE VI Representations and Warranties of the Parent Companies.... 18 6.1. Organization and Qualification; Subsidiaries................ 18 6.2. Authorization of Agreement.................................. 18
i 3 6.3. Approvals................................................... 18 6.4. No Violation................................................ 19 6.5. Proxy Statement; Schedule 14D-9............................. 19 6.6. Sufficient Funds............................................ 19 6.7. Brokers..................................................... 19 6.8. DGCL 203.................................................... 19 ARTICLE VII Covenants................................................ 20 7.1. Conduct of Business of the Company.......................... 20 7.2. Prohibited Actions by the Company........................... 20 7.3. No Solicitation............................................. 22 7.4. Access to Information....................................... 24 7.5. Confidentiality Agreement................................... 24 7.6. Reasonable Efforts.......................................... 24 7.7. Public Announcements........................................ 24 7.8. Employee Agreements......................................... 24 7.9. State Takeover Statutes..................................... 24 7.10. Rights Plan................................................. 25 7.11. Employee Benefit Plans...................................... 25 7.12. Indemnification of Directors and Officers................... 25 7.13. Event Notices and Other Actions............................. 26 7.14. Third Party Standstill Agreements; Tortious Interference.... 26 7.15. Payment of Certain Fees..................................... 26 ARTICLE VIII Closing Conditions...................................... 27 8.1. Closing Conditions.......................................... 27 ARTICLE IX Termination, Amendment and Waiver......................... 27 9.1. Termination................................................. 27 9.2. Effect of Termination....................................... 28 9.3. Amendment................................................... 28 9.4. Extension; Waiver........................................... 28 9.5. Fees, Expenses and Other Payments........................... 28 ARTICLE X General Provisions......................................... 29 10.1. Nonsurvival of Representations, Warranties and Agreements... 29 10.2. Notices..................................................... 29 10.3. Headings.................................................... 30 10.4. Severability................................................ 30 10.5. Entire Agreement............................................ 30 10.6. Assignment.................................................. 30 10.7. Parties in Interest......................................... 30 10.8. Failure or Indulgence Not Waiver; Remedies Cumulative....... 30 10.9. Governing Law............................................... 30 10.10. Enforcement................................................. 30 10.11. Counterparts................................................ 31
ii 4 AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger, dated as of December 14, 1999 (this "Agreement"), is by and among Solution 6 Holdings Limited, a New South Wales, Australia corporation ("Parent"), EIG Acquisition Corp., a Delaware corporation and an indirect wholly-owned subsidiary of Parent ("Purchaser"), and Elite Information Group, Inc., a Delaware corporation (the "Company"). Parent and Purchaser are sometimes referred to herein as the "Parent Companies." W I T N E S S E T H WHEREAS the respective Boards of Directors of the Company, Parent, and Purchaser have unanimously approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement. WHEREAS, in furtherance of such acquisition, Parent proposes to cause Purchaser to make a tender offer (as it may be amended from time to time as permitted under this Agreement, the "Offer") to purchase all the issued and outstanding shares of common stock, par value $0.01 per share, of the Company ("Company Common Stock") at a price per share of Company Common Stock of $11.00, net to the seller in cash, upon the terms and subject to the conditions set forth in this Agreement. WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware, Purchaser will merge with and into the Company and the Company will be the Surviving Corporation (as defined below). WHEREAS, concurrently with the execution and delivery of this Agreement, Parent and Purchaser, on the one hand, and certain stockholders of the Company are entering into an agreement dated the date hereof (the "Stockholders Agreement") pursuant to which such stockholders have agreed to take specified actions in furtherance of the transactions contemplated by this Agreement. NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions. Certain capitalized and other terms used in this Agreement are defined in Annex A hereto and are used herein with the meanings ascribed to them therein. 1.2. Rules of Construction. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Unless the context otherwise requires, as used in this Agreement: (a) a term has the meaning ascribed to it; (b) "or" is not exclusive; (c) whenever the words "include," "includes" or "including" are used, they shall be deemed to be followed by the words "without limitation"; and (d) words in the singular include the plural and words in the plural include the singular. ARTICLE II THE OFFER 2.1. The Offer. (a) Subject to the conditions of this Agreement including those set forth in Annex B hereto, as promptly as practicable but in no event later than five Business Days after the date of this Agreement, Purchaser shall, and Parent shall cause Purchaser to, commence the Offer within the meaning of the applicable Regulations of the SEC. The obligation of Purchaser to, and of Parent to cause Purchaser to, commence the Offer or accept for payment, or pay for, any shares of Company Common Stock tendered pursuant to the Offer shall be 1 5 subject to the conditions set forth in Annex B (any of which may be waived by Purchaser in its sole and reasonable judgment provided that, without the consent of the Company, Purchaser may not waive the Minimum Tender Condition) and to the other provisions of this Agreement. The initial expiration date of the Offer shall be the 20th Business Day following the commencement of the Offer (determined using Rule 14d-1(e)(6) under the Exchange Act). Purchaser expressly reserves the right to modify the terms of the Offer, except that, without the consent of the Company, Purchaser shall not (i) reduce the number of shares of Company Common Stock subject to the Offer, (ii) reduce the price per share of Company Common Stock to be paid pursuant to the Offer, (iii) modify or add to the conditions set forth in Annex B in any manner adverse to the holders of shares of Company Common Stock, (iv) except as provided in the next sentence, extend the Offer, (v) change the form of consideration payable in the Offer or (vi) otherwise amend the Offer in any manner adverse to the holders of shares of Company Common Stock. Notwithstanding the foregoing, Purchaser may, without the consent of the Company, (i) extend the Offer, if at the scheduled expiration date of the Offer any of the conditions to Purchaser's obligation to purchase shares of Company Common Stock are not satisfied, until such time as such conditions are satisfied or waived; provided, however, that the expiration date shall not be later than the Termination Date as a result of such extension, (ii) extend the Offer for a period of not more than 10 Business Days beyond the expiration date that would otherwise be permitted under clause (i) of this sentence, if on the date of such extension (x) less than 90% of the Company Common Stock have been validly tendered and not properly withdrawn pursuant to the Offer and (y) Purchaser has permanently waived all of the conditions to the Offer set forth in Annex B (other than conditions that are not legally capable of being satisfied and conditions that have not been satisfied because of the willful or intentional action or inaction of the Company), and (iii) extend the Offer for any period required by any Regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer. If, on any scheduled expiration date of the Offer, any of the conditions set forth in Annex B have not been satisfied or waived and such unsatisfied conditions are still capable of being satisfied, the Company may require Purchaser to extend the expiration date of the Offer for a period of not more than 10 Business Days; provided, however, that Purchaser shall not be required to extend the expiration date later than the Termination Date. On the terms and subject to the conditions of the Offer and this Agreement, Purchaser shall, and Parent shall cause Purchaser to, pay for all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer that Purchaser becomes obligated to purchase pursuant to the Offer as soon as practicable after the expiration of the Offer. (b) Notwithstanding anything to the contrary contained in this Agreement, Parent and Purchaser shall not be required to commence the Offer in any jurisdiction other than the United States of America. (c) On the date of the commencement of the Offer, Purchaser shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer ("Schedule 14D-1") which will contain an offer to purchase and form of the related letter of transmittal (the Schedule 14D-1 and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, collectively, the "Offer Documents"). Parent, Purchaser, and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect and Parent and Purchaser further agree to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and be disseminated to holders of shares of Company Common Stock, in each case, as and to the extent required by applicable federal securities Laws. (d) Subject to the terms and conditions of this Agreement, Parent shall provide or cause to be provided to Purchaser on a timely basis the funds necessary to purchase any shares of Company Common Stock that Purchaser becomes obligated to purchase pursuant to the Offer. 2.2. Company Actions. The Company hereby consents to the Offer and represents that its Board of Directors (at a meeting duly called and held) has (a) determined that the Offer and the Merger are fair to the stockholders of the Company and are in the best interests of the stockholders of the Company, (b) approved this Agreement, the Offer, the Merger and the other Transaction Agreements, which approval (assuming the accuracy of the representations and warranties in Section 6.8) constitutes approval of each of the Transactions 2 6 for purposes of the applicable provisions of the DGCL, including Section 203 of the DGCL, and (c) resolved to recommend acceptance of the Offer and approval and adoption of this Agreement and the Merger by the stockholders of the Company. The Financial Advisor has delivered to the Board of Directors of the Company its opinion that the consideration to be received by the holders of shares of Company Common Stock in the Offer and the Merger is fair to the holders of shares of Company Common Stock from a financial point of view. The Company hereby agrees to file a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the "Schedule 14D-9") containing such recommendation with the SEC (and the information required by Section 14(f) of the Exchange Act) and to mail such Schedule 14D-9 to the stockholders of the Company; provided that such recommendation may be withdrawn, modified or amended by the Company's Board of Directors only to the extent permitted by Section 7.3(b). The Company shall use its reasonable best efforts to cause such Schedule 14D-9 to be filed on the same date as Purchaser's Schedule 14D-1 is filed and mailed together with the Offer Documents. Purchaser agrees to give the Company and its counsel a reasonable opportunity to review and comment on the Schedule 14D-1 prior to Purchaser's filing of the Schedule 14D-1 with the SEC. Purchaser agrees to provide the Company and its counsel in writing with any comments Purchaser or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-1 promptly after the receipt thereof. Each of the Company, Parent, and Purchaser agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to the holders of shares of Company Common Stock, in each case, as and to the extent required by applicable federal securities Laws. The Company agrees to give Purchaser and its counsel a reasonable opportunity to review and comment on the Schedule 14D-9 prior to the Company's filing of the Schedule 14D-9 with the SEC. The Company agrees to provide Purchaser and its counsel in writing with any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt thereof. 2.3. Stockholder Lists. In connection with the Offer, the Company will promptly furnish Purchaser with mailing labels, security position listings and any available listing or computer file containing the names and addresses of the record holders of shares of Company Common Stock as of a recent date and of those Persons becoming record holders subsequent to such date (to the extent available), together with all other information in the Company's possession or control regarding the beneficial owners of shares of Company Common Stock and shall furnish Purchaser with such information and assistance (including, to the extent available, updated lists of stockholders, security position listings and computer files) as Purchaser or its agents may reasonably request in communicating the Offer to the record and beneficial holders of shares of Company Common Stock. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate this Agreement, Parent and Purchaser shall hold in confidence the information contained in any such labels, listings and files, shall use such information only in connection with the Offer and the Merger and, if this Agreement is terminated, shall, upon request, deliver to the Company or destroy all copies of such information then in their possession, followed promptly by written certification of copies destroyed, if any. 2.4. Composition of the Board of Directors; Section 14(f). Promptly upon the acceptance for payment of, and payment by Purchaser for, any shares of Company Common Stock pursuant to the Offer, Purchaser shall be entitled to designate such number of directors on the Board of Directors of the Company as will give Purchaser, subject to compliance with Section 14(f) of the Exchange Act, representation on the Board of Directors of the Company equal to at least that number of directors, rounded up to the next whole number, which is the product of (a) the total number of directors on the Company's Board of Directors (giving effect to the directors elected pursuant to this sentence) multiplied by (b) the percentage that (i) such number of shares of Company Common Stock so accepted for payment and paid for by Purchaser plus the number of shares of Company Common Stock otherwise owned by Purchaser or any other Subsidiary of Parent bears to (ii) the number of such shares outstanding, and the Company shall, at such time, cause Purchaser's designees to be so elected; provided, however, that in the event that Purchaser's designees are appointed or elected to the Board of Directors of the Company, until the Effective Time the Board of the Directors of the Company shall have at least two directors who are directors on the date of this Agreement (the "Independent Directors"); 3 7 and provided further that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall be entitled to designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of this Agreement or, if no Independent Director then remains, the other directors promptly shall designate two persons to fill such vacancies who shall not be officers, employees, stockholders or Affiliates of Parent or Purchaser, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Subject to applicable Law, the Company shall take all action reasonably requested by Parent necessary to effect any such election, including mailing to its stockholders the information statement required under Rule 14f-1 containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company shall make such mailing with the mailing of the Schedule 14D-9. Purchaser shall supply to the Company in a timely manner, and shall be solely responsible for, any information with respect to Purchaser's nominees, officers, directors and affiliates required by such Section 14(f) and 14f-1. Purchaser's designees shall be divided between the classes of directors as necessary to comply with the requirements of the Company's bylaws. In connection with the foregoing, the Company shall promptly, at the option of Purchaser, either increase the size of the Board of Directors of the Company or obtain the resignation of such number of its current directors as is necessary to enable Purchaser's designees to be elected or appointed to the Board of Directors of the Company as provided above. The date on which Purchaser's designees constitute a majority of the Company's Board of Directors is herein referred to as the "Control Date." Following the Control Date but prior to the Effective Time: (i) no amendment or waiver of this Agreement on the Company's behalf pursuant to Sections 9.03 and 9.04, respectively, and no termination of this Agreement pursuant to Section 9.01(a) shall be valid; (ii) there shall be no amendment to the certificate of incorporation or bylaws of the Company; (iii) there shall be no extension of the time for the performance of any of the obligations or other acts of Parent or Purchaser (including any extension of the Closing pursuant to Section 4.4 or the Effective Time of the Merger beyond filing of the Certificate of Merger); and (iv) no waiver of any provision in favor of the Company in the Confidentiality Agreement, unless, in each such case, there are Independent Directors in office and a majority of such Independent Directors approve such amendment, waiver, termination or action, as the case may be. ARTICLE III THE MERGER 3.1. The Merger. Subject to the terms and conditions set forth herein, Purchaser shall merge with and into the Company at the Effective Time (the "Merger"). The terms and conditions of the Merger and the mode of carrying the same into effect shall be as set forth in this Agreement. As a result of the Merger, the separate corporate existence of Purchaser shall cease and the Company shall continue as the Surviving Corporation. At the election of Parent, subject to Section 10.6, Parent or any Affiliate of Parent may be substituted for Purchaser as a constituent corporation in the Merger. 3.2. Effective Time. As soon as practicable after the satisfaction or, if permissible, waiver of the conditions set forth in Article VIII, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware, in such form as required by, and executed in accordance with the relevant provisions of, the DGCL. 3.3. Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of Purchaser and the Company shall vest in the Surviving Corporation, and all debts, liabilities and duties of Purchaser and the Company shall become the debts, liabilities and duties of the Surviving Corporation. 3.4. Certificate of Incorporation; Bylaws. (a) At the Effective Time, the Certificate of Incorporation of the Surviving Corporation shall be amended to read in its entirety the same as the certificate of incorporation of Purchaser in effect immediately 4 8 prior to the Effective Time, until further amended in accordance with applicable law; provided that the name of the Surviving Corporation shall continue to be Elite Information Group, Inc. (b) The Bylaws of Purchaser as in effect immediately prior to the Effective Time shall be the bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law; provided, however, that the Bylaws of Purchaser shall be amended prior to the Effective Time to the extent necessary to comply with Purchaser's obligations under the first sentence of Section 7.12(a). 3.5. Directors and Officers. The directors of Purchaser immediately prior to the Effective Time and/or any individuals designated by Parent shall be the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time and/or any individuals designated by Parent shall be the officers of the Surviving Corporation, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualify. 3.6. Stock Options. (a) Except as provided herein, upon consummation of the Merger, all then outstanding vested and unvested Company Stock Options and all Company Common Stock subject to a vesting requirement ("Restricted Stock") shall be cancelled in exchange for a cash payment from the Company to the holder of a Company Stock Option or Restricted Stock equal to (i) in the case of Company Common Stock Options, the product of (x) the difference between the Per Share Merger Consideration and the per share exercise price of the holder's Company Stock Option multiplied by (y) the number of shares of Company Common Stock subject to the holder's Company Stock Option and (ii) in the case of Restricted Stock, the number of shares of the holder's Restricted Stock multiplied by the per share Merger Consideration. All applicable Taxes shall be withheld from any proceeds payable under this Section 3.6(a). (b) Except as provided herein or as otherwise agreed to by the parties, (i) the Company Option Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant by the Company or any of its Subsidiaries of any interest in respect of the capital stock of the Company or any of its Subsidiaries shall be terminated as of the Effective Time, and (ii) following the Effective Time no holder of Company Stock Options or any participant in the Company Option Plans or any other such plans, programs or arrangements shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any Subsidiary thereof. (c) Notwithstanding subparagraph (a) above or Section 7.2, upon the acceptance of, and payment by Purchaser for, any shares of Company Common Stock pursuant to the Offer, the Company shall redeem any Company Stock Options for the cash payment provided in subparagraph (a) above (assuming an agreement of redemption is made with the applicable optionholder). 3.7. Stockholders' Meeting. (a) If the adoption of this Agreement by the Company's stockholders is required by Law, the Company shall, at Parent's request, as soon as practicable following the expiration of the Offer, prepare and file with the SEC the Proxy Statement in preliminary form, and each of the Company and Parent shall use its reasonable best efforts to respond as promptly as practicable to any comments of the SEC or its staff with respect thereto. The Company shall notify Parent 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 Proxy Statement or for additional information and shall supply Parent with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement. If at any time prior to receipt of the Company Stockholder Approval there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company shall promptly prepare and mail to its stockholders such an amendment or supplement. The Company shall not mail any Proxy Statement, or any amendment or supplement thereto, to which Parent reasonably objects, unless such mailing is required by Law. The Company shall use its reasonable best efforts to cause the Proxy Statement to be mailed to the Company's stockholders as promptly as practicable after filing and clearance with the SEC. 5 9 (b) If the adoption of this Agreement by the Company's stockholders is required by Law, the Company shall, at Parent's request, as soon as practicable following the expiration of the Offer and the purchase of Shares pursuant thereto, duly call, give notice of, convene and hold a meeting of its stockholders (the "Company Stockholders' Meeting") for the purpose of seeking the Company Stockholder Approval. The Company shall, through the Board of Directors of the Company, give the recommendation referred to in Section 2.2. Notwithstanding the foregoing, (i) if Purchaser or any other Subsidiary of Parent shall acquire at least 90% of the outstanding shares of Company Common Stock, the parties shall, at the request of Parent, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a stockholders meeting in accordance with Section 253 of the DGCL and (ii) the parties shall, at the request of Parent, take all necessary and appropriate action to effect the Merger through a written consent in lieu of the Company Stockholders' Meeting to the extent permitted by, and in accordance with, applicable Law. (c) Parent will provide the Company with the information concerning Parent and Purchaser required to be included in the Proxy Statement and will vote, or cause to be voted, all shares of Company Common Stock owned by it or its Subsidiaries in favor of the adoption of this Agreement. ARTICLE IV CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES 4.1. Merger Consideration; Conversion and Cancellation of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of the Parent Companies, the Company or the holders of any of the following securities: (a) Subject to Section 4.3, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (excluding any shares of Company Common Stock described in Section 4.1(c)) shall be converted into the right to receive $11.00 in cash, without interest thereon (the "Per Share Merger Consideration"). (b) All shares of Company Common Stock converted pursuant to Section 4.1(a) shall cease to be outstanding and shall automatically be canceled and retired, and each holder of a Certificate previously evidencing such shares of Company Common Stock shall cease to have any rights as a stockholder of the Company, except the right to receive the Per Share Merger Consideration for each such share. (c) Each share of Company Common Stock that is owned by the Company, Parent or Purchaser immediately prior to the Effective Time shall be cancelled and retired and shall cease to exist and no consideration shall be delivered in exchange therefor. Each share of Company Common Stock owned by any Subsidiary of the Company or Parent (other than Purchaser) immediately prior to the Effective Time shall remain outstanding without change. (d) Each share of common stock, par value $.01 per share, of Purchaser issued and outstanding immediately prior to the Effective Time shall continue to be issued and outstanding as one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. 4.2. Exchange of Certificates. (a) Exchange Fund. Parent shall deposit, or cause to be deposited, on a timely basis immediately after the Effective Time with the Paying Agent in the Exchange Fund, for the payment of the Merger Consideration through the Paying Agent upon surrender of Certificates in accordance with Section 4.2(c), cash in an amount sufficient to make the cash payments due under Section 4.1(a). The Exchange Fund shall not be used for any other purpose except as specified in this Section 4.2. (b) Letter of Transmittal. As soon as reasonably practicable after the Effective Time, Parent will cause the Paying Agent to send a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in a form and have such other provisions as Parent may reasonably specify) to each record holder of shares 6 10 of Company Common Stock immediately prior to the Effective Time, along with other appropriate materials for use in surrendering Certificates to the Paying Agent. (c) Exchange Procedures. Promptly after the Effective Time, the Paying Agent shall distribute to each former holder of shares of Company Common Stock, upon surrender to the Paying Agent for cancellation of one or more Certificates, the Merger Consideration. If the Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate or Certificates are registered, it shall be a condition of payment of the Merger Consideration that the surrendered Certificate or Certificates shall be properly endorsed, with signatures guaranteed, or otherwise in proper form for transfer and that the Person requesting such payment shall pay any transfer or other Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the surrendered Certificate or Certificates or such Person shall establish to the reasonable satisfaction of Parent that such Tax has been paid or is not applicable. Until surrendered as contemplated by this Section 4.2(c), each Certificate shall be deemed from and after the Effective Time to represent only the right to receive upon such surrender the Per Share Merger Consideration for each share of Company Common Stock evidenced by such Certificate. In no event shall the holder of any such surrendered Certificate be entitled to receive interest on any cash to be received in the Merger. Neither the Paying Agent nor any party hereto shall be liable to a holder of shares of Company Common Stock for any amount paid to a public official or Governmental Authority pursuant to any applicable abandoned property, escheat, or similar Law. If any Certificate has not been surrendered prior to the date which is five years after the Effective Time (or immediately prior to such earlier date on which Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Authority), any such cash in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto. (d) Termination of Exchange Fund. Any portion of the Exchange Fund which remains unclaimed by the former holders of shares of Company Common Stock for six months after the Effective Time shall be delivered to Parent, upon demand, and any former holders of shares of Company Common Stock who have not theretofore complied with this Article IV shall thereafter look only to Parent for any cash payment to which they are entitled. (e) Investment of Exchange Fund. The Paying Agent shall invest any cash included in the Exchange Fund, as directed by Parent, on a daily basis. Any interest and other income resulting from such investments shall be paid to Parent. (f) Withholding of Tax. Parent or any of its Affiliates shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any former holder of shares of Company Common Stock such amounts as Parent (or any Affiliate thereof) is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign Tax Law. To the extent that amounts are so withheld by Parent and paid by Parent to the applicable taxing authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the former holder of shares of Company Common Stock in respect of which such deduction and withholding was made by Parent. 4.3. Dissenting Shares. Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock ("Dissenting Shares") which are issued and outstanding immediately prior to the Effective Time and that are held by any Person who is entitled to demand and properly demands appraisal of such Dissenting Shares pursuant to, and who complies in all respects with, Section 262 of the DGCL ("Section 262") shall not be converted as provided in Section 4.1(a), but rather the holders of Dissenting Shares shall be entitled only to payment of the fair value of such Dissenting Shares in accordance with Section 262; provided, however, that if any such holder shall fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262, then the right of such holder to be paid the fair value of such holder's Dissenting Shares shall cease and such Dissenting Shares shall be treated as if they had been converted as of the Effective Time into the Merger Consideration as provided in Section 4.1(a). The Company shall serve prompt notice to Parent of any demands received by the Company for appraisal of any shares of Company 7 11 Common Stock, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands, or agree to do any of the foregoing. 4.4. Closing. The closing (the "Closing") of the Merger shall take place at the offices of Jackson Walker L.L.P., 901 Main Street, Suite 6000, Dallas, Texas 75202 at 10 a.m. (Dallas time) on a date as soon as practicable following the date on which the conditions to the Closing (other than those that, by their terms, are to be satisfied at the Closing) have been satisfied or waived, or at such other place, time and date as the parties hereto may agree. At the conclusion of the Closing on the Closing Date, the parties hereto shall cause the Certificate of Merger to be filed with the Secretary of State of the State of Delaware. 4.5. Stock Transfer Books. At the Effective Time, the stock transfer books of the Company shall be closed and there shall be no further registration of transfers of shares of Company Common Stock thereafter on the records of the Company. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the Company's Disclosure Letter that specifically relates to such Section, the Company hereby represents and warrants to the Parent Companies that: 5.1. Organization and Qualification; Subsidiaries. The Company and each Subsidiary of the Company are legal entities duly organized, validly existing and in good standing under the Laws of their respective jurisdictions of incorporation or organization, have all requisite power and authority and possess all governmental franchises and Permits necessary to enable them to own, lease and operate their respective properties and assets and to carry on their business as it is now being conducted and are duly qualified and in good standing to do business in each jurisdiction in which the nature of the business conducted by them or the ownership or leasing of their respective properties and assets makes such qualification necessary, other than such franchises and Permits and qualifications the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on the Company. Section 5.01 of the Company's Disclosure Letter sets forth, as of the date of this Agreement, a true and complete list of all the Company's directly or indirectly owned Subsidiaries, together with the jurisdiction of incorporation of each Subsidiary and the percentage of each Subsidiary's outstanding capital stock or other equity interests owned of record or beneficially by the Company or another Subsidiary of the Company. Except for such Subsidiaries and as disclosed in Section 5.01 of the Company's Disclosure Letter, neither the Company nor any of its Subsidiaries owns an equity interest in any partnership or joint venture arrangement or other business entity. 5.2. Certificate of Incorporation and Bylaws. The Company has heretofore furnished or made available to Parent complete and correct copies of the certificate of incorporation and the bylaws or the equivalent organizational documents, in each case as amended or restated to the date hereof, of the Company. Neither the Company nor any of its Subsidiaries is in violation of any of the provisions of its certificate of incorporation or bylaws (or equivalent organizational documents). 5.3. Capitalization. (a) The authorized capital stock of the Company consists of (i) 20,000,000 shares of Company Common Stock of which, as of December 13, 1999, 8,409,380 shares were issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights, and (ii) 2,000,000 shares of preferred stock, 400,000 of which are designated Series A Junior Participating Preferred Stock, but none of which are issued and outstanding. As of the date hereof, there were 705,165 shares of Company Common Stock reserved for future issuance pursuant to outstanding Company Stock Options granted pursuant to the Company Option Plans, and the exercise price for each of such Company Stock Options is set forth in the Company's Disclosure Letter. (b) Except as set forth in Section 5.3(a), no shares of Company Common Stock are reserved for issuance, and, except for the Company Stock Options, as listed in Section 5.3(b) of the Company's Disclosure 8 12 Letter, there are no options, warrants, rights, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, contracts, agreements, commitments or arrangements obligating the Company (i) to offer, sell, issue or grant any shares of, or any options, warrants or rights of any kind to acquire any shares of, or any securities that are convertible into or exchangeable for any shares of, capital stock of the Company, (ii) to redeem, purchase or acquire, or offer to purchase or acquire, any outstanding shares of, or any outstanding options, warrants or rights of any kind to acquire any shares of, or any outstanding securities that are convertible into or exchangeable for any shares of, capital stock of the Company or (iii) to grant any Lien on any shares of capital stock of the Company. (c) Except as set forth in Section 5.3(c) of the Company's Disclosure Letter, (i) the issued and outstanding shares of capital stock of, or other equity interests in, each of the Subsidiaries of the Company that are owned by the Company or any of its Subsidiaries have been duly authorized and are validly issued, and, with respect to capital stock, are fully paid and nonassessable, and were not issued in violation of any preemptive or similar rights of any past or present equity holder of such Subsidiary; (ii) all such issued and outstanding shares, or other equity interests, that are indicated as owned by the Company or one of its Subsidiaries in Section 5.3(c) of the Company's Disclosure Letter are owned (A) beneficially as set forth therein and (B) free and clear of all Liens except as described therein; (iii) no shares of capital stock of, or other equity interests in, any Subsidiary of the Company are reserved for issuance, and there are no options, warrants, rights, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, contracts, agreements, commitments or arrangements obligating the Company or any of its Subsidiaries (A) to offer, sell, issue, grant, pledge, dispose of or encumber any shares of capital stock of, or other equity interests in, or any options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, or any securities that are convertible into or exchangeable for any shares of capital stock of, or other equity interests in, any of the Subsidiaries of the Company or (B) to redeem, purchase or acquire, or offer to purchase or acquire, any outstanding shares of capital stock of, or other equity interests in, or any outstanding options, warrants or rights of any kind to acquire any shares of capital stock of, other equity interests in, or any outstanding securities that are convertible into or exchangeable for, any shares of capital stock of, or other equity interests in, any of the Subsidiaries of the Company or (C) to grant any Lien on any outstanding shares of capital stock of, or other equity interests in, any of the Subsidiaries of the Company. (d) Except for the Company Option Plans listed in Section 5.3(b) of the Company's Disclosure Letter, there are no voting trusts, proxies or other agreements, commitments or understandings of any character to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound with respect to the voting of any shares of capital stock of the Company or any of its Subsidiaries or with respect to the future registration of the offering, sale or delivery of any shares of capital stock of the Company or any of its Subsidiaries under the Securities Act. (e) There are not any bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote ("Voting Company Debt"). 5.4. Authorization of Agreement. (a) The Company has all requisite corporate power and authority to execute and deliver each Transaction Agreement to which it is a party and each instrument required hereby to be executed and delivered by it prior to or at the Closing, to perform its obligations hereunder and thereunder and to consummate the Transactions. The execution and delivery by the Company of each Transaction Agreement to which it is a party and each instrument required hereby to be executed and delivered by it prior to or at the Closing and the performance of its obligations hereunder and thereunder have been duly and validly authorized by all requisite corporate action on the part of the Company (other than, assuming the accuracy of the representations and warranties in Section 6.8, with respect to the Merger, the adoption of this Agreement by the holders of a majority of the outstanding shares of Company Common Stock in accordance with the DGCL). Each Transaction Agreement to which it is a party has been duly executed and delivered by the Company and (assuming due authorization, execution and delivery hereof by the other parties hereto) 9 13 constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the same may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors' rights generally, and (ii) legal principles of general applicability governing the application and availability of equitable remedies. (b) Assuming the accuracy of the representations and warranties contained in Section 6.8: (i) the only vote of holders of any class or series of capital stock of the Company necessary to adopt or approve this Agreement and the Merger is the adoption of this Agreement by the holders of a majority of the outstanding shares of Company Common Stock (the "Company Stockholder Approval"); and (ii) the affirmative vote of the holders of any capital stock of the Company, or any of them, is not necessary to consummate the Offer or any other Transaction, other than the Merger. 5.5. Approvals. Except for the applicable requirements, if any, of (a) the Exchange Act, (b) state securities Laws or blue sky Laws, (c) the HSR Act, (d) the filing and recordation of appropriate merger documents as required by the DGCL and (e) those Laws and Orders noncompliance with which would not reasonably be expected to have a material adverse effect on the ability of the Company to perform its obligations under each Transaction Agreement to which it is a party or to have a Material Adverse Effect on the Company, no filing or registration with, no waiting period imposed by and no Permit or Order of, any Governmental Authority is required under any Law or Order applicable to the Company or any of its Subsidiaries to permit the Company to execute, deliver or perform each Transaction Agreement to which it is a party or any instrument required hereby or thereby to be executed and delivered by it prior to or at the Closing. 5.6. No Violation. Except as set forth in Section 5.6 of the Company's Disclosure Letter, assuming effectuation of all filings and registrations with, termination or expiration of any applicable waiting periods imposed by and receipt of all Permits and Orders of, Governmental Authorities indicated as required in Section 5.5 and adoption of this Agreement by the stockholders of the Company as required by the DGCL, neither the execution and delivery by the Company of any Transaction Agreement to which it is a party or any instrument required hereby or thereby to be executed and delivered by it prior to or at the Closing nor the performance by the Company of its obligations hereunder or thereunder will (a) conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a Material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any Person under, or result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary of the Company under, any provision of (i) any Law or Order applicable to the Company, (ii) the certificate of incorporation or bylaws of the Company or (iii) any contract or agreement to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets is bound, or (b) with the passage of time, the giving of notice or the taking of any action by a third Person, have any of the effects set forth in clause (a) of this Section, except in any such case for any matters described in this Section that would not reasonably be expected to have a Material Adverse Effect on the Company. Prior to the execution of this Agreement, assuming the accuracy of the representations and warranties contained in Section 6.8, the Board of Directors of the Company has taken all necessary action to cause this Agreement and the other Transaction Agreements and the Transactions to be exempt from the provisions of Section 203 of the DGCL No other state takeover statute or similar Law or Regulation applies to the Company with respect to this Agreement, the other Transaction Agreements, the Offer, the Merger or any other Transaction. The Company has been advised by each of its directors and executive officers that each such Person currently intends to tender all shares of Company Common Stock owned by such Person pursuant to the Offer. 5.7. Reports and Financial Statements. (a) The Company has filed all SEC Reports required to be filed by the Company with the SEC (the "Company SEC Documents"). As of its respective date, each Company SEC Document complied in all material respects with the requirements of the Exchange Act or the Securities Act, as the case may be, applicable to such Company SEC Document, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, 10 14 in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Company SEC Document has been revised or superseded by a later filed Company SEC Document, none of the Company SEC Documents contains any untrue statement of a material fact or omits 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 were made, not misleading. No Subsidiaries of the Company are SEC reporting companies. (b) The Company and its Subsidiaries have filed all Reports required to be filed with any Governmental Authorities other than the SEC, including state securities administrators, except where the failure to file any such Reports of the Company would not reasonably be expected to have a Material Adverse Effect on the Company. Such Reports of the Company, including all those filed after the date of this Agreement and prior to the Effective Time, were or will be prepared in all material respects in accordance with the requirements of applicable Law. (c) The Company Consolidated Financial Statements and any consolidated financial statements of the Company (including any related notes thereto) contained in any SEC Reports of the Company filed with the SEC (i) have been or will have been prepared in accordance with applicable accounting requirements and the published Regulations of the SEC and/or in accordance with GAAP consistently applied (except (A) to the extent required by changes in GAAP and (B) with respect to SEC Reports of the Company filed prior to the date of this Agreement, as may be indicated in the notes thereto) and (ii) fairly present the consolidated financial position of the Company and its consolidated Subsidiaries as of the respective dates thereof and the consolidated results of their operations and cash flows for the periods indicated (and include, in the case of any unaudited interim financial statements, reasonable accruals for normal year-end adjustments). 5.8. No Undisclosed Liabilities. Except as set forth in Section 5.8 of the Company's Disclosure Letter, there exist no liabilities or obligations of the Company and its Subsidiaries, whether accrued, absolute, contingent or otherwise, which would be required to be reflected, reserved for or disclosed under GAAP in consolidated financial statements of the Company (including the notes thereto) as of and for the most recent period ended prior to the date this representation and warranty is given or required to be true to satisfy any condition to the Offer or the Merger, other than (a) liabilities or obligations that are adequately reflected, reserved for or disclosed in the Company's Consolidated Financial Statements and (b) liabilities or obligations incurred in the ordinary course of business of the Company since the Balance Sheet Date of similar nature and amount as the liabilities and obligations of the Company as of the Balance Sheet Date. 5.9. No Material Adverse Effect; Conduct. Except as disclosed in the Company SEC Documents filed and publicly available prior to the date of this Agreement (the "Filed Company SEC Documents") or in Section 5.9 of the Company's Disclosure Letter, from the date of the most recent audited financial statements included in the Filed Company SEC Documents, the Company has conducted its business only in the ordinary course, and during such period there has not been: (a) any event, change, effect or development that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on the Company; (b) any declaration, setting aside or payment of any dividend on, or other distribution in respect of (whether in cash, stock or property), any capital stock of the Company or any repurchase for value by the Company of any capital stock of the Company; (c) any split, combination or reclassification of any capital stock of the Company or of any other equity interests in the Company, or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of the Company or of any other equity interests in the Company; (d) (i) any granting by the Company or any Subsidiary of the Company to any director or executive officer of the Company or any Subsidiary of the Company of any increase in compensation, except in the ordinary course of business consistent with past practice or as was required under employment agreements in effect as of the date of the most recent audited financial statements included in the Filed Company SEC Documents, (ii) any granting by the Company or any Subsidiary of the Company to any 11 15 such director or executive officer of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of the date of the most recent audited financial statements included in the Filed Company SEC Documents, or (iii) any entry by the Company or any Subsidiary of the Company into any employment, severance or termination agreement with any such director or executive officer; or (e) any change in accounting methods, principles or practices by the Company or any Subsidiary of the Company materially affecting the consolidated assets, liabilities or results of operations of the Company. 5.10. Schedule 14D-9; Offer Documents; Proxy Statement. None of the information supplied or to be supplied by or on behalf of the Company for inclusion or incorporation by reference in the Offer Documents, the Schedule 14D-9 or the Proxy Statement, including any amendments or supplements thereto, at the time such document is filed with the SEC, at any time it is amended or supplemented or at the time it is first published or sent or given to holders of shares of Company Common Stock, and, in the case of the Proxy Statement, at the time that it or any amendment or supplement thereto is mailed to the Company's stockholders, at the time of the Company Stockholders' Meeting or at the Effective Time, 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; provided, that the foregoing shall not apply to information supplied by or on behalf of Parent or the Purchaser specifically for inclusion or incorporation by reference in any such document. Schedule 14D-9 will comply as to form in all material respects with the provisions of the Exchange Act, except that no representation is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Purchaser for inclusion or incorporation by reference therein. 5.11. Properties and Assets. Except as set forth in Section 5.11 of the Company's Disclosure Letter, the Company and its Subsidiaries own or have rights to use all properties and assets necessary to permit the Company and its Subsidiaries to continue to conduct their businesses as currently being conducted except where the failure to own or have the right to use such properties and assets would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Except as set forth in Section 5.11 of the Company's Disclosure Letter, each of the Company and its Subsidiaries has good and indefeasible fee title to, or valid leasehold interests in, all its material real property, free and clear of all Liens, except for Permitted Liens. As of the date of this Agreement, the Company had cash of over $30 million. There are no Liens on the Company's cash, nor are there any contractual restrictions on the use or distribution of the Company's cash. 5.12. Contracts. Section 5.12(a) of the Company's Disclosure Letter contains a true and complete list of all "Company Contracts". All Company Contracts are in full force and effect, the Company or the Subsidiary of the Company that is a party to or bound by such Company Contract has performed its obligations thereunder to date and, to the Knowledge of the Company, each other party thereto has performed its obligations thereunder to date. Except as set forth in Section 5.12(b) of the Company's Disclosure Letter, neither the Company nor any of its Subsidiaries has received any written notice of the intention of any party to terminate any Company Contract, whether as a termination for convenience or for default of the Company or any Subsidiary thereunder. 5.13. Litigation; Compliance with Laws. There are no actions, suits, investigations or proceedings (including any proceedings in arbitration) pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, at law or in equity, except actions, suits or proceedings that are set forth in Section 5.13 of the Company's Disclosure Letter. Except as set forth in Section 5.13 of the Company's Disclosure Letter, the Company and its Subsidiaries are in compliance with all applicable Laws and Regulations and are not in default with respect to any Order applicable to the Company or any of its Subsidiaries, except such events of noncompliance or defaults that, individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect on the Company. Since January 1, 1994, to the date hereof, neither the Company nor any Subsidiary of the Company has received any written notice of any 12 16 administrative or civil or criminal investigation or audit (other than Tax audits) by any Governmental Authority. 5.14. Employee Benefit Plans. (a) Each Benefit Plan of the Company and its Subsidiaries is listed in Section 5.14(a) of the Company's Disclosure Letter, including, with respect to Terminated Benefit Plans, the date of termination. (b) Except as set forth in Section 5.14(b) of the Company's Disclosure Letter, no event has occurred and, to the Knowledge of the Company, there exists no condition or set of circumstances in connection with which the Company or any of its Subsidiaries could be subject to any liability under the terms of any Benefit Plan, or under ERISA, or, with respect to any Benefit Plan, under the Code or any other applicable Law. Each of the Benefit Plans has been administered in material compliance with its terms and with the applicable provisions of ERISA, the Code and any other applicable Law. (c) Except as set forth in Section 5.14(c) of the Company's Disclosure Letter, as to any Benefit Plan of the Company intended to be qualified under Section 401 of the Code, such Benefit Plan has been determined by the IRS to satisfy in form the requirements of such Section, no event has occurred that, individually or in the aggregate, could be reasonably expected to result in the disqualification of such Benefit Plan (disregarding correction methods under the Employee Plans Compliance Resolution System) and there has been no termination or partial termination of such Benefit Plan within the meaning of Section 411(d)(3) of the Code. (d) As to any Terminated Benefit Plan intended to have been qualified under Section 401 of the Code, such Terminated Benefit Plan received a favorable determination letter from the IRS with respect to its termination, all liabilities with respect to each such plan have been satisfied by the purchase of annuities or otherwise, and each Terminated Benefit Plan has been terminated in accordance with the requirements of law and the terms of the plan. (e) There are no investigations, audits, actions, suits or claims pending (other than routine claims for benefits) or, to the Knowledge of the Company, threatened against, or with respect to, any Benefit Plan or its assets. (f) To the Knowledge of the Company, there is no matter pending (other than routine qualification determination filings) with respect to any Benefit Plan before the IRS, the Department of Labor or the PBGC. (g) All contributions required to be made by the Company or the Company's Subsidiaries to any Benefit Plan pursuant to its terms and provisions have been timely made. (h) Neither the Company or any of its subsidiaries maintain any Current Benefit Plan subject to Title IV of ERISA. (i) Except as set forth in Section 5.14(i) of the Company's Disclosure Letter, no employee of the Company or any Subsidiary of the Company or any fiduciary of a Benefit Plan has a material liability with respect to a Benefit Plan. (j) In connection with the consummation of the Transactions, no payments have been or will be made under any Current Benefit Plan or any other program, agreement, policy or arrangement which would be nondeductible under Section 280G of the Code. (k) Except as set forth in Section 5.14(k) of the Company's Disclosure Letter, the execution and delivery of this Agreement and the consummation of the Transactions will not (i) require the Company or any of its Subsidiaries to pay greater compensation or make a larger contribution to, or pay greater benefits or accelerate payment or vesting of a benefit under, any Current Benefit Plan or any other program, agreement, policy or arrangement or (ii) create or give rise to any additional vested rights or service credits under any Current Benefit Plan or any other program, agreement, policy or arrangement. (l) Except as set forth in Section 5.14(l) of the Company's Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to or is bound by any severance agreement, program or policy. True and 13 17 correct copies of all employment agreements with officers of the Company and its Subsidiaries, and all vacation, overtime and other compensation policies of the Company and its Subsidiaries relating to their employees have been made available to Parent. (m) No Benefit Plan provides retiree medical or retiree life insurance benefits to any Person and neither the Company nor any of its Subsidiaries is contractually or otherwise obligated (whether or not in writing) to provide any Person with life insurance or medical benefits upon retirement or termination of employment, other than as required by the provisions of Sections 601 through 608 of ERISA and Section 4980B of the Code. (n) Neither the Company nor any of its Subsidiaries contributes or has an obligation to contribute, and neither has within six years prior to the date of this Agreement contributed or had an obligation to contribute, to a multiemployer plan within the meaning of Section 3(37) of ERISA. (o) No compensation payable by the Company or any of its Subsidiaries to any of their employees under any Current Benefit Plan or other program, agreement, policy or arrangement is subject to disallowance under Section 162(m) of the Code. (p) All liabilities of Benefit Plans required to be included in the Company's financial statements under financial accounting standards has been so included in the Financial statements. (q) The Company or a Subsidiary of the Company has retained the right to terminate, suspend or amend any Benefit Plan. 5.15. Labor Matters. No collective bargaining agreement to which the Company or any of its Subsidiaries is a party is currently in effect or is being negotiated by the Company or any of its Subsidiaries. There is no pending or, to the Knowledge of the Company, threatened labor dispute, strike or work stoppage against the Company or any of its Subsidiaries. Neither the Company or any of its Subsidiaries nor any representative or employee of the Company or any of its Subsidiaries has committed any unfair labor practices in connection with the operation of the business of the Company and its Subsidiaries, and there is no pending or, to the Knowledge of the Company, threatened charge or complaint against the Company or any of its Subsidiaries by the National Labor Relations Board or any comparable agency of any state of the United States. The Company and its Subsidiaries are in compliance with all applicable federal, state, local or foreign labor Laws. 5.16. Taxes. (a) Except as disclosed in Section 5.16(a) of the Company's Disclosure Letter, (i) the Company and each Subsidiary of the Company, and any affiliated group, within the meaning of Section 1504 of the Code, of which the Company or any Subsidiary of the Company is or has been a member, has filed or will file in a timely manner (within any applicable extension periods) all material Tax Returns required to be filed by the Code or by applicable state, local or foreign tax Laws, and all such Tax Returns are or will be true, complete and accurate in all material respects, (ii) all Taxes with respect to taxable periods covered by such Tax Returns, and all other Taxes for which the Company or any Subsidiary of the Company is or might otherwise be liable, have been timely paid in full or will be timely paid in full by the due date thereof and the most recent audited financial statements contained in the Filed Company SEC Documents for the Company reflect an adequate reserve for all Taxes accruing or payable by the Company and its Subsidiaries for all taxable periods and portions thereof through the date of such financial statements, and (iii) there are no material liens for Taxes with respect to any of the assets or properties of the Company or any Subsidiary of the Company. (b) Except as disclosed in Section 5.16(b) of the Company's Disclosure Letter, no Tax Return of the Company or of any Subsidiary of the Company is under examination by the Internal Revenue Service, and no written notice of such an audit or examination has been received by the Company or any Subsidiary of the Company. (c) Each deficiency resulting from any audit or examination relating to Taxes by any Taxing Authority has been timely paid. No material issues relating to Taxes were raised by the relevant Taxing Authority in any completed audit or examination that can reasonably be expected to recur in a later taxable period. 14 18 (d) Neither the Company nor any Subsidiary of the Company is party to or bound by any tax sharing agreement, tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Taxing Authority). (e) Except as disclosed in Section 5.16(e) of the Company's Disclosure Letter or as disclosed in the most recent audited financial statements included in the Filed Company SEC Documents, neither the Company nor any Subsidiary of the Company shall be required to include in a taxable period ending after the Effective Time taxable income attributable to income that accrued in a Pre-Effective Time Tax period but that was not recognized in any Pre-Effective Time Tax period as a result of the installment method of accounting, the completed contract or percentage contract methods of accounting (including the look-back method under Section 460(b)(2) of the Code), the cash method of accounting or Section 481 of the Code or any comparable provision of state, local, or foreign Tax law, or for any other reason. (f) Except as disclosed in Section 5.16(f) of the Company's Disclosure Letter, (i) there are no outstanding agreements or waivers extending, or having the effect of extending, the statutory period of limitation applicable to any Tax Returns required to be filed with respect to the Company or any Subsidiary of the Company, (ii) neither the Company nor any Subsidiary of the Company, nor any affiliated group, within the meaning of Section 1504 of the Code, of which the Company or any Subsidiary of the Company is or has ever been a member, has requested any extension of time within which to file any Tax Return, which return has not yet been filed , and (iii) no power of attorney with respect to any Taxes has been executed or filed with any Taxing Authority by or on behalf of the Company or any Subsidiary of the Company. (g) The Company and its Subsidiaries have complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code or any comparable provision of any state, local or foreign Laws) and have, within the time and in the manner prescribed by applicable Law, withheld from and paid over to the proper Taxing Authorities all amounts required to be so withheld and paid over under applicable Laws. (h) To the Company's knowledge, no person who holds five percent or more of the stock of the Company is a "foreign person" as defined in Section 1445 of the Code. (i) None of the Company and its Subsidiaries, has been a member of an affiliated group filing a consolidated Federal income Tax Return other than the affiliated group of which the Company is the common parent corporation. 5.17. Environmental Matters. The properties, operations and activities of the Company and its Subsidiaries are in compliance with all material Environmental Laws. The Company and its Subsidiaries and the properties, operations and activities of the Company and its Subsidiaries are not subject to, and have not received written notice of, any existing, pending or, to the Knowledge of the Company, threatened action, suit, investigation, inquiry or proceeding by or before any Court or Governmental Authority under any Environmental Law. All material Permits or applications therefor required to be obtained or filed by the Company or any of its Subsidiaries under any Environmental Law in connection with the properties, operations and activities of the Company and its Subsidiaries have been obtained or filed and are valid and currently in full force and effect, and, to the Company's Knowledge, there are no facts or circumstances that would cause such Permits to be revoked, modified or not renewed under current conditions or in connection with the transactions contemplated by this Agreement. There has been no material release of any hazardous substance, pollutant or contaminant into the environment by the Company or its Subsidiaries or in connection with their properties, operations or activities. There has been no exposure (attributable to the action of the Company or its Subsidiaries) of any Person or property to any hazardous substance, pollutant or contaminant in connection with the properties, operations and activities of the Company and its Subsidiaries in such quantities or of such type as would reasonably be expected to give rise to a claim, demand or suit. Neither the Company nor its Subsidiaries have assumed, whether by contract, operation of Law or otherwise, any liabilities or obligations arising under Environmental Laws in connection with their respective formerly owned properties, businesses, divisions, Subsidiaries, companies or other entities. 15 19 5.18. Intellectual Property. Section 5.18 of the Company's Disclosure Letter contains a complete list of all Patents and Trademarks which are owned by the Company or its Subsidiaries. Except as set forth in Sections 5.6 and 5.18 of the Company's Disclosure Letter: (a) The rights of the Company in and to each item of Intellectual Property are owned or licensed by the Company, free and clear of any Liens (except, in the case of licensed Intellectual Property, as set forth in the license therefor). All of the Company's rights in and to such Intellectual Property owned by the Company are freely assignable by it or its Subsidiaries. As of the date of this Agreement, the Company is under no obligation to pay any royalty, license fee or other similar consideration to any third party or to obtain any approval or consent for use of any of the Intellectual Property (except, in the case of licensed Intellectual Property, as set forth in the license therefor). None of the Intellectual Property owned by the Company or its Subsidiaries is subject to any outstanding judgment, order, decree, or injunction issued by a court of competent jurisdiction; no complaint, action, suit, proceeding, or hearing, is pending or, to the Knowledge of the Company, no charge, investigation, claim or demand, is threatened, which challenges the legality, validity, enforceability, or ownership of any of the Intellectual Property owned and currently used by the Company or its Subsidiaries. (b) No breach or default (or event which with notice or lapse of time or both would result in an event of default) by the Company exists or has occurred, but not been cured, under any License-In or other agreement pursuant to which the Company uses any Intellectual Property, and the consummation of the transactions contemplated by this Agreement will not violate or conflict with or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) or result in a forfeiture under, or constitute a basis for termination of, any such License-In or other agreement, except for such breaches, defaults, violations or conflicts which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. (c) The Company owns or has the right to use all the Intellectual Property necessary to provide, produce, sell or license the services and products currently provided, produced, sold or licensed by the Company and conduct the Company's business as presently conducted, and the consummation of the transactions contemplated hereby will not impair any such rights, including any right of the Company to use or sublicense any Intellectual Property owned by others. The Intellectual Property covers all rights that are necessary to operate the business of the Company as it is presently conducted and to satisfy and perform the contracts, commitments, arrangements and understandings with customers of the Company. The Company has no Knowledge of any reason the Company will not be able to continue to own, use, license or sub-license all Intellectual Property without infringing any enforceable intellectual property rights of any third party. (d) Except for Licensed-In Intellectual Property, no Intellectual Property owned or used by the Company, and no product or service licensed or sold by the Company, infringes any trademark, trade name, copyright or patent, or misappropriates any trade secret, right of publicity, right of privacy or other proprietary right of any Person or would give rise to an obligation to render an accounting to any Person as a result of co-authorship or co-invention; provided, however, that as to Licensed-In Intellectual Property of a third party, such representation is qualified by "to the Knowledge of the Company." The Company has received no written notice of any adversely held patent, trademark, copyright, service mark, trade name or trade secret of any other Person alleging or threatening to assert that the Company's use of any of the Intellectual Property infringes upon or is in conflict with any intellectual property or proprietary rights of any third party. The Company has no Knowledge of any basis for any charge, claim, suit or action asserting any such infringement or asserting that the Company does not have the legal right to use any such Intellectual Property. (e) All the Company's Patents and registered Trademarks listed in Section 5.18 of the Company's Disclosure Schedule as having been filed in, issued by or registered with the United States Patent and Trademark Office or the corresponding offices of other countries have been so duly filed, registered or issued, as the case may be, and have been properly maintained and renewed in accordance with all applicable provisions of law and administrative regulations in the United States and each such other 16 20 country. The Company has used reasonable efforts to diligently protect its rights in such Intellectual Property, and, to the Knowledge of the Company, there have been no acts or omissions by the Company, the result of which would be to compromise the rights of the Company to apply for or enforce appropriate legal protection of such Intellectual Property in the United States or in such countries as the Company has done business within the past year. (f) Each of the Company's employees and those independent contractors retained by the Company who, either alone or in concert with others, created or creates, developed or develops, invented or invents, discovered or discovers, derived or derives, programmed or programs or designed or designs any of the Intellectual Property, has entered into a written agreement with the Company providing, in substance, that all such Intellectual Property shall be owned by, or otherwise assigned to, the Company and that the Company's Proprietary Information shall not be used, or disclosed to any third party except as authorized by the Company. No former employees or independent contractors of the Company have any claim or right to any of the Intellectual Property necessary for the lawful conduct of the Company's business as now conducted. To the Knowledge of the Company, no employee of the Company is a party to or otherwise bound by any agreement with or obligated to any other Person (including, any former employer) which prevents such employee from performing any material obligation or commitment of such employee to the Company under any agreement to which he or she is currently a party. (g) The Company and each of its Subsidiaries has used its reasonable best efforts to protect the proprietary and, as appropriate, confidential nature of all Proprietary Information that it presently owns or uses. For purposes of this Agreement, "Intellectual Property" means all of the following which is owned by, licensed by, licensed to, or used by the Company and its Subsidiaries (including all authorized copies and embodiments thereof that are fixed in a tangible media or form): (i) all registered and unregistered trademarks, service marks, logos, trade names, and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction, and applications in any jurisdiction to register (the "Trademarks"); (ii) all issued U.S. and foreign patents and pending patent applications (including, without limitation, divisionals, continuation, continuation in part, continuing and renewal applications) (the "Patents"); (iii) all registered and unregistered copyrights and all applications to register the same (the "Copyrights"), (iv) all protectable items of trade dress used by the Company and its Subsidiaries, (v) all computer software and protectable databases owned by the Company or under development by, or specifically on behalf of, the Company (the "Software"); (vi) all licenses and agreements pursuant to which the Company has acquired rights in or to the Trademarks, Patents, Copyrights or Software (excluding software and databases licensed to the Company under standard (except for immaterial deviations), nonexclusive software licenses granted to end-user customers by third parties in the ordinary course of such third parties' business) ("Licenses-In"), (vii) all licenses and agreements pursuant to which the Company has licensed or transferred the rights in and to Company Intellectual Property (excluding software licensed by the Company under standard (except for immaterial deviations) non-exclusive software licenses granted to end-user customers by the Company as part of the sale of the Company's products) ("Licenses Out"); and (viii) all confidential and proprietary trade secrets, know-how, processes, procedures, drawings, specifications, designs, plans, proposals, or technical data. ("Proprietary Information"). 5.19. Brokers. Except as set forth in Section 5.19 of the Company's Disclosure Letter, no broker, finder or investment banker (other than the Financial Advisor) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. The estimated fees and expenses incurred and to be incurred by the Company in connection with the Offer, the Merger and the other Transactions (including the fees of the Financial Adviser and the fees of the Company's legal counsel) are set forth in Section 5.19 of the Company's Disclosure Letter. The Company has furnished to Parent a true and complete copy of all agreements between the Company and the Financial Advisor relating to the Merger and the other Transactions. 5.20. Opinion of Financial Advisor. The Company has received the opinion of the Financial Advisor in customary form, dated the date of this Agreement, to the effect that, as of such date, the consideration to be 17 21 received in the Offer and the Merger by the Company's stockholders is fair to the Company's stockholders from a financial point of view. 5.21. Year 2000. The disclosures in the Company's Form 10-Q for the period ending September 30, 1999 regarding the status of "Year 2000 Issues" are true, correct and complete in all material respects as if made on the date of this Agreement. 5.22. Insurance. The Company and its Subsidiaries maintain policies of fire and casualty, liability and other forms of insurance in such amounts, with such deductibles and against such risks and losses as are reasonable for the assets and properties of the Company and its Subsidiaries and as are customary in the Company's industry. As of the date of this Agreement all such policies are in full force and effect, all premiums due and payable thereon have been paid, and no notice of cancellation or termination has been received with respect to any such policy. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE PARENT COMPANIES The Parent Companies hereby represent and warrant to the Company that: 6.1. Organization and Qualification; Subsidiaries. Parent and Purchaser are legal entities duly organized, validly existing and in good standing under the Laws of their respective jurisdictions of incorporation or organization, have all requisite power and authority to own, lease and operate their respective properties and assets and to carry on their business as it is now being conducted and are duly qualified and in good standing to do business in each jurisdiction in which the nature of the business conducted by them or the ownership or leasing of their respective properties and assets makes such qualification necessary, other than such qualifications the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on Parent. 6.2. Authorization of Agreement. Each of Parent and Purchaser has all requisite corporate power and authority to execute and deliver, each Transaction Agreement to which it is a party and each instrument required hereby to be executed and delivered by it prior to or at the Closing, to perform its obligations hereunder and thereunder and to consummate the Transactions. The execution and delivery by Parent and Purchaser of each Transaction Agreement to which it is a party and each instrument required hereby to be executed and delivered by Parent or Purchaser prior to or at the Closing and the performance of their respective obligations hereunder and thereunder have been duly and validly authorized by all requisite corporate action on the part of Parent and Purchaser, respectively. Each Transaction Agreement to which it is a party has been duly executed and delivered by Parent and Purchaser and (assuming due authorization, execution and delivery hereof by the other party hereto) constitutes a legal, valid and binding obligation of Parent and Purchaser, enforceable against Parent and Purchaser in accordance with its terms, except as the same may be limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors' rights generally and (b) legal principles of general applicability governing the application and availability of equitable remedies. 6.3. Approvals. Except for the applicable requirements, if any, of (a) the Exchange Act, (b) state securities Laws or blue sky Laws, (c) the HSR Act, (d) the filing and recordation of appropriate merger documents as required by the DGCL (and other state Laws where Purchaser or the Company are qualified to do business) and (e) those Laws and Orders noncompliance with which would not reasonably be expected to have a material adverse effect on the ability of Parent or Purchaser to perform its obligations under each Transaction Agreement to which it is a party, no filing or registration with, no waiting period imposed by and no Permit or Order of, any Governmental Authority is required under any Law or Order applicable to Parent or Purchaser to permit Parent or Purchaser to execute, deliver or perform each Transaction Agreement to which it is a party or any instrument required hereby or thereby to be executed and delivered by it prior to or at the Closing. 18 22 6.4. No Violation. Assuming effectuation of all filings and registrations with, termination or expiration of any applicable waiting periods imposed by and receipt of all Permits and Orders of, Governmental Authorities indicated as required in Section 6.3, neither the execution and delivery by Parent or Purchaser of any Transaction Agreement to which it is a party or any instrument required hereby or thereby to be executed and delivered by Parent or Purchaser prior to or at the Closing nor the performance by Parent or Purchaser of their respective obligations hereunder or thereunder will (a) conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a Material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any Person under, or result in the creation of any Lien upon any of the properties or assets of Parent or any Subsidiary of Parent under, any provision of (i) any Law or Order applicable to Parent or Purchaser, (ii) the certificate of incorporation or bylaws of Parent or Purchaser or (iii) any contract or agreement to which Parent or any of its Subsidiaries is a party or by which it or any of its properties or assets is bound, or (b) with the passage of time, the giving of notice or the taking of any action by a third Person, have any of the effects set forth in clause (a) of this Section, except in any such case for any matters described in this Section that would not reasonably be expected to have a material adverse effect upon the ability of Parent or Purchaser to perform its obligations under this Agreement or any other Transaction Agreement. 6.5. Proxy Statement; Schedule 14D-9. None of the information supplied or to be supplied by or on behalf of Parent or Purchaser for inclusion or incorporation by reference in the Offer Documents, the Schedule 14D-9 or the Proxy Statement, including any amendments or supplements thereto, incorporation by reference in the Offer Documents, the Schedule 14D-9 or the Proxy Statement, including any amendments or supplements thereto, at the time such document is filed with the SEC, at any time it is amended or supplemented or at the time it is first published or given to holders of shares of Company Common Stock, and, in the case of the Proxy Statement, at the time that it or any amendment or supplement thereto is mailed to the Company's stockholders, at the time of the Company Stockholders' Meeting or at the Effective Time, 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 made therein, in light of the circumstances under which they were made, not misleading; provided that the foregoing shall not apply to information supplied by or on behalf of the Company specifically for inclusion or incorporation by reference in any such document. The Offer Documents will contain (or will be amended in a timely manner so as to contain) all information which is required to be included therein in accordance with the Exchange Act and the rules and regulations thereunder and any other applicable law, and will comply as to form in all material respects with the provisions of the Exchange Act and any other applicable law, except that no representations is made by Parent or Purchaser with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or incorporation by reference therein. 6.6. Sufficient Funds. Parent and Purchaser have access to sufficient funds to consummate the Offer and the Merger on the terms contemplated by this Agreement and to pay related fees and expenses, the evidence of which sufficiency has been provided in Section 6.6 of the Purchaser's Disclosure Letter. 6.7. Brokers. Except for Warburg Dillon Read, no broker, finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by and on behalf of Parent or Purchaser. 6.8. DGCL 203. At no time during the three (3) years prior to the date of this Agreement has Parent, Purchaser, or any of their respective Affiliates, been an "interested stockholder" within the meaning of, and as defined in, Section 203 of the DGCL. 19 23 ARTICLE VII COVENANTS 7.1. Conduct of Business of the Company. The Company hereby covenants and agrees that, prior to the Effective Time, unless otherwise expressly contemplated by this Agreement or consented to in writing by Parent and, after the Control Date, also by a majority of the Independent Directors, it will and will cause each of its Subsidiaries to: (a) operate its business in the usual and ordinary course consistent with past practices; (b) use reasonable efforts to preserve intact its business organization, maintain its material rights and franchises, retain the services of its respective key employees and maintain its relationships with its respective customers and suppliers and others having business dealings with it; (c) maintain and keep its properties and assets in as good repair and condition as at present, ordinary wear and tear excepted, and maintain supplies and inventories in quantities consistent with its customary business practice; and (d) use reasonable efforts to keep in full force and effect insurance and bonds comparable in amount and scope of coverage to that currently maintained. 7.2. Prohibited Actions by the Company. Without limiting the generality of Section 7.1, the Company covenants and agrees that, except as expressly contemplated by this Agreement or otherwise consented to in writing by Parent and after the Control Date, also by a majority of the Independent Directors, which consents shall not be unreasonably withheld or delayed, from the date of this Agreement until the Effective Time, it will not do, and will not permit any of its Subsidiaries to do, any of the following: (a) (i) increase the compensation payable to or to become payable to any director or employee, except for increases in salary or wages of employees in the ordinary course of business and consistent with past practice or as required under any existing employment agreements, and except that the Company may pay annual bonuses for fiscal year 1999 as provided in Item 7 of Section 5.14(a) of the Company's Disclosure Letter; (ii) grant any severance or termination pay (other than pursuant to any existing employment agreements or the normal severance policy or practice of the Company or its Subsidiaries as in effect on the date of this Agreement) to, or enter into or amend in any material respect any employment or severance agreement with, any employee; (iii) establish, adopt, enter into or amend in any material respect any collective bargaining agreement or Benefit Plan of the Company or its Subsidiaries except as required by applicable Law or (iv) take any action to accelerate any rights or benefits, or make any material determinations not in the ordinary course of business consistent with past practice, under any collective bargaining agreement or Benefit Plan of the Company or its Subsidiaries; (b) declare, set aside or pay any dividend on, or make any other distribution in respect of (whether in cash, stock or property), outstanding shares of capital stock, except for dividends by a wholly owned Subsidiary of the Company to the Company or another wholly owned Subsidiary of the Company; (c) redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire, any outstanding shares of capital stock of, or other equity interests in, or any securities that are convertible into or exchangeable for any shares of capital stock of, or other equity interests in, or any outstanding options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, the Company or any of its Subsidiaries (other than (i) any such acquisition by the Company or any of its wholly owned Subsidiaries directly from any wholly owned Subsidiary of the Company in exchange for capital contributions or loans to such Subsidiary or (ii) any purchase, forfeiture or retirement of shares of Company Common Stock or the Company Stock Options occurring pursuant to the terms (as in effect on the date of this Agreement) of any existing Benefit Plan of the Company or any of its Subsidiaries); (d) effect any reorganization or recapitalization; or split, combine or reclassify any of the capital stock of, or other equity interests in, the Company or any of its Subsidiaries or issue or authorize or 20 24 propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of such capital stock or such equity interests; (e) offer, sell, issue or grant, or authorize the offering, sale, issuance or grant of, any shares of capital stock of, or other equity interests in, any securities convertible into or exchangeable for any shares of capital stock of, or other equity interests in, or any options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, or any Voting Company Debt or other voting securities of, the Company or any of its Subsidiaries, or any "phantom" stock, "phantom" stock rights, stock appreciation rights or stock-based performance units, other than issuances of shares of Company Common Stock upon the exercise of the Company Stock Options outstanding at the date of this Agreement in accordance with the terms thereof (as in effect on the date of this Agreement); (f) change the terms of any Company Stock Option; (g) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or in any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets of any other Person (other than the purchase of assets from suppliers or vendors in the ordinary course of business and consistent with past practice); (h) sell, lease, exchange or otherwise dispose of, or grant any Lien with respect to, any of the properties or assets (including technological assets) of the Company or any of its Subsidiaries, except for (i) dispositions of excess or obsolete assets, (ii) sales of inventories in the ordinary course of business and consistent with past practice and (iii) the licensing of software to customers consistent with past practice; (i) adopt any amendments to its certificate of incorporation or bylaws or other organizational documents; (j) effect any change in any accounting methods, principles or practices of the Company, except as may be required by a change in GAAP, or any change in Tax accounting; (k) (i) incur any indebtedness, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its Subsidiaries, guarantee any debt securities of another Person, enter into any "keep well" or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowings pursuant to existing lines of credit incurred in the ordinary course of business consistent with past practice or (ii) make any loans, advances or capital contributions to, or investments in, any other Person, other than to or in the Company or any direct or indirect wholly owned Subsidiary of the Company; (l) enter into any contract which, if such contract is entered into, would be a Material Contract; (m) make or agree to make any new capital expenditure or expenditures other than the capital expenditures contemplated by the Company's annual operating plan for 1999, copy of which has been furnished to Parent prior to the execution of this Agreement and except for capital expenditures from January 1, 2000 through May 1, 2000 not to exceed $732,335 in the aggregate, and capital expenditures described in Section 7.2(m) of the Company's Disclosure Letter; (n) make any nonroutine Tax election or settle or compromise any Tax liability or refund, except as provided in Section 7.2(n) of the Company's Disclosure Letter; (o) (i) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company included in the Filed SEC Documents or incurred in the ordinary course of business consistent with past practice or (ii) cancel any Material indebtedness (individually or in the aggregate) or waive any claims or rights of substantial value; 21 25 (p) enter into any new agreements with, or commitments to, insurance brokers or advisers extending beyond one year or extend any insurance policy beyond one year (including, for the avoidance of doubt, the directors' and officers' liability insurance policies referred to in Section 7.11); or (q) agree in writing or otherwise to do any of the foregoing. 7.3. No Solicitation. (a) From the date of this Agreement until the Effective Time or the termination of this Agreement pursuant to Section 9.1, the Company agrees that it will not, and will not permit any of its Subsidiaries, or any of its or their officers, directors, employees, representatives, agents, or Affiliates, including any investment banker, attorney, or accountant retained by the Company or any of its Subsidiaries (collectively, "Representatives"), to, directly or indirectly (i) initiate, solicit or encourage (including by way of furnishing information), or take any other action to facilitate, any inquiries with respect to or the making of any proposal or offer that constitutes, or may reasonably be expected to lead to, an Acquisition Proposal, (ii) enter into or maintain or continue discussions or negotiate with any Person regarding an Acquisition Proposal or in furtherance of such inquiries with respect to or to obtain an Acquisition Proposal, or (iii) agree to, approve, recommend or endorse any Acquisition Proposal, or authorize or permit any of the Representatives of the Company or any of its Subsidiaries to take any such action, and the Company shall promptly notify Parent of any such inquiries and proposals hereafter received by the Company or any of its Subsidiaries or by any such Representative, relating to any of such matters. Any violation of the restrictions set forth in this Section 7.3 by any Representative of the Company or any of its Subsidiaries, whether or not such Person is purporting to act on behalf of the Company or otherwise, shall be deemed to be a breach of this Section 7.3 by the Company. Notwithstanding the foregoing, the Board of Directors of the Company may, at any time prior to the payment of shares of Company Common Stock pursuant to the Offer, furnish information (pursuant to a customary confidentiality agreement not materially more favorable to the party receiving information than the Confidentiality Agreement and consistent with the Company's disclosure and other obligations under this Agreement, including Section 7.3(c)) to, or engage in discussions or negotiations with, any Person in response to an unsolicited (and the existence of discussions or negotiations with a Person prior to the date of this Agreement shall not create a presumption that a proposal from a Person was solicited) bona fide Acquisition Proposal of such Person that the Board of Directors of the Company determines is reasonably likely to result in a Qualifying Proposal, if, and only to the extent that, (A) the Board of Directors of the Company, after consultation with outside legal counsel to the Company, determines in good faith that failure to do so would result in a breach of the fiduciary duty of the Board of Directors of the Company to the stockholders of the Company under applicable Law, and (B) prior to furnishing such information to, or entering into discussions or negotiations with, such Person the Company provides written notice to Parent to the effect that it is furnishing information to, or entering into discussions or negotiations with, such Person and the Company complies with Section 7.3(c). The Company shall immediately cease and terminate any existing solicitation, initiation, encouragement, activity, discussion or negotiation with any Persons conducted heretofore by it or its Representatives with respect to any Acquisition Proposal. (b) Except as expressly permitted by this Section 7.3, (i) neither the Board of Directors of the Company nor any committee thereof shall (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent or Purchaser, the approval or recommendation by such Board of the Offer or the Merger as set forth in Section 2.02, (B) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal, or (C) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other agreement (each, an "Acquisition Agreement") related to any Acquisition Proposal and (ii) the Company shall not enter into any Acquisition Agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the payment of shares of Company Common Stock pursuant to the Offer, the Board of Directors of the Company may terminate this Agreement but only (A) if the Board of Directors of the Company, after consultation with outside legal counsel to the Company, determines in good faith that failure to do so would result in a breach of the fiduciary duty of the Board of Directors to the stockholders of the Company under applicable Law, (B) if the Company and the Board of Directors of the Company have complied with all the provisions of this Section 7.3, (C) after the second Business Day 22 26 following Parent's receipt of written notice advising Parent that the Board of Directors of the Company is prepared to accept a Qualifying Proposal, and after having received from the Company sufficient and accurate guidance in order to enable Parent to make a bona fide counter proposal, it being understood and agreed that nothing contained in this paragraph shall require the Company to provide to Parent any of the details of such Qualifying Proposal, including the identity of the Person making such Qualifying Proposal and the specific terms of such Qualifying Proposal (during which two day period the Company will negotiate in good faith with Parent or Purchaser concerning any amendments proposed by Parent or Purchaser) and (D) if concurrently with such termination, the Company enters into an Acquisition Agreement with respect to such Qualifying Proposal and pays to Parent the Termination Fee. (c) In addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 7.3, the Company shall promptly advise Parent, orally and in writing, of any request for information or of any Acquisition Proposal. (d) "Acquisition Proposal" means an inquiry, offer or proposal that is made after the date of this Agreement regarding any of the following (other than the Transactions) involving the Company: (i) any merger, consolidation, share exchange, recapitalization, liquidation, dissolution, business combination or other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of a substantial portion of the assets of the Company and its Subsidiaries, taken as a whole, or of any Material Business or of any Subsidiary or Subsidiaries responsible for a Material Business in a single transaction or series of related transactions; (iii) any acquisition of 20% or more of the outstanding shares of capital stock of the Company or the filing of a registration statement under the Securities Act in connection therewith or any other acquisition or disposition the consummation of which would prevent or materially diminish the benefits to Parent of the Merger; or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. "Qualifying Proposal" means any written proposal made by a third party after the date of this Agreement to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or other similar transaction all the shares of Company Common Stock then outstanding or all or substantially all of the assets of the Company and its Subsidiaries which the Board of Directors of the Company determines in good faith (x) (based on the advice of the Financial Advisor or another financial advisor of nationally recognized reputation) that such proposal has a reasonable likelihood of being consummated and (y) (based on the advice of the Financial Advisor or another financial advisor of nationally recognized reputation) that such proposal would, if consummated, be superior to the Company's stockholders from a financial point of view (taking into account any changes to the financial terms of this Agreement proposed by Parent or Purchaser in response to such proposal) when compared to the Offer, the Merger and the other Transactions, taken as a whole. "Material Business" means any business (or the assets needed to carry out such business) that contributed or represented 15% or more of the net sales, the net income or the assets (including equity securities) of the Company and its Subsidiaries taken as a whole. (e) Nothing contained in this Section 7.3 shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders which the Board of Directors of the Company, after consultation with outside legal counsel to the Company, determines in good faith is required by applicable Law; provided that neither the Board of Directors of the Company nor any committee thereof approves or recommends, or publicly proposes to approve or recommend, an Acquisition Proposal unless the Company and the Board of Directors of the Company have complied with all the provisions of this Section 7.3. Notwithstanding anything to the contrary, if the Purchaser has accepted for payment of, and paid for, any shares of Company Common Stock pursuant to the Offer, the Company will duly call, give notice and hold the Stockholders Meeting, if required by the DGCL, for the purpose of considering and taking action upon this Agreement and the Merger whether or not the Board of Directors of the Company has determined at any time after the date hereof it is no longer advisable for the stockholders of the Company to adopt this Agreement. 23 27 7.4. Access to Information. Between the date of this Agreement and the Effective Time, the Company shall, and shall cause its Subsidiaries to: (a) afford to Parent and its officers, directors, employees, accountants, consultants, legal counsel, agents and other representatives full reasonable access during normal business hours and at all other reasonable times to the officers, employees, agents, properties, offices and other facilities of the Company and its Subsidiaries and to their books and records and (b) furnish promptly to Parent and its representatives a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal or state securities Laws and such other information concerning the business, properties, contracts, records and personnel of the Company and its Subsidiaries (including financial, operating and other data and information) as may be reasonably requested, from time to time, by or on behalf of Parent. 7.5. Confidentiality Agreement. Subject to Section 7.7, the parties agree that the provisions of the Confidentiality Agreement shall remain binding and in full force and effect and that the terms of the Confidentiality Agreement are incorporated herein by reference; provided, however, that any consents from the Company necessary under the Confidentiality Agreement for Parent and Purchaser to consummate the Transactions shall be deemed to have been made. The parties shall comply with, and shall cause their respective representatives to comply with, all of their respective obligations under the Confidentiality Agreement until the Effective Time. 7.6. Reasonable Efforts. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable Laws to consummate and make effective as soon as reasonably practicable the Transactions including: (a) cooperating in the preparation and filing of all applications, requests, consents and other filings required by applicable Governmental Authorities or Courts, including filings required by the HSR Act, the Offer Documents, the Schedule 14D-9, the Proxy Statement and any amendments and supplements to any thereof; (b) taking all action reasonably necessary, proper or advisable to secure any necessary consents, approvals or waivers from third parties; (c) contesting any pending legal proceeding, whether judicial or administrative, relating to the Offer or the Merger, including seeking to have any stay or temporary restraining order entered by any Court or other Governmental Authority vacated or reversed; and (d) executing any additional instruments necessary to consummate the Transactions. In case at any time after the Effective Time any further action is necessary to carry out the purposes of this Agreement, the proper officers and directors of each party hereto shall use all reasonable efforts to take all such necessary action. 7.7. Public Announcements. Parent, Purchaser and the Company will consult with each other before issuing any press release or otherwise making any public statements with respect to the Offer or the Merger or this Agreement and shall not issue any such press release or make any such public statement prior to such consultation (and affording the other party or parties an opportunity to comment thereon), except as may be required by applicable Law or Court process or by obligations pursuant to any listing agreement with the NASD or any securities exchange. 7.8. Employee Agreements. Parent acknowledges and agrees that all employment agreements, severance agreements, deferred compensation agreements, and supplemental retirement agreements with the employees of the Company and its Subsidiaries that are listed in Section 7.8 of the Company's Disclosure Letter will be binding and enforceable obligations of the Surviving Corporation to the same extent as they were binding and enforceable obligations of the Company and its Subsidiaries as of the date of this Agreement, except as the parties thereto may otherwise agree or as required by applicable law. 7.9. State Takeover Statutes. Assuming the accuracy of the representations and warranties in Section 6.8, the Company has taken all steps necessary (a) to exempt the Transactions from Section 203 of the DGCL, (b) to ensure that no other state takeover statute or similar Law or Regulation is or becomes applicable to any Transaction Agreement and (c) if any state takeover statute or similar Law or Regulation becomes applicable to any Transaction Agreement, to ensure that the Offer, the Merger and the other Transactions may be consummated as promptly as practicable on the terms contemplated by the Transaction 24 28 Agreements and otherwise to minimize the effect of such Law or Regulation on the Offer, the Merger and the other Transactions. 7.10. Rights Plan. The Board has amended the Rights Agreement so that (i) none of the execution or delivery of this Agreement or the Stockholders Agreement or the making of the Offer or the exercise of Purchaser's rights under the Stockholders Agreement will cause (A) the "Rights" (as defined in the Rights Agreement) to become exercisable under the Rights Agreement, (B) Parent or Purchaser or any of their affiliates to be deemed an "Acquiring Person" (as defined in the Rights Agreement) or (C) the "Stock Acquisition Date" (as defined in the Rights Agreement) to occur upon any such event, (ii) none of the acceptance for payment or payment for Shares by Purchaser pursuant to the Offer, the consummation of the Merger or the exercise of Purchaser's rights under the Stockholders Agreement will cause (A) the Rights to become exercisable under the Rights Agreement or (B) Parent or Purchaser or any of their affiliates to be deemed an Acquiring Person or (C) the Stock Acquisition Date to occur upon any such event, and (iii) the "Expiration Date" (as defined in the Rights Agreement) shall occur no later than immediately prior to the purchase of shares pursuant to the Offer, a copy of which amendment is attached to Section 7.10 of the Company's Disclosure Letter. 7.11. Employee Benefit Plans. Following the Effective Time, Parent intends to continue the Benefit Plans until it has evaluated the Benefit Plans, market conditions and other factors. However, Parent reserves the right to cancel any and all Benefit Plans at any time, in which event, as to any such cancelled Benefit Plan, Parent shall grant all employees of the Surviving Corporation and its Subsidiaries on the date of such cancellation credit for vesting and eligibility purposes for all service with the Surviving Corporation and any Subsidiary of the Surviving Corporation prior to the date of such cancellation under all Benefit Plans of Parent or its Subsidiaries (other than the Surviving Corporation and its Subsidiaries) in which such employees shall become eligible to participate as if such service with the Surviving Corporation or any Subsidiary of the Surviving Corporation and their respective predecessors was service with Parent or any Subsidiary of Parent (other than the Surviving Corporation and its Subsidiaries). In the event any severance agreement, program or policy requires the payment of benefits solely as a result of the transactions contemplated under agreement, the Company will prior to the Closing amend such agreement, program or policy to prevent the payment of benefits solely as a result of the transactions contemplated under this agreement. 7.12. Indemnification of Directors and Officers. (a) Purchaser agrees that all rights to indemnification or exculpation (to the extent provided in the certificate of incorporation of the Company) for acts or omissions occurring prior to the Effective Time in favor of the current or former directors, officers or employees of the Company and its Subsidiaries as provided in their respective certificates of incorporation or bylaws shall survive the Merger and shall continue in full force and effect in accordance with their terms for a period of six years from the Effective Time. In addition, until the sixth (6th) anniversary of the Effective Time, Parent shall cause the Surviving Corporation to maintain in effect with respect to matters occurring prior to the Effective Time, to the extent available at less than 300% of current premiums, the policies of directors' and officers' liability insurance currently maintained by the Company (or policies substantially similar in amount and coverage) or, in the alternative, may cause similar coverage to be included in Parent's directors' and officers' liability coverage (if available). The Company shall not increase, amend or change any rights to indemnification or exculpation after the date hereof. (b) If any claims for indemnification as provided in subparagraph (a) above cannot be satisfied by the Surviving Corporation (through its own means and/or directors' and officers' liability insurance) and the Surviving Corporation has distributed assets to Parent or any of Parent's Affiliates or has otherwise transferred any assets to or for the benefit of Parent or any of Parent's affiliates (whether by loan, asset sale or otherwise), then Parent shall be liable for such unsatisfied indemnification claims to the extent of up to the fair market value of any such distributions or transfers (less, in the case of any transfer, the fair market value of any consideration received by the Company in such transfer). (c) If any claim or claims shall, subsequent to the Effective Time and within six years thereafter, be made in writing against any present or former director, officer or employee of the Company based on or arising 25 29 out of the services of such Person prior to the Effective Time in the capacity of such Person as a director, officer or employee of the Company (and such director, officer or employee shall have given Parent written notice of such claim or claims within such six year period), the provisions of subsection (a) of this Section respecting the rights to indemnity for current or former directors, officers or employees under the certificate of incorporation and bylaws of the Company and its Subsidiaries shall continue in effect until the final disposition of all such claims. (d) Notwithstanding anything to the contrary in this Section 7.12, neither Parent nor the Surviving Corporation shall be liable for any settlement effected without its written consent, which shall not be unreasonably withheld. 7.13. Event Notices and Other Actions. (a) From and after the date of this Agreement until the Effective Time, each party hereto shall promptly notify the other parties hereto of (i) the occurrence or nonoccurrence of any event, the occurrence or nonoccurrence of which has resulted in, or could reasonably be expected to result in, any condition to the Offer set forth in Annex B, or any condition to the Merger set forth in Article VIII, not being satisfied, (ii) the failure of such party to comply with any covenant or agreement to be complied with by it pursuant to this Agreement which has resulted in, or could reasonably be expected to result in, any condition to the Offer set forth in Annex B, or any condition to the Merger set forth in Article VIII, not being satisfied and (iii) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect. No delivery of any notice pursuant to this Section 7.13(a) shall cure any breach of any representation or warranty of such party contained in this Agreement or otherwise limit or affect the remedies available hereunder to the party or parties receiving such notice. (b) The Company and Parent shall not, and shall not permit any of their respective Subsidiaries to, take any action or nonaction that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of such party set forth in this Agreement that is qualified as to materiality becoming untrue, (ii) any of such representations and warranties that is not so qualified becoming untrue in any material respect or (iii) except as otherwise permitted by Section 7.3, any condition to the Offer set forth in Annex B, or any condition to the Merger set forth in Article VIII, not being satisfied. 7.14. Third Party Standstill Agreements; Tortious Interference. During the period from the date of this Agreement through the Effective Time, the Company shall not terminate, amend, modify or waive any provision of any confidentiality or standstill or similar agreement to which the Company or any of its Subsidiaries is a party (other than any involving Parent or customary confidentiality agreements with customers, suppliers and other third parties in the ordinary course of business provided that no such terminations, amendments, modifications or waivers shall, individually or in the aggregate have a Material Adverse Effect on the Company). Subject to the foregoing, during such period, the Company agrees to enforce, to the fullest extent permitted under applicable Law, the provisions of any such agreements, including obtaining injunctions to prevent any breaches of such agreements and to use all reasonable efforts to enforce specifically the terms and provisions thereof in any Court of the United States or any state thereof having jurisdiction. Notwithstanding the foregoing, nothing in this Section 7.14 is intended to prevent the Company from exercising its rights under Section 7.3 in accordance with the provisions of Section 7.3. 7.15. Payment of Certain Fees. Upon consummation of the Merger, Parent shall cause the Surviving Corporation to promptly (but no later than two (2) Business days following such consummation) pay any fees and expenses owed to the Financial Advisor. 26 30 ARTICLE VIII CLOSING CONDITIONS 8.1. Closing Conditions. The obligations of each party to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) This Agreement and the Merger shall have been approved and adopted by the requisite vote of the stockholders of the Company, if required by applicable Law. (b) No Court of competent jurisdiction or Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) which is in effect and which has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger. (c) The applicable waiting period under the HSR Act shall have expired or been terminated. (d) The Purchaser, Parent or their Affiliates shall have accepted for payment and purchased shares of Company Common Stock pursuant to and subject to the conditions of the Offer. ARTICLE IX TERMINATION, AMENDMENT AND WAIVER 9.1. Termination. This Agreement may be terminated and the Offer and the Merger may be abandoned at any time (notwithstanding approval of the Merger by the stockholders of the Company) prior to the Effective Time: (a) by mutual written consent of Parent, Purchaser and the Company; (b) by Parent, Purchaser or the Company if any Court of competent jurisdiction or other Governmental Authority shall have issued a final Order or taken any other final action restraining, enjoining or otherwise prohibiting the consummation of the Offer or the Merger and such Order or other action is or shall have become nonappealable; (c) by Parent or Purchaser if due to an occurrence or circumstance which would result in a failure to satisfy any of the conditions set forth in Annex B hereto, Purchaser shall have (i) failed to commence the Offer within the time required by Regulation 14D under the Exchange Act, (ii) terminated the Offer without purchasing any shares of Company Common Stock pursuant to the Offer or (iii) failed to accept for payment shares of Company Common Stock pursuant to the Offer prior to May 1, 2000 (the "Termination Date"); (d) by the Company if (i) there shall not have been (x) any breach or breaches of any representation or warranty or (y) any breach or breaches of a covenant or agreement on the part of the Company under this Agreement that, individually or in the aggregate, materially adversely affect (or materially delay) the consummation of the Offer and Purchaser shall have (A) failed to commence the Offer within the time required by Regulation 14D under the Exchange Act, (B) terminated the Offer without purchasing any shares of Company Common Stock pursuant to the Offer or (C) failed to accept for payment shares of Company Common Stock pursuant to the Offer prior to the Termination Date, or (ii) prior to the payment for shares of Company Common Stock pursuant to the Offer, concurrently with the execution of an Acquisition Agreement under the circumstances permitted by Section 7.3; provided that such termination under this clause (ii) shall not be effective unless the Company and the Board of Directors of the Company shall have complied with all their obligations under Section 7.3 and until payment of the Termination Fee pursuant to Section 9.5(b); (e) by Parent or Purchaser prior to the purchase of shares of Company Common Stock pursuant to the Offer, if (i) Purchaser shall be entitled to terminate the Offer pursuant to paragraph (b)(i) of Annex B, (ii) there shall have been any breach of any covenant or agreement on the part of the Company under this Agreement which materially adversely affects (or materially delays) the consummation of the 27 31 Offer, which shall not have been cured prior to the earlier of (A) 10 days following notice of such breach and (B) two Business Days prior to the date on which the Offer expires, provided, however, that the Company shall have no right to cure a breach of Section 7.3, (iii) the Board of Directors of the Company or any committee thereof shall have withdrawn or modified (including by amendment of Schedule 14D-9) in a manner adverse to Purchaser its approval or recommendation of the Offer, the Merger or this Agreement or shall have recommended to the Company's stockholders a Third Party Acquisition, or (iv) there shall not have been validly tendered and not withdrawn prior to the expiration of the Offer at least a majority of the Fully Diluted Shares; or (f) by the Company prior to the purchase of any shares of Company Common Stock pursuant to the Offer if (i) there shall have been a breach of any representation or warranty in this Agreement on the part of Parent or Purchaser which materially adversely affects (or materially delays) the consummation of the Offer or the Merger or (ii) there shall have been a breach of any covenant or agreement in this Agreement on the part of Parent or Purchaser which materially adversely affects (or materially delays) the consummation of the Offer or the Merger which shall not have been cured prior to the earliest of (A) 10 days following notice of such breach and (B) two Business Days prior to the date on which the Offer expires. 9.2. Effect of Termination. In the event of the termination and abandonment of this Agreement pursuant to Section 9.1, this Agreement shall forthwith become void and have no effect, without any liability on the part of any party hereto or its Affiliates, directors, officers or stockholders, other than the provisions of this Section 9.2 and Sections 5.19, 6.7, 7.5 and 9.5 and Article X and the Confidentiality Agreement. Nothing contained in this Section 9.2 shall relieve any party from liability for any antecedent breach of this Agreement. 9.3. Amendment. This Agreement may be amended by action taken by the Company, Parent and Purchaser at any time before or after any adoption of this Agreement by the stockholders of the Company (whether or not such adoption is required); provided that after the date of adoption of this Agreement by the stockholders of the Company, no amendment shall be made that by Law requires further approval of such stockholders without the approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of all the parties. 9.4. Extension; Waiver. At any time prior to the Effective Time, a party may (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties of the other parties contained herein or in any document, certificate or writing delivered pursuant hereto or (c) waive compliance with any of the agreements or conditions of the other parties hereto contained herein; provided that after the date of adoption of the Merger by the stockholders of the Company, no extensions or waivers shall be made that by Law requires further approval by such stockholders without the approval of such stockholders. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. 9.5. Fees, Expenses and Other Payments. (a) Except as provided in Section 9.5(b) of this Agreement, all fees and expenses incurred by the parties hereto shall be borne solely and entirely by the party which has incurred such fees and expenses. (b) If: (i) Parent or Purchaser terminates this Agreement pursuant to Section 9.1(e)(i) (other than a termination resulting from an event or circumstance that causes a Material Adverse Effect with respect to the Company after the date of this Agreement, which event or circumstance was not caused by the willful or intentional action or inaction by the Company) or pursuant to Section 9.1(e) (ii) (other than as a result of a breach of Section 7.3), and in any such case, any proposal for a Third Party Acquisition shall have been made on or prior to the date of such termination and in any such case, within 12 months thereafter the Company enters into an agreement with respect to the consummation of a Third Party Acquisition or a Third Party Acquisition is otherwise consummated; 28 32 (ii) Parent or Purchaser terminates this Agreement pursuant to Section 9.1(e)(ii) as a result of a breach of Section 7.3 or pursuant to Section 9.1(e)(iii); or (iii) the Company terminates this Agreement pursuant to Section 9.1(d)(ii); or (iv) if Parent or Purchaser terminates, or does not purchase any shares of Company Common Stock under, the Offer, and prior to such termination an Acquisition Proposal is publicly announced, and within twelve (12) months after such termination, the transactions contemplated by such Acquisition Proposal (as may be modified or amended) are consummated; then, in each case, the Company shall pay to Parent, within two Business Days following the execution and delivery of such agreement or such occurrence, as the case may be, or simultaneously with such termination pursuant to Section 9.1(d)(ii), a fee, in cash, of $3 million (the "Termination Fee). (c) Any payment required to be made pursuant to Section 9.5(b) of this Agreement shall be made to Parent by wire transfer of immediately available funds to an account designated by Parent. ARTICLE X GENERAL PROVISIONS 10.1. Nonsurvival of Representations, Warranties and Agreements. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 10.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. 10.2. Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given upon receipt, if delivered personally, mailed by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses or sent by electronic transmission to the telecopier number specified below: (a) If to either of the Parent Companies: Solution 6 Holdings Limited Town Hall House Level 21, 456 Kent Street Sydney, New South Wales, Australia 2000 Attention: Thomas A. Montgomery Telecopier No.: 011-612-9278-0702 with a copy to: Jackson Walker L.L.P. 901 Main Street, Suite 6000 Dallas, Texas 75202 Attention: Richard F. Dahlson Telecopier No.: (214) 953-6187 (b) If to the Company: Elite Information Group, Inc. 5100 West Gold Leaf Circle Los Angeles, California 90056 Attention: Christopher K. Poole Telecopier No.: (323) 292-3975 29 33 with a copy to: Robinson Bradshaw & Hinson, P.A. 101 North Tryon Street, Suite 1900 Charlotte, North Carolina 28246 Attention: Patrick S. Bryant Telecopier No.: (704) 378-4000 or to such other address or telecopier number as any party may, from time to time, designate in a written notice given in a like manner. Notice given by telecopier shall be deemed received on the day the sender receives telecopier confirmation that such notice was received at the telecopier number of the addressee. Notice given by mail as set out above shall be deemed received three days after the date the same is postmarked. 10.3. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 10.4. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. 10.5. Entire Agreement. This Agreement (together with the Annexes, the Company's Disclosure Letter, the Confidentiality Agreement and the other Transaction Agreements) constitutes the entire agreement of the parties, and supersedes all prior agreements and undertakings, both written and oral, among the parties, with respect to the subject matter hereof. 10.6. Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of Law or otherwise by any of the parties without the prior written consent of the other parties, except that Purchaser may assign, in its sole discretion, any of or all its rights (including the right to purchase Shares in the Offer), interests and obligations under this Agreement to Parent or to an Affiliate of Parent, but no such assignment shall relieve Purchaser of any of its obligations under this Agreement. Any attempted assignment in violation of this Section 10.06 shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. 10.7. Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and its successors and permitted assigns, and, except as provided in Article III, Article IV and Section 7.12 nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any rights, benefits or remedies or any nature whatsoever under or by reason of this Agreement. 10.8. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. 10.9. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW. 10.10. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent 30 34 breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Delaware state court or any Federal court located in the State of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Delaware state court or any Federal court located in the State of Delaware in the event any dispute arises out of this Agreement or any transaction contemplated by this Agreement (and Parent agrees that promptly after the date hereof, Parent will appoint CT Corporation as agent for service of process in Delaware for such purpose), (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it will not bring any action relating to this Agreement or any transaction contemplated by this Agreement in any court other than any Delaware state court or any Federal court sitting in the State of Delaware and (d) waives any right to trial by jury with respect to any action related to or arising out of this Agreement or any transaction contemplated by this Agreement. The parties irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware or of the United States of America located in the State of Delaware, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 10.11. Counterparts. This Agreement may be executed in multiple counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first written above by their respective officers or directors thereunto duly authorized. SOLUTION 6 HOLDINGS LIMITED. By: /s/ THOMAS A. MONTGOMERY ---------------------------------- Name: Thomas A. Montgomery ------------------------------------ Title: CEO ------------------------------------ ELITE INFORMATION GROUP, INC. By: /s/ CHRISTOPHER K. POOLE ---------------------------------- Name: Christopher K. Poole ------------------------------------ Title: CEO ------------------------------------ 31 35 ANNEX A SCHEDULE OF DEFINED TERMS The following terms when used in the Agreement shall have the meanings set forth below unless the context shall otherwise require: "Acquisition Agreement" shall have the meaning ascribed to such term in Section 7.3(b). "Acquisition Proposal" shall have the meaning ascribed to such term in Section 7.3(d). "Affiliate" shall mean, with respect to any Person, any other Person that controls, is controlled by or is under common control with the former Person. "Agreement" shall mean the Agreement and Plan of Merger dated as of December 14, 1999 among Parent, Purchaser and the Company, including any amendments thereto and each Annex (including this Annex A) and Schedule thereto (including the Company's Disclosure Letter). "Balance Sheet Date" shall mean November 30, 1999. "Benefit Plans" shall mean any employee pension benefit plan (whether or not insured), as defined in Section 3(2) of ERISA, any employee welfare benefit plan (whether or not insured) as defined in Section 3(1) of ERISA, any plans that would be employee pension benefit plans or employee welfare benefit plans if they were subject to ERISA, such as foreign plans and plans for directors, any employment contracts, severance or termination pay arrangements, any stock bonus, stock ownership, stock option, stock purchase, stock appreciation rights, phantom stock or other stock plan (whether qualified or nonqualified), and any bonus or incentive compensation plan sponsored, maintained or contributed to by the Company or any of its Subsidiaries for the benefit of any of the present or former directors, officers, employees, agents, consultants or other similar representatives providing services to or for the Company or any of its Subsidiaries in connection with such services or any such plans which have been so sponsored, maintained, or contributed to within six years prior to the date of this Agreement (however, as to employment contracts, and severance or termination pay arrangements, only as to those that are currently in effect); provided, however, that such term shall not include (a) routine employment policies and procedures developed and applied in the ordinary course of business and consistent with past practice, including wage, vacation, holiday and sick or other leave policies, and (b) workers compensation insurance. "Business Day" means any day other than a day on which banks in New York are authorized or obligated to be closed. "Certificate" shall mean an outstanding stock certificate which immediately prior to the Effective Time represented shares of Company Common Stock. "Certain Stockholders" shall have the meaning ascribed to such term in the recitals to the Agreement. "Certificate of Merger" shall have the meaning ascribed to such term in Section 3.2. "Closing" shall have the meaning ascribed to such term in Section 4.4. "Closing Date" shall mean the date of the Closing as determined pursuant to Section 4.4. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the Regulations promulgated thereunder. "Company" shall mean Elite Information Group, Inc., a Delaware corporation. "Company Common Stock" shall have the meaning ascribed to such term in the recitals to the Agreement. "Company Contract" shall mean all contracts, agreements, arrangements and understandings to which the Company or any of its Subsidiaries is a party which fall into any of the following categories: (i) leases; (ii) contracts with customers (including maintenance agreements) as provided in Section 5.12 of the A-1 36 Company's Disclosure Letter or which, as of the date hereof, have a receivable balance of over $50,000 any portion of which is over 120 days past due, which contracts are listed on Section A-1 of the Company's Disclosure Letter; (iii) agreements of resale with third party software providers; (iv) dealer agreements; (v) the Agreement with Data Fusion Technologies, Inc.; (vi) the License Support and Maintenance Agreement with Pivotal Corporation and the Services Agreement with Basys Inc.; (vii) agreements with any employees that cannot be terminated at will without less than a three-month severance/termination payment; (viii) agreements entered into since January 1, 1998 involving the sale of any stock and/or all or substantially all of the assets of the or by the Company or any of its current or former subsidiaries; (ix) loan agreements; (x) noncompetition agreements; (xi) consulting agreements (excluding temporary employee agreements and consulting agreements with installation contractors entered into in the ordinary course of business); or (xii) agreements with financial advisors. "Company Option Plans" shall mean the option plans listed in Section 5.3(a) of the Company's Disclosure Letter. "Company SEC Documents" shall have the meaning ascribed to such term in Section 5.7(a). "Company Stock Options" shall mean stock options granted pursuant to the Company Option Plans. "Company Stockholder Approval" shall have the meaning ascribed to such term in Section 5.4(b). "Company Stockholders' Meeting" shall have the meaning ascribed to such term in Section 3.7(b). "Company's Audited Consolidated Financial Statements" shall mean the consolidated balance sheets of the Company and its Subsidiaries as of December 31, 1998 and December 31, 1997 and the related consolidated statements of income and cash flows for the fiscal years ended December 31, 1998, 1997 and 1996, together with the notes thereto, all as audited by Pricewaterhouse Coopers LLP, under their report with respect thereto dated February 6, 1999 and included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 filed with the SEC. "Company's Consolidated Financial Statements" shall mean the Company's Audited Consolidated Financial Statements and the Company's Unaudited Consolidated Financial Statements. "Company's Disclosure Letter" shall mean a letter dated the date of the Agreement delivered by the Company to the Parent Companies concurrently with the execution of the Agreement, which, among other things, shall identify exceptions to the Company's representations and warranties contained in Article V and covenants contained in Article VII by specific section and subsection references. "Company's Unaudited Consolidated Financial Statements" shall mean the unaudited consolidated balance sheet of the Company and its Subsidiaries as of September 30, 1999, and the related consolidated statements of income and cash flows for the nine-month periods ended September 30, 1999 and September 30, 1998. "Copyrights" shall have the meanings ascribed to such term in Section 5.18. "Confidentiality Agreement" shall mean that certain confidentiality agreement between Parent and the Company entered into in 1999. "Control Date" shall have the meaning ascribed to such term in Section 2.4. "Court" shall mean any court of the United States, any foreign country or any domestic or foreign state, and any political subdivision thereof, or any arbitration tribunal and shall include the European Court of Justice. "Current Benefit Plans" shall mean Benefit Plans that are sponsored, maintained, or contributed to by the Company or any of its Subsidiaries as of the date of this Agreement. "DGCL" shall mean the General Corporation Law of the State of Delaware. "Dissenting Shares" shall have the meaning ascribed to such term in Section 4.3. A-2 37 "Effective Time" shall mean the date and time of the completion of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with Section 3.2 or such later time as Parent and the Company may agree and specify in such certificate. "Environmental Law or Laws" shall mean any and all Laws, enforceable requirements or Orders of any Governmental Authority pertaining to health or the environment currently in effect and applicable to a specified Person and its Subsidiaries, including the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Hazardous & Solid Waste Amendments Act of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of 1990, as amended ("OPA"), any state or local Laws implementing the foregoing federal Laws, and all other environmental conservation or protection Laws. For purposes of the Agreement, the terms "hazardous substance" and "release" have the meanings specified in CERCLA; provided, however, that, to the extent the Laws of the state or locality in which the property is located establish a meaning for "hazardous substance" or "release" that is broader than that specified in CERCLA, such broader meaning shall apply within the jurisdiction of such state or locality, and the term "hazardous substance" shall include all dehydration and treating wastes, waste (or spilled) oil, and waste (or spilled) petroleum products, by-products and derivatives thereof, polychlorinated biphenyls, asbestos, and radioactive material, even if such are specifically exempt from classification as hazardous substances or hazardous wastes pursuant to CERCLA or RCRA or the analogous statutes of any jurisdiction applicable to the specified Person or its Subsidiaries or any of their respective properties or assets. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, and the Regulations promulgated thereunder. "Exchange Act" shall mean the Securities Exchange Act of 1934, and the Regulations promulgated thereunder. "Exchange Fund" shall mean the fund of cash deposited with the Paying Agent pursuant to Section 4.2. "Expenses" shall have the meaning ascribed to such term in the Option Agreement. "Filed Company SEC Documents" shall have the meaning ascribed to such term by Section 5.9. "Financial Advisor" shall mean Volpe Brown Whelan & Company, LLC, the financial advisor to the Company with respect to the Transactions. "Fully Diluted Shares" shall have the meaning ascribed to such term in Annex B. "GAAP" shall mean accounting principles generally accepted in the United States consistently applied by a specified Person. "Governmental Authority" shall mean any governmental agency or authority (other than a Court) of the United States, any foreign country, or any domestic or foreign state, and any political subdivision or agency thereof, and shall include any multinational authority having governmental or quasi-governmental powers. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the Regulations promulgated thereunder. "Independent Directors" shall have the meaning ascribed to such term in Section 2.4. "Intellectual Property" shall have the meaning ascribed to such term in Section 5.18. "IRS" shall mean the Internal Revenue Service. "Knowledge" shall mean, with respect to either the Company or Parent, the actual knowledge (after reasonable inquiry) of: (i) in the case of the Company, Christopher K. Poole, Barry Emerson, Steven Todd and Mark Goldin; and, (ii) in the case of Parent, any executive officer of Parent. A-3 38 "Laws" shall mean all laws, statutes, ordinances and Regulations of the United States, any foreign country, or any domestic or foreign state, and any political subdivision or agency thereof, including all decisions of Courts having the effect of Law in each such jurisdiction. "Leaseholds" shall mean, with respect to any Person, all the right, title and interest of such Person as lessee or licensee, in, to and under leases, licenses, improvements and/or fixtures. "Licenses-In" shall have the meaning ascribed to such term in Section 5.18. "Licenses-Out" shall have the meaning ascribed to such term in Section 5.18. "Lien" shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing), any conditional sale or other title retention agreement, any lease in the nature thereof or the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction. "Material" shall mean is or will be material to the business, properties, assets, condition (financial and other) or results of operations of a specified Person and its Subsidiaries, if any, taken as a whole. "Material Adverse Effect" shall mean any change or effect that is material and adverse to the business, properties, assets, condition (financial and other) or results of operations of a specified Person and its Subsidiaries, if any, taken as a whole, including a material adverse effect on the ability of a specified Person to perform its obligations under each Transaction Agreement to which it is a party, other than any such effect arising out of or resulting from, in the case of a determination with respect to the Company and its Subsidiaries (i) changes in general economic conditions, (ii) general changes or developments in the industries in which the Company and its Subsidiaries operate and (iii) facts or events that are primarily and directly attributable to the announcement of this Agreement and the Transactions. "Material Business" shall have the meaning ascribed to such term in Section 7.3(d). "Material Contract" shall mean any Company Contract, except with respect to contracts with customers, only if such contract is not commercially reasonable or not consistent with past practices. "Merger" shall have the meaning ascribed to such term in Section 3.1. "Merger Consideration" shall mean, as to any Certificate, the amount to be paid to the holder thereof pursuant to the Merger, which amount shall be equal to the product of the number of shares of Company Common Stock evidenced by such Certificate, multiplied by the Per Share Merger Consideration. "Minimum Tender Condition" shall have the meaning ascribed to such term in Annex B. "NASD" shall mean the National Association of Securities Dealers, Inc. "Offer" shall have the meaning ascribed to such term in the recitals to the Agreement. "Offer Closing Date" shall mean the date on which the acceptance for payment and payment by Purchaser for shares of Company Common Stock tendered pursuant to the Offer occurs. "Offer Documents" shall have the meaning ascribed to such term in Section 2.1(c). "Order" shall mean any judgment, order or decree of any Court or Governmental Authority, federal, foreign, state or local. "Parent" shall mean Solution 6 Holdings Limited, a New South Wales, Australia corporation. "Parent Companies" shall have the meaning ascribed to such term in the first paragraph of the Agreement. "Patents" shall have the meaning ascribed to such term in Section 5.18. "Paying Agent" shall mean a bank or trust company designated and appointed by Parent to act in the capacities required thereof under Section 4.2. A-4 39 "PBGC" shall mean the Pension Benefit Guaranty Corporation. "Per Share Merger Consideration" shall have the meaning ascribed to such term in Section 4.01(a). "Permits" shall mean any and all permits, licenses, authorizations, orders, certificates, registrations or other approvals granted by any Governmental Authority. "Permitted Lien" shall mean (i) Liens for taxes not yet due and payable or which are being contested in good faith and by appropriate proceedings, (ii) carriers', warehousemen's, mechanics', materialmen's, repairmen's or other like Liens arising in the ordinary course of business which are less than $10,000 in amount and which are being contested in good faith by appropriate proceedings, or (iii) easements, rights-of-way, encroachments, restrictions, conditions and other similar encumbrances incurred or suffered in the ordinary course of business and which, individually or in the aggregate (A) are not substantial in character, amount or extent in relation to the applicable real property and (B) do not materially detract from the use, utility or value of the applicable real property or otherwise materially impair the Company's present business operations at such location. "Person" shall mean an individual, partnership, limited liability company, corporation, joint stock company, trust, estate, joint venture, association or unincorporated organization, or any other form of business or professional entity, but shall not include a Governmental Authority. "Proprietary Information" shall have the meaning ascribed to such term in Section 5.18. "Proxy Statement" shall mean a proxy statement conforming to the requirements of the Exchange Act and relating to the adoption of this Agreement by the Company's stockholders, if such adoption is required by Law. "Purchaser" shall mean EIG Acquisition Corp., a Delaware corporation and a wholly owned Subsidiary of Parent. "Qualifying Proposal" shall have the meaning ascribed to such term in Section 7.3(d). "Regulation" shall mean any rule or regulation of any Governmental Authority having the effect of Law. "Reports" shall mean, with respect to a specified Person, all reports, registrations, filings and other documents and instruments required to be filed by the specified Person or any of its Subsidiaries with any Governmental Authority (other than the SEC). "Representatives" shall have the meaning ascribed to such term in Section 7.3(a). "Restricted Stock" shall have the meaning ascribed to such term in Section 3.6(a). "Schedule 14D-1" shall have the meaning ascribed to such term in Section 2.1(c). "Schedule 14D-9" shall have the meaning ascribed to such term in Section 2.2. "SEC" shall mean the Securities and Exchange Commission. "SEC Reports" shall mean all of the following filings since December 1, 1996: (a) all Annual Reports on Form 10-K, (b) all Quarterly Reports on Form 10-Q, (c) all proxy statements relating to meetings of stockholders (whether annual or special), (d) all Current Reports on Form 8-K and (e) all other reports, schedules, registration statements or other documents required to be filed during a specified period by a Person with the SEC pursuant to the Securities Act or the Exchange Act. "Section 262" shall have the meaning ascribed to such term in Section 4.3. "Securities Act" shall mean the Securities Act of 1933 and the Regulations promulgated thereunder. "Software" shall have the meaning ascribed to such term in Section 5.18. "Stockholders Agreement" shall have the meaning ascribed to such term in the recitals to this Agreement. A-5 40 A "Subsidiary" of a specified Person shall mean any corporation, partnership, limited liability company, joint venture or other legal entity of which the specified Person (either alone or through or together with any other Subsidiary) owns, directly or indirectly, 50% or more of the stock or other equity or partnership interests the holders 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. "Surviving Corporation" shall mean the Company as the corporation surviving the Merger. "Tax" or "Taxes" shall mean all Federal, state, county, local, municipal, foreign and other taxes, assessments, duties or similar charges of any kind whatsoever, including all corporate franchise, income, sales, use, ad valorem, receipts, value added, profits, license, withholding, payroll, employment, excise, premium, property, customs, net worth, capital gains, transfer, stamp, documentary, social security, environmental, alternative minimum, occupation, recapture and other taxes, and including all interest, penalties and additions imposed with respect to such amounts, and all amounts payable pursuant to any agreement or arrangement with respect to Taxes. "Taxing Authority" shall mean any domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising tax regulatory authority. "Tax Return" or "Tax Returns" shall mean all returns, declarations of estimated tax payments, reports, estimates, information returns and statements, including any related or supporting information with respect to any of the foregoing, filed or to be filed with any Taxing Authority in connection with the determination, assessment, collection or administration of any Taxes. "Terminated Benefit Plans" shall mean Benefit Plans that were sponsored, maintained, or contributed to by the Company or any of its Subsidiaries within six years prior to the date of the Agreement but which have been terminated prior to the date of the Agreement. "Termination Date" shall have the meaning ascribed to such term in Section 9.1(c). "Termination Fee" shall have the meaning ascribed to such term in Section 9.5(b). "Third Party Acquisition" shall mean (a) the acquisition of the Company by merger, consolidation, share exchange, recapitalization, liquidation, dissolution, business combination or other similar transaction by any Person (which includes for these purposes a "person" as defined in Section 13(d)(3) of the Exchange Act) other than Parent, Purchaser or any Affiliate thereof (a "Third Party"); (b) the acquisition by a Third Party of more than 50% of the assets of the Company and its Subsidiaries, taken as a whole; (c) the acquisition by a Third Party of 50% or more of the outstanding Company Common Stock or 50% or more of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Company; (d) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (e) the purchase by the Company or any of its Subsidiaries of more than 30% of the outstanding shares of Company Common Stock. "Trademarks" shall have the meaning ascribed to such term in Section 5.18. "Transaction Agreements" shall mean, collectively, the Agreement and the Stockholders Agreement. "Transactions" shall mean, collectively, the transactions contemplated by the Transaction Agreements. "Voting Company Debt" shall have the meaning ascribed to such term in Section 5.3(e). A-6 41 ANNEX B CONDITIONS OF THE OFFER (a) Notwithstanding any other term of the Offer or the Agreement, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered shares of Company Common Stock promptly after the termination or withdrawal of the Offer), to pay for any shares of Company Common Stock tendered pursuant to the Offer unless (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer that number of shares of Company Common Stock which would represent at least a majority of the Fully Diluted Shares (the "Minimum Tender Condition"), (ii) any waiting period under the HSR Act applicable to the purchase of shares of Company Common Stock pursuant to the Offer shall have expired or been terminated; and (iii) [the Company has amended its Rights Plan so that the stockholders' rights under the Rights Plan are not triggered by the Offer or the Agreement. The term "Fully Diluted Shares" means all outstanding securities entitled generally to vote in the election of directors of the Company on a fully diluted basis, after giving effect to the exercise or conversion of all options, warrants, rights and securities exercisable or convertible into such voting securities. (b) Furthermore, notwithstanding any other term of the Offer or the Agreement, Purchaser shall not be required to commence the Offer, accept for payment or, subject as aforesaid, pay for any shares of Company Common Stock not theretofore accepted for payment or paid for, and may terminate or amend the Offer, (i) with the consent of the Company or (ii) if, at any time on or after the date of the Agreement and before the acceptance of such shares for payment or the payment therefor, any of the following conditions exists: (i) any representation and warranty of the Company in this Agreement that is qualified as to materiality shall not be true and correct or any such representation and warranty that is not so qualified shall not be true and correct in any material respect, as of the date of the Agreement and as of such time, except to the extent such representation and warranty expressly relates to an earlier date (in which case on and as of such earlier date); (ii) the Company shall have breached any of its covenants or agreements contained in the Agreement which breaches, individually or in the aggregate, materially adversely affects (or materially delays) the consummation of the Offer (it being understood that a breach of Section 7.13 of the Agreement shall not result in a failure of this condition to be satisfied unless such breach results in the failure of the condition specified in paragraph (i) above); (iii) there shall be threatened or pending any suit, action or proceeding by any Governmental Authority, or any suit, action or proceeding brought by any other Person that has a reasonable likelihood of success, (A) challenging the acquisition by Parent or Purchaser of any Company Common Stock, seeking to restrain or prohibit the making or consummation of the Offer or the Merger, or seeking to obtain from the Company, Parent or any of their respective Subsidiaries or Affiliates any damages in an amount that would result in a Material Adverse Effect in respect of the Company, taken as a whole, and in the case of Parent or any of its Subsidiaries or Affiliates relating to the Transaction, (B) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective Subsidiaries or Affiliates of any Material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries or Affiliates, or to compel the Company, Parent or any of their respective Subsidiaries or Affiliates to dispose of or hold separate any Material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries or Affiliates, as a result of the Offer, the Merger or any of the other Transactions or (C) which otherwise is reasonably likely to have a Material Adverse Effect on the Company; (iv) there shall be any statute, rule, regulation, legislation, interpretation, judgment, order or injunction threatened, proposed, sought, enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, or any consent or approval withheld with respect to, (A) Parent, the Company or any of their respective Subsidiaries or Affiliates or (B) the Offer or the Merger by any B-1 42 Governmental Authority that has or is reasonably likely to result, directly or indirectly, in any of the consequences referred to in paragraph (iii) above; (v) since the date of the Agreement there shall have occurred any event, change, effect or development that, individually or in the aggregate, has had or is reasonably likely to have, a Material Adverse Effect on the Company; (vi) there shall have occurred and be continuing (A) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States or in Australia (excluding any coordinated trading halt triggered solely as a result of a specified decrease in a market index), (B) a declaration of a banking moratorium by any Governmental Authority or any suspension of payments by any Governmental Authority in respect of banks in the United States or in Australia, (C) any general limitation (whether or not mandatory) by any Governmental Authority in the United States or in Australia on the extension of credit by banks or other lending institutions or (D) in the case of any of the foregoing existing on the date of the Agreement, a material acceleration or worsening thereof; (vii) any Person (which includes a "person" as such term is defined in Section 13(d)(3) of the Exchange Act) other than Purchaser, any of its Affiliates, or any group of which any of them is a member shall have acquired beneficial ownership of more than 20% of the outstanding shares of Company Common Stock or shall have entered into a definitive agreement or an agreement in principle with the Company with respect to a tender offer or exchange offer for any shares of Company Common Stock or a merger, consolidation or other business combination with or involving the Company or any of its Subsidiaries; (viii) the Agreement shall have been terminated in accordance with its terms; which, in the sole judgment of Purchaser or Parent, in any such case, and regardless of the circumstances giving rise to any such condition (including any action or inaction by Parent or any of its Affiliates), makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Purchaser and Parent and may be asserted by Purchaser or Parent regardless of the circumstances giving rise to such condition or may be waived by Purchaser and Parent in whole or in part at any time and from time to time in their sole and reasonable judgment; provided that the Minimum Tender Condition may be waived or modified only by the mutual written consent of Purchaser and the Company. The failure by Parent, Purchaser or any other Affiliate of Parent at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. B-2 EX-99.(C)(2) 13 STOCKHOLDERS AGREEMENT 1 EXHIBIT 99(c)(2) STOCKHOLDERS AGREEMENT This Stockholders Agreement, dated as of December 14, 1999, is by and among Solution 6 Holdings, Limited, a New South Wales, Australia corporation ("Parent"), EIG Acquisition Corp., a Delaware corporation and an indirect wholly-owned subsidiary of Parent ("Purchaser"), and the persons listed on Schedule A hereto (each a "Stockholder" and, collectively, the "Stockholders"). WHEREAS, concurrently with the execution of this Agreement, Parent, Purchaser and Elite Information Group, Inc., a Delaware corporation (the "Company"), are entering into an Agreement and Plan of Merger, dated as of the date hereof (as the same may be amended or supplemented, the "Merger Agreement"; terms used but not defined herein have the meanings set forth in the Merger Agreement), providing for the making of a cash tender offer (as such offer may be amended from time to time as permitted under the Merger Agreement, the "Offer") by Purchaser for shares of Common Stock, par value $.01 per share, of the Company (the "Common Stock") and the merger of the Company and Purchaser (the "Merger"); WHEREAS, each Stockholder is the beneficial owner of the shares of Common Stock set forth opposite such Stockholder's name on Schedule A hereto; such shares of Common Stock, as such shares may be adjusted by stock dividend, stock split, recapitalization, combination or exchange of shares, merger, consolidation, reorganization or other change or transaction of or by the Company, together with shares of Common Stock that may be acquired after the date hereof by such Stockholder, including shares of Common Stock issuable upon the exercise of options to purchase Common Stock (as the same may be adjusted as aforesaid), being collectively referred to herein as the "Shares" of such Stockholder; WHEREAS, pursuant to the Merger Agreement, the Company has irrevocably approved the granting of the options to purchase Common Stock granted herein by the Stockholders and the purchase of such Common Stock by the Purchaser upon exercise of such options for purposes of Section 203 of Delaware General Corporation Law and has irrevocably excepted such grants and purchases from the definition of "acquiring person" and/or "triggering event" and terms of similar import contained in the Company's Rights Plan; and WHEREAS, as a condition to their willingness to enter into the Merger Agreement, Parent and Purchaser have requested that the Stockholders enter into this Agreement; NOW, THEREFORE, to induce Parent and Purchaser to enter into, and in consideration of their entering into, the Merger Agreement, and in consideration of the premises and the representations, warranties and agreements contained herein, the parties agree as follows: 1. Agreement to Sell; Tender. (a) Subject to Section 8 below, as promptly as practicable following the expiration of the Offer (but in no event later than 10:00 a.m., New York City time, on the Business Day immediately after such expiration), each Stockholder hereby severally and not jointly agrees to sell to Purchaser, and Purchaser agrees to purchase, all the Shares owned by such Stockholder not tendered pursuant to Section 1(b) at a price per Share equal to the price per Share paid by Purchaser in the Offer (the "Offer Price"). The obligations of each Stockholder to sell its Shares pursuant to this Section 1(a) is conditioned upon Purchaser purchasing shares of Common Stock pursuant to the Offer. (b) In addition, each Stockholder hereby severally and not jointly agrees that if such Stockholder is directed to tender the Shares it owns as of the date hereof and any Shares it may acquire prior to the expiration of the Offer by Purchaser pursuant to the following sentence, it shall promptly tender all such Shares in the Offer, and it shall not withdraw any Shares so tendered(it being understood that the obligation contained in this sentence is unconditional, subject to Section 8 below). In the event that Purchaser wishes to direct a Stockholder to tender its Shares, Purchaser shall give written notice to such Stockholder to such effect and specifying the number (if less than all) of such Stockholder's Shares. Section 1(a) above shall be deemed satisfied upon completion of the purchase of such Shares in the Offer. 1 2 (c) In addition, each Stockholder hereby severally and not jointly grants to Purchaser an irrevocable option (as to each Stockholder, the "Option") to purchase any of or all the Shares owned by such Stockholder and any of or all the Shares for which any stock options owned by such Stockholder are then exercisable on the date the Option is exercised by the Purchaser (on any date, the "Vested Options") in each case at a price per Share equal to the Offer Price (less, in the case of Vested Options, the applicable exercise price). The Option may be exercised at any time and from time to time after the occurrence of an Exercise Event (as defined below) and on or prior to thirty (30) days following the occurrence of an Exercise Event. In the event that Purchaser wishes to exercise the Option as to a Stockholder, Purchaser shall give written notice(the date of such notice being called the "Notice Date") to such Stockholder and to the Company specifying the number (if less than all) of such Stockholder's Shares, including shares of Common Stock underlying Vested Options, and a place, time and date not later than 10 Business Days from the Notice Date for the closing of such purchase. As used herein, an "Exercise Event" means the occurrence of any of the following events: (i) at any time prior to termination of the Merger Agreement, any corporation, partnership, individual, trust, unincorporated association, or other entity or "person" (as defined in Section 13 (d) (3) of the Exchange Act), other than purchaser or any of its "affiliates" (as defined in the Exchange Act) (a "Third Party"), shall have: (A) commenced or announced an intention to commence a tender offer or exchange offer for any shares, the consummation of which would result in "beneficial ownership" (as defined in the Exchange Act) by such Third Party (together with all such Third Party's affiliates and "associates" (as defined in the Exchange Act)) of 50% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis); (B) acquired beneficial ownership of shares that, when aggregated with any shares already owned by such Third Party, its affiliates and associates, would result in the aggregate beneficial ownership by such Third Party, its affiliates and associates of 10% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis); provided, however, that "Third Party" for purposes of this clause (B) does not include any corporation, partnership, person, other entity or group that beneficially owns more than 10% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis) as of the date hereof and that does not, after the date hereof, increase such ownership percentage by more than an additional 1% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis); (C) acquired assets constituting 10% or more of the total assets or earning power of the Company taken as a whole; (D) entered into an agreement with the Company that contemplates the acquisition of (x) assets constituting 10% or more of the total assets or earning power of the Company taken as a whole or (y) beneficial ownership of 10% or more of the outstanding voting equity of the Company; or (ii) any event has occurred that would allow the Company or Parent to terminate the Merger Agreement under circumstances in which Parent may be or become entitled to a Termination Fee. 2. Representations and Warranties of the Stockholders. Each Stockholder hereby severally represents and warrants to Parent and Purchaser as follows: (a) Such Stockholder has all requisite power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. If such Stockholder is not an individual, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by such Stockholder. This Agreement has been duly executed and delivered by such Stockholder and constitutes a valid and binding obligation of the Stockholder enforceable against such Stockholder in accordance with its terms, except as the same may be limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors' rights generally 2 3 and (b) legal principles of general applicability governing the application and availability of equitable remedies. Except for the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), neither the execution, delivery or performance of this Agreement by such Stockholder nor the consummation by such Stockholder of the transactions contemplated hereby will (i) require any filing with, or permit, authorization, consent or approval of, any Governmental Authority, (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default under, or give rise to any right of termination, amendment, cancellation or acceleration under, or result in the creation of any Lien upon any of the properties or assets of such Stockholder under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, permit, concession, franchise, contract, agreement or other instrument or obligation (a "Contract") to which such Stockholder is a party or by which such Stockholder or any of such Stockholder's properties or assets, including such Stockholder's Shares, may be bound or (iii) violate any Order (as defined in the Merger Agreement) or any Law applicable to such Stockholder or any of such Stockholder's properties or assets, including such Stockholder's Shares, other than, in the case of clause (ii) above, such items that, individually or in the aggregate, have not and could not reasonably be expected to have a material adverse effect on the ability of such Stockholder to perform its obligations under this Agreement. (b) Such Stockholder's Shares and the certificates representing such Shares are now, and at all times during the term hereof will be, held by such Stockholder, or by a nominee or custodian for the benefit of such Stockholder, and such Stockholder is the legal and beneficial owner of and has good and marketable title to such Shares, free and clear of any Liens, proxies, voting trusts or agreements, understandings or arrangements, except for any such Liens or proxies arising hereunder and Liens described on Schedule B attached hereto. Notwithstanding anything in this Agreement to the contrary, the obligations of the Stockholder listed in Schedule B under this Agreement are subject to the matters set forth on Schedule B attached hereto. (c) No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of such Stockholder. (d) Such Stockholder understands and acknowledges that Parent is entering into, and causing Purchaser to enter into, the Merger Agreement in reliance upon such Stockholder's execution and delivery of this Agreement. 3.Representations and Warranties of Parent and the Purchaser. Parent and the Purchaser hereby represent and warrant to the Stockholders as follows: (a) Each of Parent and such Purchaser has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Parent and such Purchaser and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and such Purchaser. This Agreement has been duly executed and delivered by Parent and such Purchaser and constitutes a valid and binding obligation of Parent and Purchaser enforceable in accordance with its terms, except as the same may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors' rights generally and (ii) legal principles of general applicability governing the application and availability of equitable remedies. (b) The Shares will be acquired in compliance with, and such Purchaser will not offer to sell or otherwise dispose of any Shares so acquired by it in violation of the registration requirements of, the Securities Act of 1933, as amended. 4.Covenants of the Stockholders. Each Stockholder severally agrees as follows: (a) Such Stockholder shall not, except as contemplated by the terms of this Agreement, (i) sell, transfer, pledge, assign or otherwise dispose of, or enter into any Contract, option or other arrangement (including any profit sharing arrangement) or understanding with respect to the sale, transfer, pledge, assignment or other disposition of, the Shares to any person other than Purchaser or Purchaser's designee, 3 4 (ii) enter into any voting arrangement, whether by proxy, voting agreement, voting trust, power-of-attorney or otherwise, with respect to the Shares or (iii) take any other action that would in any way restrict, limit or interfere with the performance of its obligations hereunder or the transactions contemplated hereby. (b) Subject to Section 10 below, until the Merger is consummated or the Merger Agreement is terminated, such Stockholder shall not, nor shall such Stockholder permit any investment banker, financial adviser, attorney, accountant or other representative or agent of such Stockholder to, directly or indirectly (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed or reasonably likely to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Acquisition Proposal or (ii) participate in any discussions or negotiations regarding any Acquisition Proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by an investment banker, financial advisor, attorney, accountant or other representative or agent of such Stockholder shall be deemed to be a violation of this Section 4(b) by such Stockholder. (c) At any meeting of stockholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, such Stockholder shall vote (or cause to be voted) such Stockholder's Shares in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the other Transactions (as defined in the Merger Agreement). At any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which the Stockholder's vote, consent or other approval is sought, the Stockholder shall vote (or cause to be voted) the Stockholder's Shares against (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company or any other Acquisition Proposal (collectively, "Alternative Transactions") or (ii) any amendment of the Company's certificate of incorporation or bylaws or other proposal or transaction involving the Company or any of its subsidiaries, which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify the Offer, the Merger, the Merger Agreement or any of the other Transactions (collectively, "Frustrating Transactions"). 5. Grant of Irrevocable Proxy; Appointment of Proxy. (a) Each Stockholder hereby irrevocably grants to, and appoints, Chris Tyler and Thomas A. Montgomery and any other individual who shall hereafter be designated by Parent, and each of them, such Stockholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Stockholder, to vote such Stockholder's Shares, or grant a consent or approval in respect of such Shares, at any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which their vote, consent or other approval is sought, in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement and against any alternative Transaction or Frustrating Transaction. (b) Each Stockholder represents that any proxies heretofore given in respect of such Stockholder's Shares are not irrevocable, and that any such proxies are hereby revoked. (c) Each Stockholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Stockholder under this Agreement. Such Stockholder hereby further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked, subject to Section 8 below. Such Stockholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of the General Corporation Law of the State of Delaware. Such irrevocable proxy shall be valid until the termination of this Agreement pursuant to Section 8 below. 4 5 6. Further Assurances. Each Stockholder will, from time-to-time, execute and deliver, or cause to be executed and delivered, such additional or further transfers, assignments, endorsements, consents and other instruments as Parent or Purchaser may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement and to vest the power to vote such Stockholder's Shares as contemplated by Section 5. Parent and Purchaser jointly and severally agree to use reasonable efforts to take, or cause to be taken, all actions necessary to comply promptly with all legal requirements that may be imposed with respect to the transactions contemplated by this Agreement (including any applicable legal requirements of the HSR Act). 7. Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties without the prior written consent of the other parties, except that Purchaser may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to Parent or to an Affiliate of Parent, but no such assignment shall relieve Purchaser of any of its obligations under this Agreement. 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. Each Stockholder agrees that this Agreement and the obligations of such Stockholder hereunder shall attach to such Stockholder's Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including such Stockholder's heirs, guardians, administrators or successors. 8. Termination. This Agreement shall terminate upon the earlier of (i) the Effective Time or (ii) the termination of the Merger Agreement in accordance with its terms, except that, Section 1(c) shall survive any such termination to the extent provided herein. 9. Stop Transfer. The Company agrees with, and covenants to, Parent and Purchaser that the Company shall not register the transfer of any certificate representing any Stockholder's Shares unless such transfer is made in accordance with the terms of this Agreement. 10. Stockholder Capacity. No person executing this Agreement makes any agreement or understanding herein in his or her capacity as a director or officer of the Company or any subsidiary of the Company. Each Stockholder signs solely in his or her capacity as the beneficial owner of such Stockholder's Shares and nothing herein shall limit or affect any actions taken by a Stockholder in its capacity as an officer or director of the Company or any subsidiary of the Company to the extent specifically permitted by, or specifically permitted in the Merger Agreement. 11. Performance by Purchaser. Parent covenants and agrees for the benefit of the Stockholders that it shall cause Purchaser to perform in full each obligation of Purchaser set forth in this Agreement. 12. Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any federal court located in the State of Delaware or in any Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (I) consents to submit such party to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that such party will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that such party will not bring any action relating to this Agreement or any of the transactions contemplated hereby in any court other than a Federal court located in the state of Delaware or a Delaware state court and (iv) waives any right to trial by jury with respect to any claim or proceeding related to or arising out of this Agreement or any of the transactions contemplated hereby. The parties irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware or of the United States of America located in the State of Delaware, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 5 6 13. General Provisions. (a) All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense. (b) This Agreement may not be amended except by an instrument in writing signed by each of the parties hereto; provided, however, that this Agreement may be amended without the written agreement of the parties hereto to add additional persons as "Stockholders" hereunder by execution by such persons of a signature page hereto, in which event Parent shall amend Schedule A to reflect such addition. (c) All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, telecopied (which is confirmed), sent by overnight courier (providing proof of delivery) or mailed by registered or certified mail (return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to Parent or Purchaser: Solution 6 Holdings Limited Town Hall House Level 21, 456 Kent Street Sydney, New South Wales, Australia 2000 Attention: Thomas A. Montgomery Telecopier No.: 011-612-9278-0702 with a copy to: Jackson Walker L.L.P. 901 Main Street Dallas, Texas 75202 Attention: Richard F. Dahlson Telecopy No: (214) 953-6187 if to a Stockholder: to the address set forth under the name of such Stockholder on Schedule A hereto with a copy to: Robinson Bradshaw & Hinson P.A. 101 North Tyson Street, Suite 1900 Charlotte, North Carolina 28246 Attention: Patrick S. Bryant Telecopier No.: (704) 378-4000 (d) When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Wherever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". Words in the singular include the plural, and words in the plural include the singular. (e) This Agreement may be executed in multiple counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. (f) This Agreement (including the documents and instruments referred to herein) (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the 6 7 parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (g) This Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, regardless of the Laws that might otherwise govern under applicable principles of conflict of Law. (h) Except as otherwise required by Law, court process or the rules of a national securities exchange or the Nasdaq National Market or as contemplated or provided in the Merger Agreement, for so long as this Agreement is in effect, no Stockholder shall issue or cause the publication of any press release or other public announcement with respect to the transactions contemplated by this Agreement or the Merger Agreement without the consent of Parent, which consent shall not be unreasonably withheld. 7 8 IN WITNESS WHEREOF, each of Parent and Purchaser has caused this Agreement to be signed by its officer or director there unto duly authorized and each Stockholder has signed this Agreement, all as of the date first written above. SOLUTION 6 HOLDINGS, LIMITED By: /s/ THOMAS A. MONTGOMERY ------------------------------------ Name: Thomas A. Montgomery ------------------------------------ Title: CFO ------------------------------------ EIG ACQUISITION CORP. By: /s/ THOMAS A. MONTGOMERY ------------------------------------ Name: Thomas A. Montgomery ------------------------------------ Title: CFO ------------------------------------ STOCKHOLDERS: See attached signature pages ACKNOWLEDGED AND AGREED TO AS TO SECTION 9: ELITE INFORMATION GROUP, INC. By: /s/ CHRISTOPHER K. POOLE ------------------------------------ Name: Christopher K. Poole ------------------------------------ Title: CEO ------------------------------------ 8 9 SIGNATURE PAGE TO STOCKHOLDERS AGREEMENT This Signature Page to the Stockholders Agreement, dated as of December 14, 1999 (the "Agreement"), by and among Solution 6 Holdings, Limited, a New South Wales, Australia corporation, EIG Acquisition Corp., a Delaware corporation, and certain other persons, is hereby executed by the undersigned as a "Stockholder" thereunder as of the date first set forth above. PAR Investment Partners, L.P. By: PAR Group, L.P., General Partner By: PAR Capital Management, Inc., General Partner By: /s/ ARTHUR G. EPKER III -------------------------------- Name: Arthur G. Epker III -------------------------------- Title: Vice President, PAR Capital Management, Inc. -------------------------------- /s/ CHRISTOPHER K. POOLE ------------------------------------ Printed Name: Christopher K. Poole ------------------------------------ /s/ WILLIAM G. SEYMOUR ------------------------------------ Printed Name: William G. Seymour ------------------------------------ /s/ BARRY EMERSON ------------------------------------ Printed Name: Barry Emerson ------------------------------------ /s/ DAVID A. FINLEY ------------------------------------ Printed Name: David A. Finley ------------------------------------ /s/ ROGER NOALL ------------------------------------ Printed Name: Roger Noall ------------------------------------ /s/ ALAN RICH ------------------------------------ Printed Name: Alan Rich ------------------------------------ 9 10 SCHEDULE A
NUMBER OF SHARES OF COMMON NUMBER OF NAME AND ADDRESS STOCK OPTIONS - ---------------- --------- --------- Christopher K. Poole........................................ 5,000 195,000 Chairman & CEO Elite Information Group, Inc. 5100 W. Goldleaf Cr. #100 Los Angeles, CA 90056 Business Phone: (323) 642-5270 Arthur G. Epker III, Vice President......................... 1,220,300 5,000 PAR Capital Management One Financial Center #1600 Boston, MA 02111 Business Phone: (617) 526-8992 Barry Emerson............................................... -- 25,000 Chief Financing Officer Elite Information Group, Inc. 5100 W. Goldleaf Cr. #100 Los Angeles, CA 90056 Business Phone: (323) 642-5270 Alan Rich, Chairman......................................... -- 5,000 Elite Information Systems, Inc. 9430 Kirkside Road Los Angeles, CA 90035 Business Phone: (323) 642-5300 William G. Seymour.......................................... 436,622 3,000 PriMax Properties 1115 East Morehead Street Charlotte, NC 28204-2814 Business Phone: (704) 344-8200 x11 David A. Finley, President.................................. 2,000 81,666 Investment Management Partners II, Inc. 21 Bedford Center Road Bedford Hills, NY 10507 Business Phone: (914) 242-6215 Roger Noall................................................. 20,000 3,000 KeyCorp 127 Public Square Cleveland, OH 44114-1306 Business Phone: (216) 689-5651
11 SCHEDULE B EXCEPTIONS 1. Some or all of the Shares held by William G. Seymour are pledged to Bank of America as security for loans. The obligations of William G. Seymour under this Agreement with respect to such Shares are subject to the rights of Bank of America as pledgee of such Shares. William G. Seymour agrees to use commercially reasonable efforts to cause Bank of America to permit him to perform his obligations hereunder with respect to such pledged Shares, including the tender or sale thereof. Nothing in this Agreement shall require William G. Seymour to breach his obligations to Bank of America with respect to such pledged Shares. -----END PRIVACY-ENHANCED MESSAGE-----