-----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, Vb885UN00J2wnVr0c8BuqNsnrc3ZSoS/89NlIiP8MAg3bG0hlZit5YcFDwD19PaG wgV48hwpwQ6sqCA6nZZAuQ== 0000912057-99-010764.txt : 19991229 0000912057-99-010764.hdr.sgml : 19991229 ACCESSION NUMBER: 0000912057-99-010764 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19991228 GROUP MEMBERS: BRIDGEPORT ACQUISITION CORPORATION GROUP MEMBERS: BRIDGEPORT HOLDINGS INC. GROUP MEMBERS: BYOWC PARTNERS LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MICRO WAREHOUSE INC CENTRAL INDEX KEY: 0000892872 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-CATALOG & MAIL-ORDER HOUSES [5961] IRS NUMBER: 061192793 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-43249 FILM NUMBER: 99781945 BUSINESS ADDRESS: STREET 1: 535 CONNECTICUT AVE CITY: NORWALK STATE: CT ZIP: 06854 BUSINESS PHONE: 2038994000 MAIL ADDRESS: STREET 1: 535 CONNECTICUT AVE CITY: NORWALK STATE: CT ZIP: 06854 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BYOWC PARTNERS LLC CENTRAL INDEX KEY: 0001101854 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: C/O KRAMER LEVIN STREET 2: 919 THIRD AVENUE CITY: NEW YORK STATE: NY ZIP: 10021 BUSINESS PHONE: 2174532705 SC 14D1 1 SCHEDULE 14D-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 ------------------------ Micro Warehouse, Inc. (Name of Subject Company) BYOWC Partners LLC Bridgeport Holdings Inc. Bridgeport Acquisition Corporation (Bidders) Common Stock (Title of class of securities) ------------------------ 59501B105 (CUSIP number of class of securities) ------------------------ Alfred D. Boyer 9665 Wilshire Boulevard Suite 200 Beverly Hills, California 90212 (Name, address and telephone number of person authorized to receive notices and communications on behalf of bidders) ------------------------ WITH A COPY TO: Joshua M. Berman, Esq. Abbe L. Dienstag, Esq. Kramer Levin Naftalis & Frankel LLP 919 Third Avenue New York, New York 10022 (212) 715-9100 ------------------------ Calculation of Filing Fee
Transaction Valuation* Amount of Filing Fee** $454,302,388 $90,861
* For purposes of calculating fee only. Assumes the purchase by Bridgeport Acquisition Corporation ("Acquisition") of up to 23,910,652 shares of Micro Warehouse, Inc. (the "Company") common stock, at $19.00 per share, in accordance with terms of the Offer described herein. The remaining outstanding shares of common stock of the Company not owned by Acquisition or its affiliates may be purchased by the Company in an offer with respect to which the Company has filed a Schedule 13E-4 and has separately paid a fee, as described herein. ** 1/50th of 1% of Transaction Valuation. 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: Filing party: Form or registration no.: Date filed:
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Statement relates to the third party tender offer by Bridgeport Acquisition Corporation, a Delaware corporation ("Acquisition") and a wholly owned subsidiary of Bridgeport Holdings Inc. ("Parent"), a Delaware corporation and a direct subsidiary of BYOWC Partners LLC, a Delaware limited liability company ("BYOWC"), to purchase approximately such number of the outstanding shares of common stock, including the associated preferred share purchase rights (the "Shares") of Micro Warehouse, Inc., a Delaware corporation (the "Company"), which, together with Shares currently owned by BYOWC, constitutes approximately 71% of the outstanding Shares, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 28, 1999, annexed hereto as Exhibit (a)(1) (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"), at a purchase price of $19.00 per Share, net to each tendering stockholder in cash. The Offer also includes the offer by the Company to purchase the remaining outstanding Shares to the extent they are tendered in the Offer. The Company has concurrently herewith filed a Schedule 13E-4 with respect to its offer. The item numbers below and responses thereto are in accordance with the requirements of Schedule 14D-1. Item 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Micro Warehouse, Inc., a Delaware corporation. The address of the Company's principal executive offices is 535 Connecticut Avenue, Norwalk, Connecticut 06854. (b) The securities to which this statement relates are the Shares. The information set forth in the Introduction of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. Item 2. IDENTITY AND BACKGROUND. (a)-(g) This Statement is being filed by BYOWC, Parent and Acquisition (collectively, the "Reporting Persons"). Acquisition is a direct wholly owned subsidiary of Parent. Parent is currently a direct wholly-owned subsidiary of BYOWC. Upon consummation of certain equity financings described in the Offer to Purchase, BYOWC's investment partners will also own equity interests of Parent. The information set forth in Section 9 ("Certain Information Concerning BYOWC, Parent and Acquisition") and in Schedules II, III and IV of the Offer to Purchase is incorporated herein by reference. Item 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth in the Introduction, Sections 9 ("Certain Information Concerning BYOWC, Parent and Acquisition"), 11 ("Background of the Offer and the Merger") and 15 ("The Merger Agreement; Stockholder's Agreements") of the Offer to Purchase is incorporated herein by reference. Item 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. 2 Item 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSAL OF THE BIDDER. (a)-(g) The information set forth in the Introduction and Sections 5 ("Purpose of the Offer and the Merger; Structure of the Transaction; Short Form Merger; Plans for the Company; Appraisal Rights; Going Private Transactions") and 14 ("Certain Effects of the Offer") of the Offer to Purchase is incorporated herein by reference. Item 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth in Sections 9 ("Certain Information Concerning BYOWC, Parent and Acquisition") and 15 ("The Merger Agreement; Stockholder's Agreements") 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 and Sections 5 ("Purpose of the Offer and the Merger; Structure of the Transaction; Short Form Merger; Plans for the Company; Appraisal Rights; Going Private Transactions"), 9 ("Certain Information Concerning BYOWC, Parent and Acquisition"), 11 ("Background of the Offer and the Merger"), and 15 ("The Merger Agreement; Stockholder's Agreements") of the Offer to Purchase is incorporated herein by reference. Item 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in Sections 19 ("Fees and Expenses") and 20 ("Miscellaneous") of the Offer to Purchase is incorporated herein by reference. Item 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Sections 8 ("Certain Information Concerning the Company") and 9 ("Certain Information Concerning BYOWC, Parent and Acquisition") of the Offer to Purchase is incorporated herein by reference. The incorporation by reference herein of such financial information does not constitute an admission that such information is material to a decision by a stockholder of the Company whether to sell, tender or hold the Shares being sought in the Offer. Item 10. ADDITIONAL INFORMATION. (a) The information set forth in Sections 11 ("Background of the Offer and the Merger") and 15 ("The Merger Agreement; Stockholder's Agreements") of the Offer to Purchase is incorporated herein by reference. (b)-(c) The information set forth in Section 18 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Sections 14 ("Certain Effects of the Offer") and 18 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. (e) None (f) The information set forth in the Offer to Purchase and the related Letter of Transmittal, to the extent not otherwise set forth herein, is incorporated herein by reference. Item 11. MATERIAL TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated December 28, 1999. (a)(2) Letter of Transmittal. 3 (a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(4) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Notice of Guaranteed Delivery. (a)(6) Text of Press Release issued December 21, 1999. (a)(7) Form of Summary Advertisement, dated December 28, 1999. (a)(8) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(9) Text of Press Release issued December 28, 1999. (b)(1) Commitment Letter dated December 20, 1999 among Credit Suisse First Boston, CIBC Inc., CIBC World Markets Corp., BYOWC and FS Equity Partners IV, L.P., included as Exhibit 2 to the Agreement and Plan of Merger filed as Exhibit (c)(3) hereto. (c)(1) Confidentiality Agreement dated November 22, 1999, between BYOWC and the Company. (c)(2) Standstill Agreement, dated December 2, 1999, between BYOWC and the Company. (c)(3) Agreement and Plan of Merger, dated as of December 20, 1999, among BYOWC, Parent, Acquisition and the Company, including Exhibits 1, 2 and 3 thereto. (c)(4) Stockholder's Agreement, dated as of December 20, 1999, among Parent, Acquisition and Peter Godfrey. (c)(5) Stockholder's Agreement, dated as of December 20, 1999, among Parent, Acquisition and Felix Dennis. (d)-(f) Not applicable. 4 SIGNATURE After due inquiry and to the best of the undersigned's knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. BYOWC PARTNERS LLC By: /s/ ALFRED D. BOYER ----------------------------------------- Name: Alfred D. Boyer Title: MANAGING MEMBER
Dated: December 28, 1999 5 SIGNATURE After due inquiry and to the best of the undersigned's knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. BRIDGEPORT HOLDINGS INC. By: /s/ ALFRED D. BOYER ----------------------------------------- Name: Alfred D. Boyer Title: Vice President
Dated: December 28, 1999 6 SIGNATURE After due inquiry and to the best of the undersigned's knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. BRIDGEPORT ACQUISITION CORPORATION By: /s/ ALFRED D. BOYER ----------------------------------------- Name: Alfred D. Boyer Title: Vice President
Dated: December 28, 1999 7 EXHIBIT INDEX
Sequentially Exhibit No. Description Numbered Page - ----------- ----------- ---------------- (a)(1) Offer to Purchase, dated December 28, 1999.................. (a)(2) Letter of Transmittal....................................... (a)(3) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees................................ (a)(4) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees................... (a)(5) Notice of Guaranteed Delivery............................... (a)(6) Text of Press Release issued December 21, 1999.............. (a)(7) Form of Summary Advertisement, dated December 28, 1999...... (a)(8) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9............................... (a)(9) Text of Press Release issued December 28, 1999.............. (b)(1) Commitment Letter dated December 20, 1999 among Credit Suisse First Boston, CIBC Inc., CIBC World Markets Corp., BYOWC and FS Equity Partners IV, L.P., included as Exhibit 2 to the Agreement and Plan of Merger filed as Exhibit (c)(3) hereto. (c)(1) Confidentiality Agreement, dated November 22, 1999, between BYOWC and the Company....................................... (c)(2) Standstill Agreement, dated December 2, 1999, between BYOWC and the Company............................................. (c)(3) Agreement and Plan of Merger, dated as of December 20, 1999, among BYOWC, Parent, Acquisition and the Company, including Exhibits 1, 2 and 3 thereto................................. (c)(4) Stockholder's Agreement, dated as of December 20, 1999, among Parent, Acquisition and Peter Godfrey................. (c)(5) Stockholder's Agreement, dated as of December 20, 1999, among Parent, Acquisition and Felix Dennis..................
EX-99.(A)(1) 2 EXHIBIT 99(A)(1) Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Preferred Share Purchase Rights) of Micro Warehouse, Inc. at $19.00 Net Per Share by Bridgeport Acquisition Corporation, a wholly-owned subsidiary of Bridgeport Holdings Inc., and by Micro Warehouse, Inc. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS EXTENDED. Bridgeport Acquisition Corporation ("Acquisition") and Micro Warehouse, Inc. (the "Company") are making an Offer for all of the outstanding shares of common stock, including the associated preferred share purchase rights (collectively, the "Shares"), of the Company. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer at least that number of Shares that constitutes, together with any shares owned by BYOWC Partners LLC ("BYOWC"), an affiliate of Acquisition, 51% of the Shares outstanding on a fully diluted basis. BYOWC currently owns approximately 4.3% of the Shares outstanding on a fully diluted basis. Certain stockholders of the Company who in the aggregate own approximately 10.1% of the Shares outstanding on a fully diluted basis have agreed to tender their Shares in the Offer. The Offer is also conditioned upon the receipt by Acquisition of certain debt and equity financing necessary to consummate the Offer and a follow-up merger and the availability to the Company of a new credit facility following consummation of the Offer. Credit Suisse First Boston, New York branch, and CIBC Inc. have executed a commitment letter to provide the debt financing and the new credit facility. FS Equity Partners IV, L.P., a private equity investment fund managed by Freeman Spogli & Co. LLC, has executed a commitment letter to provide the portion of the equity financing on which the Offer is conditioned. See Section 10 of this Offer to Purchase for a discussion of the financings, including the conditions to the financings. The Offer is also subject to certain other conditions. See the Introduction and Section 17 of this Offer to Purchase. The Company, BYOWC, Acquisition and Bridgeport Holdings Inc., the parent of Acquisition ("Parent"), have entered into a merger agreement providing for the acquisition of the Company by Parent pursuant to the Offer and a follow-up merger. The Board of Directors of the Company has unanimously determined that the transactions contemplated by the merger agreement, including the Offer and the merger, are fair to, and in the best interests of, the Company and its stockholders, has unanimously approved the merger agreement, the Offer and the merger and unanimously recommends that the Company's stockholders accept the Offer and tender their shares pursuant to the Offer. IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to the Depositary indicated thereon and either deliver the certificate(s) for such tendered Shares to the Depositary along with the Letter of Transmittal or tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 2 of this Offer to Purchase, or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for the stockholder. Stockholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if they desire to tender such Shares. A stockholder who desires to tender Shares and whose certificate(s) for Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 2 of this Offer to Purchase. Questions and requests for assistance 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. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may also be directed to the Information Agent or the Dealer Manager. None of BYOWC, Parent, Acquisition or the Company will pay any fee or commission to any broker or dealer or to any other person (other than to the Dealer Manager, the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. The Dealer Manager for the Offer is: [LOGO] December 28, 1999 Table of Contents Questions and Answers about the Offer....................... 3 INTRODUCTION................................................ 7 SECTION 1. Terms of the Offer; Extension of Tender Period; Termination; Amendments................................. 10 2. Procedure for Tendering Shares........................ 11 3. Withdrawal Rights..................................... 14 4. Acceptance for Payment and Payment of Offer Price..... 15 5. Purpose of the Offer and the Merger; Structure of the Transaction; Short Form Merger; Plans for the Company; Appraisal Rights; Going Private Transactions.......... 16 6. Price Range of Shares; Dividends...................... 18 7. Certain Federal Income Tax Consequences............... 19 8. Certain Information Concerning the Company............ 19 9. Certain Information Concerning BYOWC, Parent and Acquisition............................................. 23 10. Source and Amount of Funds............................ 23 11. Background of the Offer and the Merger................ 26 12. Recommendation of the Company's Board of Directors.... 29 13. Interests of Certain Persons in the Offer and the Merger.................................................. 31 14. Certain Effects of the Offer.......................... 33 15. The Merger Agreement; Stockholder's Agreements........ 34 16. Dividends and Distributions........................... 45 17. Certain Conditions to the Offer....................... 46 18. Certain Legal Matters................................. 49 19. Fees and Expenses..................................... 50 20. Miscellaneous......................................... 51
Schedule I Certain Information Concerning the Directors and Executive Officers of the Company and Other Information Pursuant to Section 14(f) of the Securities Exchange Act of 1934, as amended Schedule II Certain Information Concerning the Members and Managers of BYOWC Schedule Certain Information Concerning the Directors and Executive III Officers of Parent Schedule IV Certain Information Concerning the Directors and Executive Officers of Acquisition Schedule V Opinion of Wasserstein Perella & Co., Inc.
2 Questions and Answers about the Offer of BRIDGEPORT ACQUISITION CORPORATION and MICRO WAREHOUSE, INC. To Purchase All of the Outstanding Shares (Including the Associated Preferred Share Purchase Rights) of MICRO WAREHOUSE, INC. The following information answers certain basic questions about the Offer. Stockholders of the Company should read this entire Offer to Purchase and related Letter of Transmittal for a detailed description of the Offer. As used in this section, "we" and "our" refer to Bridgeport Acquisition Corporation and its affiliates. Q. Who is Bridgeport Acquisition Corporation? A. Bridgeport Acquisition Corporation, referred to in this Offer to Purchase as "Acquisition," is a special purpose entity formed for the purpose of conducting the Offer and consummating the follow-up merger. Acquisition is a wholly-owned subsidiary of Bridgeport Holdings Inc., referred to in this Offer to Purchase as "Parent," whose stockholders include or will include BYOWC Partners LLC, referred to in this Offer to Purchase as "BYOWC," FS Equity Partners IV, L.P., a private equity investment fund managed by Freeman Spogli & Co. LLC, and other investors. BYOWC is a private investment group consisting of Gary L. Wilson, Jerome B. York, Alfred D. Boyer, Michael S. Ovitz, Alfred A. Checchi and Kenneth W. Slutsky. For more information, please see Sections 9 and 11. Q. What is the Offer? A. Acquisition and the Company are offering to purchase your Shares in the Company for $19.00 per share net to you in cash. This price represents a premium of more than 44% over the average of the last reported sales prices of the Shares over the 30 day trading period prior to our public announcement of the Offer. The last reported per Share sales price on December 20, 1999, the day prior to our public announcement of the Offer, was $15.25. For more information, please see Sections 6, 11, and 12. Q. What will happen after the Offer is completed? A. If the Offer is successfully completed, Acquisition and the Company will promptly take action so that Acquisition and the Company will be merged and the surviving corporation in the merger will be a wholly-owned subsidiary of Parent. In the merger, all Shares not tendered in the Offer will be converted into the right to receive $19.00 per Share net to the stockholder in cash. Because Acquisition will own a majority interest in the Company following the successful completion of the Offer, a merger can be accomplished by Acquisition without approval by the Company's other remaining stockholders. For more information, please see Sections 14 and 15. Q. Why is the transaction structured as a tender offer? A. The transaction has been structured as a tender offer followed by a merger at the request of the Board of Directors of the Company so that the stockholders who tender their Shares in the Offer can receive the Offer price as promptly as practicable. For more information, please see Sections 11 and 12. Q. Why is the Company participating in the Offer? A. BYOWC agreed to the tender offer structure on the condition that the Company make its cash available for the purchase of Shares in the Offer. Acquisition will purchase the first Shares tendered up to an amount which, when added to the Shares currently owned by BYOWC, equals approximately 71% of the outstanding Shares. The Company will purchase any additional Shares tendered. Although Acquisition's offer and the Company's offer are technically separate, the two offers are for all practical purposes being conducted as a single Offer. For more information, please see Section 5. Q. What does the Company's Board of Directors recommend? A. This transaction has been unanimously approved by the Company's Board of Directors and it unanimously recommends that you tender your Shares in the Offer. For more information, please see Section 12. 3 Q. What are the conditions to the Offer? A. The Offer is subject to several conditions, including, among others: - that stockholders tender at least that number of Shares which, together with the Shares owned by BYOWC, equals 51% of the outstanding Shares on a fully diluted basis. BYOWC currently owns approximately 4.3% of the Shares outstanding on a fully diluted basis. This condition is referred to as the "Minimum Condition;" and - that we receive $320 million in debt financing and $130 million in equity financing from our financing sources and that we also obtain a $70 million credit facility for the Company and Acquisition upon consummation of the Offer. Our financing sources have executed commitment letters for the debt and equity financing and the credit facility. This condition is referred to as the "Financing Condition." We can waive any of the conditions to the Offer without the Company's consent other than the Minimum Condition. For more information, please see Section 17. Q. What are the conditions to our financing arrangements? A. The debt financing for the Offer is subject to various conditions. These conditions include, among others: - that there has not occurred any change, effect or circumstance that is or could be reasonably expected to be materially adverse to the business, assets, financial condition or results of operation of the Company and its subsidiaries, taken as a whole; - that there has not occurred a material disruption of, or a material adverse change in, the financial or capital markets that could materially and adversely affect the syndication of our debt financing by our lenders; - that there is no actual or threatened litigation that could prevent or restrain the Offer or the merger or materially impair the ability of Parent or Acquisition to operate the Company or restrain or materially impair the debt financing arrangements, other than, in each case, a private litigation based upon fiduciary duty claims where the only expected remedy is monetary damages; - that the equity financing be received by Parent; and - that the conditions to the purchase of Shares in the Offer have been satisfied without giving effect to any waiver to which the debt financing source has not consented. The equity financing for the Offer is also subject to various conditions, including, among others: - that the debt financing and the credit facility are available; and - that the conditions to the purchase of Shares in the Offer have been satisfied without giving effect to any waiver to which the equity financing source has not consented. For more information, please see Section 10. Q. When does the Offer expire? Can it be extended? A. The initial expiration date of the Offer is 5:00 p.m. on Friday, January 28, 2000. The Company can always consent to our extending the Offer. We can extend the Offer without the Company's consent in the following circumstances: - If any of the conditions to the Offer, other than the Minimum Condition, have not been satisfied or waived, we can extend the Offer until such time as they are satisfied or waived. - If the only condition to the Offer that has not been satisfied or waived is the Minimum Condition, and the number of Shares tendered, together with the Shares owned by BYOWC, equals at least 40% of the outstanding Shares, we can extend the Offer for up to a total of 15 business days. 4 - If all the conditions to the Offer, including the Minimum Condition, have been satisfied or waived but the number of Shares tendered, together with the Shares owned by BYOWC, is less than 90% of the outstanding Shares (after giving effect to the reduction in the number of outstanding Shares as a result of the Company's purchase of Shares in the Offer), we can extend the Offer for up to a total of 20 business days. In order to do this, Acquisition and, if applicable, the Company must accept for payment all Shares tendered prior to such extension. For more information, please see Section 1. Q. How will I be notified if the Offer is extended? A. If the Offer is extended, we will put out a press release on the Dow Jones News Service by 9:00 a.m. on the morning after the Offer would have otherwise expired. Q. What happens if I do not tender my Shares in the Offer? A. If you do not tender your Shares and the Offer is completed, your Shares will remain outstanding and you will not receive any cash until we merge Acquisition with the Company. Once the merger is completed, your Shares will, subject to any statutory appraisal rights that you may have, be converted into the right to receive $19.00 in cash without interest for each of your Shares. Q. Do I have statutory appraisal rights? A. You do not have appraisal rights in connection with the Offer. However, if you do not tender your Shares in the Offer and the merger is consummated, you will have a statutory right to dissent and demand payment of the judicially appraised fair market value of your Shares. This value may be more or less than the per Share price paid in the Offer. The Company will notify you of the procedures necessary to perfect your appraisal rights when and if they are applicable. Accordingly, if you intend to exercise your appraisal rights, you should not tender your Shares in the Offer. For more information, please see Section 5. Q. Can the merger agreement be terminated? A. Yes. Parent and the Company can mutually agree to terminate the merger agreement. In addition, either Parent or the Company can terminate the merger agreement if: - Shares are not purchased pursuant to the Offer before March 31, 2000; - there are legal restraints preventing the merger; or - the other party breaches in a material way its representations, warranties, covenants or agreements set forth in the merger agreement and the breach is not or cannot be remedied. The merger agreement cannot be terminated on this basis, however, once Acquisition has acquired Shares in the Offer. Parent can also terminate the merger agreement if the Company withdraws or modifies its approval or recommendation of the Offer, the merger agreement or the merger in a manner adverse to Parent. In certain instances, the Company can terminate the merger agreement to accept a superior proposal. For more information, please see Section 15. Q. How do I tender my Shares? A. To tender your Shares, you should do the following: - If you hold your Shares in your own name, complete and sign the enclosed Letter of Transmittal and return it with your Share certificates to EquiServe L.P., the depositary for the Offer, at one of its addresses on the back cover of this Offer to Purchase. - If you hold your Shares in "street name" through a broker or other nominee, ask your broker or other nominee to tender your Shares. For more information, please see Section 2. 5 Q. Can I change my mind and withdraw my tender? A. In general, yes. You can withdraw Shares that you have tendered by delivering an appropriate notice of withdrawal to the depositary prior to the initial expiration date of the Offer. Shares properly withdrawn can be retendered at any time prior to the final expiration date of the Offer. Once Shares have been accepted for payment in the Offer, they cannot be withdrawn. For more information, please see Sections 3 and 4. Q. What should I do if I have questions? A. If you have any questions about the Offer, please call either: - MacKenzie Partners, Inc., the Information Agent Toll Free: (800) 322-2885 Collect: (212) 929-5500 or - Credit Suisse First Boston, the Dealer Manager Toll Free: (800) 881-8320 6 To the Holders of Common Stock of MICRO WAREHOUSE, INC.: INTRODUCTION BRIDGEPORT ACQUISITION CORPORATION, a Delaware corporation ("Acquisition"), and MICRO WAREHOUSE, INC., a Delaware corporation (the "Company" and, together with Acquisition, the "Purchasers"), hereby offer to purchase all outstanding shares of common stock, par value $0.01 per share, of the Company (the "Common Stock"), together with the associated preferred share purchase rights issued pursuant to the Rights Agreement dated as of June 17, 1996 (the "Rights Agreement"), between the Company and State Street Bank and Trust Company NA, as Rights Agent (the "Rights" and, together with the Common Stock, the "Shares"), at $19.00 per Share, net to the selling stockholder in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). Acquisition is a wholly-owned subsidiary of Bridgeport Holdings Inc., a Delaware corporation ("Parent"). Parent is an entity formed by BYOWC Partners LLC, a Delaware limited liability company ("BYOWC"), and BYOWC is jointly and severally responsible for each of Parent's and Acquisition's obligations in the Offer. BYOWC, Parent and Acquisition are sometimes collectively referred to herein as the "BYOWC Companies." For more information about Parent and BYOWC, see Section 9. Stockholders of record who tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes, if any, on the purchase of Shares by the Purchasers pursuant to the Offer. Stockholders who hold their Shares through a bank or broker should check with such institution as to whether they will be charged any service fees. However, any tendering stockholder or other payee who fails to complete and sign the Substitute Form W-9 that is included in the Letter of Transmittal may be subject to a required federal backup withholding tax of 31% of the gross proceeds payable to such stockholder or other payee pursuant to the Offer. See Section 2. Acquisition will pay all charges and expenses of Credit Suisse First Boston Corporation, as Dealer Manager ("Credit Suisse First Boston" or the "Dealer Manager"), MacKenzie Partners, Inc., as Information Agent (the "Information Agent"), and EquiServe L.P., as Depositary (the "Depositary"), incurred in connection with the Offer. See Section 19. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer at least that number of Shares that constitutes, together with the Shares owned by BYOWC, 51% of the outstanding Shares on a fully diluted basis (the "Minimum Condition"). BYOWC currently owns 1,749,700 Shares, constituting approximately 4.3% of the outstanding Shares on a fully diluted basis. Certain stockholders of the Company, who in the aggregate own 4,076,925 Shares, (constituting approximately 10.1% of the outstanding Shares on a fully diluted basis), have agreed to tender their Shares in the Offer. The Offer is also conditioned upon the receipt by Acquisition of certain debt and equity financing necessary to consummate the Offer and a follow-up merger and the availability to the Company of a new credit facility following consummation of the Offer. Credit Suisse First Boston, New York branch ("CSFB") and CIBC Inc. have executed a commitment letter to provide the debt financing and the new credit facility. FS Equity Partners IV, L.P., a private equity investment fund managed by Freeman Spogli & Co. LLC ("Freeman Spogli"), has executed a commitment letter to provide the portion of the equity financing on which the Offer is conditioned. See Section 10 of this Offer to Purchase for a discussion of the financings, including the conditions to the financings. The Offer is also subject to certain other conditions. See Section 17 of this Offer to Purchase. For purposes of the Offer, "on a fully diluted basis" means, as of any time, the number of Shares that are actually issued and outstanding plus the maximum number of Shares that the Company may be required to issue pursuant to obligations under stock options, whether or not such stock options are currently exercisable. 7 As of December 20, 1999, there were 36,070,878 Shares outstanding and there were options to acquire 3,999,660 Shares. In addition, it is anticipated that the Company will issue additional options to acquire 179,500 Shares prior to the expiration of the Offer. Accordingly, the Minimum Condition will be satisfied if, excluding the Shares currently owned by BYOWC, 18,777,820 Shares are tendered in the Offer. Holders of 4,076,925 Shares have agreed to tender those Shares in the Offer. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of December 20, 1999 (the "Merger Agreement"), among BYOWC, Parent, Acquisition and the Company. The Merger Agreement provides, among other things, that, upon the terms and subject to the conditions therein, as soon as practicable after the consummation of the Offer, the Company will be merged with and into Acquisition (the "Merger"), with Acquisition being the corporation surviving the Merger (the "Surviving Corporation"). At the effective time of the Merger (the "Effective Time"), each outstanding Share (other than Shares with respect to which appraisal rights are properly exercised under the Delaware General Corporation Law (the "DGCL") ("Dissenting Shares") and Shares owned by the BYOWC Companies or any other subsidiary of BYOWC) will be converted into and represent the right to receive $19.00 in cash or any higher price that may be paid per Share in the Offer (the "Per Share Amount"), subject to any applicable withholding taxes, without interest. See Section 15. The Board of Directors of the Company has unanimously determined that the transactions contemplated by the Merger Agreement, including the Offer and the Merger, are fair to, and in the best interests of, the Company and its stockholders, has unanimously approved the Merger Agreement, the Offer and the Merger and unanimously recommends that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. Wasserstein Perella & Co., Inc., the Company's financial advisor ("Wasserstein Perella"), has delivered to the Company's Board of Directors its written opinion dated December 20, 1999 that, as of such date, the consideration to be received by the holders of the Company's Common Stock in the Offer and the Merger is fair to such stockholders from a financial point of view. A copy of such opinion is included in this Offer to Purchase as Schedule V. The Merger Agreement provides that, promptly upon the purchase of Shares pursuant to the Offer, Parent will be entitled to designate a number of the Company's directors which bears the same ratio to the total number of directors on the Company's Board of Directors as the ratio of the number of Shares owned by the BYOWC Companies following the Offer to the total number of outstanding Shares, rounded up to the next higher whole number of directors. The Company will, upon request of Parent, promptly increase the size of the Company's Board of Directors and/or exercise its reasonable best efforts to secure the resignations of such number of directors as is necessary to enable Parent's designees to be elected to the Company's Board of Directors. See Section 15. The designation of directors by Parent is subject to compliance with the requirements of Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Certain information in Schedule I to this Offer to Purchase is furnished in order to comply with these requirements. If the Minimum Condition is satisfied and Acquisition acquires Shares in the Offer, Acquisition will have sufficient voting power to cause the adoption of the Merger Agreement by the requisite vote of the stockholders of the Company, even if no other stockholder votes in favor of such adoption. Under the DGCL, if a parent corporation owns at least 90% of the shares of each class of shares of a subsidiary corporation, the parent can merge with that subsidiary in a "short form" merger without a vote of other stockholders. If Acquisition acquires 90% or more of the outstanding Shares (including the Shares owned by BYOWC and after giving effect to the reduction in the number of outstanding Shares as a result of the Company's purchase of Shares in the Offer), Acquisition would be able to effect the Merger pursuant to the short form merger provisions of the DGCL without the vote of the Company's other stockholders. The Offer consists of an offer by Acquisition and an offer by the Company. Although technically two separate offers, the offers are being conducted for practical purposes as a single offer. The Company will only purchase Shares in the Offer if the number of Shares tendered, together with Shares owned by BYOWC, 8 exceeds approximately 71% of the outstanding Shares. Acquisition will acquire the first approximately 71% of the currently outstanding Shares, including the Shares currently owned by BYOWC, and the Company will acquire the remaining Shares tendered. See Section 5. In connection with the Offer and the Merger, the Company's Board of Directors has approved an amendment to the Company's Rights Agreement to assure that the Rights are not exercisable as a result of the Offer or the Merger. The information contained herein concerning or attributed to the Company has been supplied by the Company, and all other information contained herein has been supplied by the BYOWC Companies. Although neither the Company nor the BYOWC Companies have any knowledge that would indicate that any statements contained herein based on the information provided by the other are untrue, neither the Company nor the BYOWC Companies take any responsibility for the accuracy or completeness of any information provided by the other or for any failure by the other to disclose events that may have occurred and may affect the significance or accuracy of such information but which are unknown to the Company or the BYOWC Companies, respectively. The Company has filed a Schedule 14D-9 with the Securities and Exchange Commission (the "Commission"), which is being mailed to stockholders together with this Offer to Purchase and the related Letter of Transmittal. The Company has also filed a Schedule 13E-4 with the Commission with respect to the Company's portion of the Offer (the "Schedule 13E-4"). See Section 20. This Offer to Purchase and the related Letter of Transmittal contain important information and you should read them in their entirety before making any decision with respect to the Offer. 9 1. Terms of the Offer; Extension of Tender Period; Termination; Amendments. 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 Purchasers will accept for payment and pay for all Shares which are validly tendered and not properly withdrawn on or prior to the Expiration Date, as soon as practicable after the Expiration Date. The term "Expiration Date" means 5:00 p.m., New York City time, on Friday, January 28, 2000, unless and until the Purchasers (subject to the terms and conditions of the Merger Agreement) shall have extended the period of time for 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 Purchasers, shall expire. The Offer is conditioned upon the satisfaction of the Minimum Condition, the Financing Condition and the other conditions set forth in Section 17 (collectively, the "Offer Conditions"). Subject to the provisions of the Merger Agreement, the Purchasers may waive any or all of the conditions to their respective obligations to purchase Shares pursuant to the Offer. If by the initial Expiration Date or any subsequent Expiration Date any or all of the conditions to the Offer have not been satisfied or waived, subject to the provisions of the Merger Agreement, the Purchasers may elect to (i) terminate the Offer and return all tendered Shares to tendering stockholders, (ii) waive all of the unsatisfied conditions and, subject to any required extension, purchase all Shares validly tendered by the Expiration Date and not properly withdrawn, or (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares until the new Expiration Date, retain the Shares that have been tendered until the expiration of the Offer as extended. Under the terms of the Merger Agreement, neither Acquisition nor the Company may, without the prior written consent of the other, (i) decrease the Per Share Amount or change the form of consideration payable in the Offer, (ii) reduce the number of Shares subject to the Offer, (iii) impose conditions to the Offer in addition to the Offer Conditions, or (iv) amend any term of the Offer in a manner adverse to the holders of Shares. In addition, Acquisition may not, without the prior written consent of the Company, waive or amend the Minimum Condition. Notwithstanding the foregoing, Acquisition may, without the consent of the Company, extend the Offer at any time, and from time to time: (i) if any of the Offer Conditions (other than the Minimum Condition) shall not have been satisfied or waived, until such time as such conditions are satisfied or waived; (ii) if all of the Offer Conditions, other than the Minimum Condition, shall have been satisfied or waived, and the number of Shares tendered, together with the Shares owned by BYOWC, is greater than 40% of the Shares then outstanding, for an aggregate period of not more than 15 business days for all such extensions; (iii) for any period required by any rule, regulation, interpretation or position of the Commission or its staff applicable to the Offer; or (iv) if all of the Offer Conditions shall have been satisfied or waived but the number of Shares tendered, together with the Shares owned by BYOWC, is less than 90% of the Shares then outstanding (after giving effect to the reduction of outstanding Shares resulting from the purchase of Shares by the Company in the Offer), for an aggregate period of not more than 20 business days (for all such extensions) beyond the latest Expiration Date that would be permitted under clause (i), (ii) or (iii) of this sentence, provided that, in the case of any extension pursuant to this clause (iv), the Purchasers must first accept for payment all Shares validly tendered pursuant to the Offer as of such Expiration Date in accordance with the rules and regulations of the Commission. Subject to the applicable rules and regulations of the Commission and the provisions of the Merger Agreement, Acquisition also expressly reserves the right, in its sole discretion, at any time or from time to time, (i) to terminate the Offer if any of the Offer Conditions have not been satisfied or upon the occurrence of any of the events specified in Section 17 and (ii) to waive any Offer Condition or otherwise amend the Offer in any respect, in each case by giving oral or written notice of such extension, termination, waiver or amendment to the Depositary and by making a public announcement thereof. If the Purchasers accept for payment any Shares pursuant to the Offer, they will accept for payment all Shares validly tendered prior to the Expiration Date and not properly withdrawn, and will promptly pay for all Shares so accepted for payment. The 10 Purchasers acknowledge that, notwithstanding anything to the contrary contained in the Offer, the Purchasers shall not be required to pay for Shares tendered and may terminate or amend the Offer only if, prior to the Expiration Date, any of the Offer Conditions has not been satisfied or waived, or if any of the events specified in Section 17 has occurred. The rights reserved by the Purchasers in the preceding paragraph are in addition to the Purchasers' rights pursuant to Section 17. Any extension, delay, termination or amendment of the Offer will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to 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 14e-1(d) 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 Purchasers may choose to make any public announcement, the Purchasers shall have no 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 Purchasers make a material change in the terms of the Offer or the information concerning the Offer, or if they waive a material condition of the Offer, the Purchasers will disseminate additional tender offer materials (including by public announcement as set forth above) 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, other than a change in price, percentage of securities sought or inclusion of or change to a dealer's soliciting fee, will depend upon the facts and circumstances, including the materiality, of the changes. In the Commission's view, an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to stockholders, and, if material changes are made with respect to information that approaches the significance of price and share levels, a minimum of ten business days may be required to allow for adequate dissemination and investor response. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought or inclusion of or change to a dealer's soliciting fee, a minimum ten business day period from the date of such change is generally required to allow for adequate dissemination to stockholders. Accordingly, if, prior to the Expiration Date, the Purchasers decrease the number of Shares being sought or increase or decrease the consideration offered pursuant to the Offer, and if the Offer is scheduled to expire at any time earlier than the tenth business day from the date that notice of such increase or decrease is first published, sent or given to stockholders, the Offer will be extended at least until the expiration of such tenth business day. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. In connection with the Offer, the Company has provided Acquisition with the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to registered holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the 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. Except as set forth below, in order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message (as hereinafter defined) in connection with a book-entry transfer of Shares, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, and 11 either (i) certificates representing tendered Shares must be received by the Depositary, or such Shares must be tendered pursuant to the procedure for book-entry transfer set forth below (and confirmation of receipt of such delivery must be received by the Depositary), in each case on or prior to the Expiration Date, or (ii) the guaranteed delivery procedures set forth below must be complied with. No alternative, conditional or contingent tenders will be accepted. SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of Transmittal (i) if such Letter of Transmittal is signed by the registered holder of the Shares tendered therewith, unless such holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" in the Letter of Transmittal, or (ii) if Shares are tendered for the account of a firm that is a member in good standing of the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each being hereinafter referred to as an "Eligible Institution"). In all other cases, all signatures on a Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a certificate representing Shares is registered in the name of a person other than the signatory of the Letter of Transmittal (or a facsimile thereof), or if payment is to be made, or Shares not accepted for payment or not tendered are to be registered in the name of a person other than the registered holder, the certificate must be endorsed or accompanied by an appropriate stock power, in either case signed exactly as the name(s) of the registered holder(s) appears on the certificate, with the signature(s) on the certificate or stock power guaranteed by an Eligible Institution. If the Letter of Transmittal or stock powers are signed or any certificate is endorsed 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, unless waived by the Purchasers, proper evidence satisfactory to the Purchasers of their authority to so act must be submitted. See Instruction 5 of the Letter of Transmittal. BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to the Shares at The Depository Trust Company ("DTC") for purposes of the Offer within two business days after the date of this Offer to Purchase, and any financial institution that is a participant in DTC's system may make book-entry delivery of the Shares by causing DTC to transfer such Shares into the Depositary's account in accordance with DTC's procedure for such transfer. However, although delivery of Shares may be effected through book-entry transfer at DTC, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), 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 guaranteed delivery procedures described below must be complied with. The term "Agent's Message" means a message transmitted through electronic means by DTC to, and received by, the Depositary and forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the Shares that such participant has received, and agrees to be bound by, the terms of the Letter of Transmittal. Delivery of documents to DTC in accordance with DTC's procedures does not constitute delivery to the Depositary. GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates representing Shares are not immediately available (or the procedures for book-entry transfer cannot be 12 completed on a timely basis) or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such Shares may nevertheless be tendered, provided that all of the following conditions are satisfied: (a) such tender is made by or through an Eligible Institution; (b) the Depositary receives, prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchasers; and (c) the certificates representing all tendered Shares in proper form for transfer (or confirmation of a book-entry transfer of such Shares into the Depositary's account at DTC), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Depositary within three trading days after the date of such Notice of Guaranteed Delivery. A "trading day" is any day on which The Nasdaq Stock Market is open for business. The Notice of Guaranteed Delivery may be delivered by hand, or may be transmitted by 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. The method of delivery of all documents, including certificates for Shares, is at the option and risk of the tendering stockholder, and the delivery will be deemed made only when actually received by the Depositary. 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. DETERMINATION OF VALIDITY. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tendered Shares will be determined by the Purchasers in their sole discretion, and their determination shall be final and binding on all persons. The Purchasers reserve the absolute right to reject any or all tenders of any Shares that they determine are not in appropriate form or the acceptance for payment of or payment for which may, in the opinion of the Purchasers' counsel, be unlawful. The Purchasers also reserve the absolute right to waive any defect or irregularity in any tender with respect to any particular Shares or any particular stockholder, and the Purchasers' interpretation of the terms and conditions of the Offer will be final and binding on all persons. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been expressly waived or cured to the satisfaction of the Purchasers. None of the Company, Acquisition, Parent, BYOWC, the Depositary, the Dealer Manager, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders, nor shall any of them incur any liability for failure to give any such notification. OTHER REQUIREMENTS. By executing the Letter of Transmittal, a tendering stockholder irrevocably appoints designees of Acquisition as such stockholder's 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 Purchasers (and any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after December 28, 1999), effective if, when and to the extent that the Purchasers accept such Shares for payment pursuant to the Offer. Upon such acceptance for payment, all prior proxies given by such stockholder with respect to such Shares or other securities accepted for payment will, without further action, be revoked, and no subsequent proxies may be given by such stockholder nor any subsequent written consents executed (and, if given or executed, will not be deemed effective). Such designees of Acquisition will, with respect to such Shares and other securities or rights issuable in respect thereof, be empowered to exercise all voting and other rights of such stockholder as 13 they, in their sole discretion, may deem proper in respect of any annual, special or adjourned meeting of the Company's stockholders, action by written consent in lieu of any such meeting or otherwise. Acquisition reserves the right to require that, in order for Shares to be deemed validly tendered, Acquisition must be able to exercise full voting rights with respect to the Shares accepted by Acquisition for payment immediately upon such acceptance. The Purchasers' acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchasers upon the terms and subject to the conditions of the Offer. To prevent federal backup withholding tax on payments made to stockholders with respect to Shares purchased pursuant to the Offer, each stockholder must provide the Depositary with his correct taxpayer identification number ("TIN") and certify that he is not subject to backup withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. Non-United States holders must submit a completed Form W-8 or Form W-8BEN to avoid backup withholding. These forms may be obtained from the Depositary. See Instructions 10 and 11 of the Letter of Transmittal. 3. Withdrawal Rights. Tenders of Shares made pursuant to the Offer will be irrevocable, except that Shares tendered may be withdrawn at any time prior to the Expiration Date, and, unless theretofore accepted for payment by the Purchasers as provided herein, may also be withdrawn on or after February 27, 2000. For a withdrawal of Shares tendered to be effective, a written, telegraphic, telex 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. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name(s) in which the certificate(s) representing such Shares are registered, if different from that of the person who tendered such Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, the name of the registered holder and the serial numbers shown on the particular certificates evidencing such Shares to be withdrawn must also be furnished to the Depositary prior to the physical release of the Shares to be withdrawn. The signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 2, any notice of withdrawal must specify the name and number of the account at DTC to be credited with such withdrawn Shares and must otherwise comply with DTC's procedures. If the Purchasers extend the Offer, are delayed in their acceptance for payment of any Shares tendered, or are unable to accept for payment or pay for Shares tendered pursuant to the Offer, for any reason whatsoever, then, without prejudice to the Purchasers' rights set forth herein, the Depositary may, nevertheless, on behalf of the Purchasers, retain tendered Shares, and such Shares may not be withdrawn except to the extent that the tendering stockholder is entitled to and duly exercises withdrawal rights as described in this Section and as otherwise required by Rule 14e-1(c) under the Exchange Act. Any such delay will be accompanied by an extension of the Offer to the extent required by law. Withdrawals of tenders of Shares may not be rescinded, and Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following 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 Purchasers, in their sole discretion, and their determination will be final and binding on all persons. None of the Company, Parent, BYOWC, Acquisition, the Depositary, the Dealer Manager, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal, nor shall any of them incur any liability for failure to give any such notification. 14 4. Acceptance for Payment and Payment of Offer Price. 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 extension or amendment), the Purchasers 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) as soon as practicable after the latest to occur of the Expiration Date and, subject to compliance with Rule 14e-1(c) under the Exchange Act, the satisfaction or waiver of the Offer Conditions. Any determination concerning the satisfaction of such conditions shall be within the sole discretion of the Purchasers, and such determination shall be final and binding on all tendering stockholders. See Section 17. The Purchasers expressly reserve the right to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any applicable law. If the Purchasers desire to delay payment for Shares accepted for payment pursuant to the Offer, and such delay would otherwise be in contravention of Rule 14e-1(c) of the Exchange Act, the Purchasers will extend the Offer. See Section 1. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at DTC, as described in Section 2), (ii) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message), and (iii) any other documents required by the Letter of Transmittal. For purposes of the Offer, the Purchasers will be deemed to have accepted for payment, and thereby purchased, Shares tendered prior to the Expiration Date when, as and if the Purchasers give oral or written notice to the Depositary, as agent for the tendering stockholders, of the Purchasers' acceptance for payment of such Shares. Payment for Shares so accepted for payment will be made by the deposit of the purchase price therefor with the Depositary, which will act as agent for the tendering Stockholders for the purpose of receiving such payment from the Purchasers and transmitting such payment to tendering stockholders. If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or the Purchasers are unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to the Purchasers' rights under Section 1, the Depositary may, nevertheless, on behalf of the Purchasers, retain tendered Shares, and such Shares may not be withdrawn, except to the extent that the tendering Stockholders are entitled to withdrawal rights as described in Section 3 and as otherwise required by Rule 14e-1(c) under the Exchange Act. Under no circumstances will interest be paid on the purchase price by reason of any delay in making such payments. If the Purchasers have accepted for payment Shares tendered prior to the Expiration Date but Acquisition has not reached the 90% ownership threshold required to consummate a short form merger under the DGCL, the Purchasers may extend the Offer for up to 20 business days. During the extension period, the Purchasers will accept for payment and promptly pay for all Shares validly tendered. The procedures for tendering Shares and guaranteed delivery set forth in Section 2 will apply during the extension period. If any tendered Shares are not accepted for payment and paid for, certificates representing such Shares will be returned (or, in the case of Shares delivered by book-entry transfer with DTC as permitted by Section 2, such Shares will be credited to an account maintained with DTC) without expense to the tendering stockholder as promptly as practicable following the expiration or termination of the Offer. If, prior to the Expiration Date, the Purchasers increase the consideration to be paid for Shares pursuant to the Offer, the Purchasers will pay such increased consideration for all Shares accepted for payment or paid for pursuant to the Offer, whether or not such Shares have been tendered, accepted for payment or paid for prior to such increase in the consideration. Acquisition reserves the right to transfer or assign in whole or in part to one or more affiliates of Acquisition the right of Acquisition to purchase Shares tendered pursuant to the Offer, but any such transfer or 15 assignment will not relieve Acquisition 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. Purpose of the Offer and the Merger; Structure of the Transaction; Short Form Merger; Plans for the Company; Appraisal Rights; Going Private Transactions. PURPOSE OF THE OFFER AND THE MERGER. The purpose of the Offer and the Merger is for Parent to acquire the entire equity interest in the Company. Through the Offer, Acquisition intends to acquire control of, and a majority equity interest in, the Company. Following the completion of the Offer, Parent intends to acquire any outstanding Shares not owned by Acquisition by consummating the Merger. Under the DGCL and the Company's Certificate of Incorporation, the approval of the Board of Directors of the Company and the affirmative vote of a majority of the holders of outstanding Shares are required to adopt the Merger Agreement. The Board of Directors of the Company has approved the transactions contemplated by the Merger Agreement, including the Offer and the Merger, and, unless the Merger is consummated pursuant to the short form merger provisions of the DGCL described below, the only remaining required corporate action necessary to consummate the Merger is the adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the then outstanding Shares. If the Minimum Condition is satisfied, Acquisition will have sufficient voting power to cause the adoption of the Merger Agreement by the requisite vote of Company stockholders without the affirmative vote of any other stockholder. STRUCTURE OF THE TRANSACTION The total amount of funds required to purchase all the outstanding Shares, to cash-out options outstanding at the Effective Time of the Merger and to pay all other costs and expenses of the transaction is approximately $733 million. BYOWC has arranged to raise the equivalent of $530 million in debt and equity financing for the transaction. The remaining funds needed for the transaction will be derived from the Company's cash of approximately $203 million and, to the extent Company cash is not available in that amount, other sources. BYOWC had originally proposed to structure the transaction as a merger, in which all of the Shares would be acquired at the same time and in which the Company's cash would be available to pay for Shares. In the course of negotiating Acquisition's purchase of the Company, the Board of Directors of the Company requested that the transaction be structured as a tender offer for all outstanding Shares followed by a merger, in which the remaining Shares would be acquired. This two-step process would enable stockholders of the Company who tender their Shares in the Offer to receive their cash payment as soon as practicable and provide for a prompt and orderly transfer of the ownership of the common equity from the public stockholders to Parent. BYOWC agreed to structure the transaction as a tender offer and a follow-up merger provided the Company made its cash available for the purchase of Shares in the Offer. Acquisition and the Company will purchase Shares in the Offer according to the following formula: - Acquisition will first purchase all Shares tendered in the Offer up to a number of Shares equal to the difference between the number of outstanding Shares (less the number of Shares owned by BYOWC) and the number of Shares that can be purchased at the Per Share Amount with $200 million. - If additional Shares are tendered, the Company will purchase those Shares for an aggregate purchase price of up to $200 million. Based on this formula, it is anticipated that Acquisition will acquire up to such number of Shares which, together with the Shares currently owned by BYOWC, constitutes approximately 71% of the Shares currently outstanding, and the Company will purchase the balance of the Shares tendered. Under this structure, in order to satisfy federal margin requirements relating to Acquisition's purchase of Shares in the Offer with the 16 proceeds of the debt financing, the Company is required to guarantee the debt financing and to secure the guarantee with its assets. The Company has agreed to provide the guarantee and implement the required security arrangements. See Section 10. The Company's participation in the Offer will not affect the satisfaction of the Minimum Condition, since the Company will not purchase any Shares tendered until Acquisition has purchased in excess of the number of Shares needed to satisfy the Minimum Condition. SHORT FORM MERGER. Under the DGCL, if Acquisition acquires at least 90% of the outstanding Shares (after giving effect to the reduction in the number of outstanding Shares resulting from the purchase of Shares by the Company in the Offer), Acquisition will be able to adopt the Merger Agreement without a vote of the Company's other stockholders. The Merger Agreement provides that if Acquisition, or any other direct or indirect subsidiary of BYOWC or Parent, acquires at least 90% of the outstanding Shares (after giving effect to the reduction in the number of outstanding Shares resulting from the purchase of Shares by the Company in the Offer), Parent, Acquisition and the Company will take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without action by the other stockholders of the Company, in accordance with Section 253 of the DGCL. In the event that all of the conditions to the Purchasers' obligations to purchase Shares in the Offer are satisfied or waived and the number of Shares tendered, together with the Shares owned by BYOWC, is less than 90% of the outstanding Shares (after giving effect to the reduction in the number of outstanding Shares resulting from the purchase of Shares by the Company in the Offer), the Purchasers will accept for payment all Shares validly tendered, and Acquisition may extend the Offer for the purpose of attempting to reach the 90% threshold required for a short form merger. Under these circumstances, the Offer may be extended for up to 20 business days, and the Purchasers will accept for payment and promptly pay for all Shares validly tendered during the extension period. See Section 1. If Acquisition is unable to satisfy the requirements for a short form merger, a significantly longer period of time may be required to effect the Merger, because a vote of the Company's stockholders would be required under the DGCL. PLANS FOR THE COMPANY. Except as otherwise set forth in this Offer to Purchase, it is expected that, initially following the Merger, the business and operations of the Company will be continued by the Surviving Corporation substantially as they are currently being conducted. The directors of Acquisition will be the initial directors of the Surviving Corporation, and the officers of the Company will be the initial officers of the Surviving Corporation, except that it is the current intention of Acquisition's Board of Directors to appoint Jerome B. York as the Surviving Corporation's President and Chief Executive Officer. Upon completion of the Offer and the Merger, Parent intends to conduct a detailed review of the Company and its assets, corporate structure, capitalization, operations, policies, management and personnel. After such review, Parent will determine what actions or changes, if any, would be desirable in light of the circumstances which then exist. Except as described in this Offer to Purchase, none of BYOWC, Parent, Acquisition or the Company has any present plans or proposals that would relate to or result in (i) any extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, (ii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (iii) any change in the Company's Board of Directors or management, (iv) any material change in the Company's capitalization or dividend policy, (v) any other material change in the Company's corporate structure or business, (vi) a class of securities of the Company being delisted from a national securities exchange or ceasing to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association, or (vii) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g) of the Exchange Act. 17 APPRAISAL RIGHTS. No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, stockholders of the Company may have certain rights under the DGCL to dissent, and demand appraisal of, and to obtain payment for the fair value of their Shares. Such rights, if the statutory procedures are complied with, could lead to a judicial determination of the fair value of the Shares (excluding any element of value arising from the accomplishment or expectation of the Merger) required to be paid in cash to such dissenting stockholders for their Shares. In addition, such dissenting stockholders would be entitled to receive payment of a fair rate of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Shares. In determining the fair value of the Shares, a Delaware court would be required to take into account all relevant factors. Accordingly, such determination could be based upon considerations other than, or in addition to, the market value of the Shares, including, among other things, asset value and earning capacity. In WEINBERGER V. UOP, INC., the Delaware Supreme Court stated, among other things, that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. Therefore, the value so determined in any appraisal proceeding could be higher or lower than the price being paid in the Offer. GOING PRIVATE TRANSACTIONS. The Merger would have to comply with any applicable federal law operative at the time. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions. Acquisition does not believe that Rule 13e-3 will be applicable to the Merger unless, among other things, the Merger is completed more than one year after completion of the Offer. If applicable, Rule 13e-3 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 in the Merger be filed with the Commission and disclosed to stockholders prior to the consummation of such transaction. 6. Price Range of Shares; Dividends. The Shares are traded on the National Market System of The Nasdaq Stock Market ("NASDAQ") under the symbol "MWHS." The following table sets forth, for the periods indicated, the high and low per Share sales prices on NASDAQ as reported by published financial sources. The Company has not declared or paid any cash dividends on the Shares for the periods indicated.
High Low -------- -------- Year Ended December 31, 1997: First Quarter............................................. $16.50 $ 9.75 Second Quarter............................................ 18.63 12.88 Third Quarter............................................. 30.00 13.00 Fourth Quarter............................................ 24.75 9.88 Year Ended December 31, 1998: First Quarter............................................. $17.38 $10.25 Second Quarter............................................ 18.75 13.25 Third Quarter............................................. 27.63 14.63 Fourth Quarter............................................ 36.38 11.25 Year Ending December 31, 1999: First Quarter............................................. $47.00 $12.75 Second Quarter............................................ 19.25 12.25 Third Quarter............................................. 18.50 11.31 Fourth Quarter (through December 27, 1999)................ 18.88 11.63
18 The average of the last reported per Share sales prices for the 30-day period prior to the public announcement of the Offer was $13.03. On December 16, 1999, the media reported that the Company was rumored to be entering into an Internet marketing alliance. On that date, the last reported per Share sales price on NASDAQ was $15.19, a $3.06 increase over the $12.13 last reported per Share sales price on the previous day. On December 20, 1999, the last trading day prior to the public announcement of the Offer and Merger, the last reported per Share sales price was $15.25. On December 27, 1999, the last trading day prior to commencement of the Offer, the last reported per Share sales price was $18.44. Stockholders are urged to obtain a current market quotation for the Shares. 7. Certain Federal Income Tax Consequences. The receipt of cash for Shares pursuant to the Offer (or in the Merger) will be a taxable transaction for United States federal income tax purposes (and may also be a taxable transaction under applicable state, local or other tax laws). In general, a stockholder will recognize gain or loss for such purposes equal to the difference between the amount of cash received and such stockholder's adjusted tax basis in the Shares. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash in the Merger. Such gain or loss will be capital gain or loss if the Shares are a capital asset in the hands of the stockholder and will be long term capital gain or loss if the Shares were held for more than one year on the date of sale (in the case of the Offer) or the effective time of the Merger (in the case of the Merger). The receipt of cash for Shares pursuant to the exercise of dissenters' rights, if any, will generally be taxed in the same manner as described above. Payments in connection with the Offer or the Merger may be subject to "backup withholding" at a rate of 31%. Backup withholding generally applies if the stockholder (a) fails to furnish such stockholder's social security number or TIN, (b) furnishes an incorrect TIN, or (c) under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN provided is such stockholder's correct number and that such stockholder is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons generally are entitled to exemption from backup withholding, including corporations, non-United States persons and financial institutions. Certain penalties apply for failure to furnish correct information and for failure to include reportable payments in income. Each stockholder should consult with his own tax advisor as to such stockholder's qualification for exemption from backup withholding and the procedure for obtaining such exemption. Tendering stockholders may be able to prevent backup withholding by properly completing the Substitute Form W-9 included in the Letter of Transmittal. The foregoing discussion may not be applicable to a stockholder who acquired Shares pursuant to the exercise of employee stock options or otherwise as compensation, to a stockholder who is related to Acquisition for purposes of Section 302 of the Internal Revenue Code or to a stockholder who is not a United States person for United States federal income tax purposes (including a stockholder who is not a citizen or resident of the United States) or who is otherwise subject to special tax treatment under the Internal Revenue Code. In addition, the foregoing discussion does not address the tax treatment of holders of options to acquire Shares. The federal income tax discussion set forth above is included for general information only and is based upon present law. Stockholders are urged to consult their tax advisors with respect to the specific tax consequences of the Offer and the Merger to them, including the application and effect of the alternative minimum tax, and state, local or non-United States income and other tax laws. 8. Certain Information Concerning the Company. GENERAL INFORMATION. The Company is a Delaware corporation with its principal executive offices located at 535 Connecticut Avenue, Norwalk, Connecticut 06854. The Company began operations in 1987 as a Connecticut corporation and was reincorporated in Delaware in 1992. The Company is a specialty 19 catalog and online retailer and direct marketer of brand name personal computers, computer software, accessories, peripheral and networking products to commercial and consumer customers. The Company markets its products through frequent mailings of its distinctive, colorful catalogs and dedicated telemarketing account managers who focus on corporate, education and government accounts. The Company also offers a full-service shopping site on the Internet at WWW.WAREHOUSE.COM. Except as set forth elsewhere in this Offer to Purchase or in Schedule I hereto, (1) neither the Company nor, to the knowledge of the Company, any of the persons listed in Schedule I hereto or any associate or majority-owned subsidiary of the Company or any of the persons so listed, beneficially owns or has a right to acquire any Shares or any other equity securities of the Company, has effected any transaction in Shares or any other equity securities of the Company during the past 60 days, or has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company (including any contract, arrangement, understanding or relationship concerning the transfer or the voting of any such securities, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies, consents or authorizations), (2) to the best knowledge of the Company, none of the persons listed in Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the Commission applicable to the Offer, and (3) there have been no contracts, negotiations or transactions between any of the Company's subsidiaries or, to the best knowledge of the Company, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. FINANCIAL INFORMATION. Set forth below is certain selected consolidated financial information relating to the Company and its subsidiaries which has been excerpted or derived from the audited financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998 (the "Form 10-K") and the unaudited quarterly information contained in the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 (the "Form 10-Q"), which are incorporated by reference herein. More comprehensive financial information is included in the Form 10-K, the Form 10-Q and other documents filed by the Company with the Commission. The financial information that follows is qualified in its entirety by reference to such reports and other documents, including the financial statements and related notes contained therein. Such reports and other documents may be examined and copies may be obtained from the offices of the Commission in the manner set forth below. 20 SELECTED FINANCIAL DATA (in thousands, except per share data)
For the Year Ended December 31, ------------------ 1998 1997 ---- ---- Statement of Operations Data: Net sales................................................... $2,220,018 $2,125,698 Gross profit................................................ 359,935 351,976 Restructuring, merger costs and goodwill write-off.......... -- 67,828 Litigation settlements...................................... 14,000 20,700 Income (loss) from operations before interest, income taxes..................................................... 52,528 (42,455) Income (loss) before income taxes........................... 61,578 (37,816) Net income (loss)........................................... $ 30,178 $ (36,681) Per Share Data: Basic net income (loss) per share........................... $ 0.87 $ (1.06) Diluted net income (loss) per share......................... $ 0.85 $ (1.06) Shares used in per share calculation: Basic....................................................... 34,803 34,475 Diluted..................................................... 35,349 34,475 Operating Data: Gross profit percentage..................................... 16.2% 16.6% Operating profit (loss) percentage.......................... 2.4% (2.0%) Current ratio............................................... 2.2:1 2.0:1 Ratio of earnings to fixed charges.......................... 17.61 (6.20)(1) Balance Sheet Data (at December 31): Working capital............................................. $ 312,128 $ 262,449 Total assets................................................ 666,530 619,344 Long-term obligations....................................... -- -- Short-term debt obligations................................. -- 12,570 Stockholders' equity........................................ 398,543 348,789 Book value per share........................................ 11.25 10.07
- ------------------------ (1) Excluding the 1997 restructuring, merger costs and goodwill write-off, the 1997 ratio of earnings to fixed charges is 10.66. 21
Nine Months Ended ----------------------------- September 30, September 30, 1999 1998 ------------- ------------- (unaudited) Sales....................................................... $1,782,653 $1,624,982 Cost of goods sold.......................................... 1,505,891 1,362,653 Gross profit................................................ 276,762 262,329 Selling, general and administrative expenses................ 223,219 214,673 Net income.................................................. 37,246 16,585 Net income per share........................................ $ 1.05(1) $ 0.48(2) Net income per share (fully diluted)........................ $ 1.03(3) $ 0.47(4) Ratio of earnings to fixed charges.......................... 22.15 14.87
- ------------------------ (1) Based upon 35,611 Shares outstanding. (2) Based upon 34,695 Shares outstanding. (3) Based upon 36,104 Shares outstanding. (4) Based upon 35,081 Shares outstanding.
At September 30, At 1999 December 31, (unaudited) 1998 ------------- ------------ Balance Sheet Data Total assets................................................ $679,235 $666,530 Working capital............................................. 330,474 312,128 Long-term obligations....................................... -- -- Short-term obligations...................................... -- -- Total stockholders' equity.................................. 441,899 398,543 Book value per share........................................ 12.35 11.25
OTHER INFORMATION. The Shares are registered under the Exchange Act. Accordingly, the Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file periodic reports, proxy statements and other information with the Commission 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 granted to them, 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 such proxy statements and distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information should be available for inspection at the public reference facilities at the Commission's principal office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the regional offices of the Commission located at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The Commission maintains a site on the World Wide Web, and the reports, proxy statements and other information filed by the Company with the Commission may be accessed electronically on the Web at http://www.sec.gov. Copies of such material may also be obtained by mail, upon payment of the Commission's customary fees, from the Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. 22 9. Certain Information Concerning BYOWC, Parent and Acquisition. Acquisition is a newly formed Delaware corporation and a direct wholly-owned subsidiary of Parent. Parent is a newly formed Delaware corporation formed by BYOWC to hold the entire equity interest in the Surviving Corporation. Currently, Parent is wholly-owned by BYOWC. Upon consummation of the equity financing described in Section 10, BYOWC's investment partners will also own equity interests in Parent. To date, neither Parent nor Acquisition has conducted any business other than incident to its formation, the execution and delivery of the Merger Agreement and the commencement of the Offer. BYOWC, a Delaware limited liability company, was formed in March 1999 by a group of private investors led by Gary L. Wilson for the purpose of investing in the securities of the Company and pursuing the acquisition of the Company. The members of BYOWC are Mr. Wilson, Jerome B. York, Alfred D. Boyer, Michael S. Ovitz, Alfred A. Checchi and Kenneth W. Slutsky. Mr. Boyer is the sole managing member of BYOWC. For information concerning the members of BYOWC, see Schedule II to this Offer to Purchase. Until immediately prior to the time that Acquisition purchases Shares pursuant to the Offer, it is anticipated that neither Acquisition nor Parent will have any significant assets or liabilities or engage in activities other than those incident to its formation and capitalization and the transactions contemplated by the Offer and the Merger Agreement. Since Parent and Acquisition are newly formed and have minimal assets and capitalization, no meaningful financial information is available. At the present time, Messrs. Wilson, York and Boyer are the directors and officers of Parent and Acquisition. Following the financing transactions described in Section 10 below, it is anticipated that the number of the officers and directors of both Parent and Acquisition will be increased to include additional designees of BYOWC and its investment partners in Parent. From March through September 1999, BYOWC acquired 1,749,700 Shares in the open market. Other than its acquisition of Shares, the execution and delivery of the Merger Agreement and the financing commitment letters and other activities incident to the Offer and Merger, BYOWC has not engaged in any business activities. The address of the principal offices of each of BYOWC, Parent and Acquisition is 9965 Wilshire Boulevard, Beverly Hills, California 90212, and the telephone number there is (310) 247-2711. Except as set forth in this Offer to Purchase, none of BYOWC, Parent, Acquisition or, to the best of their knowledge, any of the persons listed in Schedule II, Schedule III or Schedule IV to this Offer to Purchase, (a) has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss, or the giving or withholding of proxies, (b) has engaged in contacts, negotiations or transactions with the Company or its affiliates concerning a merger, consolidation, acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets or (c) has had any other transaction with the Company or any of its executive officers, directors or affiliates that would require disclosure under the rules and regulations of the Commission applicable to the Offer. Other than the Shares owned by BYOWC and the rights arising under the Merger Agreement and the Stockholder's Agreements (as defined in Section 15), neither Parent, Acquisition nor any of their affiliates beneficially own any Shares or have effected any transactions in the Shares within the past 60 days. 10. Source and Amount of Funds. The total amount of funds required by the Purchasers to purchase all of the Shares pursuant to the Offer and the Merger, to make payments with respect to the cash-out of employee and director stock options, and to pay all fees and expenses contemplated by the Merger Agreement, is expected to be approximately $733 million (including for this purpose the 1,749,700 Shares currently owned by BYOWC valued at $19.00 per 23 Share). In addition, it is anticipated that the Company, following the completion of the Offer, and the Surviving Corporation, following the Merger, will require at least $50 million in available credit for its general corporate purposes. Acquisition expects to obtain $210 million of the requisite funds in the form of equity financing from Parent and to obtain $320 million in term financing from the bank facilities described below. Parent will obtain the $210 million in equity financing prior to the consummation of the Offer through (i) a capital investment of $80 million (including for this purpose the Shares currently owned by BYOWC valued at $19.00 per share) from BYOWC and other investors; and (ii) $130 million in capital contributions from FS Equity Partners IV, L.P. ("FS Partners"), a private equity investment fund managed by Freeman Spogli, pursuant to the terms of a commitment letter between Parent and FS Partners that is summarized below. FS Partners has indicated that it intends to fund a portion of its commitment from other investors. The FS Partners commitment letter is attached as Exhibit 2 to the Merger Agreement, which is filed as an exhibit to the Schedule 14D-1 referenced in Section 20, and this summary is qualified in its entirety by reference to the text of such letter. The obligation of FS Partners to fund its $130 million in equity financing is subject to the following conditions: - The making of $80 million in capital investments by BYOWC and other investors. - The availability of the Term Loan Facilities and the New Credit Facility described below. - The absence of any legal prohibition on FS Partners purchasing the equity interest in Parent and executing, delivering and performing under the transaction documentation. - The satisfaction of each condition in the Merger Agreement to Acquisition's obligation to purchase Shares in the Offer without any waiver to which FS Partners has not consented. - The negotiation, execution and delivery of the various transaction agreements relating FS Partners' purchase of equity interests in Parent. Pursuant to a commitment letter dated December 20, 1999 (the "Bank Commitment Letter"), CSFB and CIBC Inc. (together, the "Banks") have committed to provide Acquisition an aggregate of up to $320 million in cash in the form of two senior secured term loan facilities (the "Term Loan Facilities") for the purpose of purchasing Shares in the Offer and the Merger. The Banks have indicated that they intend to syndicate a portion of the Term Loan Facilities and the New Credit Facility referred to below to other lending institutions. The obligation of the Banks is subject to certain conditions, including, among others: - Parent's receipt of the $210 million in equity financing described above. - The satisfaction of the Offer Conditions without giving effect to any waiver or amendment not approved by the Banks. - There being outstanding at the time of the closing of the financing not more than $5 million under the Company's existing revolving credit facility, the repayment in full of such credit facility and its termination. The Company currently has no borrowings outstanding under such facility. - The Banks' receipt of a solvency opinion with respect to the Company. - The absence of any change, effect or circumstance that is or could reasonably be expected to be materially adverse to the business, assets, financial condition or results of operations of the Company and its subsidiaries taken as a whole. - The absence of a material disruption of or a material adverse change in financial, banking or capital market conditions that, in the reasonable judgment of the Banks, could reasonably be expected to materially and adversely affect the syndication of the facilities. 24 - The absence of any actual or threatened legal action that could prevent or restrain the Offer or the Merger or materially impair the ability of Parent or Acquisition to operate the Company or materially impair the debt financing arrangements, excluding, in each case, any private litigation based upon state law fiduciary duty claims based upon the transactions contemplated by the Merger Agreement where the only remedy that could reasonably be expected to be awarded is monetary damages. - The negotiation and execution of documentation reasonably satisfactory to the Banks. The Company has agreed to guarantee the obligations of Acquisition under the Term Loan Facilities and pledge its assets to the Banks as security for such guarantee. In addition, the Banks have committed to make available, effective upon the initial payment for Shares purchased pursuant to the Offer, to the Company and Acquisition, and thereafter, following consummation of the Merger, to the Surviving Corporation a $70 million revolving credit facility (the "New Credit Facility"). The Banks' obligations to provide the New Credit Facility are subject to the same conditions as their obligations to fund the Term Loan Facilities. Prior to the Merger, $20 million under the New Credit Facility will be available to Acquisition to pay interest and commitment fees related to the debt financing following consummation of the Offer and $50 million will be available to the Company for working capital purposes. Following the Merger the full $70 million will be available to the Surviving Corporation for working capital purposes. The Company has agreed to guarantee the borrowings of Acquisition under the New Credit Facility and to pledge its assets to the Banks as security for the entire New Credit Facility. The foregoing discussion of the Bank Commitment Letter is qualified in its entirety by reference to the text of such letter, which is attached as Exhibit 3 to the Merger Agreement and filed as an exhibit to the Schedule 14D-1 referenced in Section 20. The receipt by Acquisition of $130 million in equity financing from FS Partners, the receipt by Acquisition of the proceeds of the Term Loan Facilities, and the effectiveness of the New Credit Facility are conditions to the Offer and are collectively referred to as the "Financing Condition." See Section 17. The Company has covenanted in the Merger Agreement that, until the Offer is consummated, it will maintain on hand cash in the amount of $200 million plus any amounts that the Company receives upon the exercise of stock options at any time following the execution of the Merger Agreement. 25 The approximate amounts of sources and uses of cash relating to the Offer and the Merger are presented in the table below. Sources of Cash Equity investments: From BYOWC and others................................... $ 80,000,000(1) From FS Partners and others............................. 130,000,000 Bank financing: Term Loan Facilities.................................... $320,000,000 Company's available cash.................................... 203,000,000(2) ------------ $733,000,000 ============
Uses of Cash
($ in millions) --------------- Purchase of Shares.......................................... $685,350,000(1) Cash-out of employee stock options.......................... 17,250,000 Fees and expenses........................................... 30,400,000(3) ------------ $733,000,000 ============
- ------------------------ (1) Includes the 1,749,700 Shares owned by BYOWC valued at $19.00 per Share. (2) To the extent the Company's available cash is insufficient, the payment of certain fees and expenses may be deferred or the Company may borrow under its revolving credit facility. (3) Does not include approximately $5,000,000 in change-of-control payments which may become payable to certain officers of the Company upon termination of employment six months after consummation of the Offer. See Section 13. 11. Background of the Offer and the Merger. From time to time, the Company has considered possible acquisitions, strategic alliances, mergers and other forms of business combination transactions as well as a recapitalization and other similar transactions. As a part of the Company's ongoing review of its strategic alternatives, the Company consulted initially with Goldman, Sachs & Co. and then with Wasserstein Perella as financial advisors to the Company. Commencing in February 1999, representatives of the Company, including Peter Godfrey, the Chairman, President and Chief Executive Officer of the Company, and Bruce L. Lev, Executive Vice President of Legal and Corporate Affairs, held informal discussions with possible financial purchasers and with various companies in the computer reseller industry that the Company's senior management believed might have an interest in discussing possible strategic transactions involving the Company. In the fall of 1997, Mr. Boyer of Boyer Capital Management, investment bankers, reviewed publicly available information concerning the Company, its competitors and its industry, and based on this review, decided to explore the possibility of putting together the financial and management resources that would be required to acquire the Company in a leveraged buyout transaction. In December 1997, Mr. Boyer contacted Mr. York, with whom he had been previously associated, to assist in further understanding the Company's industry and the opportunity presented by such a transaction, and with a view towards Mr. York's leading the management of the Company if it were to be acquired. Mr. York is a former chief financial officer of International Business Machines Corporation and of Chrysler Corporation. 26 During the first quarter of 1998, a group of private investors led by Mr. Wilson and including Messrs. York, Boyer and Ovitz formed BYOW Partners LLC ("BYOW") for the purpose of investing in Shares and pursuing a possible acquisition of the Company. During the second quarter of 1998, BYOW acquired less than 5% of the Company's stock in the open market. In late July, in view of the growing instability in the financial markets, BYOW determined that it was not then feasible to accomplish a leveraged buyout of the Company. Accordingly, BYOW sold its Shares and dissolved. In the first quarter of 1999, following a fall in the market price of the Company's stock, Mr. Boyer, after consultation with Mr. York, again determined that an opportunity might exist to acquire the Company in a leveraged buyout. In March 1999, the group of private investors that formed BYOW and, in addition, Messrs. Checchi and Slutsky, formed BYOWC for the purpose of investing in Shares and pursuing a possible acquisition of the Company. From March through September 1999, BYOWC acquired approximately 4.9% of the Company's outstanding Shares in the open market. In early September 1999, Mr. Wilson contacted a number of financial institutions, including CSFB, to discuss the possibility of providing financing to BYOWC for a leveraged buyout of the Company. Mr. Boyer, as representative of BYOWC, began negotiating with CSFB with respect to such financing arrangements. On September 29, 1999, at a meeting initiated by Mr. Boyer, Messrs. Boyer and York informed Mr. Godfrey of BYOWC's ownership interest in the Company and proposed an acquisition of all outstanding Shares in an all cash transaction. Mr. Boyer indicated a range of prices per share that might be payable in a possible transaction but stated that he would not be in a position to specify an offer price until BYOWC had an opportunity to perform a due diligence review of the Company. The transaction proposed by BYOWC contemplated that Mr. Godfrey and Felix Dennis, a director and co-founder of the Company who together with Mr. Godfrey owned approximately 11% of the Company's outstanding Shares, would participate in the proposed transaction through a contribution of some or all of their Shares. Mr. Boyer suggested that the Company's and BYOWC's counsel should meet to determine the next steps. Mr. Godfrey informed the Company's Board of Directors of BYWOC's proposal shortly thereafter. At a meeting of the Company's Board of Directors on October 15, 1999, the Company's Board of Directors designated two independent directors to act as a special committee (the "Special Committee") because of the possibility that certain directors of the Company might participate as equity investors in the proposed transaction. The Company's Board of Directors directed the Special Committee to consider the BYOWC proposal as well as other strategic alternatives available to the Company, to meet with Wasserstein Perella as appropriate in order to evaluate the BYOWC proposal and to formulate a response. The Company's Board of Directors also authorized Wasserstein Perella to contact representatives of BYOWC in order to discuss the terms and conditions of the BYOWC proposal. On October 18, 1999, Mr. Lev, representatives of Jones, Day, Reavis & Pogue ("Jones Day"), counsel for the Company, and Kramer Levin Naftalis & Frankel LLP ("Kramer Levin"), counsel for BYOWC, met to discuss the general terms of a possible transaction. At that meeting, Jones Day delivered to Kramer Levin a draft confidentiality agreement that contained standstill provisions. During the period October 18, 1999 through November 4, 1999, the parties and their representatives discussed the terms of the confidentiality agreement proposed by the Company, including its standstill provisions. The parties were unable to agree on the term of the standstill provisions, with the Company requesting a term of one year and BYOWC offering only a three month standstill period because of the size of its investment in the Company. BYOWC expressed its willingness to enter into a standstill agreement with a one year term but only if, after BYOWC had completed its due diligence review, BYOWC did not offer to purchase the Company in an all cash merger transaction at a price of not less than $17 per Share. Meanwhile, in early November 1999, Mr. Wilson contacted Freeman Spogli, which manages FS Partners, to discuss the possibility of becoming an equity participant with BYOWC in a leveraged buyout of the 27 Company. While Mr. Boyer continued to negotiate with CSFB and other proposed lenders concerning the terms of possible debt financing, and Mr. Wilson and Mr. Boyer began negotiations with Freeman Spogli with regard to possible equity financing for the proposed transaction. At a meeting of the Special Committee on November 15, 1999, the Special Committee received an update on the status of BYOWC's proposal. Wasserstein Perella reviewed with the Special Committee its preliminary analysis of the fairness to stockholders from a financial point of view of the $17 per Share minimum price proposed by BYOWC. The Special Committee also discussed the status of other potential strategic alliances and business combinations and the possibility of a recapitalization or share repurchase program. Jones Day and representatives of Wasserstein Perella reviewed the Special Committee's and Board's fiduciary duties in the circumstances. The Special Committee authorized the Company's management and representatives to continue negotiations with BYOWC with regard to a potential transaction. However, the Special Committee expressed the view that, due to the potential conflict of interest, Mr. Godfrey and Mr. Dennis should not be equity participants in the proposed transaction. The Special Committee also recommended that the transaction should be structured as a tender offer for all Shares followed by a second-step merger (rather than a single step merger transaction) to provide stockholders with payment for their Shares as soon as practicable, that the transaction price should be higher than the proposed $17 per Share and that the amount of any termination fee should be reasonable. On November 16, 1999, a representative of Wasserstein Perella contacted Mr. Boyer to inform him of the results of the Special Committee meeting, including that the $17 per Share minimum price was unacceptable for purposes of making inoperative the one year standstill period requested by the Company. During the next two days, representatives of the parties discussed the minimum Share price and other terms of BYOWC's proposal. On November 18, 1999, Mr. Boyer, Mr. Lev and representatives of Jones Day, Wasserstein Perella and Kramer Levin met to discuss BYOWC's proposal. At that meeting, Mr. Boyer indicated that BYOWC was prepared to go forward with the transaction without the participation of Messrs. Godfrey and Dennis as equity participants and that BYOWC was willing to structure the transaction as a tender offer for all Shares followed by a merger so long as the Company participated in the Offer. The parties also discussed resolving the impasse on the standstill issue by having the parties enter into a definitive merger agreement prior to BYOWC conducting its diligence review, with a provision that would allow BYOWC to terminate the agreement if the results of BYOWC's diligence review were unsatisfactory according to specified criteria. During the period November 21 through November 29, Mr. York contacted a number of potential investors to obtain additional equity financing in lieu of management's participation in the proposed buy-out. During that same period, the parties negotiated the terms of a merger agreement. On November 22, 1999, the parties entered into a confidentiality agreement in contemplation of the delivery of disclosure schedules in advance of executing the merger agreement. On November 23, 1999, BYOWC offered a transaction price of $18.50 per Share. Since Messrs. Godfrey and Dennis were not going to participate as equity holders in the proposed transaction, it was determined that it would now be appropriate for the transaction to be considered by the full Board of Directors rather than the Special Committee. On November 24, 1999, management of the Company, after consultation with members of the Company's Board of Directors, indicated that $19.00 per Share would be an acceptable transaction price if the parties could reach agreement on all other issues and assuming Wasserstein Perella would render a favorable opinion as to fairness. At a November 29, 1999 meeting of the Company's Board of Directors, members of the Company's senior management and representatives of Jones Day and Wasserstein Perella reported on the status of the negotiations with BYOWC. Mr. Lev reviewed the terms of the proposed merger documents. Wasserstein Perella presented its preliminary analysis of the fairness to stockholders from a financial point of view of the $19.00 per Share transaction price. The Company's Board of Directors discussed the Company's strategic alternatives, including the possibility of a recapitalization and share repurchase program, and the status of 28 discussions with other companies regarding strategic transactions involving the Company. The Company's Board of Directors then authorized senior management and its legal and financial advisors to continue negotiations with BYOWC. At the November 29, 1999 meeting of the Company's Board of Directors, the Company's Board of Directors authorized payment of a special success bonus of $500,000 to Mr. Lev to be paid following consummation of a change-of-control transaction involving the Company. For a more detailed description of this bonus arrangement, see Section 13. On November 30, 1999, after consultation with BYOWC's financing sources, Mr. Boyer informed Mr. Lev that BYOWC would be unable to proceed on the basis of having the parties enter into a merger agreement prior to completion of a due diligence review of the Company by BYOWC and its financing sources. Mr. Boyer stated that BYOWC would enter into a one year standstill agreement immediately in order that a due diligence review could proceed, provided that the term of the standstill period would be limited to not more than three months (i) in the event that BYOWC did not proceed with the proposed transaction as a result of material adverse information regarding the Company discovered during the diligence review, or (ii) if, following completion of the due diligence review, BYOWC offered to proceed with the transaction but the Company declined to do so. On December 1, 1999, the parties executed a standstill agreement containing such provisions. During the period December 1 through 20, 1999, representatives of the parties negotiated the terms of the proposed merger documents, and BYOWC, Freeman Spogli, CSFB and CIBC Inc. conducted their due diligence reviews of the Company. During the same period, the equity financing commitment of FS Partners were finalized, after which BYOWC and FS Partners finalized the debt financing commitments of CSFB and CIBC and the parties negotiated the terms of the Merger Agreement and the Stockholder's Agreements. At meetings of the Company's Board of Directors on December 19 and 20, 1999, the Company's senior management and representatives of Jones Day and Wasserstein Perella reported on the discussions with BYOWC. Mr. Lev again reviewed the fiduciary duties of the directors in these circumstances. Jones Day and Mr. Lev reviewed the terms of the transaction documents, as well as each of the matters relating to the proposed transaction in which the Company's Board of Directors and the Company's management had an interest which could be said to be different from or in addition to the interests of the Company's stockholders generally. See Section 13. Representatives of Wasserstein Perella then presented Wasserstein Perella's financial analysis of the proposed transaction and orally informed the Company's Board of Directors, which advice was subsequently confirmed in writing, that, as of December 20, 1999, in the opinion of Wasserstein Perella, the $19.00 per Share price to be paid in the Offer and the Merger was fair, from a financial point of view, to the holders of the Company's Common Stock. Following the discussion, the Company's Board of Directors, by unanimous vote, approved the Merger Agreement and the transactions contemplated by that agreement. Following the approval of the Company's Board of Directors, the Merger Agreement was executed in the early morning hours of December 21, 1999 and the transaction was publicly announced prior to the opening of business on that day. 12. Recommendation of the Company's Board of Directors. At a meeting held on December 20, 1999, the Company's Board of Directors unanimously approved the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and determined that the transactions contemplated by the Merger Agreement, including the Offer and the Merger, are fair to and in the best interests of the Company and its stockholders. The Company's Board of Directors unanimously voted to recommend that the stockholders of the Company accept the Offer and tender their Shares pursuant to the Offer and adopt the Merger Agreement. 29 In approving the Merger Agreement and the transactions contemplated thereby, and recommending that stockholders accept the Offer and tender their Shares pursuant to the Offer, the Company's Board of Directors considered a number of factors including, in addition to the factors mentioned in Section 11 above, the following: - the Company's future prospects, ability to access the capital markets, alternatives available to the Company as a stand-alone enterprise and the absence of strategic alternatives available to the Company; - the discussions held by management of the Company with certain possible financial and strategic purchasers or partners of the Company who were not interested in a transaction or not interested in a transaction that would result in a premium to the stockholders similar to that represented by the Per Share Amount being offered in this transaction; - certain challenges facing the Company, including increased competition in all segments of the Company's businesses from other companies, particularly those who have demonstrated a higher growth rate and those with a lower cost structure, and the ability of the Company's reorganized sales force to respond to and execute competitively in the face of heightened competition; - the intention of Mr. Godfrey, the Company's chief executive officer, to limit his role at the Company in the near future and the prospects of finding a suitable replacement for Mr. Godfrey; - the $19.00 Per Share Amount represents a premium of 24.6% over the last reported per Share sales price ($15.25) on NASDAQ on December 20, 1999, the last full trading day prior to the execution of the Merger Agreement, and a premium of 56.6% over the last reported per Share sales price ($12.13) on NASDAQ on December 15, 1999, the last full trading day prior to media reports that the Company was rumored to be entering into an Internet marketing alliance; - the $19.00 Per Share Amount to be paid to the stockholders in the Offer and the Merger exceeded the highest price at which the Shares have traded since April 27, 1999 and the highest last reported per Share sales price since February 26, 1999; - the financial presentation of Wasserstein Perella at the Company's December 19, 1999 Board of Directors meeting and the oral opinion of Wasserstein Perella, rendered on December 20, 1999, to the effect that based upon and subject to certain matters stated in its opinion, as of that date, the consideration to be received by the holders of the Company's Common Stock pursuant to the Offer and the Merger is fair to the holders, other than Parent and its affiliates, from a financial point of view (the "Fairness Opinion"). Wasserstein Perella confirmed its opinion in writing following the meeting of the Company's Board of Directors. THE FULL TEXT OF THE FAIRNESS OPINION, WHICH SETS FORTH THE MATTERS CONSIDERED AND THE ASSUMPTIONS MADE BY WASSERSTEIN PERELLA, IS ATTACHED HERETO AS SCHEDULE V. STOCKHOLDERS ARE URGED TO READ THE FAIRNESS OPINION IN ITS ENTIRETY. THE FAIRNESS OPINION IS DIRECTED ONLY TO FAIRNESS, FROM A FINANCIAL POINT OF VIEW, OF THE $19.00 PER SHARE CASH CONSIDERATION TO BE RECEIVED BY STOCKHOLDERS, OTHER THAN PARENT AND ITS AFFILIATES, PURSUANT TO THE OFFER AND THE MERGER, AND IS NOT INTENDED TO CONSTITUTE, AND DOES NOT CONSTITUTE, A RECOMMENDATION AS TO WHETHER ANY STOCKHOLDER SHOULD TENDER SHARES PURSUANT TO THE OFFER OR AS TO HOW ANY HOLDER SHOULD VOTE WITH RESPECT TO THE MERGER AND SHOULD NOT BE RELIED UPON BY ANY HOLDER FOR THAT PURPOSE; - the provisions of the Merger Agreement which permit the Company's Board of Directors to consider an unsolicited superior proposal in order to comply with the Company's Board of Directors' fiduciary duties to stockholders; - the terms of the Merger Agreement were determined through arm's-length negotiations between the Company and its financial and legal advisors, on the one hand, and Acquisition and its financial and legal advisors, on the other, and provide for the Offer to allow the stockholders to receive payment for their Shares on an accelerated basis; and 30 - the ability of the stockholders who object to the Merger to obtain "fair value" for their Shares if they exercise and perfect their appraisal rights under the DGCL. In evaluating the Offer and the Merger, the members of the Company's Board of Directors considered their knowledge of the business, financial condition and prospects of the Company, and the advice of financial and legal advisors. In view of the variety of factors considered in connection with its evaluation and approval of the Offer, the Merger Agreement and the transactions contemplated thereby, the Company's Board of Directors did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination. In addition, individual members of the Company's Board of Directors may have given different weight to different factors. The Company's Board of Directors also considered three principal relative detriments/risks of the Offer and the Merger: - as a result of the Offer and the Merger, the benefits of the Company's long-term prospects would not be realized by the existing stockholders; - the termination fee required by the terms of the Merger Agreement to be paid by the Company in certain circumstances makes it more costly for another potential bidder to propose to acquire the Company on a basis that would be superior to that contemplated by the Merger Agreement; and - the Financing Condition. 13. Interests of Certain Persons in the Offer and the Merger. GENERAL. In considering the recommendation of the Company's Board of Directors with respect to the Offer and the Merger and the fairness of the consideration to be received in the Offer and the Merger, stockholders should be aware that certain officers and directors of the Company have the interests and relationships summarized below that may present them with potential conflicts of interest in connection with the Offer and the Merger. The Company's Board of Directors recognized such interests and determined that such interests neither supported nor detracted from the fairness of the Offer and the Merger to the stockholders. RELATIONSHIPS WITH PETER GODFREY. Mr. Peter Godfrey is a member of the Company's Board of Directors and is the President and Chief Executive Officer of the Company. In addition to Mr. Godfrey's ownership of 2,800,962 Shares, he holds options to purchase 130,000 Shares. The Company and Mr. Godfrey have entered into an employment agreement pursuant to which the Company has agreed to employ Mr. Godfrey as President and Chief Executive Officer through December 31, 2000. Under the terms of the employment agreement, in the event Mr. Godfrey terminates his employment due to a change of control of the Company, as defined in such employment agreement, he will be entitled to receive a lump-sum payment of approximately $1,693,994. Mr. Godfrey may not terminate his employment pursuant to such agreement before the expiration of a six month period after the change of control. RELATIONSHIPS WITH WAYNE GARTEN. Mr. Wayne Garten is the Executive Vice President and Chief Financial Officer of the Company. Mr. Garten holds options to purchase 200,000 Shares. The Company and Mr. Garten have entered into an employment agreement pursuant to which the Company has agreed to employ Mr. Garten as Vice President and Chief Financial Officer through December 31, 2000. Under the terms of the employment agreement, in the event Mr. Garten terminates his employment due to a change of control of the Company, as defined in such employment agreement, he will be entitled to receive a lump-sum payment of approximately $562,632. Mr. Garten may not terminate his employment pursuant to such agreement before the expiration of a six month period after the change of control. 31 RELATIONSHIPS WITH ADAM SHAFFER. Mr. Adam Shaffer is the Executive Vice President of Marketing, Advertising and Purchasing. Mr. Shaffer holds options to purchase 582,761 Shares. The Company and Mr. Shaffer have entered into an employment agreement pursuant to which the Company has agreed to employ Mr. Shaffer as Vice President of Marketing, Advertising and Purchasing through December 31, 2000. Under the terms of the employment agreement, in the event Mr. Shaffer terminates his employment due to a change of control of the Company, as defined in such employment agreement, he will be entitled to receive a lump-sum payment of $1,082,038. Mr. Shaffer may not terminate his employment pursuant to such agreement before the expiration of a six month period after the change of control. RELATIONSHIPS WITH BRUCE L. LEV. Mr. Bruce L. Lev is the Executive Vice President of Legal and Corporate Affairs of the Company. The Company has agreed that within two business days following the consummation of a transaction that results in any person or group (as such term is defined in Rule 13d-3 of the Exchange Act) acquiring more than 50% of the outstanding voting securities of the Company, the Company will pay Mr. Lev a lump-sum cash payment of $500,000. Mr. Lev holds options to purchase 211,000 Shares. The Company and Mr. Lev have entered into an employment agreement pursuant to which the Company has agreed to employ Mr. Lev as Executive Vice President of Legal and Corporate Affairs through December 31, 2000. Under the terms of the employment agreement, in the event Mr. Lev terminates his employment due to a change of control of the Company, as defined in such employment agreement, he will be entitled to receive a lump-sum payment of $1,161,349. Mr. Lev may not terminate his employment pursuant to such agreement before the expiration of a six month period after the change of control. OWNERSHIP OF COMMON STOCK. As of December 20, 1999, the directors and executive officers of the Company, as a group, beneficially owned an aggregate of 4,084,360 Shares (representing approximately 11.3% of the then outstanding Shares), excluding Shares subject to options. All such Shares held by such directors and executive officers will be treated in the Merger in the same manner as Shares held by other stockholders. See Section 15. In the aggregate, the directors and executive officers of the Company will be entitled to receive approximately $77,602,840 for their Shares upon consummation of the Offer and the Merger (based on the number of Shares, excluding options, owned on December 20, 1999), assuming a Per Share Amount of $19.00. OPTIONS. As of December 20, 1999, the directors and executive officers of the Company held options to acquire an aggregate of 1,787,803 Shares. Immediately after the Effective Date, pursuant to the Merger Agreement, each outstanding option, including those held by such directors and executive officers, whether or not then exercisable will, in accordance with procedures that apply to all holders of options, be canceled, and each holder of an option will be entitled to receive from the Surviving Corporation an amount equal to the positive difference, if any, between the Per Share Amount and the exercise price of the option multiplied by the number of Shares subject to the option. For additional information concerning directors and executive officers of the Company, please see Schedule I hereto. The Company's Board of Directors was aware of these actual and potential conflicts of interest and considered them along with the other matters described under Section 12. INDEMNIFICATION AND INSURANCE. For a discussion of certain agreements by Parent with respect to indemnification of, and insurance for, directors and officers of the Company, see Section 15. To the best knowledge of the Company, all of the executive officers and directors of the Company currently intend to tender all Shares owned by them pursuant to the Offer. 32 14. Certain Effects of the Offer. INDEBTEDNESS OF THE COMPANY. The Company currently has an unsecured credit facility under which no borrowings are currently outstanding. Under the terms of the Merger Agreement, the Company is required to maintain $200 million available for the purchase of Shares in the Offer and the Merger, and, as a result, the Company may need to borrow prior to consummation of the Offer for working capital purposes. Upon consummation of the Offer, the Company will guarantee Acquisition's debt financing for the Offer and will enter into the New Credit Facility. Because of the dedication of the Company's cash to the purchase of Shares in the Offer and the Merger, it is anticipated that the Company may need to borrow under the New Credit Facility for working capital. The guarantee and the New Credit Facility will be secured by a pledge of substantially all of the Company's assets. The guarantee and the New Credit Facility will also impose various covenants on the Company. These covenants could restrict the Company's financial and operating flexibility. EFFECT ON THE MARKET FOR THE COMPANY'S 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. Consequently, depending upon the number of Shares purchased and the number of remaining holders of Shares, the purchase of Shares pursuant to the Offer may adversely affect the liquidity and market value of the remaining Shares held by the public. The Purchasers cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or less than the Offer price. STOCK QUOTATIONS. The Shares are currently listed and traded on NASDAQ, which constitutes the principal trading market for the Shares. Depending upon the aggregate market value and the number of Shares not purchased pursuant to the Offer, the Shares may no longer meet the quantitative maintenance criteria for continued inclusion on NASDAQ and may cease to be authorized for quotation on such market. Pursuant to the maintenance criteria, issuers on NASDAQ are required to have (i) (A) at least 750,000 publicly held shares, (B) at least 400 holders of round lots, (C) a market value of publicly held shares of at least $5 million, (D) a minimum bid price per share of $1, and (E) net tangible assets of at least $4 million or (ii) (A) at least 1.1 million publicly held shares, (B) at least 400 holders of round lots, (C) a market value of publicly held shares of at least $15 million, (D) a market capitalization of at least $50 million or total assets and total revenue of at least $50 million (each for the most recently completed fiscal year or two of the last three most recently completed fiscal years), (E) a minimum bid price per share of $5, and (F) at least four registered and active market makers for the Shares. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares outstanding are not considered as being publicly held for this purpose. If, as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the requirements for continued inclusion in NASDAQ or in any other tier of The Nasdaq Stock Market, the market for Shares could be adversely affected. In the event that the Shares no longer meet the requirements for continued inclusion in any tier of The Nasdaq Stock Market, it is possible that Shares would continue to trade in the over-the-counter market and that price quotations would be reported on the Nasdaq bulletin board or 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. 33 REGISTRATION UNDER THE EXCHANGE ACT. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application of the Company to the Commission if such Shares are not listed on a national securities exchange and there are fewer than 300 holders of record of the Shares. The termination of the 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 Commission, and would make certain of the provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirement of furnishing a proxy statement in connection with stockholders' meetings and the related requirement of an annual report to stockholders, and the requirements of Rule 13e-3 with respect to going private transactions, no longer applicable with respect to the Shares or to the Company. Furthermore, if registration of the Shares under the Exchange Act were terminated, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, may be impaired or, with respect to certain persons, eliminated. If the Shares were no longer registered under the Exchange Act, they would not be eligible for listing on any tier of The Nasdaq Stock Market or for quotation on NASDAQ. According to the Company, as of December 20, 1999, there were 165 holders of record of the Shares. Parent intends to cause the Company to make an application for termination of registration of the Shares as soon as possible after consummation of the Offer if the Shares are then eligible for such termination. MARGIN SECURITIES. 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 such Shares as collateral. Depending on factors similar to those described above regarding listing and market quotations, it is possible the Shares would no longer constitute "margin securities" for purposes of the Federal Reserve Board's margin regulations and therefore could no longer be used as collateral for loans made by brokers. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities." 15. The Merger Agreement; Stockholder's Agreements. THE MERGER AGREEMENT The following summary of certain provisions of the Merger Agreement is qualified in its entirety by reference to the text of the Merger Agreement, a copy of which has been filed as an exhibit to the Schedule 14D-1 referred to in Section 20 and is incorporated herein by reference. The following summary may not contain all of the information important to you. The Merger Agreement may be examined and copies may be obtained from the Commission in the same manner as set forth in Section 8. Capitalized terms used in the following summary and not otherwise defined in this Offer to Purchase shall have the meanings set forth in the Merger Agreement. THE OFFER. The Merger Agreement contemplates the commencement of the Offer and prescribes the conditions to the consummation of the Offer. For a description of the Offer Conditions, see Section 17. Assuming the prior satisfaction or waiver of the Offer Conditions, the Purchasers will accept for payment and pay for, in accordance with the terms of the Offer, all Shares validly tendered, according to the following priority: - First, Acquisition shall accept for payment and purchase Shares up to a maximum number of Shares equal to the Acquisition Share Number; and 34 - Second, the Company shall accept for payment and purchase Shares up to a maximum number of Shares equal to the Company Share Number. The "Company Share Number" means the sum of (x) $200,000,000 and (y) the aggregate exercise price of all options to acquire stock of the Company exercised following the date of the Merger Agreement and prior to consummation of the Offer, divided by the Per Share Amount. The "Acquisition Share Number" means the total number of issued and outstanding Shares less the Shares currently owned by BYOWC and less the Company Share Number. The Company agrees that no Shares held by the Company or any subsidiary of the Company will be tendered pursuant to the Offer. THE MERGER. The Merger Agreement provides that, following the consummation of the Offer and subject to the terms and conditions thereof, at the Effective Time the Company shall be merged with and into Acquisition and, as a result of the Merger, the separate corporate existence of the Company shall cease, and Acquisition shall continue as the Surviving Corporation and a direct subsidiary of Parent. CONDITIONS TO THE MERGER. The respective obligations of the BYOWC Companies, on the one hand, and the Company, on the other hand, to effect the Merger are subject to the satisfaction or waiver of the following conditions: (i) the Offer shall have been consummated, (ii) the Merger Agreement shall have been adopted by the requisite vote of the stockholders, if required by applicable law, (iii) the absence of any legal restraint preventing the consummation of the Merger and (iv) all consents of any Governmental Authority required for the consummation of the Merger and the transactions contemplated by the Agreement shall have been obtained, other than where the failure to obtain such consents will not have a material adverse effect on the business, assets, condition (financial or other), liabilities or results of operations of the Surviving Corporation and its subsidiaries taken as a whole. CONVERSION OF SHARES. At the Effective Time, (i) each issued and outstanding Share (other than Shares that are held by stockholders properly exercising dissenters' rights under the DGCL and Shares to be cancelled pursuant to clause (ii) below) will be converted into the right to receive the Per Share Amount in cash payable to the holder thereof, without interest, upon surrender of the certificate representing such Share. From and after the Effective Time, the holders of certificates evidencing ownership of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided for in the Merger Agreement or by applicable law, (ii) each Share owned by the Company, BYOWC, Parent, Acquisition or any direct or indirect wholly owned subsidiary of BYOWC immediately prior to the Effective Time shall be canceled, and no payment or other consideration shall be made with respect thereto and (iii) the shares of Acquisition common stock issued and outstanding immediately prior to the Merger will be converted into a number of validly issued, fully paid and nonassessable shares of common stock of the Surviving Corporation equal to the number of Shares owned by BYOWC, Parent, Acquisition or any direct or indirect wholly owned subsidiary of BYOWC immediately prior to the Effective Time, which shares will constitute all of the issued and outstanding capital stock of the Surviving Corporation and shall be owned by Parent. In addition, at the Effective Time, the Surviving Corporation shall issue to Parent a warrant to purchase common stock at $19.00 per share, on the terms set forth in the Merger Agreement. This warrant enables Parent to purchase shares of the Surviving Corporation so that, upon exercise, the number of outstanding shares of the Surviving Corporation would be substantially the same as the number of Shares outstanding immediately prior to the Offer. 35 THE COMPANY'S BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the purchase by Acquisition of Shares pursuant to the Offer (and provided that the Minimum Condition has been satisfied), Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as will give Parent, 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 which equals the product of the total number of directors on the Board of Directors of the Company (giving effect to the directors appointed or elected pursuant to this sentence and including current directors serving as officers of the Company) multiplied by the percentage that the aggregate number of Shares beneficially owned by Acquisition or any other affiliate of Parent (including such Shares as are accepted for payment by Acquisition pursuant to the Offer, but excluding Shares held by the Company) bears to the number of Shares outstanding (after reduction for Shares accepted for payment by the Company pursuant to the Offer). At such time, if requested by Parent, the Company will also cause each committee of the Board of Directors of the Company to include persons designated by Parent constituting the same percentage of each such committee as Parent's designees are of the Board of Directors of the Company. The Company shall, upon request by Parent, promptly increase the size of the Board of Directors of the Company or exercise reasonable best efforts to secure the resignations of such number of directors as is necessary to enable Parent's designees to be appointed or elected to the Board of Directors of the Company in accordance with terms described in this section and to cause Parent's designees so to be appointed or elected; PROVIDED, HOWEVER, that, in the event that Parent's designees are appointed or elected to the Board of Directors of the Company in accordance with these terms, until the Effective Time the Board of Directors of the Company shall have at least two directors who are directors on the date of the Merger Agreement, each of whom is neither an officer of the Company nor a designee, stockholder, affiliate or associate (within the meaning of the federal securities laws) of BYOWC (such directors, the "Continuing Directors") or such persons having such qualifications who are designated as "Independent Directors" by a majority of the Continuing Directors in office at the time of such designation (such persons, together with the Continuing Directors, the "Independent Directors"). Notwithstanding anything in the Merger Agreement to the contrary, subsequent to the designation of the directors by Parent and prior to the Effective Time, the unanimous vote of the Independent Directors shall be required to (i) amend or terminate the Merger Agreement on behalf of the Company, (ii) exercise or waive any of the Company's rights or remedies thereunder, (iii) extend the time for performance of Parent's, Acquisition's or BYOWC's obligations thereunder, (iv) take any other action by the Company in connection with the Merger Agreement required to be taken by the Board of Directors of the Company or (v) amend the Company's Certificate of Incorporation or the Company's Bylaws, each as in effect on the date of the Merger Agreement. STOCKHOLDERS' MEETING. Pursuant to the Merger Agreement, the Company will, if required by applicable law in order to consummate the Merger, take all steps necessary so that the Merger Agreement and the Merger will be presented for the approval of the Company's stockholders, either at a stockholders meeting duly called for such purpose or by written consent of stockholders in lieu of a meeting in accordance with the DGCL. BYOWC, Parent and Acquisition have agreed to use their reasonable best efforts to cause such meeting or consent (or the short form merger described in the next following paragraph) to occur within six months after completion of the Offer. The Merger Agreement provides that the Company will, if required by applicable law in order to consummate the Merger, prepare and file with the Commission and, when cleared by the Commission, will mail to stockholders a proxy statement relating to the adoption of the Merger Agreement and the transactions contemplated thereby, or an information statement, as appropriate, satisfying all requirements of the Exchange Act. If Acquisition acquires at least a majority of the outstanding Shares, it will have sufficient voting power to approve the Merger, even if no other stockholder votes in favor of the Merger. 36 The Merger Agreement provides that the Company shall not be required to take the foregoing actions if Parent or Acquisition may consummate the Merger without the vote or approval of the Company's stockholders in accordance with the short term merger provisions of Section 253 of the DGCL. OPTIONS The Company shall provide a period of 30 days ending on the Effective Time in which each option outstanding to purchase Shares under the Company's stock option plans (including the plans formerly maintained by Inmac Corporation) (each such option, and any other stock option of the Company, a "Company Option"), whether or not then exercisable, may be exercised, provided that such exercise with respect to an otherwise unvested option shall be contingent upon the subsequent occurrence of the Effective Time. At the Effective Time, each Company Option, whether or not then vested or exercisable, shall be cancelled and the holder thereof shall receive from the Surviving Corporation as soon as practicable following consummation of the Merger an amount in cash equal to the positive difference, if any, between the Per Share Amount and the exercise price of the Company Option multiplied by the number of Shares for which the Company Option was granted, subject to reduction only for any applicable withholding taxes. In no event will any Company Options be exercisable after the Effective Time. INTERIM OPERATIONS. COVENANTS. The Merger Agreement requires the Company and its subsidiaries, from the date of the Merger Agreement until the Effective Time, to operate their respective businesses in the ordinary course and to use their reasonable efforts to preserve intact their business organizations, to keep available the services of their present officers, employees and consultants and to preserve their relationships with persons having significant business relations with them. The Merger Agreement restricts the Company and its subsidiaries from entering into certain types of transactions outside the ordinary course of business without the consent of the Parent, including, among others, amending its organizational documents, issuing additional shares of capital stock or rights to acquire its capital stock, making material dispositions of assets, paying dividends, making changes in its capital structure, redeeming its capital stock, settling any stockholder actions against the Company, acquiring businesses, incurring certain additional indebtedness, authorizing certain capital expenditures, entering into or amending certain material contracts, amending its employee benefit or compensation plans, changing accounting policies, making tax elections or compromises and discharging certain liabilities. NO SOLICITATION. Pursuant to the Merger Agreement, the Company shall not, directly or indirectly, through any officer, director, employee, representative or agent of the Company or any of the Company's subsidiaries, solicit or encourage the initiation of (including by way of furnishing information) any inquiries or proposals regarding any merger, sale of assets, sale of shares of capital stock (including without limitation by way of a tender offer) or similar transactions involving the Company or any of its subsidiaries that if consummated would constitute an Alternative Transaction (as defined below) (any of the foregoing inquiries or proposals, an "Acquisition Proposal"). The Board of Directors of the Company is not, however, prevented from (i) furnishing information to a third party which has made a BONA FIDE Acquisition Proposal that is a Superior Proposal (as defined below) not solicited in violation of the Merger Agreement, provided that such third party has executed an agreement with confidentiality provisions substantially similar to those then in effect between the Company and BYOWC or (ii) subject to compliance with the other terms of the Merger Agreement's "No Solicitation" provision, considering and negotiating a BONA FIDE Acquisition Proposal that is a Superior Proposal not solicited in violation of the Merger Agreement; PROVIDED, HOWEVER, that, as to each of clauses (i) and (ii), (x) such actions occur at a time prior to the initial consummation of the Offer and (y) the Board of Directors of the Company determines (after due consultation with independent counsel, which may be Jones Day) that it is 37 or is reasonably likely to be required to do so in order to discharge properly its fiduciary duties; PROVIDED, FURTHER, that if a third person has made an Acquisition Proposal and the Company cannot determine based upon the information provided by the third person whether the Acquisition Proposal is a Superior Proposal, it may so indicate to the third person. For purposes of the Merger Agreement, a "Superior Proposal" means any proposal made by a third party to acquire, directly or indirectly, for consideration consisting of cash and/or securities, all of the equity securities of the Company entitled to vote generally in the election of directors or all the assets of the Company, on terms which the Board of Directors of the Company reasonably believes (after consultation with a financial advisor of nationally recognized reputation) to be more favorable from a financial point of view to its stockholders than the Offer and the Merger and the transactions contemplated by the Merger Agreement taking into account at the time of determination any changes to the financial terms of the Merger Agreement which as of that time had been proposed by Parent. "Alternative Transaction" means any of (i) a transaction pursuant to which any person (or group of persons) other than Parent or its affiliates (a "Third Party") acquires or would acquire more than 30% of the outstanding shares of any class of equity securities of the Company, whether from the Company or pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or other business combination involving the Company pursuant to which any Third Party acquires more than 30% of the outstanding equity securities of the Company or the entity surviving such merger or business combination, (iii) any transaction pursuant to which any Third Party acquires or would acquire control of assets (including for this purpose the outstanding equity securities of subsidiaries of the Company and securities of the entity surviving any merger or business combination including any of the Company's subsidiaries) of the Company or any of its subsidiaries having a fair market value (as determined by the Board of Directors of the Company in good faith) equal to more than 30% of the fair market value of all the assets of the Company and its the subsidiaries, taken as a whole, immediately prior to such transaction, or (iv) any other consolidation, business combination, recapitalization or similar transaction involving the Company or any of the Company's subsidiaries that are "significant" under Regulation S-X at a level of 30% or more, other than the transactions contemplated by the Merger Agreement; PROVIDED, HOWEVER, that the term Alternative Transaction shall not include any acquisition of securities by a broker dealer in connection with a BONA FIDE public offering of such securities. The Merger Agreement requires the Company to immediately notify Parent and Acquisition after receipt of any Acquisition Proposal, or any modification of or amendment to any Acquisition Proposal, or any request for nonpublic information relating to the Company or any of its subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or records of the Company or any subsidiary by any person or entity that informs the Board of Directors of the Company or such subsidiary that it is considering making, or has made, an Acquisition Proposal. Such notice to Parent shall be made orally and in writing, and shall indicate the identity of the person making the Acquisition Proposal or intending to make an Acquisition Proposal or requesting non-public information or access to the books and records of the Company, the terms of any such Acquisition Proposal or modification or amendment to an Acquisition Proposal, and whether the Company is providing or intends to provide the person making the Acquisition Proposal with access to information concerning the Company as provided above. The Company shall also promptly notify Parent, orally and in writing, if it enters into negotiations concerning any Acquisition Proposal. Except to the extent that the Company's Board of Directors determines (after due consultation with independent counsel which may be Jones Day) that it is or is reasonably likely to be required to do so in order to properly discharge its fiduciary duties, neither the Company nor the Board of Directors of the Company shall withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Acquisition, the approval of such Board of Directors of the Merger Agreement, the Offer or the Merger; PROVIDED, HOWEVER, that in no event may the Board of Directors withdraw or modify its recommendation earlier than the second full business day following Parent's receipt of written notice of the intention of the Board of Directors to do so. The Company and the Board of Directors of the Company shall not (i) redeem the Rights, or waive or amend any provision of the Rights Agreement, in any such case to permit or facilitate the consummation of any Acquisition Proposal or Alternative Transaction, or (ii) enter into any agreement with respect to, or otherwise 38 approve or recommend to stockholders, or publicly propose to approve or recommend, any Acquisition Proposal or Alternative Transaction, unless the Merger Agreement has been terminated in accordance with its terms. A deferral of the distribution of Rights following the commencement of a tender offer or exchange offer is not prohibited under the Merger Agreement. The Merger Agreement does not restrict the Company from taking and disclosing to its stockholders a position required by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders required by applicable law, rule or regulation. The Company is required to ensure that the officers and directors of the Company and the Company Significant Subsidiaries and any investment banker or other advisor or representative retained by the Company are aware of the restrictions set forth above. The Company is responsible for any failure of such advisors or representatives to comply with such restrictions. INDEMNIFICATION AND INSURANCE. Pursuant to the Merger Agreement, the Certificate of Incorporation and Bylaws of the Surviving Corporation shall contain the provisions with respect to indemnification set forth in the Certificate of Incorporation and the Bylaws of the Company, which provisions shall not be amended, modified or otherwise repealed for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder as of the Effective Time of individuals who at the Effective Time were directors, officers, employees or agents of the Company, unless such modification is required after the Effective Time by law. The Merger Agreement further provides that the Surviving Corporation shall, to the fullest extent permitted under applicable law or under the Surviving Corporation's Certificate of Incorporation or Bylaws, indemnify and hold harmless, each present and former director, officer or employee of the Company or any of its subsidiaries (collectively, the "Indemnified Parties") against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, (x) arising out of or pertaining to the transactions contemplated by the Merger Agreement or (y) otherwise with respect to any acts or omissions occurring at or prior to the Effective Time, to the same extent as provided in the Company's Certificate of Incorporation or Bylaws or any applicable contract or agreement as in effect on the date hereof, in each case for a period of six years after the date hereof. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time) and subject to the specific terms of any indemnification contract, (i) any counsel retained by the Indemnified Parties for any period after the Effective Time shall be reasonably satisfactory to the Surviving Corporation (and, for these purposes, Jones Day shall be deemed reasonably satisfactory to the Surviving Corporation), (ii) after the Effective Time, the Surviving Corporation shall pay the reasonable fees and expenses of such counsel, promptly after statements therefor are received and (iii) the Surviving Corporation will cooperate in the defense of any such matter; PROVIDED, HOWEVER, that the Surviving Corporation shall not be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld or delayed); and PROVIDED, FURTHER, that, in the event that any claim or claims for indemnification are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until the disposition of any and all such claims. The Indemnified Parties as a group may retain only one law firm to represent them in each applicable jurisdiction with respect to any single action unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties, in which case each Indemnified Person with respect to whom such a conflict exists (or group of such Indemnified Persons who among them have no such conflict) may retain one separate law firm in each applicable jurisdiction. The Merger Agreement also provides that the Surviving Corporation shall honor the Company's obligations under existing indemnification and employment agreements. 39 In addition, Parent will provide, or cause the Surviving Corporation to provide, for a period of not less than six years after the Effective Time, the Company's current directors and officers an insurance and indemnification policy that provides coverage for events occurring at or prior to the Effective Time (the "D&O Insurance") that is no less favorable than the existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage; PROVIDED, HOWEVER, that Parent and the Surviving Corporation shall not be required to pay an annual premium for the D&O Insurance in excess of 300% of the annual premium currently paid by the Company for such insurance, but in such case shall purchase as much such coverage as possible for such amount. The Merger Agreement provides that the foregoing provisions are intended to benefit the Indemnified Parties and shall be binding on all successors and assigns of the Surviving Corporation and shall be enforceable by the Indemnified Parties. Parent has agreed to guarantee the performance by the Surviving Corporation of the indemnification obligations set forth above. REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the Company has made customary representations and warranties to Parent with respect to, among other things, its organization, subsidiaries, capitalization, authority relative to the Merger Agreement, the absence of contractual or legal violations resulting from the Merger Agreement, governmental approvals with respect to the Merger Agreement, compliance with laws, governmental permits, securities filings, financial statements, the absence of material adverse effects on the Company and certain other events since September 30, 1999, the absence of undisclosed liabilities, litigation, employee benefit plans, labor matters, disclosure documents, the absence of limitations on conduct of business, title to property, taxes, environmental matters, brokers and investment bankers, intellectual property, interested party transactions, insurance, product liability and recalls, fairness opinion, and the amendment of the Rights Agreement. Pursuant to the Merger Agreement, Parent and BYOWC have made customary representations and warranties to the Company with respect to, among other things, their organization, authority relative to the Merger Agreement, governmental approvals with respect to the Merger Agreement, the absence of contractual or legal violations resulting from the Merger Agreement, disclosure documents, finders and investment bankers, the commitments for Parent's financing arrangements, the activities of Acquisition, Parent's "interested stockholder" status, BYOWC's beneficial ownership of Shares and the solvency of the Surviving Corporation. Certain representations and warranties in the Merger Agreement are qualified as to "materiality" or "Material Adverse Effect." For purposes of the Merger Agreement and this Offer to Purchase, the capitalized term "Material Adverse Effect" means any change, effect or circumstance that is materially adverse to the business, assets (including intangible assets), financial condition or results of operations of the Company and its subsidiaries, or Parent, BYOWC or any of their respective subsidiaries, as the case may be, in each case taken as a whole; PROVIDED, HOWEVER, that effects of changes that are applicable to or arise on account of (A) any changes in economic, regulatory, or political conditions generally, (B) the United States securities markets, (C) the Merger Agreement or the transactions contemplated by the Merger Agreement, (D) the computer reseller industry generally, or (E) the effect of the public announcement of the transactions contemplated hereby, including, without limitation, any effect on current or prospective customers or employees of the Company, is excluded from the definition of "Material Adverse Effect" and from any determination as to whether a Material Adverse Effect has occurred or may occur. The failure of a representation or warranty to be true and correct, either individually or together with the failure of other representations or warranties to be true and correct, or the failure to perform an obligation, agreement or covenant is deemed to have a Material Adverse Effect if (x) the business, assets (including 40 intangible assets), financial condition, or results of operations of the Company and its subsidiaries, or Parent, BYOWC or any of their respective subsidiaries, as the case may be, in each case taken as a whole, are or are reasonably likely to be materially worse than if such representation or warranty had been true and correct or such obligation, agreement or covenant had been performed, excluding, however, the effects of the changes specified in the proviso set forth in preceding paragraph, (y) in the case of the Company, such representation or warranty materially misstates the capitalization of the Company and/or its subsidiaries or (z) the failure of such representation or warranty to be true and correct or the failure to perform such obligation, agreement of covenant materially and adversely affects the ability of the Company or Parent, as the case may be, timely to consummate the transactions contemplated by the Merger Agreement. REASONABLE EFFORTS. Under the Merger Agreement, each of the Company, BYOWC, Parent and Acquisition has agreed to use reasonable efforts to take all actions and to do all things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by the Merger Agreement. In addition, the Company has agreed to cooperate reasonably with BYOWC, Parent and Acquisition in connection with the negotiation and documentation of the debt financing. PUBLIC ANNOUNCEMENTS. So long as the Merger Agreement is in effect, the Company, and Parent, have agreed not to issue or cause the publication of any press release or any other announcement with respect to the Offer or the Merger or the transactions contemplated thereby without the consent of the other party, which shall not to be unreasonably withheld, except where such release or announcement is required by applicable law or pursuant to any applicable listing agreement with, or rules or regulations of NASDAQ, if it has used all reasonable efforts to consult with the other party. EMPLOYEE MATTERS. Under the Merger Agreement, Parent shall cause the Surviving Corporation to (i) satisfy all obligations of the Company under each existing severance agreement or employment agreement between the Company and any of its officers or employees, and (ii) for a period of one year beginning on the Effective Time, provide each individual who, as of the Effective Time, is an employee of the Company or any subsidiary of the Company (a "Company Employee"), so long as he or she remains employed by the Surviving Corporation or a subsidiary thereof during such one-year period, with (x) health and welfare benefits that are comparable in the aggregate to such benefits as are provided to Company Employees immediately prior to the Effective Time; (y) severance benefits pursuant to the Company's Severance Pay Plan in effect immediately prior to the Effective Time; and (z) 401(k) plan benefits and deferred compensation benefits as in effect under the Company's 401(k) plan and deferred compensation plan in effect immediately prior to the Effective Time. Notwithstanding the foregoing, Parent, the Surviving Corporation, or any subsidiary thereof may (A) terminate, amend or modify any health and welfare employee benefit plan, program or arrangement in any respect, (B) terminate the employment of any employee of, or the service of any independent contractor, leased employee or other service provider to, the Surviving Corporation or any subsidiary thereof, and (C) modify the terms and conditions of the employment of any such employee or the service of any such independent contractor, leased employee or other service provider. The Merger Agreement expressly provides that the provisions of the foregoing paragraph are not enforceable by any third party, including, without limitation, any Company Employee, collective bargaining unit or employee organization. The Merger Agreement provides that the Company shall use its reasonable best efforts to obtain from each holder of a Company Option his or her consent to the provisions described above under "--Options" prior to the initial Expiration Date of the Offer. The Company has agreed to obtain such consent from the holders of 80% of such Company Options within 15 business days after the date of the Merger Agreement. 41 FINANCING COVENANTS. Parent has agreed not to, without the prior consent of the Company (which consent shall not be unreasonably withheld), materially amend, modify or waive any of the terms of the financing arrangements for the Offer if such amendment, modification or waiver would, among other things, have a significant adverse effect on or significantly delay the consummation of the Offer and/or the Merger. BYOWC and Parent have further agreed to enforce, to the fullest extent permitted under applicable law, the obligations of the respective investment and financing sources to provide the financing for the Offer and the Merger and will use their reasonable best efforts to consummate such financing arrangements. The Company has agreed (i) until the Offer is consummated, to maintain on hand cash, cash equivalents and/or marketable securities equal to $200,000,000 plus the aggregate exercise price of Company Options exercised after the date of the Merger Agreement; (ii) to guarantee and secure the Term Loan Facilities to be entered into by Acquisition; and (iii) to enter into the New Credit Facility. TERMINATION; FEES. The Merger Agreement may be terminated at any time prior to the Effective Time, whether before or after approval by the stockholders of the Company of the Merger: (a) by duly authorized mutual written consent of Parent and the Company; (b) by either Parent or the Company if the initial consummation of the Offer shall not have occurred on or before March 31, 2000, PROVIDED, HOWEVER, that the right to terminate the Merger Agreement pursuant to this clause shall not be available to any party whose failure to fulfill any of its obligations under the Merger Agreement results in the failure of the Offer to be consummated by such time; (c) by either Parent or the Company if, as the result of the failure of the Minimum Condition or any of the other conditions set forth in Section 17, the Offer shall have terminated or expired in accordance with its terms without Acquisition having purchased any Shares pursuant to the Offer, PROVIDED that if the failure to satisfy any conditions set forth in Section 17 shall be a basis for termination of the Merger Agreement under any other clause of this section, a termination pursuant to this clause shall be deemed a termination under such other clause; (d) by either Parent or the Company if any Governmental Authority shall have issued a non-appealable final order, decree or ruling or taken any other action permanently restraining, enjoining or otherwise prohibiting the consummation of the Merger; (e) by Parent if, whether or not permitted to do so by the Merger Agreement, the Board of Directors of the Company or the Company shall have (x)(i) withdrawn or modified in a manner adverse to Parent its approval or recommendation of the Offer, the Merger Agreement or the Merger; (ii) approved or recommended to the stockholders of the Company any Acquisition Proposal or Alternative Transaction; or (iii) approved or recommended that the stockholders of the Company tender their Shares in any tender or exchange offer that is an Alternative Transaction; or (y) taken any public position or made any disclosures to the Company's stockholders, whether or not permitted pursuant to the "No Solicitation" provisions of the Merger Agreement described above, which has the effect of any of the foregoing; (f) by Parent or the Company, if any representation or warranty of the other party in the Merger Agreement shall not have been true when made (without for this purpose giving effect to qualifications of materiality contained in such representations and warranties), if such failure to be true and correct, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect; PROVIDED that, if such misrepresentation is curable prior to the initial Expiration Date (or any extension thereof) through the exercise of the misrepresenting party's reasonable best efforts and for so long as such party continues to exercise such reasonable best efforts, the other party may not terminate the Merger Agreement pursuant to this clause; 42 (g) by Parent or the Company, if any representation or warranty of the other party shall have become untrue (without for this purpose giving effect to qualifications of materiality contained in such representations and warranties), other than as a result of a breach or failure to perform by such party of any of its covenants or agreements under the Merger Agreement, if such failure to be true and correct, individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect; PROVIDED, that if such misrepresentation is curable prior to the initial Expiration Date (or any extension, thereof) through the exercise of the misrepresenting party's reasonable best efforts, and for so long as such party continues to exercise such reasonable best efforts, the other party may not terminate the Merger Agreement pursuant to this clause; (h) by Parent or the Company, if the other party shall have materially breached any of its covenants or other agreements contained in the Merger Agreement; PROVIDED, THAT, except for any breach of the Company's obligations under the "No Solicitation" provision of the Merger Agreement described above, if such breach is curable by the breaching party prior to the initial Expiration Date (or any extension thereof) through the exercise of such party's reasonable best efforts and for so long as such party continues to exercise such reasonable best efforts, the other party may not terminate the Merger Agreement under this clause. The parties have agreed that for purposes of this clause (h), (x) the Company's failure to obtain the consent of the holders of 80% of the Company's Options described under "--Options" above shall be deemed a material breach, and (y) a failure by Parent, Acquisition, or BYOWC to comply with its financing covenants set forth in the Merger Agreement and summarized above under "--Financing Covenants" shall be deemed a material breach; and (i) by the Company, in order to accept a Superior Proposal, PROVIDED, THAT, the Offer shall not theretofore have been initially consummated; the Board of Directors of the Company reasonably determines (after due consultation with independent counsel, which may be Jones Day), that it is or is reasonably likely to be required to accept such proposal in order to discharge properly its fiduciary duties; the Company has given Parent two full business days' advance notice of the Company's intention to accept such Superior Proposal; the Company shall in fact accept such proposal; the Company shall have paid the fee and expenses contemplated by the Merger Agreement; and the Company shall have complied in all respects with the provisions of the section regarding "No Solicitation." Notwithstanding the foregoing, the right to terminate the Merger Agreement pursuant to clauses (e), (f), (g) and (h) above shall not be available to Parent if Acquisition or any other affiliate of Parent shall have acquired Shares pursuant to the Offer. In the event of termination of the Merger Agreement in accordance with its terms, the Merger Agreement generally shall become void with no liability on the part of any party thereto or of any of its affiliates, directors, officers or stockholders except for any obligation of the Company or Parent to pay certain fees and expenses as set forth in the Merger Agreement. Notwithstanding the foregoing, no such termination shall relieve any party from any liability for any willful breach of the Merger Agreement prior to termination and nothing shall relieve BYOWC and the Company or any of their affiliates of their obligations under the Confidentiality Agreement. The Merger Agreement provides that if the Merger Agreement is terminated: (i) by Parent or the Company pursuant to the provision described in clause (b) or (c) above and an Alternative Transaction is publicly announced by the Company or any third party within nine months following the date of such termination and such transaction is at any time thereafter consummated on substantially the terms theretofore announced. For purposes of this provision, all references to 30% in the definition of Alternative Transaction are deemed to refer to 40%. (ii) by Parent pursuant to the provisions described in clause (e) above; or (iii) by the Company pursuant to the provision described in clause (i) above, 43 then the Company shall pay Parent a fee of $14.5 million and shall also pay Parent $3 million to reimburse Parent for documented expenses relating to the transactions contemplated by the Merger Agreement (which expenses shall include all fees and expenses payable to any financing sources). The Merger Agreement also provides that if the Merger Agreement is terminated by Parent pursuant to clauses (f) or (h) above, the Company will pay Parent's actual, documented and reasonable out-of-pocket expenses relating to the transactions contemplated by the Merger Agreement (including, but not limited to, fees and expenses of counsel and accountants) in an aggregate amount not to exceed $3 million, and shall also pay Parent's actual and documented out-of-pocket expenses in the nature of fees, costs and expenses paid to financing sources. The Merger Agreement further provides that if the Merger Agreement is terminated by the Company pursuant to clauses (f) or (h) above, Parent will pay the Company's actual, documented and reasonable out-of-pocket expenses relating to the transactions contemplated by the Merger Agreement (including, but not limited to, fees and expenses of counsel and accountants and out-of-pocket expenses of financial advisors) in an aggregate amount not to exceed $3 million. The Merger Agreement provides that no fee or expenses will be paid to a party if such party was in material breach of its obligations immediately prior to the termination that triggered payment of such fee or expenses. OBLIGATIONS OF BYOWC. BYOWC has agreed to be jointly and severally responsible with Parent and/or Acquisition for each and every obligation of Parent and Acquisition under the Merger Agreement to be performed at or prior to the Effective Time. STOCKHOLDER'S AGREEMENTS. As an inducement to the BYOWC Companies to enter into the Merger Agreement with the Company, Mr. Godfrey and Mr. Dennis (the "Stockholders"), who in the aggregate own approximately 10.1% of the outstanding Shares on a fully diluted basis, have each entered into a stockholder's agreement (the "Stockholder's Agreements") with Parent and Acquisition. The following summary of certain provisions of the Stockholder's Agreements, copies of which are filed as exhibits to the Schedule 14D-1, is qualified in its entirety by reference to the text of the Stockholder's Agreements. You may examine or obtain copies of the Stockholder's Agreements in accordance with the procedures set forth in Section 8. Each Stockholder has agreed that he shall tender all his Shares in the Offer and that he shall not withdraw any Shares so tendered. In addition, each Stockholder has agreed not to transfer, or consent to any transfer of any or all of such Stockholder's Shares or any interest therein (except as contemplated by the applicable Stockholder's Agreement), enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of his Shares or any interest therein, grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares or any interest therein except with respect to election of directors at the Company's annual meeting, deposit the Shares into a voting trust or enter into a voting arrangement or agreement with respect to the Shares or take any other action that would in any way restrict, limit or interfere with his obligations under the applicable Stockholder's Agreement. Each Stockholder, only in his capacity as a stockholder, has also agreed not to, directly or indirectly, solicit, initiate or encourage the submission of any Acquisition Proposal or participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal. 44 Each Stockholder, only in his capacity as a stockholder, has agreed to vote such Stockholder's Shares against, or refrain from giving consent in favor of (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, joint venture, recapitalization, dissolution, liquidation or winding up of or by the Company and (ii) any amendment of the Company's Certificate of Incorporation or Bylaws or other proposal or transaction (including any consent solicitation to remove or elect any directors of the Company) involving the Company or any of its subsidiaries, which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify, or result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under or with respect to, the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement. Each Stockholder has made certain representations and warranties in his Stockholder's Agreement, including with respect to (i) ownership of his Shares, (ii) the authority to enter into and perform his obligations under such Stockholder's Agreement and the absence of required consents and statutory or contractual conflicts or violations, (iii) the absence of liens, claims, security interests, proxies, voting trusts or other arrangements or any other encumbrances on or in respect of his Shares, except for those disclosed to Acquisition (iv) finder's fees, and (v) an acknowledgment of Parent's reliance upon the Stockholder's execution of the Stockholder's Agreement in entering into, and causing to enter into, the Merger Agreement. Each Stockholder's Agreement, and all rights and obligations thereunder, shall terminate upon the earlier of (a) the date upon which the Merger Agreement is terminated in accordance with its terms or (b) the date that Parent or Acquisition shall have purchased and paid for the Shares of such stockholder pursuant to the terms of the respective Stockholder's Agreement; PROVIDED, HOWEVER, that the termination of the Stockholder's Agreement shall not relieve any party of liability for breach of such agreement prior to its termination. 16. Dividends and Distributions. As discussed in Section 15, the Merger Agreement provides that the Company will not take certain actions such as paying dividends on, or making any other distributions in respect of, any of its capital stock, splitting, combining, or reclassifying any of its capital stock or purchasing, redeeming, or otherwise acquiring any shares of capital stock of the Company. If, on or after the date of the Merger Agreement and notwithstanding the provisions thereof, the Company should (i) split, combine or otherwise change the Shares or its capitalization, (ii) acquire presently outstanding Shares or otherwise cause a reduction in the number of outstanding Shares except in accordance with the Offer or (iii) issue or sell any shares of any class or any securities convertible into any such shares, or any rights, warrants or options to acquire any such shares or convertible securities (other than Shares issued pursuant to, and in accordance with the terms in effect on the date of the Merger Agreement of, stock options issued prior to such date), then, without prejudice to Acquisition's rights under the Merger Agreement, Acquisition (subject to the Merger Agreement), in its sole discretion, may make such adjustments in the Offer price and other terms of the Offer as it deems appropriate to reflect such action. If, on or after the date of the Merger Agreement and notwithstanding the provisions thereof, the Company should declare or pay any cash, non-cash or stock dividend or other distribution on, or issue any rights with respect to, the Shares, payable or distributable to stockholders of record on a date prior to the transfer to the name of Acquisition or its nominees or transferees on the Company's stock transfer records of the Shares purchased pursuant to the Offer, then, without prejudice to Acquisition's rights under the Merger Agreement, (i) the price per Share payable by Purchasers pursuant to the Offer may, subject to the provisions of the Merger Agreement, in the sole discretion of Acquisition, be reduced by the amount of any such cash dividend or distribution and (ii) any non-cash dividend, distribution or right to be received by the tendering stockholders will (a) be received and held by the tendering stockholders for the account of Acquisition and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of Acquisition, accompanied by appropriate documentation of transfer or (b) at the direction of Acquisition, be exercised for the benefit of Acquisition, in which case the proceeds of such exercise will promptly be remitted 45 to Purchaser. Pending such remittance, Acquisition will be entitled, subject to applicable law, to all rights and privileges as owner of any such non-cash dividend, distribution or right or such proceeds and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by Acquisition in its sole discretion. 17. Certain Conditions to the Offer. CONDITIONS TO ACQUISITION'S OFFER. Notwithstanding any other provision of the Offer, Acquisition shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) of the Exchange Act (relating to the obligation of Acquisition to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and (subject to any such rules and regulations) may delay the acceptance for payment of any tendered Shares and (except as provided in the Merger Agreement) amend or terminate Acquisition's obligations to purchase Shares under the Offer, if (i) the Minimum Condition shall not have been satisfied, (ii) any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the "HSR Act") shall not have expired or been terminated prior to the expiration of the Offer or (iii) at any time after the date of the Merger Agreement and before the initial time of acceptance of Shares for payment pursuant to the Offer, any of the following conditions exists: (a) there shall be in effect an injunction or other order, decree, judgment or ruling by a Governmental Authority of competent jurisdiction or a law rule or regulation shall have been promulgated, or enacted by a Governmental Authority of competent jurisdiction which in any such case (i) restrains or prohibits the making or consummation of the Offer or the consummation of the Merger, (ii) prohibits or restricts the ownership or operation by Parent (or any of its affiliates or subsidiaries) of any portion of the Company's business or assets, which is material to the business of the Company taken as a whole or which would substantially deprive Parent and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, or compels Parent (or any of its affiliates or subsidiaries) to dispose of or hold separate any portion of the Company's business or assets, or its or BYOWC's business or assets or which would substantially deprive Parent and/or its affiliates and/or subsidiaries of the benefit of ownership of the Company's business or assets, or (iii) imposes material limitations on the ability of Purchaser effectively to acquire or to hold or to exercise full rights of ownership of the Shares, including, without limitation, the right to vote Shares purchased by Acquisition pursuant to the Offer or acquired by Parent in the Merger on all matters properly presented to the stockholders of the Company, or (iv) imposes any material limitations on the ability of Parent and/or its affiliates or subsidiaries effectively to control in any material respect the business and operations of the Company (other than prior to the Effective Time, by reason of there being minority stockholders in the Company); or (b) there shall have been instituted, pending or threatened (in writing or by public announcement) an action by a Governmental Authority seeking (i) to restrain or prohibit the making or consummation of the Offer or the consummation of the Merger or (ii) to impose any other restriction, prohibition or limitation referred to in the foregoing paragraph (a); or (c) the Merger Agreement shall have been terminated by the Company or Parent in accordance with its terms; or (d) Parent and the Company shall have agreed in writing that Acquisition shall amend the Offer to terminate the Offer or postpone the payment for Shares pursuant thereto; or (e) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in the Shares on NASDAQ, or (ii) a declaration of a banking moratorium or any general suspension of payments in respect of banks in the United States; or (f) all proceeds of the $130 million of equity financing to which FS Partners has committed and the Term Loan Facilities necessary to consummate the Offer shall not have been received by Acquisition or the New Credit Facility shall not be in effect; PROVIDED that this condition shall not apply if (i) the failure of 46 Acquisition to receive the proceeds of such financing or the failure of the New Credit Facility to be in effect shall have been occasioned by the action or inaction by BYOWC or Parent, which action or inaction also constitutes a breach of any material covenant, representation or warranty of BYOWC or Parent under the Merger Agreement, or (ii) the failure of Acquisition to receive the proceeds of the equity financing to which FS Partners has committed shall have been occasioned by the inability to document such financing in a manner reasonably satisfactory to FS Partners; or (g) any of the representations and warranties made by the Company in the Merger Agreement shall not have been true and correct when made, or shall thereafter have ceased to be true and correct as if made as of such later date (other than representations and warranties made as of a specified date) (in each case without for this purpose giving effect to qualifications of materiality contained in such representation and warranty), or the Company shall not have performed each obligation and agreement and complied with each covenant to be performed and complied with by it under the Merger Agreement, if such failure to be true and correct or such failure to perform, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect, PROVIDED, HOWEVER, that such breach or failure to perform is incapable of being cured or has not been cured prior to the initial Expiration Date (as it may be extended); or (h) the Company's Board of Directors shall have modified or amended its recommendation of the Offer in any manner adverse to Parent or shall have withdrawn its recommendation of the Offer, or shall have recommended acceptance of any Acquisition Proposal or shall have resolved to do any of the foregoing; or (i) any corporation, entity or "group" (as defined in Section 13(d)(3) of the Exchange Act) ("person/group"), other than Parent and Acquisition and any person/group identified in the Company's Proxy Statement dated June 3, 1999), shall have acquired beneficial ownership of more than 15% of the outstanding Shares, or shall have been granted any options or rights, conditional or otherwise, to acquire a total of more than 15% of the outstanding Shares and which, in each case, does not tender the Shares beneficially owned by it in the Offer; (ii) any new group shall have been formed which beneficially owns more than 15% of the outstanding Shares and which does not tender the Shares beneficially owned by it in the Offer; or (iii) any person/group (other than Parent or one or more of its affiliates) shall have entered into an agreement in principle or definitive agreement with the Company with respect to a tender or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Company; or (j) any change, development, effect or circumstance shall have occurred or be threatened that is reasonably likely to have a Material Adverse Effect with respect to the Company; or (k) the Rights shall have become exercisable; or (l) the Company shall commence a case under any chapter of Title XI of the United States Code or any similar law or regulation; or a petition under any chapter of Title XI of the United States Code or any similar law or regulation is filed against the Company which is not dismissed within 2 business days; or (m) the Company's offer shall not be consummated at the same time as Acquisition's offer (other than by reason of the fact that the number of Shares tendered in the Offer were not sufficient to require the purchase of Shares by the Company in the Offer pursuant to the Merger Agreement). The foregoing conditions are for the sole benefit of Parent and Acquisition and may be asserted by Parent and Acquisition regardless of the circumstances giving rise to any such condition, and may be waived by Parent and Acquisition, in whole or in part, at any time and from time to time, in the sole discretion of Parent and Acquisition. The failure by Parent or Acquisition at any time to exercise any of the foregoing rights shall not be deemed a waiver of any right, the waiver of such right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right shall be deemed an ongoing right which may be asserted at any time and from time to time. 47 Should Acquisition's obligation to purchase Shares under the Offer be terminated pursuant to the foregoing provisions, all tendered Shares not theretofore accepted for payment shall forthwith be returned to the tendering stockholders. CONDITIONS TO THE COMPANY'S OFFER. Notwithstanding any other provision of the Offer, the Company shall not be required to accept for payment or, subject to any applicable rules and regulations of the Commission, including Rule 14e-1(c) of the Exchange Act (relating to the obligation of the Company to pay for or return tendered Shares promptly after termination or withdrawal of the Company's offer), pay for any Shares and (subject to any such rules or regulations) may delay the acceptance for payment of any tendered Shares and (except as provided in the Merger Agreement) amend or terminate the Company's obligations to purchase Shares under the Offer if (i) the Minimum Condition shall not have been satisfied or (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated prior to the expiration of the Offer or (iii) at any time after the date of the Merger Agreement and before the initial time of acceptance of Shares for payment pursuant to the Offer, any of the following conditions exists: (a) there shall be in effect an injunction or other order, decree, judgment or ruling by a Governmental Authority of competent jurisdiction or a law, rule or regulation shall have been promulgated, or enacted by a Governmental Authority of competent jurisdiction which in any such case restrains or prohibits the making or consummation of the Offer or the consummation of the Merger; or (b) there shall have been instituted, pending or threatened (in writing or by public announcement) an action by a Governmental Authority seeking to restrain or prohibit the making or consummation of the Offer or the consummation of the Merger; or (c) the Merger Agreement shall have been terminated by the Company or Parent in accordance with its terms including by the Company to accept a Superior Proposal in accordance with the terms of the Merger Agreement; or (d) Parent and the Company shall have agreed that Acquisition shall amend the Offer to terminate the Offer or postpone the payment for Shares pursuant thereto; or (e) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in the Shares on NASDAQ or (ii) a declaration of a banking moratorium or any general suspension of payments in respect of banks in the United States; or (f) any of the representations and warranties made by Parent in the Merger Agreement shall not have been true and correct when made, or shall thereafter have ceased to be true and correct as if made as of such later date (other than representations and warranties made as of a specified date) (in each case without for this purpose giving effect to qualifications of materiality contained in such representation and warranty), or Parent shall not have performed each obligation and agreement and complied with each covenant to be performed and complied with by it under this Agreement, if such failure to be true and correct or such failure to perform, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect, PROVIDED, however, that such breach or failure to perform is incapable of being cured or has not been cured prior to the initial Expiration Date (as it may be extended); or (g) the New Credit Facility shall not be in effect, PROVIDED that this condition shall not apply if the failure of the New Credit Facility to be in effect shall have been occasioned by the action or inaction of the Company, which action or inaction also constitutes a breach of any material covenant, representation or warranty of the Company under the Merger Agreement; or (h) Acquisition's offer shall not be consummated at the same time as the Company's offer. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition, and may be waived by the Company, in whole or in part, at any time and from time to time, in the sole discretion of the Company. The failure by the 48 Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of any right, the waiver of such right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right shall be deemed an ongoing right which may be asserted at any time and from time to time. Should the Company's obligation to purchase Shares under the Offer be terminated pursuant to the foregoing provisions, all tendered Shares not theretofore accepted for payment pursuant thereto shall forthwith be returned to the tendering stockholders. 18. Certain Legal Matters. GENERAL. Except as described in this Section 18, based on a review of publicly available filings by the Company with the Commission and other publicly available information concerning the Company, the BYOWC Companies are not aware of any license or regulatory permit that appears to be material to the business of the Company and that might be adversely affected by the Purchasers' acquisition of Shares pursuant to the Offer, or of any approval or other action by any governmental, administrative or regulatory agency or authority, domestic or foreign, that would be required for the acquisition or ownership of Shares by the Purchasers pursuant to the Offer. Should any such approval or other action be required, it is presently contemplated that such approval or action would be sought, except as described below under "--State Takeover Laws." While the Purchasers do not currently intend to delay acceptance for payment of 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 required, would be obtained without substantial conditions or that adverse consequences would not result to the Company's business or that certain parts of the Company's business would not have to be disposed of in the event that 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, Acquisition may decline to accept for payment or pay for any Shares tendered. See Section 17. STATE TAKEOVER LAWS. The Company and certain of its subsidiaries conduct business in a number of states throughout the United States, some of which have adopted laws and regulations applicable to offers to acquire shares of corporations that are incorporated or have substantial assets, stockholders and/or a principal place of business in such states. In EDGAR V. MITE CORP., the Supreme Court of the United States held that the Illinois Business Takeover Statute, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and was therefore 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 conditions, in particular, that the corporation has a substantial number of stockholders in and is incorporated under the laws of such state. The Company is incorporated under the laws of the State of Delaware. In general, Section 203 of the DGCL ("Section 203") prevents an "interested stockholder" (including a person who owns or has the right to acquire 15% or more of the corporation's outstanding voting stock) from engaging in a "business combination" (defined to include mergers and certain other actions) with a Delaware corporation for a period of three years following the date such person became an interested stockholder. The Board of Directors of the Company has taken all appropriate action so that neither BYOWC, Parent nor Acquisition is or will be considered an "interested stockholder" pursuant to Section 203. Neither Parent nor Acquisition has determined whether any other state takeover laws and regulations will by their terms apply to the Offer or the Merger, and, except as set forth above, neither Parent nor Acquisition 49 has presently sought to comply with any state takeover statute or regulation. Parent and Acquisition reserve the right to challenge the applicability or validity of any state law or regulation purporting to apply to the Offer or the Merger, and neither anything in this Offer to Purchase nor any action taken in connection herewith is intended as a waiver of such right. In the event it is asserted that one or more state takeover statutes is applicable to the Offer or the Merger and an appropriate court does not determine that such statute is inapplicable or invalid as applied to the Offer or the Merger, Parent or Acquisition might be required to file certain information with, or to receive approval from, the relevant state authorities, and Acquisition might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer. ANTITRUST. Under the HSR Act and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. Because Parent and Acquisition are newly formed entities and upon consummation of the Offer, no person is expected to own 50% or more of the voting securities of Parent, Parent and Acquisition do not believe that the acquisition of Shares in the Offer and Merger will be subject to notification under the HSR Act. The HSR Act may be applicable to the acquisition of voting securities of Parent by certain investors as the formation of a corporate joint venture. If applicable to a particular investor, the acquisition by such investor of voting securities of Parent may not be consummated until the expiration of a 30-calendar day waiting period after the filing of certain required information and documentary material with the Antitrust Division and the FTC (unless earlier terminated pursuant to a request therefor, which requests will be made). If, within such 30-day waiting period, either the Antitrust Division or the FTC requests additional information or documentary material, the waiting period would be extended for an additional period of 20 calendar days following the date of substantial compliance with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the rules promulgated under the HSR Act. Thereafter, such waiting period may be extended only by court order or by agreement of Parent. The only investors in Parent to whom the HSR Act is expected to apply are BYOWC and FS Partners. Each of BYOWC and FS Partners expects to file a Notification and Report Form with respect to the Offer under the HSR Act on December 29, 1999, and, in such event, the required waiting period with respect to the Offer will expire at 11:59 p.m., New York City time, on January 27, 1999 unless a request for additional information or documentary material is received or the Antitrust Division or the FTC terminates the waiting period prior thereto. The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the proposed purchase of Shares by Acquisition pursuant to the Offer. At any time before or after such purchase, 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 transaction or seeking divestiture of the Shares so acquired or divestiture of substantial assets of Parent or its subsidiaries. Litigation seeking similar relief could also be brought by private persons and the state attorneys general. Based upon an examination of publicly available information relating to the businesses in which the Company, BYOWC and the other persons expected to invest in Parent are engaged, Parent and Acquisition do not believe that consummation of the Offer or the acquisition of interests in Parent will result in violation of any applicable antitrust laws. However, 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, what the result would be. See Section 17 for certain conditions to the Offer, including conditions with respect to certain judicial or governmental actions. 19. Fees and Expenses. The BYOWC Companies and the Company have retained Credit Suisse First Boston to act as Dealer Manager, and the BYOWC Companies have retained MacKenzie Partners, Inc. to act as the Information Agent and EquiServe L.P. to act as the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telex, telecopy and personal interview 50 and may request brokers, dealers and other nominee stockholders to forward the Offer materials to beneficial owners. The Dealer Manager, the Information Agent and the Depositary will receive reasonable and customary compensation for services relating to the Offer and will be reimbursed for certain out-of-pocket expenses. The BYOWC Companies and the Company have agreed to indemnify the Dealer Manager, and Acquisition has agreed to indemnify the Information Agent and the Depositary, against certain liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. None of BYOWC, the Company, Parent or Acquisition will pay any fees or commissions to any broker or dealer or to any other person (other than to the Dealer Manager, the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by the Purchasers for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 20. Miscellaneous. The Offer is being made to all holders of Shares. The Purchasers are not aware of any jurisdiction where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Purchasers becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchasers will make a good faith effort to comply with any such state statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Purchasers cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. 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 will be deemed to be made on behalf of the Purchasers by one or more registered brokers or dealers licensed under the laws of such jurisdiction. No person has been authorized to give any information or make any representation on behalf of the BYOWC Companies or the Company not contained in this Offer to Purchase or in the related Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. Parent, Acquisition and BYOWC have filed with the Commission a Tender Offer Statement on Schedule 14D-1, together with all exhibits thereto, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act (the "Exchange Act Rules"), furnishing certain additional information with respect to the Offer. The Company has filed a Solicitation/Recommendation Statement on Schedule 14D-9, together with all exhibits thereto, pursuant to Rule 14d-9 of the Exchange Act Rules and a Schedule 13E-4 together with all exhibits thereto, pursuant to Rule 13(e)-4 of the Exchange Act Rules. Such Schedules and any amendments thereto, including exhibits, may be inspected and copies may be obtained from the offices of the Commission in the manner set forth in Section 8 (except that they will not be available at the regional offices of the Commission). BRIDGEPORT ACQUISITION CORPORATION MICRO WAREHOUSE, INC. DECEMBER 28, 1999 51 SCHEDULE I Information Statement Pursuant to Section 14(f) of the Securities Exchange Act of 1934 and Rule 14f-1 thereunder This Information Statement is being mailed on or about December 28, 1999 as part of the Offer to Purchase. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Offer to Purchase. You are receiving this Information Statement in connection with the possible election of persons designated (the "Parent Designees") by Parent to the Company's Board of Directors. This Information Statement is required by Section 14(f) of the Exchange Act, and Rule 14f-1 promulgated thereunder. You are urged to read this Information Statement carefully. You are not, however, required to take any action in connection with this Information Statement. The Offer commenced on December 28, 1999 and is scheduled to expire at 5 p.m. New York City Time, on Friday, January 28, 2000, unless extended upon the terms set forth in the Offer to Purchase. The information contained in this Information Statement concerning Parent and Acquisition has been furnished by Parent. The Company assumes no responsibility for the accuracy or completeness of that information. Voting Securities of the Company The Shares constitute the only class of voting securities of the Company outstanding. Each Share has one vote. As of December 20, 1999, there were 36,070,878 Shares issued and outstanding. Designation of Directors The Merger Agreement provides that, promptly upon payment by Acquisition for Shares pursuant to the Offer (provided the Minimum Condition is satisfied), Parent is entitled to designate such number of directors, rounded up to the next whole number, on the Company's Board of Directors that will give Parent, subject to compliance with Section 14(f) of the Exchange Act, representation on the Company's Board of Directors equal to at least that number of directors which equals the product of the total number of directors on the Company's Board of Directors (giving effect to the directors appointed or elected pursuant to such provision and including current directors serving as officers of the Company) multiplied by the percentage that the aggregate number of Shares beneficially owned by Acquisition or any other affiliate of Parent (including for the purposes of such provision, such Shares as are accepted for payment by Acquisition pursuant to the Offer, but excluding Shares held by the Company) bears to the number of Shares outstanding (after reduction for Shares accepted for payment by the Company pursuant to the Offer). At such time, if requested by Parent, the Company will also cause each committee of the Company's Board of Directors to include persons designated by Parent constituting the same percentage of each such committee as Parent's designees are of the Company's Board of Directors. The Merger Agreement also provides that the Company shall, upon request by Parent, promptly increase the size of the Company's Board of Directors or exercise reasonable best efforts to secure the resignations of such number of directors as is necessary to enable Parent's designees to be elected to the Company's Board of Directors and shall cause Parent's designees to be so elected. However, in the event that Parent's designees are appointed or elected to the Company's Board of Directors, until the Effective Time the Company's Board of Directors shall have at least two directors who are directors on the date hereof, each of whom is neither an officer of the Company nor a designee, stockholder, affiliate or associate (within the meaning of the federal securities laws) of BYOWC (such directors, the "Continuing Directors") or such persons having such qualifications who are designated as "Independent Directors" by a majority of Continuing Directors in office at the time of such designation. BYOWC and FS Partners have agreed that, in the event Parent is entitled to designate directors pursuant to the foregoing provisions, such Parent designees shall be appointed by BYOWC and FS Partners in the I-1 same proportion as BYOWC and FS Partners are each entitled to appoint their respective representatives to the Board of Directors of the Surviving Corporation. Parent has informed the Company that it will select its designees from the following individuals: Parent Director Designees
Present Principal Occupation or Employment and Five-Year Name Age Employment History Other Directorships - ---- -------- ------------------------------- --------------------------- Gary L. Wilson....................... 59 See Schedule II Northwest Airlines Corp., CB Richard Ellis, Inc. (real estate services), On Command Corp. (hotel movie distribution systems), and The Walt Disney Company. Jerome B. York....................... 61 See Schedule II Apple Computer, Inc., Metro-Goldwyn-Mayer, Inc., MGM Grand, Inc., National TechTeam, Inc. (information technology provider) and Waste Management, Inc. Alfred D. Boyer...................... 49 See Schedule II -- Alfred A. Checchi.................... 50 See Schedule II Northwest Airlines Corp. Michael S. Ovitz..................... 53 See Schedule II J. Crew Group, Inc. (apparel) and Yankee Candle Corporation (candle manufacturer). Bradford M. Freeman.................. 57 General Partner, Freeman Spogli CB Richard Ellis, Inc. and (Investments), since 1983. RDO Equipment Company (agricultural and industrial equipment distributor). William C. Johnson................... 59 Affiliated Operating Executive, Century Maintenance Supply, Freeman Spogli, since 1993; Inc. (distributor of Vice Chairman, Brylane Inc. maintenance, repair and (catalog retailer) since 1993; supply products to the Chief Executive Officer, multi- family housing Grolier Incorporated industry), and Medical Arts (publishing and printing Press (direct marketer of company) 1990-1994. office supplies to healthcare professionals). Jon D. Ralph......................... 35 General Partner, Freeman Envirosource, Inc. Spogli, since 1998; various (environmental and other capacities at Freeman industrial services), The Spogli since 1989. Pantry, Inc. (convenience store chain), Hudson Respiratory Care Inc. (medical devices), River Holding Corp. (medical devices) and Century Maintenance Supply, Inc. Charles P. Rullman................... 51 General Partner, Freeman The Pantry, Inc., Hudson Spogli, since 1995; General Respiratory Care Inc. and Partner Westar Capital River Holding Corp. (Investments), 1992-1995.
I-2 Security Ownership of Certain Beneficial Holders and Management Security Ownership of Certain Beneficial Holders The following table sets forth certain information concerning the beneficial ownership as of December 20, 1999 (the "Measurement Date") regarding those persons known to the Company to have been owners on such date of more than 5% of the Shares then outstanding based on filings pursuant to Rule 13d of the Exchange Act.
Amount Beneficially Percentage of Common Name And Address Of Beneficial Owner Owned(1) Stock Outstanding - ------------------------------------ ------------------- -------------------- Massachusetts Financial Services Company(2).......... 4,370,921 12.1% 500 Boylston Street Boston, MA 02116 Peter Godfrey(3)..................................... 2,901,628 8.0% Micro Warehouse, Inc. 535 Connecticut Avenue Norwalk, CT 06854 MFS Series Trust II-MFS Emerging Growth Fund(2)...... 2,857,100 7.9% 500 Boylston Street Boston, MA 02116 Mellon Bank Corporation(4)........................... 1,900,000 5.3% One Mellon Bank Center Pittsburgh, PA 15258
- ------------------------ (1) Unless otherwise indicated, each person or group has sole voting and dispositive power with respect to all these Shares. (2) Information concerning beneficial ownership by Massachusetts Financial Services Company ("MFS") and MFS Series Trust II-MFS Emerging Growth Fund ("MEG") is based on a report on Schedule 13G filed with the Securities and Exchange Commission dated February 11, 1999. This report indicates that, of the 4,370,921 Shares, MFS has sole voting power with respect to 4,357,371 Shares and no shared voting power and has sole dispositive power with respect to 4,370,921 Shares. Additionally, of the 4,370,921 Shares beneficially owned by MFS, 2,857,100 Shares or 7.9% are also beneficially owned by MEG and 1,513,821 Shares are also beneficially owned by certain other non-reporting entities as well as MFS. In total, MFS and MEG beneficially own 4,370,921 Shares or 12.1% of the outstanding Shares. MFS and MEG have their principal business offices at 500 Boylston Street, Boston, MA 02116. (3) Includes 100,666 Shares that Mr. Godfrey has the right to acquire within 60 days of the Measurement Date through the exercise of stock options. (4) Information regarding beneficial ownership by Mellon is based on the Company's information and belief. To the Company's knowledge there have been no Commission filings confirming this information. Security Ownership of Management The following table sets forth certain information concerning the beneficial ownership of Common Stock as of the Measurement Date by: -- the Directors -- each of the Executive Officers named in the Summary Compensation Table -- all Directors and Executive Officers as a group. I-3 The Amount and Nature of Beneficial Ownership column includes Shares that may be acquired within 60 days of the Measurement Date through the exercise of stock options.
Stock Options that will be Amount Exercisable as of Percent of Beneficially February 26, Class Name And Address of Beneficial Owner Owned(1) 2000 Outstanding - ------------------------------------ ------------ ----------------- ----------- Peter Godfrey........................................ 2,901,628 100,666 8.0% Micro Warehouse, Inc. 535 Connecticut Avenue Norwalk, CT 06854 Felix Dennis......................................... 1,275,963 -- 3.5% 39 Goodge Street London, England W1P 1FD Frederick H. Fruitman................................ 45,000 45,000 * Loeb Partners Corporation 61 Broadway 24th Floor New York, NY 10006 Joseph M. Walsh...................................... 45,000 40,000 * Curtis Circulation Company 730 River Road New Milford, NJ 07646 Wayne P. Garten...................................... 121,667 121,667 * Micro Warehouse, Inc. 535 Connecticut Avenue Norwalk, CT 06854 Bruce L. Lev......................................... 158,467 158,467 * Micro Warehouse, Inc. 535 Connecticut Avenue Norwalk, CT 06854 Adam Shaffer......................................... 392,345 392,345 * Micro Warehouse, Inc. 535 Connecticut Avenue Norwalk, CT 06854 Jeffrey Gentile...................................... 16,400 16,400 * Micro Warehouse, Inc. 535 Connecticut Avenue Norwalk, CT 06854 All Directors and Officers as a Group (31 persons)... 5,089,136 1,004,776 14.1%
I-4 - ------------------------ * Represents less than one percent (1) Unless otherwise indicated, each person or group has sole voting and dispositive power with respect to all these Shares. Information Concerning the Board of Directors and Executive Officers Identification of Directors The names, ages and related information of the directors of the Company as of the Measurement Date appear below.
Name Age Present Offices Held in the Company Director Since - ---- -------- ------------------------------------------ -------------- Felix Dennis......................... 52 Director and Principal Consultant 1992 Frederick H. Fruitman................ 49 Director 1992 Peter Godfrey........................ 54 Director, Chairman of the Board, President 1987 and Chief Executive Officer Joseph M. Walsh...................... 56 Director 1993
FELIX DENNIS, 52, co-founder, has served as a director since October 1992 and as a principal consultant from the Company's inception in 1987 through December 31, 1998. Since 1972, Mr. Dennis has been Chairman of Dennis Publishing, Ltd., an independently owned publishing company that publishes MACUSER and COMPUTER SHOPPER magazines, as well as other magazines in the United Kingdom and the United States. FREDERICK H. FRUITMAN, 49, became a director in December of 1992. Since 1990 he has been a Managing Director of Loeb Partners Corporation, an investment banking firm. Mr. Fruitman is a director of FIND/SVP, Inc. PETER GODFREY, 54, co-founder, was appointed Chairman on January 25, 1994 and has served as President and Chief Executive Officer from the Company's inception until October 1996 and from October 1997 to the present. Mr. Godfrey has served as a director since the Company's inception. JOSEPH M. WALSH, 56, became a director in February of 1993. Since December 1992 he has served as Chairman and Chief Executive Officer of Curtis Circulation Company. From 1972 through 1974 and from 1982 through November 1992 he served as President of Curtis. From 1974 through 1982 he was Executive Vice President of Cadence Industries Corporation and President of certain of its subsidiaries including Data Systems for Health (a computerized national billing company), US Pencil and Stationery Company (primarily an advertising specialty mail-order company) and Perfect Subscription Companies (which were formerly Perfect School Plans, Moore-Cottrell and Keystone Readers Service). He is a Certified Public Accountant. I-5 Executive Officers Set forth below is certain information concerning the executive officers of the Company:
Name Age Position with the Company - ---- -------- ------------------------------------------------------- Peter Godfrey(1)..................... 54 Chairman of the Board, President and Chief Executive Officer Stephen J. Carline................... 39 Executive Vice President of Sales Wayne P. Garten...................... 47 Executive Vice President & Chief Financial Officer Bruce L. Lev......................... 56 Executive Vice President of Legal & Corporate Affairs, General Counsel and Secretary Adam Shaffer......................... 34 Executive Vice President of Marketing, Advertising and Purchasing Geoffrey Boytos...................... 41 Senior Vice President of Database Marketing and Brand Management Jeffrey Gentile...................... 36 Senior Vice President of Merchandising
- ------------------------ (1) Additional information with respect to Mr. Godfrey can be found above under "Identification of Directors." STEPHEN J. CARLINE has served as Executive Vice President of Sales since October 1998. Mr. Carline was co-founder and from November 1997 through November 1998 served as principal member of Discovery Training & Development, L.L.C., a telesales and teleservice training and consulting firm specializing in business-to-business sales for the IT industry. From September 1996 to July 1997 Mr. Carline was Vice President of Sales of Insight Enterprises, Inc., a direct marketer of computers and computer-related products. From 1986 through 1996 he served in a variety of positions at Careertrack, Inc., an international direct marketer of training and development programs, including Vice President of Sales and Operations from 1995 to 1996, Director, Sales Division from 1991 to 1995, Director, Operations Division from 1989 to 1991 and Manager Customer Service Department from 1986 through 1989. WAYNE P. GARTEN has served as Executive Vice President and Chief Financial Officer since December 1997 and as Senior Vice President and Chief Financial Officer from February 1997 to December 1997. From 1983 to August 1996 Mr. Garten was employed by Hanover Direct, Inc., a specialty brand direct marketer, and its predecessor company The Horn and Hardart Company, where he served as Executive Vice President and Chief Financial Officer from 1989 until 1996. Mr. Garten is a Certified Public Accountant. BRUCE L. LEV has served as Executive Vice President of Legal and Corporate Affairs, General Counsel and Secretary since December 1997. From April 1995 until December 1997 he served as Vice President, General Counsel and Secretary. Mr. Lev has served as Secretary since inception. The law firm of which he was Senior Partner has served as an outside counsel since our inception. A successor to that firm, Lev & Berlin, P.C., continues in this capacity and Mr. Lev is of counsel to the firm. Prior to joining us, Mr. Lev had been a lawyer in private practice since 1968. ADAM SHAFFER has served as Executive Vice President of Marketing, Advertising and Purchasing since December 1997 and served as Vice President of Product and Marketing from November 1996 to December 1997. Mr. Shaffer served as Vice President of Worldwide Marketing from January 1996 to November 1996. From April 1993 to January 1996 he served as Vice President of Marketing. From April 1992 to March 1993 he served as director of our MacShopper division. GEOFFREY BOYTOS has served as Senior Vice President of Database Marketing and Brand Management since January of 1998 and served as Vice President of Database Marketing from November 1996 to January 1998. From 1992 to 1996 Mr. Boytos served as our Director of Database Marketing. I-6 JEFFREY GENTILE has served as Senior Vice President of Merchandising since January 1998. Mr. Gentile has been with the Company since 1992 serving in a variety of management-level positions including Director of Datacom Warehouse and Group Director of Marketing. BOARD OF DIRECTORS MEETINGS, COMPENSATION OF CERTAIN DIRECTORS, AND COMMITTEES OF THE BOARD The Board of Directors of the Company (the "Board") held a total of four meetings during 1998. Each Director attended in person or by telephone all of the meetings of the Board and their respective committee meetings. Frederick H. Fruitman became a Director in December 1992 and Joseph M. Walsh became a Director in February 1993. Neither of them is an officer, employee or consultant. Each receives an annual fee of $20,000 for services rendered as a Director and as a member of the Board's Committees. In addition, each received a bonus payment of $50,000 in early 1998 attributable to special assistance provided beyond the normal scope of his Director responsibilities. As of January 1, 1999 each also receives a fee of $1,000 per Board meeting attended and $500 per Committee meeting attended. AUDIT COMMITTEE The Audit Committee's responsibilities include recommending to the Board the independent public accountants to conduct the annual audit of our books and accounts, reviewing the proposed scope of the audit and approving the audit fees to be paid. The Audit Committee also reviews with the independent public accountants and with management the adequacy and effectiveness of the Company's internal auditing, accounting, financial and ethical business conduct controls. In addition, the Audit Committee reviews audited financial statements with the independent public accountants. The members of the Audit Committee are Messrs. Fruitman and Walsh. The Audit Committee held four meetings during 1998. COMPENSATION AND STOCK OPTION COMMITTEE The Compensation and Stock Option Committee's responsibilities include reviewing the Company's executive compensation policy and approving the salaries of all officers and certain other of the Company's employees. It also supervises the administration of all stock option and benefit plans and other matters affecting executive compensation, subject to further approval of the Board. The members of the Compensation and Stock Option Committee are Messrs. Fruitman and Walsh. The Compensation and Stock Option Committee held four meetings during 1998. NOMINATING COMMITTEE The Nominating Committee's responsibilities include proposing a slate of directors for selection by the stockholders at each annual meeting and proposing candidates to fill vacancies on the Board. The members of the Nominating Committee are Messrs. Fruitman and Walsh. I-7 REPORT OF COMPENSATION AND STOCK OPTION COMMITTEE GENERAL One of the principal tasks of the Board has been to formulate an effective compensation policy designed to balance the short-term need to attract qualified executives with the long-term need to provide incentives to those executives and other employees in a manner that will encourage a long-term commitment to the Company's growth and enhancement of stockholder value. COMPENSATION PHILOSOPHY AND OBJECTIVES In order to attract qualified executives, the Company's philosophy has been and continues to be to provide a total compensation package that is competitive within the hardware, software and direct marketing industries and bears a close relationship to individual performance and the Company's long-term business objectives. The total direct compensation package for the Company's executive officers is presently made up of three elements: -- an annual base salary -- a short-term incentive program in the form of a performance based bonus (with certain discretionary components) -- a longer-term incentive program in the form of stock options. ANNUAL BASE SALARY The Company reviews the salaries of its officers annually. In determining salaries, the Company considers, among other factors, the officer's scope of responsibility, prior experience and data on comparable salaries in relevant markets and industries. The annual base salaries of individual officers were increased in 1998 as a result of promotions, individual periodic performance reviews and cost of living adjustments. PERFORMANCE-BASED BONUS The Company continues to believe that incentive awards tied to achievement of the Company's goals as well as goals and objectives for individual employees should be an important portion of each employee's compensation. In early 1998 the Company instituted the 1998 Incentive Plan for the Company's executive management that tied incentive compensation directly to budgeted profits and the achievement of the executives' individual goals and objectives. The incentive plan for all other employees ties bonuses to the overall profit achievement of either the Company's U.S. operations or, for non-U.S. employees, the appropriate international business unit. In many instances bonuses will also be tied to agreed-upon individual goals and objectives. For 1998 the Company paid a total of $5,676,397 to employees as incentive-based bonuses. STOCK OPTIONS The purpose of the stock option program is to provide additional incentives to all employees to work to maximize stockholder value. To encourage growth in stockholder value, the Company believes that employees should have a significant stake in the ongoing success of the business and that stock options align the employee's financial interests with that of the stockholders. In addition, the option plan utilizes vesting periods to encourage employees to continue in the Company's employ. During 1998 the Company granted options to purchase 1,854,650 shares of Common Stock to certain employees at exercise prices ranging from $11.34 to $28.41 per share. The Company intends to continue granting stock options on a periodic basis to employees, directors and consultants. I-8 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER The 1998 base salary of Mr. Godfrey was $558,916 pursuant to an employment agreement effective as of January 1, 1995. Mr. Godfrey did not participate in the Executive Management 1998 Incentive Plan. He did, however, receive a discretionary bonus of $436,084 in early 1999 attributable to his leadership in the Company's strong financial and operating performance in 1998. Additionally, pursuant to his employment agreement, in February 1998 Mr. Godfrey was granted 40,000 options to purchase Shares with an exercise price of $13.59 per share. As of January 1, 1999 Mr. Godfrey entered into a new two-year employment agreement. The Compensation and Stock Option Committee believes that the Company's compensation programs of base salary, incentive plans and stock option grants are appropriate for Mr. Godfrey and other executive officers on the basis of industry standards, competitive practices and the Company's performance. TAX DEDUCTIBILITY OF EXECUTIVE COMPENSATION Section 162(m) of the Internal Revenue Code disallows a deduction for executive compensation exceeding one million dollars per year unless certain conditions are satisfied. The Committee has reviewed and approved all of the Company's option plans and compensation programs. While the Company generally intends to preserve the income tax deductibility under Section 162(m) of executive compensation, it reserves the right to pay executives as it determines appropriate. In this connection, the Company has determined not to have the Executive Management Incentive Plan and grants of stock options to certain executives comply with Section 162(m) and will retain discretion to authorize the payment of compensation that does not qualify for income tax deductibility. By retaining this discretion, the Company will maintain its flexibility to motivate and reward excellent performance without compromising the expectations of the Company's executives. The Compensation and Stock Option Committee Frederick H. Fruitman Joseph M. Walsh I-9 COMPENSATION OF EXECUTIVE OFFICERS The following table sets forth compensation information for the three years ending December 31, 1996, 1997 and 1998 with respect to: -- the Chief Executive Officer -- the four most highly compensated executive officers other than the CEO who were serving as executive officers as of December 31, 1998 -- two additional individuals for each of whom disclosure would have been provided above except for the fact that the individual was not serving as an executive officer as of December 31, 1998.
Long-term Compensation Other Annual Securities Underlying All Other Name and Principal Position Year Salary Compensation Options/SARs (#) Compensation - --------------------------- -------- --------- ------------ ---------------------- ------------ Peter Godfrey............ 1998 $558,916 $436,084 40,000 -- Chairman, President and 1997 528,902 -- 40,000 -- Chief Executive Officer 1996 513,633 -- 50,000 -- Wayne P. Garten.......... 1998 339,882 323,375 100,000 $4,571(1) Executive Vice President 1997 203,077 91,384 100,000 -- and 1996 -- -- -- -- Chief Financial Officer(2) Bruce L. Lev............. 1998 347,106 331,799 100,000 16,390(3) Executive Vice President 1997 325,712 150,000 48,000 14,194(3) of Legal And Corporate 1996 319,459 -- 23,000 12,942(3) Affairs and General Counsel Adam Shaffer............. 1998 333,937 323,375 500,000 4,903(1) Executive Vice President 1997 233,856 194,887 50,000 2,375(1) of Marketing, Advertising 1996 277,500 77,500 -- 2,325(1) and Purchasing Jeffrey Gentile.......... 1998 197,588 87,863 14,250 4,755(1) Senior Vice President of 1997 157,667 40,000 30,500 2,375(1) Merchandising 1996 140,400 34,450 -- 2,375(1) Stephen England.......... 1998 258,989 351,285 100,000 4,703(1) Former Executive Vice 1997 231,388 88,798 20,000 2,375(1) President of Sales(4) 1996 202,245 86,152 30,000 2,375(1) Jeffrey Sheahan.......... 1998 204,642 -- -- 82,142(6) Former Senior Vice 1997 204,391 -- 35,000 91,922(6) President and President 1996 206,479 42,500 13,000 78,617(6) of European Operations(5)
- ------------------------ (1) Represents matching contributions under our 401(k) Savings Plan. (2) Mr. Garten became an executive officer and employee in February 1997. (3) Includes the following additional compensation to Mr. Lev:
Insurance 401(K) Matching Year Premiums Contributions - ---- --------- --------------- 1998........ $11,819 $4,571
I-10
Insurance 401(K) Matching Year Premiums Contributions - ---- --------- --------------- 1997........ 11,747 2,375 1996........ 6,553 1,195
(4) Mr. England resigned pursuant to an October 19, 1998 severance agreement. (See "Severance Agreement with Named Executive Officer"). (5) Mr. Sheahan resigned effective October 9, 1998. (6) Includes the following additional compensation to Mr. Sheahan:
Housing, Living and Education 401(K) Matching Year Expenses Contributions - ---- ------------------- --------------- 1998 $77,514 $4,628 1997 89,547 2,375 1996 76,164 2,453
OPTIONS GRANTED IN LAST FISCAL YEAR The table below shows the individual grants of non-qualified stock options to the Chief Executive Officer and the other executive officers named in the Summary Compensation Table during 1998.
Potential Realized Value Assumed Value Rates of Stock Price Shares % of Total Appreciation for Underlying Options Exercise Option Term(3) Grant Options Granted in Price per Expiration -------------------------- Name Date(1) Granted FY 1998 Share($) Date(2) 5%($) 10%($) - ---- -------- ---------- ---------- --------- ---------- ----------- ------------ Peter Godfrey.......... 2/26/98 40,000 2.16% $13.59 2/26/08 $ 340,075 $ 863,505 Wayne P. Garten........ 2/26/98 100,000 5.39% $13.59 2/26/08 $ 850,188 $ 2,158,763 Bruce L. Lev........... 2/26/98 100,000 5.39% $13.59 2/26/08 $ 850,188 $ 2,158,763 Adam Shaffer........... 2/26/98 500,000 29.96% $13.59 2/26/08 $4,250,942 $10,793,816 Jeffrey Gentile........ 1/12/98 14,250 0.77% $12.50 1/12/08 $ 106,219 $ 274,645 Stephen England........ 2/26/98 100,000 5.39% $13.59 2/26/08 $ 850,188 $ 2,158,763 Jeffrey Sheahan........ -- -- -- -- -- --
- ------------------------ (1) The grants made to Messrs. Godfrey, Garten, Lev, Shaffer and England on February 26, 1998 vest in equal installments on each of the first three anniversaries of their grants. The grant to Mr. Gentile on January 12, 1998 vests in equal installments on each of the first five anniversaries of the grant. (2) Each of the options granted above has a ten-year term. (3) The potential realizable value portion of the foregoing table illustrates value that might be realized upon exercise of the options immediately prior to the expiration of their term, assuming the specified compounded rates of appreciation on the Shares over the full term of the options. The rates of appreciation are established by the Commission and are not intended as a forecast of future appreciation. The actual gain, if any, realized by the recipient will depend upon the actual performance of the Shares. There can be no assurance that the amounts reflected in this table will be achieved. I-11 OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES The table below lists the shares acquired on exercise of options by the Chief Executive Officer and the other executive officers named in the Summary Compensation Table during 1998 and certain information as to options unexercised at December 31, 1998.
Number of Unexercised Value of Unexercised In-the- Options at December 31, money Options Shares 1998(1) at December 31, 1998 Acquired on Value --------------------------- ----------------------------- Name Exercise # Realized Exercisable Unexercisable Exercisable Unexercisable - ---- ----------- --------- ----------- ------------- ------------- ------------- Peter Godfrey............. 0 -- 71,333 58,677 $ 529,752 $1,217,273 Wayne P. Garten........... 0 -- 43,334 156,666 $ 893,472 $3,322,528 Bruce L. Lev.............. 0 $777,719 99,684 111,316 $1,303,144 $2,205,894 Adam Shaffer.............. 0 $820,914 200,303 382,458 $4,100,267 $7,781,663 Jeffrey Gentile........... 14,400 $111,397 -- 32,150 -- $ 682,959 Stephen England........... 68,500 $905,737 48,834 84,166 $1,014,953 $1,718,934 Jeffrey Sheahan........... 28,859 $258,554 -- -- -- --
- ------------------------ (1) Values have been calculated based on the closing price of the Shares reported on the Nasdaq National Market on December 31, 1998 at $33.8125 per share. SEVERANCE AGREEMENT WITH STEPHEN ENGLAND STEPHEN ENGLAND. On October 19, 1998 the Company entered into a Severance Agreement and General Release with Stephen England. Pursuant to the agreement, Mr. England resigned as Executive Vice President of Sales and the Company agreed to pay his annual base salary of $250,000 (as adjusted annually for cost of living adjustments) on the regular payroll cycle through December 31, 2000. In addition, Mr. England received incentive compensation plus his targeted commission for 1998 in an aggregate amount of $351,285. Mr. England's outstanding stock options continue to vest until December 31, 2000 and each may be exercised until the earlier of (i) its expiration date or (ii) the later of 12 months after it vests or December 31, 1999. STOCK OPTION PLANS The Company's Board and stockholders approved the 1992 Stock Option Plan and 1994 Stock Option Plan both of which provide for the grant of stock options to the Company's and its subsidiaries' officers, directors, employees and consultants. Under these stock option plans, the Company may grant options that are intended to qualify as Incentive Stock Options within the meaning of Section 422A of the Internal Revenue Code and options not intended to qualify as Incentive Stock Options, also referred to as Nonstatutory Stock Options. Incentive Stock Options may not be granted to consultants who are not also the Company's employees. A total of up to 6,000,000 Shares may be issued upon the exercise of options granted under the plans. The Company also succeeded to all of the obligations and responsibilities of Inmac Corp.'s 1983 and 1992 Stock Option Plans and 1988 Director's Stock Option Plan when the Company acquired Inmac in January 1996. A total of up to 943,920 Shares may be issued upon the exercise of options granted under these plans. I-12 All of our stock option plans may be administered by the Board or the Compensation and Stock Option Committee. Subject to the provisions of each of the stock option plans, the Board has the authority to select the employees, directors or consultants to whom options are granted and determine the terms of each option, including: -- the number of shares of Common Stock the option entitles the holder to purchase -- the date on which the option becomes exercisable -- the price at which the option may be exercised, which must be equal to the fair market value of the Shares as of the date of grant for Incentive Stock Options and 85% of fair market value for Nonstatutory Stock Options -- the duration of the option, which may not exceed ten years. SECTION 401(K) SAVINGS PLAN The Company sponsors a 401(k) savings plan that covers full-time employees who meet its eligibility requirements. Participants may make tax deferred contributions of up to 15% of annual compensation (subject to other limitations specified by the Internal Revenue Code). As of January 1, 1998 the Company increased from 25% to 50% the matching contribution for amounts which do not exceed 6% of the participant's annual compensation. Although the Company is entitled to make discretionary profit sharing contributions to the plan, the Company has not made any such contributions. COMPENSATION AND STOCK OPTION COMMITTEE INTERLOCKS AND INSIDERS PARTICIPATION Members of the Compensation and Stock Option Committee are Messrs. Fruitman and Walsh, neither of whom is an officer, employee or consultant. There were no committee interlocks during 1998. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS CONSULTING AGREEMENT In 1998 Mr. Dennis received fees of $50,000 plus expenses for consulting services to the Company under a consulting agreement dated January 1, 1989. The consulting agreement expired on December 31, 1998. Additionally, Mr. Dennis has agreed that he will not receive options under any of the Company's stock option plans. DENNIS PUBLISHING, LTD. MacUser, PC Pro, MacShopper and Computer Shopper magazines are owned and published in the United Kingdom by Dennis Publishing, Ltd., of which Felix Dennis is a controlling stockholder and Chairman. Mr. Godfrey holds a 5% interest in Computer Shopper magazine. The Company may from time to time purchase advertising space in and rent subscriber lists from these magazines for purposes of marketing products in the United Kingdom. Neither Mr. Dennis nor Mr. Godfrey participates in any decision relating to the purchase of advertising space or rental of subscription lists from these magazines, and all related fees are negotiated on an arm's-length basis between the Company's operating representatives and representatives of Dennis Publishing. Dennis Publishing, Ltd. and Mr. Dennis are also affiliated with two companies that publish the non-computer magazines, Maxim Magazine and Stuff Magazine, in which two magazines Mr. Godfrey holds 12.5% interests. The Company has not purchased advertising space or rented subscriber lists from these magazines. The Company also is utilizing the services of a division of Dennis Publishing, Ltd., Dennis Interactive, for the creation of a multi-media presentation in support of the Company's outbound telemarketing efforts. I-13 CHARTERED AIRCRAFT The Company periodically charters an aircraft owned and operated by a company wholly owned by Mr. Godfrey. The Company paid a total of $7,825 in 1998 for the use of such aircraft for business purposes. LEASES The Company leases 12,000 square feet of executive office space in South Norwalk, Connecticut from Mr. Godfrey and 13,500 square feet of office space in South Norwalk from an entity 50% owned by Mr. Godfrey under leases that expire December 31, 1999. The Company paid a total of $292,339 in 1998 for rent of these premises. I-14 SCHEDULE II Certain Information Concerning the Members and Managing Member of BYOWC Partners LLC The following table sets forth the name, current business address, present principal occupation or employment, and material occupations, positions, offices or employment for the past five years of each member and the managing manager of BYOWC. Each such person is a citizen of the United States of America. None of the listed persons, during the past five years, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person 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.
Present Principal Occupation or Employment Name and Position Held Current Business Address and Five-Year Employment History - ---------------------- ------------------------ -------------------------------- Gary L. Wilson, 300 N. Delfern Drive Chairman of the Board of Directors, Member Los Angeles, CA 90077 Northwest Airlines Corp., since 1997; Co-Chairman of the Board of Directors, Northwest Airlines Corp., 1991-1997. Jerome B. York, 7939 Rio Rico Drive Chief Executive Officer, Harwinton Member Las Vegas, NV 89113 Corporation (investments and consulting), since 1999; Vice Chairman, Tracinda Corporation, 1995-1999; Senior Vice President and Chief Financial Officer, International Business Machines Corporation, 1993-1995. Alfred D. Boyer, 9665 Wilshire Boulevard, Suite 200 Partner, Gary L. Wilson Partners Managing Member Beverly Hills, CA 90212 (investments), since 1996; Managing Partner, Boyer Capital Management (investments), since 1994. Michael S. Ovitz, 9465 Wilshire Boulevard, Sixth Floor Artists Management Group, LLC since Member Beverly Hills, CA 90212 1998; President, The Walt Disney Company, 1995-1996; Founding Partner, Creative Artists Agency, 1975-1995. Alfred A. Checchi, 920 Manhattan Beach Boulevard Private Investor since 1997; Co- Member Suite #1 Chairman of the Board of Directors, Manhattan Beach, CA 90266 Northwest Airlines Corp., 1991-1997. Kenneth W. Slutsky, 920 Manhattan Beach Boulevard Vice-Chairman, Candle Corporation Member Suite #1 (computer software) since 1993. Manhattan Beach, CA 90266
II-1 SCHEDULE III Certain Information Concerning the Directors and Executive Officers of Parent The following table sets forth the name, current business address, present principal occupation or employment, and material occupations, positions, offices or employment for the past five years of each director and executive officer of Parent. Each such person is a citizen of the United States of America. None of the listed persons, during the past five years, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person 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.
Present Principal Occupation or Employment Name and Position Held Current Business Address and Five-Year Employment History - ---------------------- ------------------------ -------------------------------- Gary L. Wilson, See Schedule II See Schedule II President Jerome B. York, See Schedule II See Schedule II Vice President and Treasurer Alfred D. Boyer, See Schedule II See Schedule II Vice President and Secretary
III-1 SCHEDULE IV Certain Information Concerning the Directors and Executive Officers of Purchaser The following table sets forth the name, current business address, present principal occupation or employment, and material occupations, positions, offices or employment for the past five years of each director and executive officer of Purchaser. Each such person is a citizen of the United States of America. None of the listed persons, during the past five years, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which such person 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.
Present Principal Occupation or Employment Name and Position Held Current Business Address and Five-Year Employment History - ---------------------- ------------------------ -------------------------------- Gary L. Wilson, See Schedule II See Schedule II President Jerome B. York, See Schedule II See Schedule II Vice President and Treasurer Alfred D. Boyer, See Schedule II See Schedule II Vice President and Secretary
IV-1 Schedule V [LETTERHEAD OF WASSERSTEIN PERELLA & CO., INC.] December 20, 1999 Board of Directors Micro Warehouse, Inc. 535 Connecticut Avenue Norwalk, CT 06854 Members of the Board: You have asked us to advise you with respect to the fairness, from a financial point of view, to the holders of the common stock, par value $0.01 per share (the "Shares") of Micro Warehouse, Inc. (the "Company") of the consideration to be received by such holders pursuant to the terms of the Agreement and Plan of Merger, dated as of December 20, 1999 (the "Merger Agreement"), among the Company, Bridgeport Holdings Inc. ("Parent"), and Bridgeport Acquisition Corporation ("Sub"). The Merger Agreement provides for, among other things, cash tender offers by Sub and the Company to acquire, collectively, all of the outstanding Shares at a price of $19.00 per Share (the "Tender Offer"), and for a subsequent merger of the Company with and into Sub pursuant to which each remaining outstanding Share not purchased in the Tender Offer (other than any Shares held in the treasury of the Company or owned by Parent, Sub or their respective subsidiaries) will be converted into the right to receive $19.00 in cash (the "Merger" and, together with the Tender Offer, the "Transaction"). The terms and conditions of the Transaction are set forth in more detail in the Offer to Purchase relating to the Tender Offer (the "Offer to Purchase") and the Merger Agreement. In connection with rendering our opinion, we have reviewed a draft of the Merger Agreement, and for purposes hereof, we have assumed that the final form thereof will not differ in any material respect from the draft provided to us. We have also reviewed and analyzed certain publicly available business and financial information relating to the Company for recent years and interim periods to date, as well as certain internal financial and operating information, including financial forecasts, analyses and projections prepared by or on behalf of the Company and provided to us for purposes of our analysis, and we have met with management of the Company to review and discuss such information and, among other matters, the Company's business, operations, assets, financial condition and future prospects. We have reviewed and considered certain financial and stock market data relating to the Company, and we have compared that data with similar data for certain other companies, the securities of which are publicly traded, that we believe may be relevant or comparable in certain respects to the Company or one or more of its businesses or assets, and we have reviewed and considered the financial terms of certain recent acquisitions and business combination transactions in the personal computer retail industry that we believe to be reasonably comparable to the Transaction or otherwise relevant to our inquiry. We have also performed such other financial studies, analyses, and investigations and reviewed such other information as we considered appropriate for purposes of this opinion. In our review and analysis and in formulating our opinion, we have assumed and relied upon the accuracy and completeness of all of the historical financial and other information provided to or discussed with us or publicly available, and we have not assumed any responsibility for independent verification of any of such information. We have also assumed and relied upon the reasonableness and accuracy of the financial projections, forecasts and analyses provided to us, and we have assumed that such projections, forecasts and analyses were reasonably prepared in good faith and on bases reflecting the best currently available judgments and estimates of the Company's management as to the matters covered thereby. We express no V-1 Board of Directors December 20, 1999 Page 2 opinion with respect to such projections, forecasts and analyses or the assumptions upon which they are based. In addition, we have not reviewed any of the books and records of the Company, or assumed any responsibility for conducting a physical inspection of the properties or facilities of the Company, or for making or obtaining an independent valuation or appraisal of the assets or liabilities of the Company, and no such independent valuation or appraisal was provided to us. We also have assumed that the transactions described in the Merger Agreement will be consummated without waiver or modification of any of the material terms or conditions contained therein by any party thereto. Our opinion is necessarily based on economic and market conditions and other circumstances as they exist and can be evaluated by us as of the date hereof. It should be noted that in the context of our engagement by the Company, except for a very limited number of preliminary contacts with non-strategic financial buyers, we were not authorized to and did not solicit third party indications of interest in acquiring all or any part of the Company or otherwise perform what is commonly known as a "market check." In the ordinary course of our business, we may actively trade the debt and equity securities of the Company for our own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. We are acting as financial advisor to the Company in connection with the proposed Transaction and will receive a fee for our services, a significant portion of which is contingent upon the consummation of the Transaction. In addition, we have performed various investment banking services in the past for entities with which principals of Parent have previously been affiliated and have received customary fees for rendering such services. Our opinion addresses only the fairness from a financial point of view to the holders of Shares of the consideration to be received by such holders pursuant to the Transaction, and we do not express any views on any other terms of the Transaction. Specifically, our opinion does not address the Company's underlying business decision to effect the transactions contemplated by the Merger Agreement, or the merits of the Merger relative to any other alternative transaction or business strategy that may be available to the Company. It is understood that this letter is for the benefit and use of the Board of Directors of the Company in its consideration of the Transaction and except for inclusion in its entirety in any proxy statement required to be circulated to holders of Shares relating to the Merger or tender offer recommendation statement on Schedule 14D-9 from the Company to holders of Shares relating to the Transaction or in the Schedule 14D-1 relating to the Transaction, may not be quoted, referred to or reproduced at any time or in any manner without our prior written consent. This opinion does not constitute a recommendation to any holder of Shares with respect to whether such holder should tender Shares pursuant to the Tender Offer or as to how such holder should vote with respect to the Merger, and should not be relied upon by any holder as such. Based upon and subject to the foregoing, including the various assumptions and limitations set forth herein, it is our opinion that as of the date hereof, the $19.00 per Share cash consideration to be received by the holders of Shares pursuant to the Tender Offer and the Merger is fair to such holders from a financial point of view. Very truly yours, WASSERSTEIN PERELLA & CO., INC. V-2 Manually signed facsimile copies of the Letter of Transmittal will be accepted. Letters of Transmittal and certificates for Shares should be sent or delivered by each stockholder of the Company or his 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: EquiServe BY FIRST CLASS MAIL: BY HAND: BY OVERNIGHT, CERTIFIED FOR FACSIMILE OR EXPRESS MAIL DELIVERY: TRANSMISSION: State Street Bank & Securities Transfer & State Street Bank & (Eligible Institutions Trust Company Reporting Services, Inc. Trust Company Only) Corporate Actions c/o Boston EquiServe L.P. Corporate Actions (781) 575-4827 P.O. 9573 100 William 40 Campanelli Drive For Information: Boston, MA 02205-9573 Street/Galleria Braintree, MA 02184 (800) 426-5523 New York, NY 10038
Any questions or requests for assistance may be directed to the Information Agent at its address and telephone numbers set forth below. Requests for additional copies of this Offer to Purchase and the Letter of Transmittal may be directed to the Information Agent or the Depositary. Stockholders may also contact their brokers, dealers, commercial banks, trust companies or other nominees for assistance concerning the Offer. The Information Agent for the Offer is: abcdef 156 Fifth Avenue New York, NY 10010 (212) 929-5500 (call collect) or (800) 322-2885 (toll free) The Dealer Manager for the Offer is: Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010 Call Toll Free: (800) 881-8320 EX-99.(A)(2) 3 EXHIBIT 99(A)(2) Letter of Transmittal to Tender Shares of Common Stock (Including the Associated Preferred Share Purchase Rights) of Micro Warehouse, Inc. Pursuant to the Offer to Purchase Dated December 28, 1999 by Bridgeport Acquisition Corporation, a wholly-owned subsidiary of Bridgeport Holdings Inc., and by Micro Warehouse, Inc. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS EXTENDED. THE DEPOSITARY FOR THE OFFER IS: EquiServe BY FIRST CLASS MAIL: BY HAND: BY OVERNIGHT, BY FACSIMILE CERTIFIED OR TRANSMISSION: EXPRESS MAIL DELIVERY: State Street Bank & Securities Transfer & State Street (For Eligible Trust Company Reporting Services, Inc. Bank & Institutions Corporate Actions c/o Boston EquiServe L.P. Trust Company Only) P.O. 9573 100 William Street/Galleria Corporate (781) 575-4827 Boston, New York, NY 10038 Actions For MA 02205-9573 40 Campanelli Information: Drive (800) 426-5523 Braintree, MA 02184
Delivery of this instrument to an address other than as set forth above or transmissions of instructions via facsimile transmission to a number other than as set forth above does not constitute a valid delivery. You must sign this Letter of Transmittal in the appropriate space therefor provided below and complete the Substitute Form W-9 set forth below. The instructions accompanying this Letter of Transmittal should be read carefully before this Letter of Transmittal is completed. This Letter of Transmittal is to be completed by stockholders either if certificates representing Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in Instruction 2) is utilized, if delivery is to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company ("DTC") pursuant to the procedures set forth in Section 2 of the Offer to Purchase dated December 28, 1999 (the "Offer to Purchase"). Stockholders whose certificates are not immediately available, or who cannot deliver their certificates or confirmation of the book-entry transfer of their Shares into the Depositary's account at DTC ("Book-Entry Confirmation") and all other documents required hereby to the Depositary on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), must tender their Shares according to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2. Delivery of documents to DTC does not constitute delivery to the Depositary. / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY AT DTC AND COMPLETE THE FOLLOWING: 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 AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s): ___________________________________________ Window Ticket Number (if any): _____________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Institution that Guaranteed Delivery: ______________________________ 2 - --------------------------------------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - --------------------------------------------------------------------------------------------------------------- Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank exactly as name(s) Certificate(s) Tendered appear on the Certificate(s)) (Attach additional lists if necessary) - --------------------------------------------------------------------------------------------------------------- Total Number of Shares Number of Certificate Represented by Shares Number(s)* Certificate(s) Tendered** ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- ------------------------------------------------------- Total Shares - ---------------------------------------------------------------------------------------------------------------
* Need not be completed by stockholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are being tendered hereby. See Instruction 4. The names and addresses of the registered holders should be printed, if not already printed above, exactly as they appear on the certificates representing Shares tendered hereby. The certificates and number of Shares that the undersigned wishes to tender should be indicated in the appropriate boxes. Note: Signatures must be provided below. Please read the accompanying instructions carefully. / / Check here if certificates have been lost, destroyed or stolen. See Instruction 8. 3 Ladies and Gentlemen: The undersigned hereby tenders to Bridgeport Acquisition Corporation, a Delaware corporation ("Acquisition") and a wholly-owned subsidiary of Bridgeport Holdings Inc., a Delaware corporation ("Parent") and an affiliate of BYOWC Partners LLC, a Delaware limited liability company ("BYOWC"), and Micro Warehouse, Inc., a Delaware company (the "Company" and, together with Acquisition, the "Purchasers"), the above-described shares of common stock, par value $.01 per share, including the associated preferred share purchase rights (collectively, the "Shares"), of the Company, pursuant to the Purchasers' offer to purchase all of the outstanding Shares at a price of $19.00 per Share, net to the tendering stockholder in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 28, 1999 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, including any amendments or supplements thereto collectively constitute the "Offer"). The Purchasers reserve the right to transfer or assign, in whole or from time to time in part, to BYOWC or to one or more affiliates of BYOWC, the right to purchase Shares tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment of and payment for the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer, the undersigned hereby sells, assigns, and transfers to, or upon the order of, the Purchasers all right, title and interest in, to and under all of the Shares that are being tendered hereby (and any and all other Shares or other securities or rights issued or issuable in respect thereof on or after December 28, 1999) and irrevocably appoints 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 representing 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 DTC, together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchasers upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (b) present such Shares (and any such other Shares or securities or rights) for registration and transfer on the books of the Company, 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 irrevocably appoints Gary L. Wilson, Alfred D. Boyer and any other designee of Acquisition, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution and resubstitution, to vote in such manner as each such attorney-in-fact and proxy or his substitute shall, in his sole discretion, deem proper, and otherwise act (including pursuant to written consent) with respect to all the Shares tendered hereby which have been accepted for payment by the Purchasers prior to the time of such vote or action (and any and all other Shares or securities or rights issued or issuable in respect thereof on or after December 28, 1999), which the undersigned is entitled to vote at any meeting of stockholders (whether annual or special and whether or not an adjourned meeting) of the Company, or by consent in lieu of any such meeting, or otherwise. This proxy and power of attorney is coupled with an interest in the Shares tendered hereby, is irrevocable, is granted in consideration of, and is effective upon, the acceptance for payment of such Shares (and any such other Shares or securities or rights) by the Purchasers in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior proxies granted by the undersigned at any time with respect to such Shares (and any such other Shares or securities or rights) and no subsequent proxies will be given (and if given will be deemed to be ineffective) with respect thereto by the undersigned. The undersigned acknowledges that in order for Shares to be deemed validly tendered, immediately upon the acceptance for payment of such Shares, Acquisition or Acquisition's designee must be able to exercise full voting and other rights of a record and beneficial holder with respect to such Shares. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any and all other Shares or securities or rights issued or issuable in respect thereof on or after December 28, 1999), and that, when the same are accepted for payment by the Purchasers, the Purchasers will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or the Purchasers to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and any such other Shares or securities or rights). No authority herein conferred or agreed to be conferred in this Letter of Transmittal shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. 4 The undersigned understands that tenders 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 Purchasers upon the terms and subject to the conditions of the Offer. The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase, the Purchasers may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any certificates representing 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 representing Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the registered holder(s) appearing under "Description of Shares Tendered" at the address shown below such registered holder(s) name(s). In the event that either or 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 representing Shares not tendered or accepted for payment in the name(s) of, and deliver such check and/or return such certificates to, the person or persons so indicated. Stockholders tendering Shares by book-entry transfer may request that any Shares not accepted for payment be returned by crediting such stockholder's account maintained at DTC. The undersigned recognizes that the Purchasers have no obligation pursuant to the "Special Payment Instructions" to transfer any Shares from the name of the registered holder(s) thereof if the Purchasers does not accept for payment any of the Shares so tendered hereby. 5 - ------------------------------------------------- SPECIAL PAYMENT INSTRUCTIONS (See Instructions 1, 5, 6 and 7) To be completed ONLY if certificates representing Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be issued in the name of someone other than the undersigned, or if Shares tendered by book-entry transfer which are not purchased are to be returned by credit to an account maintained at DTC other than that account designated above. Issue check and/or certificate(s) to: Name: ________________________________________________________________________ (Please Print) Address: _____________________________________________________________________ ______________________________________________________________________________ (Include Zip Code) ______________________________________________________________________________ (Tax Identification or Social Security No.) Credit unpurchased Shares tendered by book-entry transfer to the DTC account set forth below ______________________________________________________________________________ (Account Number) - ------------------------------------------------------------- - ------------------------------------------------------------- SPECIAL DELIVERY INSTRUCTIONS (See Instructions 1, 5, 6 and 7) To be completed ONLY if certificates representing Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown under "Description of Shares Tendered." Issue check and/or certificate(s) to: Name: ________________________________________________________________________ (Please Print) Address: _____________________________________________________________________ ______________________________________________________________________________ (Include Zip Code) - ------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- IMPORTANT SIGN HERE AND COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE ____________________________________________________________________________ ____________________________________________________________________________ Signature(s) of Holder(s) of Shares Dated ____________________ (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) 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, agents, officers of corporations or others acting in a fiduciary or representative capacity, please set forth the full title and see Instruction 5.) Name(s) ____________________________________________________________________ ____________________________________________________________________________ (Please Print) Capacity (full title) ______________________________________________________ Address ____________________________________________________________________ ____________________________________________________________________________ ____________________________________________________________________________ (Including Zip Code) Area Code and Telephone No. ( ) _______________________________________ Tax Identification or Social Security No. _________________________________ (Please Complete Substitute Form W-9 on Reverse Side) GUARANTEE OF SIGNATURE(S) (See Instructions 1 and 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY PLACE MEDALLION GUARANTEE IN SPACE BELOW Authorized Signature(s) ____________________________________________________ Name _______________________________________________________________________ (Please Print) Title ______________________________________________________________________ Name of Firm _______________________________________________________________ Address ____________________________________________________________________ (Include Zip Code) Area Code and Telephone Number ( ) ____________________________________ Dated: _____________________________________________________________________ - -------------------------------------------------------------------------------- 7 INSTRUCTIONS Forming Part of the Terms and Conditions of the Offer 1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required (i) if this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of Shares) tendered herewith, unless such holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on this Letter of Transmittal, or (ii) if such Shares are tendered for the account of a firm that is a member in good standing of the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each being hereinafter referred to as 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. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of Transmittal is to be completed by stockholders either if certificates representing Shares are to be forwarded herewith to the Depositary or, unless an Agent's Message (as defined below) is utilized, if tenders of Shares are to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 2 of the Offer to Purchase. Certificates representing all physically tendered Shares, or any book-entry confirmation of Shares, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in connection with a book-entry transfer, an Agent's Message, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). If a stockholder's certificate(s) representing Shares are not immediately available (or the procedure for the book-entry transfer cannot be completed on a timely basis) or time will not permit all required documents to reach the Depositary on or prior to the Expiration Date, such stockholder's Shares may nevertheless be tendered if the procedures for guaranteed delivery set forth in Section 2 of the Offer to Purchase are followed. Pursuant to such procedure, (i) such tender must be 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 Purchasers, must be received by the Depositary on or prior to the Expiration Date, and (iii) the certificates representing all tendered Shares, in proper form for transfer, or Book-Entry Confirmation of Shares, as the case may be, in each case together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three Nasdaq Stock Market trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 2 of the Offer to Purchase. The term "Agent's Message" means a message transmitted through electronic means by DTC to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the DTC participant tendering the Shares that such participant has received, and agrees to be bound by, this Letter of Transmittal. The method of delivery of this Letter of Transmittal, the certificate(s) representing Shares and all other required documents, including delivery through DTC, is at the option and sole risk of the tendering stockholder. The delivery will be deemed made only when actually received by the Depositary. If such delivery is by mail, registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to insure 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. 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 signed schedule attached hereto. 8 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER SHARES BY BOOK-ENTRY TRANSFER). If fewer than all the Shares represented 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 such case, new certificate(s) representing the remainder of the Shares that were represented by the old certificate(s) will be sent to the registered holder(s), unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by certificate(s) delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face(s) of the certificate(s) without alteration, enlargement or 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 is signed by the registered holder(s) of the Shares listed and tendered hereby, no endorsements of certificates or separate stock powers are required, unless payment 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 or any certificates or stock powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Purchasers of such person's authority so to act must be submitted. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution, unless the signature is that of an Eligible Institution. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchasers will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of purchased Shares to them or their order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates representing Shares not tendered or accepted for payment are to be registered in the name of, any person other than the registered holder, 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 holder or such other person) payable on account of the transfer to such person will be deducted from the purchase price, unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or certificates representing Shares not tendered or accepted for payment are to be issued in the name of 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 someone 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. Stockholders tendering Shares by book-entry transfer may request that Shares not accepted for payment be credited to such account maintained at DTC as such stockholder may designate herein. If no such instructions are given, such Shares not accepted for payment will be returned by crediting the account at DTC designated above. 9 8. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s) representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify the Depositary. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen certificates have been followed. To expedite replacement, call Shareholder Services at EquiServe at 1-800-426-5523. 9. WAIVER OF CONDITIONS. The conditions to the Offer may be waived by the Purchasers, in whole or in part, at any time and from time to time in the Purchasers' sole discretion (subject to the provisions of the Merger Agreement referred to in the Offer to Purchase). 10. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN"), generally the stockholder's social security or federal employer identification number, on the Substitute Form W-9, which is provided below, and to certify whether the stockholder is subject to backup withholding of United States federal income tax. If a tendering stockholder is subject to federal backup withholding, the stockholder must cross out item (2) of the "Certification" box of the Substitute Form W-9. Failure to provide the information on the Substitute Form W-9 may subject the tendering stockholder to a 31% federal backup withholding tax on the payment of the purchase price. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the stockholder should write "Applied For" in the space provided for the TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days of its receipt of the Substitute Form W-9, the Depositary will withhold 31% on all payments of the purchase price until a TIN is provided to the Depositary. 11. NON-UNITED STATES HOLDERS. Non-United States holders must submit a completed IRS Form W-8 or Form W-8BEN to avoid backup withholding. IRS Form W-8 or Form W-8BEN may be obtained by contacting the Depositary at one of the addresses on the face of this Letter of Transmittal. 12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may be directed to the Information Agent at the address set forth below. 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 obtained from the Information Agent or the Dealer Manager at their addresses set forth below or from your broker, dealer, commercial bank, trust company or other nominee. Important: This Letter of Transmittal (or a facsimile thereof), together with certificates representing Shares or confirmation of book-entry transfer and all other required documents, or the Notice of Guaranteed Delivery, must be received by the Depositary on or prior to the Expiration Date. 10 IMPORTANT TAX INFORMATION Under United States federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payer) with such stockholder's correct social security number, individual taxpayer identification number, or employer identification number (each a Taxpayer Identification Number or a "TIN") on Substitute Form W-9 provided below. If such stockholder is an individual, the TIN is such person's social security number. The TIN of a resident alien who does not have and is not eligible to obtain a social security number is such person's IRS individual taxpayer identification number. If a tendering stockholder is subject to federal backup withholding, the stockholder must cross out item (2) of the Certification box on the Substitute Form W-9. If the Depositary is not provided with the correct TIN, the stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service ("IRS"). In addition, payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to federal backup withholding. Certain stockholders (including, among others, all corporations and certain non-United States individuals) are not subject to federal backup withholding. In order for a non-United States individual to qualify as an exempt recipient, that stockholder must submit to the Depositary a properly completed IRS Form W-8 or Form W-8BEN, signed under penalties of perjury, attesting to that individual's exempt status. Such forms may be obtained from the Depositary. Exempt stockholders, other than non-United States individuals, should furnish their TIN, write "EXEMPT" on the face of the Substitute Form W-9 below, and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If federal backup withholding applies, the Depositary is required to withhold 31% of any payments made to the stockholder. Federal backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the IRS. Purpose of Substitute Form W-9 To prevent federal backup withholding on payments that are made to a stockholder with respect to Shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of such stockholder's correct TIN by completing the Substitute Form W-9 below certifying that the TIN provided on such form is correct (or that such stockholder is awaiting a TIN) and that (i) such holder is exempt from federal backup withholding, (ii) such holder has not been notified by the IRS that such holder is subject to federal backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified such holder that such holder is no longer subject to federal backup withholding (see Part 2 of Substitute Form W-9). What Number to give the Depositary The stockholder is required to give the Depositary the TIN of the record owner of the Shares. If the Shares are 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 guidelines on which number to report. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, such stockholder should write "Applied For" in the space provided for in the TIN in Part 1, and sign and date the Substitute Form W-9. If "Applied For" is written in Part 1 and the Depositary is not provided with a TIN within 60 days, the Depositary may withhold 31% on all payments of the purchase price until a TIN is provided to the Depositary. 11 PAYER'S NAME: EQUISERVE - ------------------------------------------------------------------------------------------------------------------------- SUBSTITUTE Part 1--PLEASE PROVIDE YOUR TIN Social Security number OR FORMW-9 IN THE BOX AT RIGHT AND CERTIFY Employer identification number Department of the Treasury BY SIGNING AND DATING BELOW ---------------------- Internal Revenue Service (If awaiting TIN write "Applied For") ---------------------------------------------------------------------------- Payer's Request for Taxpayer Part 2--For Payees exempt from backup withholding, see the enclosed Identification Number (TIN) Guidelines for Certification of Taxpayer Identification Number (TIN) on and Certification Substitute Form W-9 and complete as instructed therein. - ------------------------------------------------------------------------------------------------------------------------- CERTIFICATION--Under the penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or a Taxpayer Identification Number has not been issued to me and either (a) I have mailed or delivered an application to receive a Taxpayer Identification Number to the appropriate Internal Revenue Service ("IRS") or Social Security Administration office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a Taxpayer Identification Number within sixty (60) days, 31% of all reportable payments made to me thereafter may be withheld until I provide a number); and (2) I am not subject to backup withholding because (a) I am exempt from backup withholding, (b) I have not been notified by the IRS that I am subject to 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. 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 you have failed to report all interest and dividends on your tax return. If after being notified by the IRS that you were subject to backup withholding, you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see instructions in the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9). NAME: (please print) ADDRESS: (please print) 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 INFORMATION. THE INFORMATION AGENT FOR THE OFFER IS: abcdef 156 Fifth Avenue New York, NY 10010 (212) 929-5500 (call collect) or (800) 322-2885 (toll free) THE DEALER MANAGER FOR THE OFFER IS: Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010 Call Toll Free: (800) 881-8320 EX-99.(A)(3) 4 EXHIBIT 99(A)(3) CREDIT SUISSE FIRST BOSTON CORPORATION [LOGO] Eleven Madison Avenue Telephone 212 325 2000 New York, NY 10010-3629
Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Preferred Share Purchase Rights) of Micro Warehouse, Inc. at $19.00 Net Per Share by Bridgeport Acquisition Corporation, a wholly-owned subsidiary of Bridgeport Holdings Inc., and by Micro Warehouse, Inc. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS EXTENDED December 28, 1999 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Bridgeport Acquistion Corporation, a Delaware corporation ("Acquisition") and a wholly-owned subsidiary of Bridgeport Holdings Inc., a Delaware corporation ("Parent") and an affiliate of BYOWC Partners LLC, a Delaware limited liability company ("BYOWC"), and by Micro Warehouse, Inc., a Delaware corporation (the "Company" and, together with Acquisition, the "Purchasers"), to act as Dealer Manager in connection with the Purchasers' offer to purchase all of the outstanding shares of common stock, par value $.01 per share, including the associated preferred share purchase rights (collectively, the "Shares"), of the Company, at a price of $19.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 28, 1999 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), copies of which are enclosed herewith. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of December 20, 1999 (the "Merger Agreement"), among BYOWC, Parent, Acquisition and the Company. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. For your information and for forwarding to your clients, we are enclosing the following documents: 1. The Offer to Purchase. 2. The Letter of Transmittal to be used by stockholders of the Company in accepting the Offer, including a Certification of Taxpayer Identification Number on Substitute Form W-9. Facsimile copies of the Letter of Transmittal (with manual signatures) may be used to tender Shares. CREDIT SUISSE FIRST BOSTON CORPORATION [LOGO]
3. A letter to stockholders of the Company from Peter Godfrey, Chairman of the Board, Chief Executive Officer and President of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9, dated December 28, 1999 filed by the Company with the Securities and Exchange Commission. 4. A printed form of letter which may be sent to your clients for whose account you hold Shares in your name or in the name of your nominee with space provided for obtaining such clients' instructions with regard to the Offer. 5. The Notice of Guaranteed Delivery to be used to accept the Offer if certificates representing Shares are not immediately available or if time will not permit all required documents to reach the Depositary (as defined below) prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) or if the procedures for book-entry transfer cannot be completed on a timely basis. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. Stockholders who fail to complete and sign the Substitute Form W-9 may be subject to a required federal backup withholding tax of 31% of the gross proceeds payable to such stockholder or other payee pursuant to the Offer. See Section 2 of the Offer to Purchase. 7. A return envelope addressed to EquiServe L.P., c/o State Street Bank & Trust Company, Corporate Actions, P.O. 9573, Boston, MA 02205-9573 (the "Depositary"). Your attention is directed to the following: 1. The tender price is $19.00 per Share, net to the seller in cash, without interest, upon the terms and conditions set forth in the Offer to Purchase. 2. The Board of Directors of the Company has unanimously determined that the transactions contemplated by the Merger Agreement, including the Offer and the Merger (as defined in the Offer to Purchase), are fair to, and in the best interests of, the Company and its stockholders, has unanimously approved the Merger Agreement, the Offer and the Merger and unanimously recommends that the holders of Shares accept the Offer and tender their Shares pursuant to the Offer. 3. The Offer and withdrawal rights will expire at 5:00 P.M, New York City time, on Friday, January 28, 2000, unless the Offer is extended. 4. The Offer is being made for all of the outstanding Shares. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer at least that number of Shares that constitutes, together with any Shares owned by BYOWC, 51% of the Shares outstanding on a fully diluted basis. BYOWC currently owns approximately 4.3% of the Shares outstanding on a fully diluted basis. Certain stockholders of the Company who collectively own approximately 10.1% of the Shares outstanding on a fully diluted basis have agreed to tender their Shares in the Offer. The Offer is also conditioned upon the receipt by Acquisition of certain debt and equity financing necessary to consummate the Offer and the Merger and the availability to the Company of a new credit facility following consummation of the Offer. Credit Suisse First Boston, New York branch, and CIBC Inc. have executed a commitment letter to provide the debt financing and the new credit facility. FS Equity Partners IV, L.P., a private equity investment fund managed by Freeman Spogli & Co. LLC, has executed a commitment letter to provide the portion of the equity financing on which the Offer is conditioned. See Section 10 of the Offer to Purchase for a discussion of the financings, including the conditions to the financings. The Offer is also subject to certain other conditions. See Section 17 of the Offer to Purchase. 2 CREDIT SUISSE FIRST BOSTON CORPORATION [LOGO]
5. Stockholders who tender Shares will not be obligated to pay brokerage fees or commissions to the Dealer Manager, the Information Agent or the Depositary or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Purchasers pursuant to the Offer. 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 Purchasers will accept for payment and pay for all Shares which are validly tendered on or prior to the Expiration Date and not theretofore properly withdrawn pursuant to the Offer. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, pursuant to the procedures described in Section 2 of the Offer to Purchase), (ii) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message (as defined in Section 2 of the Offer to Purchase)), and (iii) all other documents required by the Letter of Transmittal. If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedures specified under Section 2 of the Offer to Purchase. The Purchasers will not pay any fees or commissions to any broker or dealer or to any other person (other than the Depositary, the Information Agent and the Dealer Manager) in connection with the solicitation of tenders of Shares pursuant to the Offer. The Purchasers will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients. The Purchasers will pay or cause to be paid any stock transfer taxes payable on the transfer of Shares to them, except as otherwise provided in Instruction 6 of the Letter of Transmittal. Your prompt action is requested. We urge you to contact your clients as promptly as possible. Please note that the Offer and withdrawal rights will expire at 5:00 P.M., New York City time, on Friday, January 28, 2000, unless the Offer is extended. Any inquiries you may have with respect to the Offer should be directed to, and additional copies of the enclosed materials may be obtained by contacting, the undersigned at (800) 881-8320 (call toll free). Very truly yours, Credit Suisse First Boston Corporation NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE PURCHASERS, PARENT, BYOWC, THE DEPOSITARY, THE DEALER MANAGER OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED AND THE STATEMENTS CONTAINED THEREIN. 3 EX-99.(A)(4) 5 EXHIBIT 99(A)(4) Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Preferred Share Purchase Rights) of Micro Warehouse, Inc. at $19.00 Net Per Share by Bridgeport Acquisition Corporation, a wholly-owned subsidiary of Bridgeport Holdings Inc., and by Micro Warehouse, Inc. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration is an Offer to Purchase, dated December 28, 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 Bridgeport Acquisition Corporation, a Delaware corporation ("Acquisition") and a wholly-owned subsidiary of Bridgeport Holdings Inc., a Delaware corporation ("Parent") and an affiliate of BYOWC Partners, LLC, a Delaware limited liability company ("BYOWC"), and Micro Warehouse, Inc., a Delaware corporation (the "Company" and, together with Acquisition, the "Purchasers"), to purchase all of the outstanding shares of common stock, par value $.01 per share, including the associated preferred share purchase rights (collectively, the "Shares"), of the Company, at a price of $19.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of December 20, 1999 (the "Merger Agreement"), among BYOWC, Parent, Acquisition and the Company. We are the holder of record (directly or indirectly) of Shares for your account. A tender of such Shares can be made only by us or our nominees 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 by you to tender Shares held by us for your account. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, pursuant to the terms and subject to the conditions set forth in the Offer. Your attention is directed to the following: 1. The tender price is $19.00 per Share, net to you in cash, without interest. 2. The Board of Directors of the Company has unanimously determined that the transactions contemplated by the Merger Agreement, including the Offer and the Merger (as defined in the Offer to Purchase), are fair to, and in the best interests of, the Company and its stockholders, has unanimously approved the Merger Agreement, the Offer and the Merger and unanimously recommends that the holders of Shares accept the Offer and tender their Shares pursuant to the Offer. 3. The Offer and withdrawal rights will expire at 5:00 P.M., New York City time, on Friday, January 28, 2000, unless the Offer is extended. 4. The Offer is being made for all of the outstanding Shares. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the expiration of the Offer at least that number of Shares that constitutes, together with any Shares owned by BYOWC, 51% of the Shares outstanding on a fully diluted basis. BYOWC currently owns approximately 4.3% of the Shares outstanding on a fully diluted basis. Certain stockholders of the Company who collectively own approximately 10.1% of the Shares outstanding on a fully diluted basis have agreed to tender their Shares in the Offer. The Offer is also conditioned upon the receipt by Acquisition of certain debt and equity financing necessary to consummate the Offer and the Merger and the availability to the Company of a new credit facility following consummation of the Offer. Credit Suisse First Boston, New York branch, and CIBC Inc. have each executed a commitment letter to provide the debt financing and the new credit facility. FS Equity Partners IV, L.P., a private equity investment fund managed by Freeman Spogli & Co. LLC, has executed a commitment letter to provide the portion of the equity financing on which the Offer is conditioned. See Section 10 of the Offer to Purchase for a discussion of the financings, including the conditions to the financings. The Offer is also subject to certain other conditions. See Section 17 of the Offer to Purchase. 5. Stockholders who have Shares registered in their own name and who tender Shares directly to the Depositary (as defined in the Offer to Purchase) will not be obligated to pay brokerage fees, commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Purchasers pursuant to the Offer. If you wish to have us tender any or all of your Shares, please complete, sign and return the instruction form set forth below. 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 instruction form set forth below. Please forward your instructions to us as soon as possible to allow us ample time to tender your Shares on your behalf prior to the expiration of the Offer. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and any supplements and amendments thereto. The Purchasers are not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If the Purchasers become aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchasers will make a good faith effort to comply with any such state statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Purchasers cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. 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 will be deemed to be made on behalf of the Purchasers by Credit Suisse First Boston or one or more registered brokers or dealers licensed under the laws of such jurisdiction. 2 Instructions with Respect to the Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Preferred Share Purchase Rights) of Micro Warehouse, Inc. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated December 28, 1999, ("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 Bridgeport Acquistion Corporation, a Delaware corporation ("Acquisition") and a wholly-owned subsidiary of Bridgeport Holdings Inc., a Delaware corporation and an affiliate of BYOWC Partners LLC, a Delaware limited liability company, and Micro Warehouse, Inc., a Delaware corporation (the "Company" and, together with Acquisition, the "Purchasers"), to purchase all of the outstanding shares of common stock, par value $.01 per share, including the associated preferred share purchase rights (collectively, the "Shares"), of the Company, at a price of $19.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer. This will instruct you to tender to the Purchasers the number of Shares indicated below (or, if no number is indicated below, all Shares) held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to be Tendered:* SIGN HERE Shares --------------------------------------------------- --------------------------------------------------- Dated Signature(s) --------------------------------------------------- --------------------------------------------------- Print Name(s) --------------------------------------------------- --------------------------------------------------- Address(es) --------------------------------------------------- Area Code and Telephone Number --------------------------------------------------- Taxpayer ID or Social Security Number
- ------------------------ * Unless otherwise indicated, it will be assumed that all of your Shares held by us for your account are to be tendered. 3 EX-99.(A)(5) 6 EXHIBIT 99(A)(5) Notice of Guaranteed Delivery for Tender of Shares of Common Stock (Including the Associated Preferred Share Purchase Rights) of Micro Warehouse, Inc. to Bridgeport Acqusition Corporation, a wholly-owned subsidiary of Bridgeport Holdings Inc., and Micro Warehouse, Inc. (Not to be used for Signature Guarantees) 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, including the associated preferred share purchase rights (collectively, the "Shares"), of Micro Warehouse, Inc., a Delaware corporation (the "Company"), are not immediately available (or if the procedure for book-entry transfer cannot be completed on a timely basis), or if time will not permit all required documents to reach the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined below)). Such form may be delivered by hand, transmitted by facsimile transmission or mailed to the Depositary at the addresses and facsimile number set forth below. See Section 2 of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: EquiServe BY FIRST CLASS MAIL: BY HAND: BY OVERNIGHT, CERTIFIED BY FACSIMILE OR EXPRESS MAIL TRANSMISSION: DELIVERY: State Street Bank & Securities Transfer & State Street Bank & (For Eligible Trust Company Reporting Services, Inc. Trust Company Institutions Only) Corporate Actions c/o Boston EquiServe Corporate Actions (781) 575-4827 P.O. 9573 L.P. 40 Campanelli Drive For Information: Boston, MA 02205-9573 100 William Braintree, MA 02184 (800) 426-5523 Street/Galleria New York, NY 10038
Delivery of this Notice of Guaranteed Delivery to an address other than as set forth above or transmission of instructions via facsimile transmission to a number other than as set forth above does 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. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal or an Agent's Message (as defined in Section 2 of the Offer to Purchase) and certificates representing the Shares to the Depositary within the time period specified herein. Failure to do so could result in a financial loss to the Eligible Institution. Ladies and Gentlemen: The undersigned hereby tenders to Bridgeport Acquisition Corporation, a Delaware corporation ("Acquisition") and a wholly-owned subsidiary of Bridgeport Holdings Inc., a Delaware corporation ("Parent") and an affiliate of BYOWC Partners LLC, a Delaware limited liability company, and Micro Warehouse, Inc., a Delaware corporation (the "Company" and, together with Acquisition, the "Purchasers"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 28, 1999 (the "Offer to Purchase") and the related Letter of Transmittal (which, including any amendments or supplements thereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Number of Shares - -------------------------------------------------------------------------------- Certificate No(s). (if available) - -------------------------------------------------------------------------------- Name(s) of Record Holder(s) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Type or Print) Address(es) and (Zip Code) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- / / Check box if Shares will be tendered by book-entry transfer. Name of Tendering Institution: - -------------------------------------------------------------------------------- Area Code and Tel. No(s). - -------------------------------------------------------------------------------- Account Number - -------------------------------------------------------------------------------- Signature(s) - -------------------------------------------------------------------------------- Dated - -------------------------------------------------------------------------------- 2 GUARANTEE (Not to be used for signature guarantee) The undersigned, a member in good standing of the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"), (a) represents that the above named person(s) own(s) the Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (b) represents that such tender of Shares complies with Rule 14e-4 under the Exchange Act, and (c) guarantees delivery to the Depositary, at one of its addresses set forth above, of certificates representing the Shares tendered hereby in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's accounts at The Depository Trust Company, in each case with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees, or an Agent's Message in the case of a book-entry transfer, and any other required documents, within three Nasdaq Stock Market trading days after the date hereof. - ----------------------------------------------- ----------------------------------------------- (Name of Firm) (Authorized Signature) - ----------------------------------------------- ----------------------------------------------- (Address) (Name) (Please Type or Print) ----------------------------------------------- ----------------------------------------------- (Zip code) (Title) - ----------------------------------------------- ----------------------------------------------- (Area Code and Tel. No.) Date
Note: Do not send certificates for Shares with this Notice of Guaranteed Delivery. Certificates representing Shares should be sent with your Letter of Transmittal. 3 EX-99.(A)(6) 7 EXHIBIT 99(A)(6)PRESS RELEASE NORWALK, CT.--(BUSINESS WIRE)--December 21, 1999--Micro Warehouse, Inc. (NASDAQ: MWHS, NEWS, MSGS), a leading direct marketer of computer products with annual revenues of $2.2 billion, today announced it has agreed to be acquired by a group of investors led by Gary L. Wilson, Chairman and investor in Northwest Airlines; former IBM CFO Jerome B. York; and investment firm Freeman Spogli & Co. Inc. Under the definitive merger agreement unanimously approved by the Micro Warehouse Board of Directors, shareholders will receive $19 in cash for each Micro Warehouse share, representing a 44% premium to the Company's average stock price over the past 30 days. The transaction is valued at approximately $725 million. A cash tender offer will be commenced within five business days for all Micro Warehouse shares, and the acquisition is expected to be completed by the end of January. Credit Suisse First Boston and CIBC World Markets have committed to fund $320 million in senior debt financing at the closing of the transaction. In addition to Wilson, York and Freeman Spogli, the investors include Alfred D. Boyer, Alfred Checchi and Michael Ovitz. Upon completion of the tender offer, York will succeed Micro Warehouse co-founder Peter Godfrey as Chairman and Chief Executive Officer. Upon completion of the merger, a new seven-member Board of Directors will be established for Micro Warehouse: York, Wilson, Boyer, Checchi and three representatives of Freeman Spogli. "This transaction is an outstanding opportunity for Micro Warehouse," said Peter Godfrey. "The Company will benefit from the tremendous management resources that Gary Wilson, Jerry York and these other distinguished investors bring to Micro Warehouse." "Micro Warehouse is a leader in direct marketing of computer products, a distribution business facing many challenges in a changing industry," said Gary Wilson. "Peter Godfrey has done an outstanding job of building Micro Warehouse since he co-founded it in 1987, and we hope to build on the strong platform he created to take the Company to the next level. I am very pleased that my partner Jerry York has agreed to become Chairman and CEO, and I expect to work closely with him while continuing my active involvement with Northwest Airlines." "I am looking forward to the opportunity to lead Micro Warehouse at this critical juncture in its development," said Jerome York. "Although the Company faces significant challenges, I am very impressed with Micro Warehouse's strong operating management, talented work force and good customer relationships. I look forward to working closely with all of these constituencies for the benefit of our employees, customers, suppliers and investors." "We are pleased to be partnering with such an accomplished group of investors," said Bradford M. Freeman, a founding partner of Freeman Spogli. "The Company has a well-established brand and we believe the experience and leadership provided by the investor group will help Micro Warehouse reach its full potential." The acquisition is subject to completion of the tender offer and customary closing conditions, and includes a termination fee payable to the investor group in certain circumstances. Alfred D. Boyer of Boyer Capital Management initiated the transaction and represented the investor group. Micro Warehouse was advised by Wasserstein Perella & Co., Inc. For the senior secured credit facilities, Credit Suisse First Boston is acting as lead arranger, book manager and administrative agent, and CIBC World Markets is acting as syndication agent. Credit Suisse First Boston will also be dealer-manager for the tender offer. Micro Warehouse, Inc. is a specialty catalog and online retailer and direct marketer of brand name personal computers, computer software, accessories, peripheral and networking products to commercial and consumer customers. The Company markets its products through frequent mailings of its distinctive, colorful catalogs and dedicated telemarketing account managers who focus on corporate, education and government accounts. Freeman Spogli & Co. Inc. is a Los Angeles-based private investment firm that invests together with management in companies positioned for growth. The firm, founded in 1983, invests primarily in consumer-related companies, operating in the retailing, direct marketing and service businesses. Since its inception, the firm has invested over $1.6 billion in 30 companies with aggregate enterprise values of more than $10 billion. Information Concerning Forward-Looking Statements With the exception of historical information this release contains "forward-looking statements" based on management's expectations. Factors that could cause future results to differ from these expectations include, but are not limited to, continued growth in the market for computer products; increased competition from other catalog, retail store, online and other resellers and manufacturers of computer products; reductions in manufacturers' incentive programs; other competitive, pricing and supply issues; results of our foreign operations; successful and timely integration of new systems; quarterly fluctuations and seasonality of our business; and our ability to recruit, train and retain sales account representatives and other key personnel. We discuss these and other risks and contingencies in more detail in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 1998 Annual Report to Stockholders and our Form 10-Q for the quarter ended September 30, 1999. We warn you not to place undue reliance on the forward-looking statements contained in this release because they speak only as of the date of this release and we have no obligation to update or revise them in the future. EX-99.(A)(7) 8 EXHIBIT 99(A)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase dated December 28, 1999, and the related Letter of Transmittal and any amendments or supplements thereto, and is being made to all holders of Shares. The Offer, however, 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. The Purchasers (as defined below) may in their discretion, however, take such actions as they may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In jurisdictions whose laws require that the Offer be made by a licensed broker or dealer, the Offer shall be deemed to be made on the Purchasers' behalf by Credit Suisse First Boston Corporation ("Credit Suisse First Boston" or the "Dealer Manager") or by one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Preferred Share Purchase Rights) of Micro Warehouse, Inc. at $19.00 Net Per Share by Bridgeport Acquisition Corporation, a wholly owned subsidiary of Bridgeport Holdings Inc., and by Micro Warehouse, Inc. Bridgeport Acquisition Corporation, a Delaware corporation ("Acquisition Company"), and Micro Warehouse, Inc., a Delaware corporation (the "Company" and, together with Acquisition Company, the "Purchasers"), are severally offering to purchase all outstanding shares of common stock, par value $0.01 per share, of the Company (the "Common Stock"), together with the associated preferred share purchase rights issued pursuant to the Rights Agreement dated as of June 17, 1996, between the Company and State Street Bank and Trust Company NA, as Rights Agent (the "Rights" and, together with the Common Stock, the "Shares"), at $19.00 per Share, net to the selling stockholder in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 28, 1999 (the "Offer to Purchase") and in the related Letter of Transmittal (the "Letter of Transmittal") (the Offer to Purchase and the Letter of Transmittal, as amended or supplemented from time to time, together constitute the "Offer"). Acquisition Company's offer is for up to approximately 71% ofthe Shares currently outstanding (including the Shares owned by BYOWC (as defined below)). If more than such number of Shares are tendered in the Offer, the Company's offer is for those additional Shares. Acquisition Company is a wholly owned subsidiary of Bridgeport Holdings Inc., a Delaware corporation ("Parent"). Parent is an entity formed by BYOWC Partners LLC, a Delaware limited liability company ("BYOWC"), and BYOWC is jointly and severally responsible for each of Acquisition Company's and Parent's obligations in the Offer. Stockholders of record who tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes, if any, on the purchase of Shares by the Purchasers pursuant to the Offer. Stockholders who hold their Shares through a broker or bank should consult such institution as to whether it charges any service fees. Acquisition Company will pay all charges and expenses of the Dealer Manager, EquiServe L.P., which is acting as depositary (the "Depositary"), and MacKenzie Partners, Inc., which is acting as the information agent (the "Information Agent"), incurred in connection with the Offer. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON FRIDAY, JANUARY 28, 2000, UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined below) at least that number of Shares that constitutes 51% of the Shares outstanding on a fully diluted basis (including the Shares owned by BYOWC) (the "Minimum Condition"). BYOWC currently owns approximately 4% of the Shares outstanding on a fully diluted basis. Certain stockholders of the Company who collectively own approximately 10% of the Shares outstanding on a fully diluted basis have each entered into a stockholder's agreement with Parent and Acquisition Company pursuant to which they have agreed to tender all of their Shares in the Offer and not withdraw any Shares so tendered. The Offer is also conditioned upon the receipt by Acquisition Company of certain debt and equity financing necessary to consummate the Offer and the Merger (as defined below) and the availability to the Company of a new credit facility following consummation of the Offer. Credit Suisse First Boston, New York branch, and CIBC Inc. have executed a commitment letter to provide the debt financing and the new credit facility. FS Equity Partners IV, L.P., a private equity investment fund managed by Freeman Spogli & Co. LLC, has executed a commitment letter to provide the portion of the equity financing on which the Offer is conditioned. The Offer is also subject to certain other conditions. The Offer is being made pursuant to an Agreement and Plan of Merger dated as of December 20, 1999 (the "Merger Agreement"), among BYOWC, Parent, Acquisition Company and the Company. The Merger Agreement provides, among other things, that following the completion of the Offer and the satisfaction or waiver, if permissible, of all conditions set forth in the Merger Agreement and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), the Company will be merged with and into Acquisition Company (the "Merger"), with Acquisition Company surviving the Merger as a wholly owned subsidiary of Parent. In the Merger, each outstanding Share (other than Dissenting Shares (as defined in the Merger Agreement), if any, and Shares owned by the Company or any of its subsidiaries, or by BYOWC, Parent, Acquisition Company or any direct or indirect wholly owned subsidiary of BYOWC) will be converted into the right to receive the Offer Price or any higher price per Share paid in the Offer, without interest thereon. The Merger Agreement is more fully described in Section 15 of the Offer to Purchase. The Board of Directors of the Company has unanimously determined that the Offer, the Merger and the transactions contemplated by the Merger Agreement are fair to and in the best interests of the Company and its stockholders, has unanimously approved the Merger Agreement, the Offer and the Merger and unanimously recommends that the stockholders of the Company accept the Offer and tender their Shares pursuant to the Offer. For purposes of the Offer, the applicable Purchaser shall be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn when, as and if the applicable Purchaser gives oral or written notice to the Depositary, as agent for the tendering stockholders, of its acceptance for payment of such Shares. Payment for Shares so accepted 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 Purchasers and transmitting payment to validly tendering stockholders. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing such Shares (or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company ("DTC")), (ii) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry transfer and (iii) any other documents required by the Letter of Transmittal. The term "Expiration Date" means 5:00 P.M., New York City time, on Friday, January 28, 2000, unless and until Acquisition Company (subject to the terms and conditions of the Merger Agreement) extends the period of time for 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 Acquisition Company, shall expire. Acquisition Company expressly reserves the right, in its sole discretion, to extend the Offer at any time and from time to time (i) if any condition to the consummation of the Offer other than the Minimum Condition has not been satisfied or waived, in which case such extension may continue until such conditions are satisfied or waived, (ii) if all conditions to the consummation of the Offer have been satisfied or waived other than the Minimum Condition, and the number of Shares tendered is greater than 40% of the Shares then outstanding (including the Shares owned by BYOWC), in which case such extension may continue for an aggregate period not to exceed 15 business days, (iii) for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission or its staff applicable to the Offer or (iv) if all conditions to the consummation of the Offer have been satisfied or waived but the number of Shares tendered is less than 90% of the Shares then outstanding (including the Shares owned by BYOWC and after giving effect to the reduction in the number of Shares outstanding as a result of the Company's purchase of Shares in the Offer), in which case such extension may continue for an aggregate period not to exceed 20 business days and only if Acquisition Company and, if applicable, the Company first accept for payment all Shares validly tendered prior to such extension. Acquisition Company shall cause any such extension by giving oral or written notice of such extension to the Depositary, which will be followed by public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the right, if any, of a tendering stockholder to withdraw such stockholder's Shares. The consummation of the Merger is subject to the satisfaction or waiver of certain conditions set forth in the Merger Agreement, including, if required, the adoption of the Merger Agreement by the requisite vote of the stockholders of the Company. The stockholder vote necessary to adopt the Merger Agreement is the affirmative vote of the holders of a majority of the Shares outstanding. If the Minimum Condition is satisfied and Acquisition Company and, if applicable, the Company purchase Shares pursuant to the Offer, Acquisition Company and Parent will be able to effect the Merger without the affirmative vote of any other stockholder. If Acquisition Company acquires at least 90% of the Shares then outstanding (including the Shares owned by BYOWC and after giving effect to the reduction in the number of Shares outstanding as a result of the Company's purchase of Shares in the Offer) pursuant to the Offer or otherwise, the parties to the Merger Agreement shall 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 meeting of stockholders of the Company in accordance with the short form merger provisions of the DGCL. Under no circumstances will interest be paid on the purchase price to be paid for the Shares pursuant to the Offer, regardless of any extension of the Offer or any delay in making such payment. Similarly, no interest will be paid on the consideration to be paid in the Merger to stockholders who do not tender their Shares pursuant to the Offer, regardless of any delay in effecting the Merger or making such payment. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date, and, unless theretofore accepted for payment pursuant to the Offer, may also be withdrawn at any time on or after February 27, 2000, or at such later time as may apply if the Offer is extended. If all conditions to the Offer have been satisfied or waived and Acquisition Company extends the Expiration Date because less than 90% of the Shares then outstanding (including the Shares owned by BYOWC and after giving effect to the reduction in the number of Shares outstanding as a result of the Company's purchase of Shares in the Offer) have been tendered, stockholders who have properly tendered, or will properly tender, Shares will no longer have any withdrawal rights and any Shares so tendered will be accepted for payment and paid for by the Purchasers. If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or the Purchasers are unable to accept for payment or pay for Shares tendered pursuant to the Offer, then, without prejudice to the Purchasers' rights, the Depositary may, nevertheless, on behalf of the Purchasers, retain tendered Shares and such Shares may not be withdrawn except to the extent that the tendering stockholder is entitled to and duly exercises withdrawal rights pursuant to Section 3 of the Offer to Purchase. For a withdrawal of Shares tendered to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth in the Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name(s) in which the certificate(s) representing such Shares are registered, if different from that of the person who tendered such Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, the name of the registered holder and the serial numbers shown on the particular certificate evidencing the Shares to be withdrawn must also be furnished to the Depositary prior to the physical release of the Shares to be withdrawn. The signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in the Offer to Purchase) (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedures for book-entry transfer, any notice of withdrawal must specify the name and number of the account at DTC to be credited with such withdrawn Shares and must otherwise comply with DTC's procedures. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchasers, in their sole discretion, and their determination will be final and binding on all parties. The information required to be disclosed by Rule 13e-4(d)(1) and Rule14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. In connection with the Offer, the Company has provided Acquisition Company with the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories. The Offer to Purchase, the related Letter of Transmittal and other related materials will be mailed to registered holders of Shares and will be furnished to brokers, dealers, commercial 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. The Offer to Purchase and the related Letter of Transmittal contain important information that should be read carefully before any decision is made with respect to the Offer. Any questions or requests for assistance or for additional copies of the Offer to Purchase, the related Letter of Transmittal and other related tender offer materials may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below, and copies will be furnished promptly at Acquisition Company's expense. None of BYOWC, Parent, Acquisition Company or the Company will pay any fees or commissions to any broker or dealer or any other person (other than the Dealer Manager, the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: [Logo of Mackenzie Partners] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Call Collect) or Call Toll Free (800) 322-2885 The Dealer Manager for the Offer is: [Logo of Credit Suisse First Boston] Eleven Madison Avenue New York, New York 10010-3629 Call Toll Free (800) 881-8320 EX-99.(A)(8) 9 EXHIBIT 99(A)(8) 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.
- ------------------------------------------------------------------------------- FOR THIS TYPE OF ACCOUNT: GIVE THE NAME AND SOCIAL SECURITY NUMBER OF: - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- GIVE THE NAME AND FOR THIS TYPE OF ACCOUNT: EMPLOYER IDENTIFICATION NUMBER OF: - ------------------------------------------------------------------------------- 1. Individual The individual 2. Two or more individuals The actual owner of the (joint account) account or, if combined funds, the first individual on the account(1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable The grantor-trustee(1) savings trust (grantor is also trustee) b. So-called trust account The actual owner(1) that is not a legal or valid trust under state law 5. Sole proprietorship The owner(3) 6. Sole proprietorship The owner(3) 7. A valid trust, estate, or The legal entity(4) pension trust 8. Corporate The corporation 9. Association, club, religious, The organization charitable, educational organization or other tax- exempt organization 10. Partnership The partnership 11. A broker or registered The broker or nominee nominee 12. Account with the Department The public entity of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agriculture program payments
- ------------------------------------------------------------------------------- - -------------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a social security number, that person's number must be furnished. (2) Circle the minor's name and furnish the minor's social security number. (3) You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or your employer identification number (if you have one). (4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the tax identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) NOTE: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number, or Form SS-4, Application for an Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. United States resident aliens who cannot obtain a social security number must apply for an ITIN (Individual Taxpayer Identification Number) on Form W-7. PAYEES EXEMPT FROM BACKUP WITHHOLDING Even if the payee does not provide a TIN in the manner required, you are NOT REQUIRED to backup withhold on any payments you make if the payee is: 1. An organization exempt from tax under section 501(a), any IRA, or a custodial account under section 403(b)(7) if the account satisfies the requirements of section 401(f)(2). 2. The United States or any of its agencies or instrumentalities. 3. A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. 4. A foreign government or any of its political subdivisions, agencies, or instrumentalities. 5. An international organization or any of its agencies or instrumentalities. Other payees that MAY BE EXEMPT from backup withholding include: 6. A corporation. 7. A foreign central bank of issue. 8. A dealer in securities or commodities required to register in the United States, the District of Columbia, or a possession of the United States. 9. A futures commission merchant registered with the Commodity Futures Trading Commission. 10. A real estate investment trust. 11. An entity registered at all times during the tax year under the Investment Company Act of 1940. 12. A common trust fund operated by a bank under section 584(a). 13. A financial institution. 14. A middleman known in the investment community as a nominee or who is listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. 15. A trust exempt from tax under section 664 or described in section 4947. INTEREST AND DIVIDEND PAYMENTS. All listed payees are exempt except the payee in item 9. BROKER TRANSACTIONS. All payees listed in items 1 through 13 are exempt. A person registered under the Investment Advisors Act of 1940 who regularly acts as a broker is also exempt. PAYMENTS EXEMPT FROM BACKUP WITHHOLDING Payments that are not subject to information reporting also are not subject to backup withholding. DIVIDENDS AND PATRONAGE DIVIDENDS that generally are exempt from backup withholding include: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident alien partner. - Payments of patronage dividends not paid in money. - Payments made by certain foreign organizations. - Section 404(k) distributions made by an ESOP. INTEREST PAYMENTS that generally are exempt from backup withholding include: - Payments of interest on obligations issued by individuals. However, if you pay $600 or more of interest IN THE COURSE OF YOUR TRADE OR BUSINESS to a payee, you must report the payment. Backup withholding applies to the reportable payment if the payee has not provided a TIN or has provided an incorrect TIN. - 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. - Mortgage interest paid to you. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THE 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. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your correct taxpayer identification number to a requester, 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.--Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. (4) MISUSE OF TAXPAYER IDENTIFICATION NUMBER.--If the requester discloses or uses taxpayer identification numbers in violation of Federal law, the requester may be subject to civil and criminal penalties. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(A)(9) 10 EXHIBIT 99(A)(9) Exhibit 99(a)(9) Tuesday, December 28, 1999 08:04 AM NORWALK, CT--(BUSINESS WIRE)--December 28, 1999--Micro Warehouse, Inc. (NASDAQ:MWHS) and Bridgeport Acquisition Corporation, an affiliate of an investor group led by Gary Wilson, Jerome York and Freeman Spogli and Co., today commenced their previously announced cash tender offer to acquire all of the outstanding common shares of Micro Warehouse at a price of $19 per share, net to the seller in cash. The tender offer is scheduled to expire at 5:00 p.m., New York City time, on Friday, January 28, 2000, unless the offer is extended. The investor group currently owns approximately 4.3% of Micro Warehouse shares outstanding on a fully diluted basis, and certain Micro Warehouse stockholders who collectively own approximately 10.1% of Micro Warehouse shares outstanding on a fully diluted basis have agreed to tender their shares in the offer. The offer is conditioned upon 51% (including shares owned by the investor group) of the outstanding common shares of Micro Warehouse being validly tendered and not withdrawn prior to the expiration of the offer, receipt of debt financing under a commitment letter from Credit Suisse First Boston and CIBC Inc., receipt of equity financing under a commitment letter from Freeman Spogli and Co., and certain customary closing conditions. Credit Suisse First Boston is the Dealer Manager for the offer. The complete terms and conditions of the offer are set forth in the Offer to Purchase being filed today with the Securities and Exchange Commission, copies of which are available from MacKenzie Partners, the information agent for the offer. Micro Warehouse, Inc. is a specialty catalog and online retailer and direct marketer of brand name personal computers, computer software, accessories, peripheral and networking products to commercial and consumer customers. CONTACT: George Sard/Heather Reeves Sard Verbinnen & Co 212/687-8080 EX-99.(C)(1) 11 EXHIBIT 99(C)(1) Exhibit 99.(c)(1) Micro Warehouse, Inc. 535 Connecticut Avenue Norwalk, CT 06854 November 22, 1999 BYOWC Partners LLC 9965 Wilshire Boulevard Beverly Hills, California 90212 Ladies and Gentlemen: We are prepared to furnish to you information which is confidential, proprietary or otherwise not generally available to the public in connection with the negotiation of a transaction document in the negotiation of a possible transaction (a "Transaction"). In consideration thereof and as a condition thereto, we each agree (as to ourselves and our respective affiliates) as follows: 1. NONDISCLOSURE OF INFORMATION. Subject to Section 2 hereof, each of us will (a) keep the Information furnished to us by the other party and its Representatives confidential and (b) not use any such Information other than in connection with the Transaction. Each of us may, however, disclose any such Information to our respective Representatives, but only if such Representatives reasonably need to know such Information in connection with the Transaction. Each of us will (i) inform our respective Representatives receiving any such Information of the confidential nature thereof and of this letter agreement, (ii) direct our respective Representatives to treat any such Information confidentially and not to use it other than in connection with the Transaction, and (iii) be responsible for any of our respective Representatives' improper use of any such Information (including without limitation by such Representatives who, subsequent to the first date of disclosure of Information hereunder, become our former Representatives). Subject to Section 2 hereof, without the prior consent of the other party, each of us will not, and will each direct our respective Representatives not to, disclose to any third person (1) that any such Information has been made available to us, (2) that discussions relating to a possible Transaction are taking place, or (3) any other facts with respect to any such discussions. 2. NOTICE PRECEDING COMPELLED DISCLOSURE. If we or any of our respective Representatives are requested to disclose any of the Information furnished to us by the other party and its Representatives, we will promptly notify the party furnishing such Information to permit it to seek a protective order or take other appropriate action. Each of us will also cooperate in such party's efforts to obtain a protective order or other reasonable assurance that confidential treatment will be accorded such Information. If, in the absence of a protective order, either of us or our respective Representatives BYOWC Partners LLC November 22, 1999 Page 2 are, in the opinion of our respective counsel, compelled as a matter of law to disclose any such Information to a third party, we may disclose to the third party compelling disclosure only the part of such Information as the disclosing party determines in good faith is required by law to be disclosed (in which case, prior to such disclosure, we will use reasonable efforts to advise and consult with the party furnishing such Information and its counsel as to such disclosure and the nature and wording of such disclosure) and we will each use our respective reasonable efforts, at the providing party's request and expense, to obtain confidential treatment therefor. 3. TREATMENT OF INFORMATION. Each of us will treat and maintain the Information furnished to us by the other party and its Representatives under this letter agreement in substantially the same manner as we treat and maintain confidential information in the ordinary course of our respective business. As soon as possible upon the written request of such other party or upon the termination of negotiations relating to the Transaction by either of us, we and our respective Representatives will return to the other party all tangible Information which has been provided to us by the other party and its Representatives and will destroy (or, at our option, return to the other party) all Information that has been prepared by the receiving party and its Representatives. Such destruction (or return) will be confirmed in writing to such other party. Any such Information that is not so destroyed (or returned) will remain subject to this letter agreement. You hereby acknowledge that you are aware and that your Representatives have been advised by us that applicable securities laws may prohibit any person who has material, non-public information from purchasing or selling our securities or from communicating the information to any other person or entity. 4. PUBLIC INFORMATION. Each of us agrees that this letter agreement will not apply to such portions of the Information furnished to us by the other party or its Representatives which (a) are or become generally available to the public through no action of the party to which such Information was furnished and their Representatives or (b) are or become available to the party to which it was furnished hereunder on a nonconfidential basis from a source, other than from the other party or its Representatives, which the receiving party believes, after reasonable inquiry, was not prohibited from so disclosing such portions by a contractual, legal or fiduciary obligation to the providing party. 5. CERTAIN ACTIONS. (A) COORDINATION OF CONTACTS. During the course of negotiations relating to the Transaction prior to the execution of a definitive agreement with respect to the Transaction (a "Definitive Agreement"), we each agree that we will not, and will instruct our respective Representatives not to initiate contact with any director, officer, employee or person known to us to be a lender, securityholder, or member of the other party in connection with the Transaction, except as authorized by an Authorized Representative of the other party. The Company's Authorized Representatives are Frederick H. Fruitman and Bruce L. Lev. Your Authorized Representative is Alfred D. Boyer. If negotiations relating to the Transaction is terminated by either of us, we and our respective Representatives will permanently cease all such contacts, whether or not previously BYOWC Partners LLC November 22, 1999 Page 3 authorized, other than contacts with the Authorized Representatives unless such Authorized Representatives authorize further contacts. (b) NO SOLICITATION. You agree that for a period of two years from the date of this letter agreement, except within the terms of our specific prior written consent, neither you, nor any of your Representatives on your behalf, will directly or indirectly solicit for employment or hire any director, officer or employee of the Company or any subsidiary whose salary and bonus exceeded $100,000 in the year prior to the earlier of the date of such solicitation or the date of hire, except that you will not be precluded from hiring any such employee who (i) responds to a public advertisement placed by you or (ii) has terminated employment with the Company prior to commencement of solicitation of such employee. (c) NO DISPARAGEMENT. If, prior to entering into a Definitive Agreement, our Board of Directors (the "Board") publicly discloses that it is considering or that it has approved any transaction with a third party involving a merger, consolidation, material joint venture, sale of substantial assets or stock or other form of business combination or acquisition transaction (an "Alternative Transaction"), you agree that, from the time you first learn that the Board is considering an Alternative Transaction until the end of one year from the date of this Agreement, (I) neither you nor your Representatives will (a) publicly disparage or privately disparage the Company in a manner meant to harm the Company or its reputation as opposed to the expression of a view in a personal conversation that is not meant to interfere with an Alternative Transaction by disparaging the Company, or (b) appear before or otherwise communicate with any governmental authority, including without limitation, any anti-competition and or regulatory authority, that has direct or indirect authority over the Company, the third party or their respective affiliates (a "Regulatory Authority") to oppose, or influence the Regulatory Authority to oppose, the Alternative Transaction and (II) the Company will not publicly disparage or privately disparage you or your members in a manner meant to harm you or your members or their reputation as opposed to the expression of a view in a personal conversation. The foregoing covenant will not, however, (i) preclude or limit you from exercising any right you or the Company may have under any existing contract or interfere with the conduct of the existing business with the Company or any of our affiliates, on the one hand, and you or any of your affiliates, on the other hand, or (ii) prohibit you from responding to any specific written request from a Regulatory Authority (so long as it did not solicit or encourage that request, it being understood that disclosure to the Regulatory Authority of the existence of the terms of this Agreement in response to an oral request from a Regulatory Authority will not constitute solicitation or encouragement of a written request). (d) SURVIVAL. The foregoing provisions of this Paragraph 5 will remain in effect for the periods specified herein notwithstanding that some or all of the Information has become publicly disclosed or outdated or that any portion of this letter agreement has become inoperative as to any portion of the Information. BYOWC Partners LLC November 22, 1999 Page 4 6. CERTAIN OBLIGATIONS ONLY ON DEFINITIVE AGREEMENT. No agreement providing for any Transaction will be deemed to exist unless and until a Definitive Agreement has been executed and delivered by each of us and each of the other parties thereto, and we each hereby irrevocably waive any claims (including without limitation breach of contract) in connection with any Transaction contemplated hereby unless and until a Definitive Agreement has been so executed and delivered and then only pursuant to the terms thereof and applicable law. Unless and until a Definitive Agreement has been so executed and delivered, neither of us nor any of our respective Representatives has any legal obligation to the other or any of its affiliates of any kind with respect to any Transaction because of this letter agreement or any other written or oral expression with respect to any Transaction, except, in the case of this letter agreement, for the matters specifically agreed to herein. For purposes of this Paragraph 6, the term "Definitive Agreement" does not include a letter of intent or any other preliminary written agreement, whether or not executed, nor does it include any actual or purported written or verbal acceptance of any offer or proposal. Except as otherwise expressly agreed in writing or as expressly provided herein, each of us and our respective Representatives will be free to conduct the process relating to any Transaction as they in their sole discretion determine (including without limitation changing any procedures relating to a Transaction, or negotiating with and entering into a Definitive Agreement with any other person, without in any such case prior notice to the other of us or any other person). Neither party will have any claims against the other party or any of its Representatives arising out of or relating to any Transaction other than those, if any, arising under this letter agreement in accordance with the terms hereof or as parties to a Definitive Agreement. 7. GENERAL PROVISIONS. (a) No failure or delay in exercising any right hereunder will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right. No document or other action purporting to have been signed on behalf of or to bind either of us will be operative for purposes of this letter agreement unless it is in writing and is signed by an Authorized Representative. This letter agreement will be binding on and inure to the benefit of the parties hereto and their respective successors and assigns. Money damages would not be a sufficient remedy for any violation of the terms of this letter agreement and, accordingly, each of us will be entitled to specific performance and injunctive relief as remedies for any violation, in addition to all other remedies available at law or equity. We consent to personal jurisdiction in any action brought in any federal or state court within the State of New York having subject matter jurisdiction in the matter for purposes of any action arising out of this letter agreement. This letter agreement will be governed by and construed in accordance with the laws of the State of New York, without giving effect to the principles of conflict of laws thereof. (b) Each of us is a sophisticated legal entity and was advised and will continue to be advised by experienced counsel, and to the extent we deem appropriate other advisors, in connection with any Transaction. We agree that as between us (and any of our respective representatives) our rights pursuant to the Definitive Agreement will be the sole and exclusive rights, obligations and remedies with respect to the use of the Information by us or any of our Representatives and any BYOWC Partners LLC November 22, 1999 Page 5 Transaction. Without limiting the generality or effect of the foregoing, as a material inducement to the furnishing of the Information, and in light of, among other factors, the acknowledgments contained herein, we each hereby waive any claim or cause of action that we otherwise might assert, including without limitation under common law (including without litigation common law fraud, constructive fraud, negligent misrepresentation and similar theories) or federal or state securities laws (including without limitation Rule 10b-5 under the Securities Exchange Act of 1934), trade regulation, environmental or other laws, by reason of any Transaction, except for claims or causes of action brought under and subject to the terms of a Definitive Agreement. We agree that neither of us will have any liability or obligation to the other or its Representatives in respect of any claim or cause of action that is or may be brought in respect of the use of the Information by us or any of our Representatives or any Transaction except pursuant to a Definitive Agreement. (c) Without limiting the generality or effect of any other provision of this letter agreement, we hereby acknowledge and agree on behalf of ourselves and our affiliates that, regardless of the facts and circumstances, (i) none of our respective Representatives had, has or will have any duty to the other of us in connection with any Transaction and (ii) neither of us has any right to recovery against any of the other's Representatives in respect of any Transaction on any theory, whether for alleged breach of contract, negligent misrepresentation, actual or constructive fraud, federal or state securities or other laws or otherwise. 8. CERTAIN DEFINITIONS. As used in this letter agreement, (a) the "Company" means, Micro Warehouse, Inc. and the affiliates controlled by it, and "you" means BYOWC Partners LLC and the affiliates controlled by it and any group of which it is a member (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934 and Rule 13d-3 promulgated thereunder), (b) the term "we," "us," and "our" includes the Company and you, (c) the terms or phrases "affiliate," "beneficial owner," "election contest," "equity security," "group," "participant," "person," "proxy," "security" and "solicitation" (and the plurals thereof) have the meanings ascribed to such terms under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, (d) all information (written or otherwise) that is confidential, proprietary or otherwise not generally available to the public and is furnished by one party to the other, whether furnished by such party or by its respective Representatives, together with all written or electronically stored documentation prepared by the party receiving such information or its respective Representatives to the extent derived from or containing such information (such prepared documentation being deemed for purposes of this letter agreement to have been "furnished") is herein referred to as the "Information", and (e) any director, member, officer, employee, agent, lender, equity participant or other financing source or representative, including without limitation any accountant, attorney and financial advisor, is herein referred to as a "Representative." BYOWC Partners LLC November 22, 1999 Page 6 Please sign and return one copy of this letter agreement to evidence your acceptance of and agreement to the foregoing, whereupon this letter agreement will become the binding obligation of each of the undersigned. MICRO WAREHOUSE, INC. By: /s/ BRUCE L. LEV ------------------------------------ Name: Bruce L. Lev Title: Executive Vice President - General Counsel Accepted and agreed to as of the date first above written: BYOWC PARTNERS LLC By: /s/ ALFRED D. BOYER -------------------------------- Name: Alfred D. Boyer Title: Managing Member EX-99.(C)(2) 12 EXHIBIT 99(C)(2) Exhibit 99(C)(2) MICRO WAREHOUSE, INC. 535 Connecticut Avenue Norwalk, CT 06854 December 2, 1999 BYOWC Partners LLC 9965 Wilshire Blvd. Beverly Hills, CA 90212 Attention: Alfred D. Boyer Gentlemen: Over the past several weeks, representatives of BYOWC Partners LLC ("BYOWC") and Micro Warehouse, Inc. (the "Company") have been discussing the possibility of BYOWC's proposing to acquire the Company for cash, have been discussing a range of prices per share at which such proposal might be made, and have been negotiating the form of agreement which would govern such a proposed transaction. The parties acknowledge that any final agreement is subject to approval of the Company's Board of Directors, receipt by the Company of a fairness opinion from its financial advisor and completion by BYOWC of its due diligence investigation. BYOWC has requested that the Company provide it with non-public information to assist BYOWC in completing its diligence investigation and its evaluation of this possible transaction. The Company is willing to provide this information to BYOWC, but the Company is requiring BYOWC to agree to certain standstill provisions, and the parties have agreed to certain other provisions, as follows: I. A. Promptly following the execution of this letter agreement, the Company shall: (1) afford to the officers, employees, accountants, counsel, financing sources and other representatives of BYOWC, reasonable access during normal business hours to its properties, books, contracts, commitments and records; (2) furnish to BYOWC all information concerning its business, properties and personnel as BYOWC may reasonably request or has reasonably requested; (3) make available during normal business hours to the officers, employees, accountants, counsel, financing sources and other representatives of BYOWC the appropriate individuals (including management personnel, attorneys, accountants and other professionals) for discussion of the Company's business, properties, prospects and 8 personnel as BYOWC may reasonably request, in each case so as to provide BYOWC with a meaningful opportunity to complete its diligence investigation of the Company's BYOWC Partners LLC December 2, 1999 Page 2 non-public information and to make a determination prior to December 17, 1999 (the "Determination Date") whether or not to proceed with the proposed transaction. B. If on or prior to the Determination Date BYOWC provides written notice to the Company that it wishes but is unable to make a Qualifying Offer (as defined below) by reason of its lack of financing for a Qualified Offer on commercially reasonable terms, the Determination Date shall be extended to January 7, 2000 for the purpose of enabling BYOWC to arrange for such financing. II. As of the date of this letter agreement, except as previously disclosed to the Company in writing, BYOWC does not own beneficially any securities entitled to be voted generally in the election of directors of the Company or any direct or indirect options or other rights to acquire any such securities ("Voting Securities"). BYOWC agrees that for a period of one year from the date of this letter agreement (the "Standstill Period"), without the written approval of the Company, neither BYOWC nor any of its members or its or their controlled affiliates, will publicly propose or publicly announce or otherwise disclose an intent to propose, or enter into or agree to enter into, singly or with any other person, directly or indirectly, (i) any form of business combination, acquisition or similar transaction relating to the Company, (ii) any form of restructuring, recapitalization or similar transaction with respect to the Company; or (iii) any demand, request or proposal to amend, waive or terminate any provision of this paragraph II, nor except as aforesaid, during such period will BYOWC or any of its members or its or their controlled affiliates: (1) acquire, or offer, propose or agree to acquire, by purchase or otherwise, any of the Company's Voting Securities, other than by reason of a stock dividend, stock split, rights offering or similar action initiated by the Company; PROVIDED, HOWEVER, BYOWC may acquire additional Voting Securities so long as the aggregate amount beneficially owned by BYOWC does not exceed 10% of the total outstanding capital stock of the Company; (2) make, or in any way participate in, any solicitation of proxies with respect to any such Voting Securities (including by the execution of action by written consent), become a participant in any election contest with respect to the Company, seek to influence any person with respect to any such Voting Securities or demand a copy of the list of the Company's stockholder or other books and records; (3) participate in or encourage the formation of any partnership, syndicate or other group which owns or seeks or offers to acquire beneficial ownership of any such Voting Securities (other than the 10% permitted in subsection (2) above), or which seeks to affect the Company's control or has the purpose of circumventing any provision of this letter agreement; (4) otherwise act, alone or in concert with others (including by providing financing for another person), to seek or to offer to control or influence, in any manner, BYOWC Partners LLC December 2, 1999 Page 3 the Company's management, Board of Directors, or policies other than communications with management or the Board in BYOWC's capacity as a stockholder without the purpose or effect of changing control of the Company or effecting any of the actions otherwise prohibited by this paragraph II; or (5) make any proposal or other communication designed to compel or which has the effect of compelling the Company to make a public announcement thereof in respect of any matter referred to in this letter. Without limiting the generality or effect of the foregoing, BYOWC agrees that, in consideration of the covenants herein contained, if the Company publicly announces that it has entered into an agreement providing for, or is engaged in discussions with a third party relating to, a tender offer, merger, consolidation or other similar transaction including a third party, BYOWC may not, except within the terms of a specific written request from the Company prior thereto, submit an alternative or competing proposal. III. Notwithstanding anything to the contrary in the preceding paragraph II: A. If on or prior to the Determination Date BYOWC offers to purchase the Company for cash in a tender offer and merger transaction, pursuant to a merger agreement with terms substantially similar to the terms discussed by the parties, at a price per share that is not less than the per share price discussed by the parties (a "Qualifying Offer"), the following provisions will apply: (1) The provisions contained in paragraph II above (the "Standstill Provisions") will terminate at the close of business on February 29, 2000; provided, however, that if the Determination Date is extended pursuant to paragraph I.B above, the Standstill Provisions will remain in effect for such number of additional days as is equal to the number of days after December 17, 1999 that BYOWC makes a Qualifying Offer. (2) The Standstill Provisions will terminate sooner upon the happening of any of the following events: (a) the board of directors of the Company approves a transaction with any other person that would result in-- (i) such person acquiring all or substantially all of the assets of the Company (or any successor company), or (ii) such person beneficially owning more than 40% of the outstanding voting securities of the Company (or any successor company); or BYOWC Partners LLC December 2, 1999 Page 4 (b) any person or group has commenced or publicly announced its intention to commence a bona fide tender offer for more than 50% of the outstanding Voting Securities of the Company. B. If BYOWC does not make a Qualifying Offer by reason of its discovery: (1) that the business, assets (including intangible assets), financial condition or results of operations of the Company and its subsidiaries taken as a whole are materially and adversely different than as set forth in the Company's periodic filings with the Securities and Exchange Commission prior to the date hereof (the "Public Reports") or otherwise disclosed in writing to BYOWC prior to the date hereof ("Disclosed Information"); (2) of any facts or circumstances not disclosed in the Company's Public Reports or the Disclosed Information, which in the good faith judgment of BYOWC would reasonably be expected to increase the cost of consummating a Qualifying Offer by more than $10,000,000 above the cost reasonably expected to be incurred based upon the information set for in the Public Reports and the Disclosed Information; or (3) of any facts or circumstances not disclosed in the Company's Public Reports or the Disclosed Information, which in the good faith judgment of BYOWC would materially interfere, restrict or otherwise adversely affect the ability of BYOWC or the Company to consummate a Qualifying Offer, it shall so notify the Company in writing promptly following the Determination Date, setting forth in reasonable detail the basis as aforesaid for not making a Qualifying Offer. In such case, the Standstill Provisions will terminate at the close of business on February 29, 2000. C. If the Company and BYOWC enter into a merger agreement and the merger agreement is terminated other than by reason of a breach by BYOWC of its representations, warranties, covenants or agreements set forth in such agreement, the Standstill Provisions will terminate contemporaneously with the termination of the merger agreement. IV. During the period beginning on the date hereof through and including the December 17, 1999, the Company shall not, directly or indirectly, through any officer, director, employee, representative or agent of the Company or any of its subsidiaries, solicit or encourage the initiation of (including by way of furnishing information), negotiate or in any way respond to (including by way of furnishing information) any inquiries or proposals, regarding any merger, sale of assets, sale of shares of capital stock (including without limitation by way of tender offer) or similar transactions involving the Company or any of its subsidiaries (an "Alternative Proposal"). The Company shall immediately cease and cause to be terminated any existing discussions or negotiations with any persons (other than BYOWC) conducted heretofore with respect to any Alternative Proposal. BYOWC Partners LLC December 2, 1999 Page 5 At this time BYOWC and the Company have not entered into any agreement or understanding to effect a merger transaction, and this letter should not be construed to imply that the parties have done so. Your signature below will confirm our mutual agreement as hereinabove provided. Very truly yours, MICRO WAREHOUSE, INC. By: /S/ BRUCE L. LEV ------------------------ Bruce L. Lev Executive Vice President AGREED TO: BYOWC PARTNERS LLC By: /s/ ALFRED D. BOYER ----------------------------- Alfred D. Boyer Managing Member EX-99.(C)(3) 13 EXHIBIT 99(C)(3) Exhibit 99(c)(3) AGREEMENT AND PLAN OF MERGER BY AND AMONG BYOWC PARTNERS LLC, BRIDGEPORT HOLDINGS INC., BRIDGEPORT ACQUISITION CORPORATION and MICRO WAREHOUSE, INC. Dated as of December 20, 1999 TABLE OF CONTENTS ARTICLE I TENDER OFFER AND MERGER.........................................................2 SECTION 1.01 THE OFFER..........................................................2 SECTION 1.02 TERMS AND CONDITIONS OF THE OFFER..................................2 SECTION 1.03 COMPANY ACTION.....................................................5 SECTION 1.04 DIRECTORS..........................................................5 SECTION 1.05 THE MERGER.........................................................6 SECTION 1.06 EFFECTIVE TIME.....................................................7 SECTION 1.07 CONVERSION OF SHARES...............................................7 SECTION 1.08 DISSENTING SHARES..................................................7 SECTION 1.09 SURRENDER OF SHARES................................................8 SECTION 1.10 OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN...........................9 SECTION 1.11 CERTIFICATE OF INCORPORATION AND BYLAWS...........................10 SECTION 1.12 DIRECTORS AND OFFICERS............................................10 SECTION 1.13 OTHER EFFECTS OF MERGER...........................................10 SECTION 1.14 PROXY STATEMENT...................................................10 SECTION 1.15 ADDITIONAL ACTIONS................................................11 SECTION 1.16 MERGER WITHOUT MEETING OF STOCKHOLDERS............................11 SECTION 1.17 LOST, STOLEN OR DESTROYED CERTIFICATES............................11 SECTION 1.18 MATERIAL ADVERSE EFFECT...........................................11 ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................12 SECTION 2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES......................12 SECTION 2.02 CERTIFICATE OF INCORPORATION AND BYLAWS...........................12 SECTION 2.03 CAPITALIZATION....................................................13 SECTION 2.04 AUTHORITY RELATIVE TO THIS AGREEMENT..............................14 SECTION 2.05 CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.............14 SECTION 2.06 COMPLIANCE; PERMITS...............................................15 SECTION 2.07 SEC FILINGS; FINANCIAL STATEMENTS.................................16 SECTION 2.08 ABSENCE OF CERTAIN CHANGES OR EVENTS..............................16 SECTION 2.09 NO UNDISCLOSED LIABILITIES........................................16 SECTION 2.10 ABSENCE OF LITIGATION.............................................17 SECTION 2.11 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS.....................17 SECTION 2.12 LABOR MATTERS.....................................................19 SECTION 2.13 DISCLOSURE DOCUMENTS..............................................19 SECTION 2.14 RESTRICTIONS ON BUSINESS ACTIVITIES...............................20 SECTION 2.15 TITLE TO PROPERTY.................................................20 SECTION 2.16 TAXES.............................................................20 SECTION 2.17 ENVIRONMENTAL MATTERS.............................................22 SECTION 2.18 BROKERS...........................................................23 SECTION 2.19 INTELLECTUAL PROPERTY.............................................23 SECTION 2.20 INTERESTED PARTY TRANSACTIONS.....................................24 SECTION 2.21 INSURANCE.........................................................24 SECTION 2.22 PRODUCT LIABILITY.................................................25 SECTION 2.23 OPINION OF FINANCIAL ADVISOR......................................25 SECTION 2.24 RIGHTS AGREEMENT..................................................25
-i- ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT....................................25 SECTION 3.01 ORGANIZATION AND GOOD STANDING....................................25 SECTION 3.02 AUTHORIZATION; BINDING AGREEMENT..................................26 SECTION 3.03 GOVERNMENTAL APPROVALS............................................26 SECTION 3.04 NO VIOLATIONS.....................................................26 SECTION 3.05 DISCLOSURE DOCUMENTS..............................................26 SECTION 3.06 FINDERS AND INVESTMENT BANKERS....................................27 SECTION 3.07 FINANCING ARRANGEMENTS............................................27 SECTION 3.08 NO PRIOR ACTIVITIES...............................................28 SECTION 3.09 DGCL SECTION 203..................................................28 SECTION 3.10 BENEFICIAL OWNERSHIP OF SHARES....................................28 SECTION 3.11 SURVIVING CORPORATION AFTER THE MERGER............................28 ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER.......................................29 SECTION 4.01 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.............29 SECTION 4.02 NO SOLICITATION...................................................31 ARTICLE V ADDITIONAL AGREEMENTS.........................................................33 SECTION 5.01 APPROVAL OF THE MERGER............................................33 SECTION 5.02 VOTING OF SHARES BY PURCHASER.....................................33 SECTION 5.03 ACCESS TO INFORMATION; CONFIDENTIALITY............................33 SECTION 5.04 CONSENTS; APPROVALS...............................................34 SECTION 5.05 INDEMNIFICATION AND INSURANCE.....................................34 SECTION 5.06 NOTIFICATION OF CERTAIN MATTERS...................................36 SECTION 5.07 FURTHER ACTION....................................................36 SECTION 5.08 PUBLIC ANNOUNCEMENTS..............................................36 SECTION 5.09 CONVEYANCE TAXES..................................................37 SECTION 5.10 OPTION PLANS AND BENEFITS, ETC. ..................................37 SECTION 5.11 EMPLOYEE MATTERS..................................................37 SECTION 5.12 COMPLIANCE WITH STATE PROPERTY TRANSFER STATUTES..................37 SECTION 5.13 FINANCING COVENANTS...............................................38 ARTICLE VI CONDITIONS TO THE MERGER.....................................................39 SECTION 6.01 OFFER.............................................................39 SECTION 6.02 STOCKHOLDER APPROVAL..............................................39 SECTION 6.03 NO INJUNCTION OR ACTION...........................................39 SECTION 6.04 GOVERNMENTAL APPROVALS............................................39 ARTICLE VII TERMINATION.................................................................40 SECTION 7.01 TERMINATION.......................................................40 SECTION 7.02 [INTENTIONALLY OMITTED]...........................................42 SECTION 7.03 EFFECT OF TERMINATION.............................................42 SECTION 7.04 FEES AND EXPENSES.................................................42 ARTICLE VIII GENERAL PROVISIONS.........................................................43 SECTION 8.01 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.......43 SECTION 8.02 CERTAIN LIMITATIONS...............................................44 SECTION 8.03 NOTICES...........................................................45 SECTION 8.04 CERTAIN DEFINITIONS...............................................46 SECTION 8.05 AMENDMENT.........................................................47 SECTION 8.06 WAIVER............................................................47 SECTION 8.07 HEADINGS..........................................................47
-ii- SECTION 8.08 SEVERABILITY......................................................47 SECTION 8.09 ENTIRE AGREEMENT..................................................47 SECTION 8.10 ASSIGNMENT........................................................47 SECTION 8.11 PARTIES IN INTEREST...............................................48 SECTION 8.12 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE.............48 SECTION 8.13 ENFORCEMENT; GOVERNING LAW; JURISDICTION..........................48 SECTION 8.14 COUNTERPARTS......................................................49 SECTION 8.15 WAIVER OF JURY TRIAL..............................................49 SECTION 8.16 OBLIGATIONS OF BYOWC..............................................49 SECTION 8.17 INTERPRETATION....................................................49 ANNEX I............................................................................51 ANNEX II...........................................................................54 Summary of Terms of Warrant..............................................................56
-iii- AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of December 20, 1999 (this "AGREEMENT"), among BYOWC Partners LLC, a Delaware limited liability company ("BYOWC"), Bridgeport Holdings Inc. ("PARENT"), a Delaware corporation and a subsidiary of BYOWC, Bridgeport Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent ("PURCHASER"), and Micro Warehouse, Inc., a Delaware corporation (the "COMPANY"). W I T N E S S E T H: WHEREAS, the respective Boards of Directors of BYOWC, the Company, Purchaser and Parent have determined that it is in the best interests of their respective stockholders and members for Purchaser to acquire the Company; and WHEREAS, in furtherance thereof Parent has formed Purchaser for the purpose of making a tender offer (the "PURCHASER OFFER") to acquire shares of common stock of the Company (the "COMPANY COMMON STOCK"), par value $.01 (the "SHARES"), for $19.00 per share in cash, or such higher price as may be paid in the Offer (the "PER SHARE AMOUNT"), subject to any applicable withholding, net to the seller in cash without interest; and WHEREAS, the Company has agreed to simultaneously make an offer to acquire Shares (the "COMPANY OFFER", and, together with the Purchaser Offer, the "OFFER") for the Per Share Amount, subject to any applicable withholding, net to the seller in cash without interest; and WHEREAS, the Purchaser Offer and the Company Offer shall together be an offer to acquire all of issued and outstanding Shares, subject to the priority set forth in this Agreement; and WHEREAS, also in furtherance thereof, the Boards of Directors of the Company, Purchaser and Parent have each approved this Agreement and the merger of Purchaser with the Company (the "MERGER") following the Offer, upon the terms and subject to the conditions set forth herein and in accordance with the applicable provisions of the General Corporation Law of the State of Delaware (the "DGCL"); and WHEREAS, the Board of Directors of the Company has approved this Agreement and the Merger and resolved to recommend acceptance of the Offer and the adoption of this Agreement to the Company's stockholders and has determined that the Offer and the Merger are fair to and in the best interest of the Company's stockholders. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, BYOWC, Parent, Purchaser and the Company hereby agree as follows: ARTICLE I TENDER OFFER AND MERGER SECTION 1.01 THE OFFER. (a) Provided that this Agreement shall not have been terminated in accordance with SECTION 7.1 hereof and that none of the events set forth in ANNEX I or ANNEX II hereto shall have occurred and be existing, Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the "SECURITIES EXCHANGE ACT")) the Purchaser Offer, and the Company shall commence the Company Offer, as promptly as practicable, but in no event later than five business days following the first public announcement of the execution of this Agreement, and each shall use reasonable best efforts to consummate the Offer. (b) The Purchaser Offer and the Company Offer shall be conducted for practical purposes as a single offer, with Shares being accepted for payment and purchased in the Offer according to the following order of priority: first, Purchaser shall accept for payment and purchase Shares up to a maximum number of Shares equal to the Purchaser Share Number; and second, the Company shall accept for payment and purchase Shares up to a maximum number of Shares equal to the Company Share Number. "COMPANY SHARE NUMBER" means the sum of (x) $200,000,000 and (y) the aggregate exercise price of all options to acquire stock of the Company exercised following the date hereof and prior to consummation of the Offer (the "OPTION EXERCISE AMOUNT") divided by the Per Share Amount. "PURCHASER SHARE NUMBER" means the total number of issued and outstanding Shares less the Shares otherwise owned by BYOWC, Parent or Purchaser and less the Company Share Number. The Company agrees that no Shares held by the Company or any subsidiary of the Company will be tendered pursuant to the Offer. (c) The Per Share Amount payable in the Offer shall be net to each seller in cash, subject to reduction only for any applicable withholding taxes and, if (but only if) the Per Share Amount is to be paid other than to a registered holder of Shares, any applicable transfer taxes payable by such seller. SECTION 1.02 TERMS AND CONDITIONS OF THE OFFER. (a) The obligation of Purchaser to accept for payment any Shares tendered shall be subject to the satisfaction of only those conditions set forth in ANNEX I hereto and the obligation of the Company to accept for payment any Shares tendered shall be subject to the satisfaction of only those conditions set forth in ANNEX II hereto. (b) Without the prior written consent of the Company, Purchaser will not, and Parent will cause Purchaser not to, (i) decrease or change the form of the Per Share Amount, (ii) decrease the number of Shares sought in the Purchaser Offer, (iii) amend or waive the Minimum Condition (as defined in Annex I hereto), or impose conditions other than the conditions set forth in Annex I on the Offer, or (iv) amend any term of the Purchaser Offer in any manner materially adverse to stockholders of the Company; PROVIDED, HOWEVER, that subject to applicable legal requirements, Parent may cause Purchaser to waive the conditions set forth in Annex I, other than the Minimum Condition and the conditions set forth in paragraph (c) and (d) of Annex I, in Parent's sole discretion. Assuming the prior satisfaction or waiver of the conditions set forth in Annex I, Parent will cause Purchaser to accept for payment, and pay for, in accordance with the -2- terms of the Purchaser Offer, Shares validly tendered and not withdrawn pursuant to the Purchaser Offer as soon as practicable after the Initial Expiration Date (as defined below) or any extension thereof and in any subsequent offering period of the Purchaser Offer, up to a number of Shares equal to the Purchaser Share Number, in the order of priority set forth in Section 1.01(b). (c) Without the prior written consent of Parent, the Company will not (i) decrease or change the form of the Per Share Amount, (ii) decrease the number of Shares sought in the Company Offer, (iii) impose conditions other than the conditions set forth in Annex II on the Company Offer, or (iv) amend any term of the Company Offer in any manner materially adverse to Parent or Purchaser; PROVIDED, HOWEVER, that subject to applicable legal requirements, the Company may waive any condition set forth in Annex II other than the conditions set forth in paragraphs (c) and (d) of Annex II in the Company's sole discretion. Assuming the prior satisfaction or waiver of the conditions in Annex II, the Company will accept for payment, and pay for, in accordance with the terms of the Company Offer, Shares validly tendered and not withdrawn pursuant to the Offer as soon as practicable after the Initial Expiration Date or any extension thereof and in any subsequent offering period of the Offer, up to a number of Shares equal to the Company Share Number, in the order of priority set forth in Section 1.01(b). All Shares purchased by the Company pursuant to the Company Offer shall, at the election of the Company, be immediately cancelled or returned to the treasury of the Company. (d) The Offer shall initially expire on the later to occur of (x) twenty (20) business days after the date of its commencement and (y) January 28, 2000 (the "INITIAL EXPIRATION DATE"), unless this Agreement is terminated in accordance with SECTION 7.01 hereof, in which case the Offer (whether or not previously extended in accordance with the terms hereof) shall expire on such date of termination. Purchaser and the Company shall not terminate or withdraw the Offer or extend the expiration date of the Offer unless at the expiration date of the Offer the conditions to the Offer described in ANNEX I and ANNEX II hereto shall not have been satisfied or earlier waived. Notwithstanding the foregoing, but subject in all events to Section 7.01, Purchaser may, without the consent of the Company, extend the Offer at any time, and from time to time, (i) if at the then scheduled expiration date of the Offer any of the conditions to the obligations of Purchaser and the Company to accept Shares for payment (other than the Minimum Condition, as to which this clause does not apply) shall not have been satisfied or waived, until such time as such conditions are satisfied or waived; (ii) if all conditions to the obligations of Purchaser and the Company to accept Shares for payment (other than the Minimum Condition) shall have been satisfied or waived, the Minimum Condition has not been satisfied but the number of Shares tendered, together with the Shares otherwise owned by BYOWC, Parent or Purchaser, is greater than 40% of the Shares outstanding, for an aggregate period of not more than fifteen (15) business days (for all such extensions); (iii) for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or its staff applicable to the Offer; or (iv) if all conditions to the obligations of Purchaser and the Company to accept for payment and pay for Shares are satisfied or waived but the number of Shares tendered, together with the Shares otherwise owned by BYOWC, Parent or Purchaser, is less than 90% of the then outstanding number of Shares (and after giving effect to the reduction of outstanding Shares resulting from the purchase of Shares by the Company pursuant to the Company Offer), for an aggregate period of not more than twenty (20) business days (for all such extensions) beyond the latest expiration date that would -3- be permitted under clauses (i), (ii) or (iii) of this sentence, and in the case of any extension pursuant to this clause (iv) Purchaser and/or the Company, as the case may be, shall accept for payment all Shares validly tendered pursuant to the Offer as of the most recently expired expiration date in accordance with the rules and regulations of the SEC, including Rule 14d-11 promulgated under the Securities Exchange Act. (e) The Offer shall be made by means of an offer to purchase (the "OFFER TO PURCHASE") having only the conditions set forth in ANNEX I and ANNEX II hereto. BYOWC, Parent, the Company and Purchaser shall cooperate in good faith in the timely preparation of the Offer to Purchase and the other Offer Documents (as defined below). (f) As soon as practicable on the date the Offer is commenced, (x) Purchaser shall file with the SEC a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, the "SCHEDULE 14D-1") and (y) the Company Shall file an Issuer Tender Offer Statement on Schedule 13E-4 (the "SCHEDULE 13E-4") and a Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-9") with respect to the Offer, each of which will comply in all material respects with the provisions of, and satisfy in all material respects the requirements of, such Schedule 14D-1, Schedule 13E-4 and Schedule 14D-9, respectively, and all applicable federal securities laws and, in the case of the Schedule 14D-1 and Schedule 13E-4, will contain as an exhibit or incorporate by reference the Offer to Purchase and forms of the related letter of transmittal and summary advertisement (which documents, together with any supplements or amendments thereto, and any other SEC schedule or form which is filed in connection with the Offer and related transactions, are referred to collectively herein as the "OFFER DOCUMENTS"). Each of Parent, Purchaser and the Company agrees promptly to correct any information provided by it for use in the Schedule 14D-1, the Schedule 13E-4, the Schedule 14D-9 or the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect and to supplement the information provided by it specifically for use in the Schedule 14D-1, the Schedule 13E-4, the Schedule 14D-9 or the other Offer Documents to include any information that shall become necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Parent, Purchaser and the Company, as applicable, shall take all steps necessary to cause the (x) Schedule 14D-1, the Schedule 13E-4 and the Schedule 14D-9, as so corrected or supplemented, to be filed with the SEC and (y) the Offer Documents and the Schedule 14D-9, as so corrected or supplemented, to be disseminated to holders of Shares, in each case as and to the extent required by applicable federal securities laws. (g) The Company and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-1 before it is filed with the SEC, and Purchaser shall consider any such comments in good faith. Parent, Purchaser and their counsel shall be given a reasonable opportunity to review and comment on the Schedule 13E-4 and Schedule 14D-9 before it is filed with the SEC, and the Company shall consider any such comments in good faith. (h) The Per Share Amount shall be appropriately adjusted to reflect fully the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Shares), distribution, exercise or exchange of the Rights (as defined in Section 4.02(d)) or such Rights becoming exercisable, reorganization, -4- recapitalization, split up, combination or exchange of shares or other like event with respect to the Shares occurring after the date hereof and prior to the consummation of the Offer or the Merger, as the case may be. SECTION 1.03 COMPANY ACTION. (a) The Company represents and warrants that the Board of Directors of the Company, at a meeting duly called and held on December 20, 1999, at which all the Directors were present in person or by telephone, duly approved and adopted this Agreement and the transactions contemplated hereby, including the Offer and the Merger, resolved to recommend that stockholders of the Company accept the Offer, tender their Shares pursuant to the Offer and adopt this Agreement, and determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are fair to and in the best interests of the stockholders of the Company. The Company hereby consents to the inclusion in the Offer Documents of such recommendation of the Board of Directors of the Company. The Company represents that its Board of Directors has received the written opinion (the "FAIRNESS OPINION") of Wasserstein Perella & Co., Inc. (the "FINANCIAL ADVISOR") that the proposed consideration to be received by the holders of Shares pursuant to the Offer and the Merger is fair to such holders from a financial point of view. The Company has been authorized by the Financial Advisor to permit, subject to the prior review and consent by the Financial Advisor (such consent not to be unreasonably withheld), the inclusion of the Fairness Opinion (or a reference thereto) in the Offer Documents, the Schedule 14D-9 and the Proxy Statement (as hereinafter defined). (b) In connection with the Offer, the Company shall promptly upon execution of this Agreement furnish Purchaser with mailing labels containing the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories, each as of a recent date, and shall promptly furnish Purchaser with such additional information reasonably available to the Company, including updated lists of stockholders, mailing labels and security position listings, and such other information and assistance as Purchaser or its agents may reasonably request for the purpose of communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of applicable law and except as necessary to disseminate the Offer Documents and otherwise for the purpose of effecting the transactions contemplated hereby, BYOWC, Parent and Purchaser shall hold in confidence the materials furnished pursuant to this SECTION 1.03(b), use such information only in connection with the Offer, the Merger and the other transactions contemplated by this Agreement and, if this Agreement is terminated, as promptly as practicable return to the Company such materials and all copies thereof in the possession of BYOWC, Parent and Purchaser. SECTION 1.04 DIRECTORS. Promptly upon the purchase by Purchaser of Shares pursuant to the Offer (and provided that the Minimum Condition has been satisfied), Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as will give Parent, subject to compliance with Section 14(f) of the Securities Exchange Act, representation on the Board of Directors of the Company equal to at least that number of directors which equals the product of the total number of directors on the Board of Directors of the Company (giving effect to the directors appointed or elected pursuant to this sentence and including current directors serving as officers of the Company) multiplied by the percentage that the aggregate number of Shares beneficially owned by Purchaser or any other affiliate of Parent (including for purposes of this SECTION 1.04 such Shares -5- as are accepted for payment pursuant to the Purchaser Offer, but excluding Shares held by the Company) bears to the number of Shares outstanding (after reduction for Shares accepted for payment pursuant to the Company Offer). At such time, if requested by Parent, the Company will also cause each committee of the Board of Directors of the Company to include persons designated by Parent constituting the same percentage of each such committee as Parent's designees are of the Board of Directors of the Company. The Company shall, upon request by Parent, promptly increase the size of the Board of Directors of the Company or exercise reasonable best efforts to secure the resignations of such number of directors as is necessary to enable Parent's designees to be elected to the Board of Directors of the Company in accordance with the terms of this SECTION 1.04 and to cause Parent's designees so to be elected; PROVIDED, HOWEVER, that, in the event that Parent's designees are appointed or elected to the Board of Directors of the Company, until the Effective Time (as hereinafter defined) the Board of Directors of the Company shall have at least two directors who are directors on the date hereof, each of whom is neither an officer of the Company nor a designee, stockholder, affiliate or associate (within the meaning of the federal securities laws) of BYOWC (such directors, the "CONTINUING DIRECTORS") or such persons having such qualifications who are designated as "Independent Directors" by a majority of Continuing Directors in office at the time of such designation (such persons, together with the Continuing Directors, the "INDEPENDENT DIRECTORS"). Subject to applicable law, the Company shall promptly take all action necessary pursuant to Section 14(f) of the Securities Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this SECTION 1.04 and shall include in the Schedule 14D-9 mailed to stockholders promptly after the commencement of the Offer (or in an amendment thereof or an information statement pursuant to Rule 14f-1 if Parent has not theretofore designated directors) such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this SECTION 1.04. Parent will supply the Company, and be solely responsible for, any information with respect to itself and its nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f-1. Notwithstanding anything in this Agreement to the contrary, subsequent to the designation of the directors by Parent referred to in the first sentence of this Section 1.04 and prior to the Effective Time, the unanimous vote of the Independent Directors shall be required to (i) amend or terminate this Agreement on behalf of the Company, (ii) exercise or waive any of the Company's rights or remedies hereunder, (iii) extend the time for performance of Parent's, Purchaser's or BYOWC's obligations or other acts required hereunder, (iv) take any other action by the Company in connection with this Agreement required to be taken by the Board of Directors of the Company or (v) amend the Company's Certificate of Incorporation or the Company's Bylaws, each as in effect on the date of this Agreement. SECTION 1.05 THE MERGER. Upon the terms and subject to the conditions of this Agreement, the Merger shall be consummated in accordance with the DGCL. At the Effective Time (as defined in SECTION 1.06 hereof), upon the terms and subject to the conditions of this Agreement, the Company shall be merged with and into Purchaser in accordance with the DGCL and the separate existence of the Company shall thereupon cease, and Purchaser, as the surviving corporation in the Merger (the "SURVIVING CORPORATION"), shall continue its corporate existence under the laws of the State of Delaware as a direct subsidiary of Parent. The parties shall prepare and execute a certificate of merger (the "CERTIFICATE OF MERGER") that complies in all respects with the requirements of the DGCL and with the provisions of this Agreement. -6- SECTION 1.06 EFFECTIVE TIME. The Merger shall become effective at the time of the filing of the Certificate of Merger with the Secretary of State of Delaware in accordance with the applicable provisions of the DGCL or at such later time as may be specified in the Certificate of Merger. As soon as practicable (and in any event within three business days) after all the conditions set forth in ARTICLE VI of this Agreement have been satisfied or waived by the party or parties entitled to the benefit of the same, the parties hereto shall cause the Merger to become effective. Parent and the Company shall mutually determine the exact time of such filing and the place where the closing of the Merger (the "CLOSING") shall occur. The time when the Merger shall become effective is herein referred to as the "EFFECTIVE TIME," and the date on which the Effective Time occurs is herein referred to as the "CLOSING DATE." SECTION 1.07 CONVERSION OF SHARES. At the Effective Time, by virtue of the Merger and without any action on the part of Purchaser, the Company or the holder of any of the securities specified below: (a) Each Share issued and outstanding immediately prior to the Effective Time (other than Shares to be cancelled pursuant to SECTION 1.07(b) and other than any Dissenting Shares (as hereinafter defined)) shall be converted into the right to receive the Per Share Amount in cash payable to the holder thereof, without interest, upon surrender of the certificate representing such Share in accordance with SECTION 1.09 hereof. From and after the Effective Time, the holders of certificates evidencing ownership of Shares outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such Shares except as otherwise provided for herein or by applicable law. (b) Each Share owned by the Company or any of its subsidiaries, BYOWC, Parent, Purchaser or any direct or indirect wholly owned subsidiary of BYOWC immediately prior to the Effective Time shall be canceled, and no payment or other consideration shall be made with respect thereto. (c) The shares of Purchaser common stock issued and outstanding immediately prior to the Merger shall be converted into and constitute a number of validly issued, fully paid and nonassessable shares of common stock of the Surviving Corporation equal to the number of Shares owned by BYOWC, Parent, Purchaser or any direct or indirect wholly owned subsidiary of BYOWC immediately prior to the Effective Time. In addition, the Surviving Corporation shall at the Effective Time issue to Parent a Warrant to purchase common stock on the terms set forth in Exhibit 1. SECTION 1.08 DISSENTING SHARES. (a) Notwithstanding any provision of this Agreement to the contrary, any Shares issued and outstanding immediately prior to the Effective Time and held by a holder who has demanded and perfected his demand for appraisal of his Shares in accordance with the DGCL and as of the Effective Time has neither effectively withdrawn nor lost his right to such appraisal ("DISSENTING SHARES") shall not be converted into or represent a right to receive cash pursuant to SECTION 1.07 hereof, but the holder thereof shall be entitled only to such rights as are granted by the DGCL. (b) Notwithstanding the provisions of SECTION 1.08(a) hereof, if any holder of Shares who demands appraisal of his Shares under the DGCL shall effectively withdraw or lose -7- (through failure to perfect or otherwise) his right to appraisal, then as of the Effective Time or the occurrence of such event, whichever occurs later, such holder's Shares shall automatically be converted into and represent only the right to receive cash as provided in SECTION 1.07(a) hereof, without interest thereon, upon surrender of the certificate or certificates representing such Shares. (c) The Company shall give Parent (i) prompt notice of any written demands for appraisal or payment of the fair value of any Shares, withdrawals of such demands and any other instruments served pursuant to the DGCL received by the Company after the date hereof and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company shall not voluntarily make any payment with respect to any demands for appraisal and shall not, except with the prior written consent of Parent, settle or offer to settle any such demands. SECTION 1.09 SURRENDER OF SHARES. (a) Prior to the Effective Time, Parent shall appoint EquiServe or such other commercial bank or trust company designated by Parent and reasonably acceptable to the Company to act as exchange agent hereunder (the "EXCHANGE AGENT") for the payment of the Per Share Amount upon surrender of certificates representing the Shares. All the fees and expenses of the Exchange Agent shall be borne by the Surviving Corporation; PROVIDED, HOWEVER, that, if the Merger shall not be consummated, such fees and expenses shall be borne by Parent. (b) On or before the Effective Time, Parent shall cause the Surviving Corporation to provide the Exchange Agent with cash in amounts necessary to pay for all the Shares pursuant to SECTION 1.07(a) hereof (including, if necessary, by providing or causing to be provided cash for this purpose to the Surviving Corporation). (c) On the Closing Date, the Surviving Corporation shall instruct the Exchange Agent to mail promptly to each holder of record of a certificate representing any Shares canceled upon the Merger pursuant to SECTIONS 1.07(a) hereof (i) a form of 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 Exchange Agent and shall be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the certificates. Each holder of a certificate or certificates representing any Shares canceled upon the Merger pursuant to SECTIONS 1.07(a) hereof may thereafter surrender such certificate or certificates to the Exchange Agent, as agent for such holder, to effect the surrender of such certificate or certificates on such holder's behalf for a period ending one year after the Effective Time. Upon the surrender of certificates representing the Shares, the Surviving Corporation shall cause the Exchange Agent to pay the holder of such certificates in exchange therefor cash in an amount equal to the Per Share Amount multiplied by the number of Shares represented by such certificate. Until so surrendered, each such certificate (other than certificates representing Dissenting Shares) shall represent solely the right to receive the aggregate Per Share Amount relating thereto. (d) If payment of cash in respect of canceled Shares is to be made to a person other than the person in whose name a surrendered certificate is registered, it shall be a condition to such payment that the certificate so surrendered shall be properly endorsed or shall otherwise be in proper form for transfer by delivery and that the person requesting such payment shall have paid any transfer and other taxes required by reason of such payment in a name other than that of -8- the registered holder of the certificate or instrument surrendered or shall have established to the satisfaction of Parent or the Exchange Agent that such tax either has been paid or is not payable. (e) At the Effective Time, the stock transfer books of the Company shall be closed, and no transfer of Shares shall be made thereafter, other than transfers of Shares that have occurred prior to the Effective Time. In the event that, after the Effective Time, certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for cash as provided in SECTIONS 1.07(a). (f) The Per Share Amount paid in the Merger shall be net to the holder of Shares in cash, and without interest thereon, subject to reduction only for any applicable withholding taxes and, but only if the Per Share Amount is to be paid other than to the registered holder, any applicable stock transfer taxes payable by such holder. (g) Promptly following the date which is one year after the Effective Time, the Exchange Agent shall deliver to the Surviving Corporation all cash, certificates and other documents in its possession relating to the transactions contemplated hereby, and the Exchange Agent's duties shall terminate. Thereafter, each holder of a certificate representing Shares (other than certificates representing Dissenting Shares and certificates representing Shares held directly or indirectly by the Surviving Corporation, Parent or BYOWC) may surrender such certificate to the Surviving Corporation and (subject to any applicable abandoned property, escheat or similar law) receive in consideration therefor the aggregate Per Share Amount relating thereto, without any interest thereon. (h) None of the Company, Parent, Purchaser, BYOWC, the Surviving Corporation or the Exchange Agent shall be liable to any holder of Shares for any cash delivered to a public official pursuant to any abandoned property, escheat or similar law, rule, regulation, statute, order, judgment or decree. SECTION 1.10 OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN. (a) The Company shall provide a period of 30 days ending on the Effective Time in which each option ("COMPANY PLAN OPTIONS") outstanding under the Company option plans listed on Section 2.11 of the Company Disclosure Schedule (as hereinafter defined) ("COMPANY STOCK OPTION PLANS"), whether or not then vested or exercisable, may be exercised, provided that such exercise with respect to an otherwise unvested option shall be contingent upon the subsequent occurrence of the Effective Time. (b) Each Company Plan Option and each other option to purchase Shares under any stock option plan or agreement of the Company outstanding immediately prior to the Effective Time (a "COMPANY OPTION"), whether or not then vested or exercisable, shall be cancelled and the holder thereof shall receive from the Surviving Corporation as soon as practicable following consummation of the Merger an amount in cash equal to the positive difference, if any, between the Per Share Amount and the exercise price of the Company Option multiplied by the number of Shares for which the Company Option was exercisable immediately prior to the Effective Time, subject to reduction only for any applicable withholding taxes. In no event will any Company Options be exercisable after the Effective Time, except to receive cash as provided in the first sentence of this Section 1.10(b). -9- SECTION 1.11 CERTIFICATE OF INCORPORATION AND BYLAWS. Subject to SECTION 5.05 hereof, unless otherwise determined by Parent prior to the Effective Time, at and after the Effective Time (a) the Certificate of Incorporation of Purchaser, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided by the DGCL; and (b) the Bylaws of Purchaser shall be the Bylaws of the Surviving Corporation in effect at the Effective Time (subject to any subsequent amendments). SECTION 1.12 DIRECTORS AND OFFICERS. At and after the Effective Time, the directors of Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until their successors are duly elected or appointed and qualified. SECTION 1.13 OTHER EFFECTS OF MERGER. The Merger shall have all further effects as specified in the applicable provisions of the DGCL. SECTION 1.14 PROXY STATEMENT. (a) Following the consummation of the Offer and if required by the Securities Exchange Act because an action by the Company's stockholders is necessary in order to consummate the Merger, the Company shall prepare and file with the SEC and, when cleared by the SEC, shall mail to stockholders, a proxy statement in connection with a meeting of the Company's stockholders to vote upon the adoption of this Agreement and the Merger and the transactions contemplated hereby, or an information statement, as appropriate, satisfying all requirements of the Securities Exchange Act (such proxy or information statement in the form mailed by the Company to its stockholders, together with any and all amendments or supplements thereto, is herein referred to as the "PROXY STATEMENT"). (b) Parent will furnish the Company with such information concerning BYOWC, Parent and its subsidiaries as is necessary in order to cause the Proxy Statement, insofar as it relates to Parent and its subsidiaries, to comply with applicable Law. Parent agrees promptly to advise the Company if, at any time prior to the meeting of stockholders of the Company referenced herein, any Parent Information (as defined below) in the Proxy Statement is or becomes incorrect or incomplete in any material respect and to provide the Company with the information needed to correct such inaccuracy or omission. Parent will furnish the Company with such supplemental information as may be necessary in order to cause the Proxy Statement, insofar as it relates to BYOWC and its subsidiaries, to comply with applicable law after the mailing thereof to the stockholders of the Company. (c) The Company and Parent agree to cooperate in making any preliminary filings of the Proxy Statement with the SEC, as promptly as practicable, pursuant to Rule 14a-6 or Rule 14c-5, as applicable, under the Securities Exchange Act. (d) The Company shall provide Parent for its review a copy of the Proxy Statement prior to each filing thereof, with reasonable time and opportunity for such review. Parent authorizes the Company to utilize in the Proxy Statement the information concerning Parent and its subsidiaries provided to the Company in connection with, or contained in, the Proxy Statement. -10- SECTION 1.15 ADDITIONAL ACTIONS. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of Purchaser or the Company or otherwise to carry out this Agreement, the officers and directors of the Company and Purchaser shall be authorized to execute and deliver, in the name and on behalf of Purchaser or the Company, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of Purchaser or the Company, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement. SECTION 1.16 MERGER WITHOUT MEETING OF STOCKHOLDERS. Notwithstanding the foregoing provisions of this ARTICLE I, in the event that Purchaser, or any other direct or indirect subsidiary of Parent, shall own or acquire at least 90 percent of the outstanding Shares, the parties hereto agree to 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 meeting of stockholders of the Company, in accordance with Section 253 of the DGCL. SECTION 1.17 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event any certificates representing Shares shall have been lost, stolen or destroyed, the Exchange Agent shall make such payment in exchange for such lost, stolen or destroyed certificates upon the making of an affidavit of that fact by the holder thereof; PROVIDED, HOWEVER, that the Surviving Corporation may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificates to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Parent, the Surviving Corporation or the Exchange Agent with respect to the certificates alleged to have been lost, stolen or destroyed. SECTION 1.18 MATERIAL ADVERSE EFFECT. (a) When used in connection with the Company or any of its subsidiaries, or Parent, BYOWC or any of their respective subsidiaries, as the case may be, the term "MATERIAL ADVERSE EFFECT" means any change, effect or circumstance that is materially adverse to the business, assets (including intangible assets), financial condition or results of operations of the Company and its subsidiaries, or Parent, BYOWC or any of their respective subsidiaries, as the case may be, in each case taken as a whole; PROVIDED, HOWEVER, that effects of changes that are applicable to or arise on account of (A) any changes in economic, regulatory, or political conditions generally, (B) the United States securities markets, (C) this Agreement or the transactions contemplated by this Agreement, (D) the computer reseller industry generally, or (E) the effect of the public announcement of the transactions contemplated hereby, including, without limitation, any effect on current or prospective customers or employees of the Company, shall be excluded from the definition of "Material Adverse Effect" and from any determination as to whether a Material Adverse Effect has occurred or may occur. (b) The failure of a representation or warranty to be true and correct, either individually or together with the failure of other representations or warranties to be true and correct, or the failure to perform an obligation, agreement or covenant shall be deemed to have a Material Adverse Effect if (x) the business, assets (including intangible assets), financial -11- condition, or results of operations of the Company and its subsidiaries, or Parent, BYOWC or any of their respective subsidiaries, as the case may be, in each case taken as a whole, are or are reasonably likely to be materially worse than if such representation or warranty had been true and correct or such obligation, agreement or covenant had been performed, excluding, however, the effects of the changes specified in the proviso set forth in Section 1.18(a), (y) in the case of the Company, such representation or warranty materially misstates the capitalization of the Company and/or its subsidiaries or (z) the failure of such representation or warranty to be true and correct or the failure to perform such obligation, agreement of covenant materially and adversely affects the ability of the Company or Parent, as the case may be, timely to consummate the transactions contemplated by this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent that, except as disclosed in forms, reports and other documents filed by the Company with the SEC since December 31, 1998 through the date of this Agreement (the "COMPANY SEC DOCUMENTS") or set forth in the corresponding section of the disclosure schedule delivered by the Company to Parent prior to the execution of this Agreement (the "COMPANY DISCLOSURE SCHEDULE"): SECTION 2.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the Company and its subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power and authority necessary to own, lease and operate the properties it purports to own, operate or lease and to carry on its business as it is now being conducted, except where the failure to be so organized, existing and in good standing or to have such power or authority is not reasonably likely to have a Material Adverse Effect. Each of the Company and its subsidiaries is duly qualified or licensed as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it or the nature of its activities makes such qualification or licensing necessary, except where the failure to be so duly qualified or licensed and in good standing is not reasonably likely to have a Material Adverse Effect. The Company's only "significant" subsidiary, as defined in Regulation S-X, is Micro Warehouse Ltd., a U.K. company (the "COMPANY SIGNIFICANT SUBSIDIARIES"). Section 2.01 of the Company Disclosure Schedule describes the jurisdiction of incorporation of each subsidiary and the percentage of each such subsidiary's outstanding capital stock owned by the Company or another subsidiary of the Company. Except for the capital stock and other ownership interests in its Subsidiaries, the Company does not directly or indirectly own any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any equity or similar interest in, any corporation, partnership, joint venture or other business association or entity (other than its wholly-owned subsidiaries), with respect to which interest the Company has invested (and currently owns) or is required to invest $100,000 or more, excluding securities in any publicly-traded company held for investment by the Company and comprising less than five percent of the outstanding stock of such company. SECTION 2.02 CERTIFICATE OF INCORPORATION AND BYLAWS. The Company has heretofore made available to Parent a complete and correct copy of its Certificate of -12- Incorporation and Bylaws as amended to date (the "COMPANY CHARTER DOCUMENTS"), and will make available to Parent at Parent's request, as promptly as practicable, the Certificate of Incorporation and Bylaws (or equivalent organizational documents) of each Company Significant Subsidiary (the "SUBSIDIARY DOCUMENTS"). Such Company Charter Documents and Subsidiary Documents are in full force and effect. Neither the Company nor any of the Company Significant Subsidiaries is in violation of any of the provisions of its Certificate of Incorporation or Bylaws or equivalent organizational documents, except for violations of the Subsidiary Documents which do not and are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. 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, except for violations of such documents which, individually or in the aggregate, do not and are not reasonably likely to have a Material Adverse Effect. SECTION 2.03 CAPITALIZATION. The authorized capital stock of the Company consists of 100,000,000 shares of Company Common Stock, 100,000 shares of Preferred Stock, $.01 par value ("COMPANY PREFERRED STOCK"), and 45,000 shares of Series A Junior Participating Preferred Stock, $.01 par value ("COMPANY SERIES A PREFERRED STOCK"). As of November 30, 1999, (i) 36,059,088 shares of Company Common Stock were issued and outstanding, all of which are validly issued, fully paid and nonassessable (excluding shares which are issued but not outstanding all of which are not entitled to vote), (ii) there were no shares of Company Common Stock which were held by subsidiaries of the Company, (iii) 6,000,000 shares of Company Common Stock were reserved for grants pursuant to the Company Stock Option Plans, and 4,028,320 shares of Company Common Stock were subject to existing grants under the Company Stock Option Plans, and (iv) no shares of Company Preferred Stock or Company Series A Preferred Stock were issued and outstanding. No change in such capitalization has occurred since November 30, 1999, except for changes resulting from the exercise of Stock Options. Except for existing option grants referred to in clause (iii) above, options whose issuance is permitted after the date hereof pursuant to Section 4.01, Rights under the Rights Agreement and the Warrant contemplated by Section 1.07, there are no options, warrants or other rights, agreements, arrangements or commitments of any character binding on the Company or any of its subsidiaries relating to the issued or unissued capital stock of the Company or any of its subsidiaries or obligating the Company or any of its subsidiaries to issue or sell any shares of capital stock of, or other equity interests in, the Company or any of its subsidiaries. All shares of Company Common Stock subject to issuance as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to which they are issuable, shall be duly authorized, validly issued, fully-paid and nonassessable. There are no obligations, contingent or otherwise, of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of Company Common Stock or the capital stock of any subsidiary. There are no obligations, contingent or otherwise, of the Company or any of its subsidiaries to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any such subsidiary or any other entity other than guarantees of bank obligations of subsidiaries entered into in the ordinary course of business. All of the outstanding shares of capital stock (other than directors' qualifying shares) of each of the Company's Significant Subsidiaries are duly authorized, validly issued, fully-paid and nonassessable, and all such shares (other than directors' qualifying shares and a de minimis number of shares owned by employees of such subsidiaries) are owned by the Company or another subsidiary free and clear of all security interests, liens, claims, pledges, agreements, -13- limitations in the Company's voting rights, charges or other encumbrances of any nature whatsoever. SECTION 2.04 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all necessary corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action, and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (other than the adoption of this Agreement by the Company's stockholders in accordance with the DGCL and the Company's Charter Documents and the filing of the appropriate documents with respect to the Merger in accordance with the DGCL). As of the date of this Agreement, the Board of Directors of the Company has determined that it is advisable and in the best interest of the Company's stockholders for the Company to enter into this Agreement and to consummate the Offer and the Merger upon the terms and subject to the conditions of this Agreement and has adopted resolutions so that Section 203 of the DGCL is not applicable to the Offer, the Merger or the other transactions contemplated by this Agreement. This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by BYOWC, Parent and Purchaser, constitutes a legal, valid and binding obligation of the Company. SECTION 2.05 CONTRACTS; NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Section 2.05(a) of the Company Disclosure Schedule includes, as of the date of this Agreement, a list of (i) other than intercompany agreements, all loan agreements, indentures, mortgages, pledges, conditional sale or title retention agreements, security agreements, equipment obligations, guaranties, standby letters of credit, equipment leases or lease purchase agreements, each in an amount equal to or exceeding $275,000 to which the Company or any of its subsidiaries is a party or by which any of them is bound; (ii) all contracts, agreements, commitments or other understandings or arrangements to which the Company or any of its subsidiaries is a party or by which any of them or any of their respective properties or assets are bound or affected, but excluding contracts, agreements, commitments or other understandings or arrangements entered into in the ordinary course of business or involving, in the case of any such contract, agreement, commitment, or other understanding or arrangement, individual payments or receipts by the Company or any of its subsidiaries of less than $100,000 over the term of such contract, commitment, agreement, or other understanding or arrangement; and (iii) all agreements which are required to be filed as "material contracts" with the SEC pursuant to the requirements of the Securities Exchange Act but have not been so filed with the SEC. (b) The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, (i) conflict with or violate the Certificate of Incorporation or Bylaws of the Company, (ii) conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which its or any of their respective properties is bound or affected, or (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default), or impair the Company's or any of its subsidiaries' rights or alter the rights or obligations of any third party under, or give to others any rights of termination, amendment, -14- acceleration or cancellation of, or result in the creation of a lien or encumbrance on (including a right to purchase) any of the properties or assets of the Company or any of its subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties is bound or affected, except, in the case of clauses (ii) or (iii), for any such conflicts, violations, breaches, defaults or other occurrences that are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. (c) The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to (each, a "CONSENT"), any governmental or regulatory authority, domestic or foreign (each, a "GOVERNMENTAL AUTHORITY"), except (i) for applicable requirements, if any, of the Securities Exchange Act, state securities laws ("BLUE SKY LAWS"), the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR ACT"), filings and consents under any applicable foreign laws intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade ("FOREIGN MONOPOLY LAWS"), filings and consents as may be required under any environmental, health or safety law or regulation pertaining to any notification, disclosure or required approval triggered by the Merger or the transactions contemplated by this Agreement ("ENVIRONMENTAL, HEALTH AND SAFETY LAWS"), and the filing and recordation of appropriate merger or other documents as required by the DGCL, (ii) where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or materially delay consummation of the Merger, or otherwise prevent or materially delay the Company from performing its material obligations under this Agreement, or is not otherwise reasonably likely, individually or in the aggregate, to have a Material Adverse Effect, or (iii) as to which any necessary consents, approvals, authorizations, permits, filings or notifications have heretofore been obtained or filed, as the case may be, by the Company. SECTION 2.06 COMPLIANCE; PERMITS. (a) Neither the Company nor any of its subsidiaries is in conflict with, or in default or violation of, (i) any law, rule, regulation, order, judgment or decree applicable to the Company or any of its subsidiaries or by which its or any of their respective properties is bound or affected or (ii) any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or its or any of their respective properties is bound or affected, except in the case of clauses (i) and (ii) for any such conflicts, defaults or violations which are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. (b) The Company and its subsidiaries hold all permits, licenses, easements, variances, exemptions, consents, certificates, orders and approvals from governmental authorities which are material to the operation of the business of the Company and its subsidiaries taken as a whole as it is now being conducted (collectively, the "COMPANY PERMITS"), except where the failure to hold such Company Permits is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. The Company and its subsidiaries are in compliance with the terms of the Company Permits, except as described in the Company SEC Reports or where the -15- failure to so comply is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.07 SEC FILINGS; FINANCIAL STATEMENTS. (a) The Company has filed all forms, reports and documents required to be filed by it with the SEC since December 31, 1996. All such forms, reports and documents (i) were prepared in all material respects in accordance with the requirements of the Securities Act or the Securities Exchange Act, as the case may be, and (ii) did not at the time they were filed (or if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing) 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, in the light of the circumstances under which they were made, not misleading. None of the Company's subsidiaries is required to file any forms, reports or other documents with the SEC. (b) Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the forms, reports and documents referred to in Section 2.07(a) (or if amended or superceded by a filing prior to the date of this Agreement to restate or reclassify amounts shown thereon, then as restated or reclassified) was prepared in accordance with United States generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or in the Company SEC Reports), and each fairly presents in all material respects the consolidated financial position of the Company and its subsidiaries as at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. SECTION 2.08 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1999, the Company has conducted its business in the ordinary course and there has not occurred: (i) any changes, effects or circumstances constituting or which is reasonably likely to constitute, individually or in the aggregate, a Material Adverse Effect; (ii) any amendments or changes in the Certificate of Incorporation or Bylaws of the Company; (iii) any damage to, destruction or loss of any asset of the Company (whether or not covered by insurance) that is reasonably likely, individually or in the aggregate, to have a Material Adverse Effect; (iv) any material change by the Company in its accounting methods, principles or practices (other than changes required by GAAP after the date of this Agreement); or (v) other than in the ordinary course of business, any sale of a material amount of assets of the Company. SECTION 2.09 NO UNDISCLOSED LIABILITIES. Neither the Company nor any of its subsidiaries has any liabilities (absolute, accrued, contingent or otherwise), except liabilities (a) in the aggregate adequately provided for in the Company's unaudited balance sheet (including any related notes thereto) as of September 30, 1999 included in the Company's Quarterly Report of Form 10-Q for the quarter ended September 30, 1999 (the "1999 BALANCE SHEET"), (b) incurred in the ordinary course of business and not required under GAAP to be reflected on the 1999 Balance Sheet, (c) incurred since September 30, 1999 in the ordinary course of business, (d) incurred in connection with this Agreement, the Offer or the Merger or the other transactions contemplated hereby, or (e) which is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. -16- SECTION 2.10 ABSENCE OF LITIGATION. Except for those arising out of transactions contemplated by this Agreement, there are no claims, actions, suits, proceedings or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries, or any properties or rights of the Company or any of its subsidiaries, before any court, arbitrator or administrative, governmental or regulatory authority or body, domestic or foreign, that is reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.11 EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS. (a) Section 2.11(a) of the Company Disclosure Schedule lists, all employee pension benefit plans (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), all employee welfare benefit plans (as defined in Section 3(1) of ERISA), and all other bonus, stock option, stock purchase, incentive, deferred compensation, supplemental retirement, severance and other similar fringe or employee benefit plans, programs or arrangements (including those which contain change of control provisions or pending change of control provisions), and any employment, executive compensation or severance agreements (including those which contain change of control provisions or pending change of control provisions), written or otherwise, as amended, modified or supplemented, for the benefit of, or relating to, any former or current employee, officer, director or consultant (or any of their beneficiaries) of the Company or any other entity (whether or not incorporated) which is a member of a controlled group including the Company or which is under common control with the Company within the meaning of Sections 414(b), (c), (m) or (o) of the Code or Section 4001(a) (14) or (b) of ERISA (a "COMPANY ERISA Affiliate"), or any subsidiary of the Company, excluding any plans that have not been maintained or contributed to in the six year period ending on the date hereof, as well as each plan with respect to which the Company or a Company ERISA Affiliate could incur liability under Title IV of ERISA or Section 412 of the Code (together for the purposes of this Section 2.11, the "COMPANY EMPLOYEE PLANS"). The Company has made available to Parent, prior to the date of this Agreement, copies of (i) each such written Company Employee Plan (or a written description of any Company Employee Plan which is not written) and all related trust agreements, insurance and other contracts (including policies), summary plan descriptions, summaries of material modifications and communications distributed to plan participants, (ii) the three most recent annual reports on Form 5500 series, with accompanying schedules and attachments, filed with respect to each Company Employee Plan required to make such a filing, (iii) the latest reports which have been filed with the Department of Labor with respect to each Company Employee Plan required to make such filing and (iv) the most recent favorable determination letters issued for each Company Employee Plan and related trust which is intended to be qualified under Section 401(a) of the Code (and, if an application for such determination is pending, a copy of the application for such determination). (b) (i) None of the Company Employee Plans promises or provides retiree medical or other retiree welfare benefits to any person, and none of the Company Employee Plans is a "multiemployer plan" as such term is defined in Section 3(37) of ERISA; (ii) to the knowledge of the Company, no party in interest or disqualified person (as defined in Section 3(14) of ERISA and Section 4975 of the Code) has at any time engaged in a transaction with respect to any Company Employee Plan which could subject the Company or any Company ERISA Affiliate, directly or indirectly, to a material tax, penalty or other material liability for prohibited transactions under ERISA or Section 4975 of the Code; (iii) to the knowledge of the -17- Company, no fiduciary of any Company Employee Plan has breached any of the responsibilities or obligations imposed upon fiduciaries under Title I of ERISA, which breach is reasonably likely to result in any material liability to the Company or any Company ERISA Affiliate; (iv) all Company Employee Plans have been established and maintained substantially in accordance with their terms and have operated in compliance in all material respects with the requirements of applicable law (including but not limited to the applicable notification and other requirements of COBRA, the Health Insurance Portability and Accountability Act of 1996, the Newborns' and Mothers' Health Protection Act of 1996, the Mental Health Parity Act of 1996, and the Women's Health and Cancer Rights Act of 1998), and may (to the knowledge of the Company without a duty of inquiry) by their terms be amended and/or terminated at any time to the greatest extent permitted by applicable law, and the Company and each of its subsidiaries have performed all material obligations required to be performed by them under, are not in any material respect in default under or violation of, and have no knowledge of any default or violation by any other party to, any of the Company Employee Plans; (v) each Company Employee Plan which is intended to be qualified under Section 401(a) of the Code is the subject of a favorable determination letter from the IRS, and, to the Company's knowledge, nothing has occurred which is reasonably likely to impair such determination; (vi) other than routine claims for benefits made in the ordinary course of the operation of the Company Employee Plans, there are no pending, nor to the Company's knowledge any threatened, claims, investigations or causes of action with respect to any Company Employee Plan, whether made by a participant or beneficiary of such a plan, a governmental agency or otherwise, against the Company, any Company director, officer or employee, any Company Employee Plan or any fiduciary of a Company Employee Plan; and (vii) there are no communications to any employee, former employee or any other person who may be entitled to benefits under any Company Employee Plan that are materially inconsistent with any provision of any Company Employee Plan. (c) Section 2.11(c) of the Company Disclosure Schedule sets forth a true and complete list ,as of the date of this Agreement, of each current or former employee, officer or director of the Company or any of its subsidiaries who holds (i) any option to purchase Company Common Stock as of the date hereof, together with the number of shares of Company Common Stock subject to such option, the option price of such option (to the extent determined as of the date hereof), and the expiration date of such option; (ii) any shares of Company Common Stock that are restricted; and (iii) any other right, directly or indirectly, to receive Company Common Stock, together with the number of shares of Company Common Stock subject to such right. (d) To the extent not already included and so labeled in Section 2.11(a) of the Company Disclosure Schedule, Section 2.11(d) of the Company Disclosure Schedule sets forth a true and complete list, as of the date of this Agreement, of (i) all employment agreements with officers of the Company or any of its subsidiaries; (ii) all agreements with consultants who are individuals that obligate the Company or any of its subsidiaries to make annual cash payments in an amount exceeding $100,000; (iii) all agreements with respect to the services of independent contractors or leased employees whether or not they participate in any of the Company Employee Plans that obligate the Company or any of its subsidiaries to make annual cash payments exceeding $100,000; (iv) all officers of the Company or any of its subsidiaries who have executed a non-competition agreement with the Company or any of its subsidiaries; and (v) all plans, programs, agreements and other arrangements of the Company which contain change of control provisions. -18- (e) None of the Company Employee Plans is subject to Section 302 of ERISA, Section 412 of the Code or Title IV of ERISA. (f) (i) The Company has never maintained an employee stock ownership plan (within the meaning of Section 4975(e)(7) of the Code) or any other Company Employee Plan that invests in Company stock; (ii) since December 8, 1999, the Company has not proposed nor agreed to any increase in benefits under any Company Employee Plan (or the creation of new benefits) or change in employee coverage which would materially increase the expense of maintaining any Company Employee Plan; (iii) the consummation of the transactions contemplated by this Agreement will not result in an increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any benefits or compensation payable in respect of any employee; and (iv) no person will be entitled to any severance benefits under the terms of any Company Employee Plan solely by reason of the consummation of the transactions contemplated by this Agreement. (g) The Company has no stock purchase plan or similar plan pursuant to which employees of the Company or its subsidiaries are offered the right or option to purchase securities of the Company other than the Company's 1992 and 1994 Stock Option Plans. SECTION 2.12 LABOR MATTERS. (a) There are no controversies, including any strikes, slowdowns, work stoppages, lockouts, pending or, to the knowledge of the Company, threatened, between the Company or any of its subsidiaries and any of their respective employees, which controversies have had, or are reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. (b) Neither the Company nor any of its subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to persons employed by the Company or its subsidiaries, nor does the Company or any of its subsidiaries know of any activities or proceedings of any labor union to organize any significant number of such employees. (c) The Company is in compliance with all applicable laws (including any legal obligation to engage in affirmative action), agreements and contracts relating to employment practices, terms and conditions of employment, and the employment of former, current and prospective employees, independent contractors and "leased employees" (within the meaning of Section 414(n) of the Code) of the Company including all such laws, agreements and contracts relating to wages, hours, collective bargaining, employment discrimination, immigration, disability, civil rights, fair labor standards, occupational safety and health, workers' compensation, pay equity, wrongful discharge and violation of the potential rights of such former, current, and prospective employees, independent contractors and leased employees, and has timely prepared and filed all appropriate forms (including Immigration and Naturalization Service Form I-9) required by any relevant governmental authority, except where the failure to be in compliance is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.13 DISCLOSURE DOCUMENTS. The Schedule 13E-4 and the Schedule 14D-9 will comply in all material respects with the Securities Exchange Act, except that no -19- representation or warranty is being made by the Company with respect to the Parent Information (as defined below) included in the Schedule 13E-4 or the Schedule 14D-9. Neither the Schedule 13E-4 nor the Schedule 14D-9 nor any of the information relating to the Company or its affiliates provided by or on behalf of the Company specifically for inclusion in the Schedule 14D-1 or the Offer Documents will, at the respective times the Schedule 13E-4, the Schedule 14D-9, the Schedule 14D-1 and the Offer Documents are filed with the SEC and are first published, sent or given to stockholders of the Company, 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. The Proxy Statement will comply in all material respects with the applicable requirements of the Securities Exchange Act, except that no representation or warranty is being made by the Company with respect to the Parent Information included in the Proxy Statement. The Proxy Statement will not, at the time the Proxy Statement is filed with the SEC or first sent to stockholders or at the time of the Company's stockholders' meeting, 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 were made, not misleading except that no representation or warranty is being made by the Company with respect to the Parent Information included in the Proxy Statement. SECTION 2.14 RESTRICTIONS ON BUSINESS ACTIVITIES. Except for this Agreement, to the Company's knowledge, there is no agreement, judgment, injunction, order or decree binding upon the Company or any of its subsidiaries which has or is reasonably likely to have the effect of prohibiting or impairing the conduct of business by the Company or any of its subsidiaries as currently conducted by the Company or such subsidiary, except for any prohibition or impairment as is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.15 TITLE TO PROPERTY. The Company and each of its subsidiaries have good title to all of their real properties and other assets, free and clear of all liens, charges and encumbrances, except liens for taxes not yet due and payable and such liens or other imperfections of title, if any, as do not materially interfere with the present use of the property affected thereby or which are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect, and except for liens which secure indebtedness reflected in the 1999 Balance Sheet; and, to the knowledge of the Company, all leases pursuant to which the Company or any of its subsidiaries lease from others any real or personal property, are valid and effective in accordance with their respective terms, and there is not, to the knowledge of the Company, under any of such leases, any existing material default or event of default (or event which with notice or lapse of time, or both, would constitute a material default), except where the lack of such validity and effectiveness or the existence of such default or event of default is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.16 TAXES. Except as is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect: (a) The Company and each of its subsidiaries has timely and accurately filed, or caused to be timely and accurately filed, all material Tax Returns (as hereinafter defined) required to be filed by it, and has paid, collected or -20- withheld, or caused to be paid, collected or withheld, all material amounts of Taxes (as hereinafter defined) required to be paid, collected or withheld, other than such Taxes for which adequate reserves in the 1999 Balance Sheet have been established or which are being contested in good faith. There are no material claims or assessments pending against the Company or any of its subsidiaries for any alleged deficiency in any Tax, there are no pending audits or investigations or, to the knowledge of the Company's Vice President/Controller or any other officer senior thereto, threatened of or relating to any liability in respect of any Taxes, and the Company has not been notified in writing of any proposed Tax claims or assessments against the Company or any of its subsidiaries (other than in each case, claims and assessments for which adequate reserves in the 1999 Balance Sheet have been established or which are being contested in good faith or claims or assessments that are immaterial in amount). Neither the Company nor any of its subsidiaries has executed any waivers or extensions of any applicable statute of limitations to assess any material amount of Taxes. The federal income tax returns of the Company and its subsidiaries have been audited by the IRS for the taxable year through 1995. The statute of limitations period for assessment of federal income taxes has expired for all taxable years through the taxable year ending 1995. There are no outstanding requests by the Company or any of its subsidiaries for any extension of time within which to file any material Tax Return or within which to pay any material amounts of Taxes shown to be due on any Tax Return. To the best knowledge of the Company, there are no liens for material amounts of Taxes on the assets of the Company or any of its subsidiaries except for statutory liens for current Taxes not yet due and payable. Other than with respect to the Company and its subsidiaries, neither the Company nor any of its subsidiaries is liable for Taxes of any other Person, or is currently under any contractual obligation to indemnify any person with respect to Taxes (except for customary agreements to indemnify lenders or security holders in respect of taxes other than income taxes), or is a party to any tax sharing agreement or any other agreement providing for payments by the Company or any of its subsidiaries with respect to Taxes. Neither the Company nor any of its subsidiaries will be required to include any adjustment in taxable income for any period ending after the Closing under Section 481 of the Code (or under any similar provision of the Tax laws of any jurisdiction) as a result of a change in the method of accounting for a period ending on or before the Closing or pursuant to an agreement with a Tax authority with regard to the Tax liability of the Company or any of its subsidiaries for any period ending on or before the Closing. There are no outstanding powers of attorney enabling any party to represent the Company or any of its subsidiaries with respect to Tax matters. Neither the Company nor any of its subsidiaries is a party to any joint venture, partnership or other arrangement or contract which is or is reasonably likely to be treated as a partnership for federal income tax purposes. None of the Company's property is "tax exempt use property" within the meaning of Section 168(h) of the Code. There are no private letter rulings in respect of any Tax pending between the Company or its subsidiaries and any taxing authority. The Company is not a party to any agreement, contract, arrangement or plan that would result (taking into account the transactions contemplated by this Agreement), separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code. (b) For purposes of this Agreement, the term "TAX" shall mean any United States federal, state, local, non-United States or provincial income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, alternative or add-on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge imposed by any Governmental Authority, together with any interest or -21- penalty imposed thereon. The term "TAX RETURN" shall mean a report, return or other information (including any attached schedules or any amendments to such report, return or other information) required to be supplied to or filed with a Governmental Authority with respect to any Tax, including an information return, claim for refund, amended return or declaration or estimated Tax. SECTION 2.17 ENVIRONMENTAL MATTERS. (a) Except as is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect, the operations and properties of the Company and its subsidiaries are in compliance with applicable Environmental Laws (as hereinafter defined), which compliance includes the possession by the Company and its subsidiaries of all permits and governmental authorizations required under applicable Environmental Laws, and compliance with the terms and conditions thereof. (b) Except as is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect, there are no Environmental Claims (as hereinafter defined), including claims based on "arranger liability," pending or, to the knowledge of the Company, threatened in writing against the Company or any of its subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries has retained or assumed. (c) There are no past or present actions, circumstances, conditions, events or incidents, including the release, emission, discharge, presence or disposal of any Materials of Environmental Concern (as hereinafter defined), that are reasonably likely to form the basis of any Environmental Claim against the Company or any of its subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its subsidiaries have retained or assumed, except for such Environmental Claims that are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. (d) Except as is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect or as set forth in Section 2.17(d) of the Company Disclosure Schedule or the Company SEC Reports, (i) the Company has not been notified in writing that any locations where the Company or any of its subsidiaries has stored, disposed or arranged for the disposal of Materials of Environmental Concern which have been listed on the National Priority List, or any analogous state site list, and the Company and its subsidiaries have not been notified that any of them is a potentially responsible party at any such location; (ii) there are no underground storage tanks located on property owned or leased by the Company or any of its subsidiaries; (iii) there is no friable asbestos containing material contained in or forming part of any building, building component, structure or office space owned, leased or operated by the Company or any of its subsidiaries; and (iv) there are no polychlorinated biphenyls (PCBs) or PCB-containing items contained in or forming part of any building, building component, structure or office space owned, leased or operated by the Company or any of its subsidiaries; PROVIDED, HOWEVER, that other than in the case of a Company Facility, the representations in clause (ii), (iii), and (iv) are made to the knowledge of the Company. (e) For purposes of this Agreement: (i) "ENVIRONMENTAL CLAIM" means any written claim, action, cause of action, investigation or written notice by any person or entity alleging potential liability (including -22- potential liability for investigatory costs, cleanup costs, governmental response costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from the presence, or release into the environment, of any Material of Environmental Concern at any location, owned, leased or operated by the Company or any of its subsidiaries to the extent occurring at the time of such ownership, lease or operation or at any other time to the extent liability therefor has been retained or assumed by the Company or any of its subsidiaries. (ii) "ENVIRONMENTAL LAWS" means all United States federal, state, local and non-United States laws, regulations, codes and ordinances, relating to pollution or protection of human health and the environment (including ambient air, surface water, ground water, land surface or sub-surface strata), including but not limited to CERCLA, RCRA, TSCA, OSHA, the Clean Air Act, the Clean Water Act, each as amended or supplemented, and any applicable transfer statutes or laws. (iii) "MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals, pollutants, contaminants, hazardous materials, hazardous substances and hazardous wastes, medical waste, toxic substances, petroleum and petroleum products, asbestos-containing materials, polychlorinated biphenyls, and any other chemicals, pollutants or substances regulated under any Environmental Law. (iv) "COMPANY FACILITY" means each of the Company Warehouse, Bldg. 11, 3336 State Route 73, Wilmington, Ohio and the Company Corporate Headquarters at 535 Connecticut Avenue, Norwalk, Connecticut. SECTION 2.18 BROKERS. No broker, finder or investment banker (other than the Financial Advisor, the fees and expenses of whom will be paid by the Company) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. The Company has heretofore furnished to Parent a complete and correct copy of all agreements between the Company and the Financial Advisor pursuant to which such firm would be entitled to any payment relating to the transactions contemplated hereunder. SECTION 2.19 INTELLECTUAL PROPERTY. (a) As used herein, the term "INTELLECTUAL PROPERTY ASSETS" shall mean all worldwide intellectual property rights, including, without limitation, patents, trademarks, service marks and copyrights, and registrations and applications therefor, trade names, common law marks, know-how, trade secrets, computer software programs and proprietary information. As used herein, "COMPANY INTELLECTUAL PROPERTY ASSETS" shall mean the Intellectual Property Assets used or owned by the Company or any of its subsidiaries that are material to the business of the Company and its subsidiaries as currently conducted. (b) The Company and/or each of its subsidiaries owns, or is licensed or otherwise possesses legally enforceable rights to use all Company Intellectual Property Assets without conflict with the rights of others. (c) Except as is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect, no claims (i) are currently pending or, to the knowledge of the Company, are threatened in writing by any person with respect to the Company Intellectual -23- Property Assets, or (ii) are currently pending or, to the knowledge of the Company, threatened by any person with respect to the Intellectual Property Assets of a third party (the "THIRD PARTY INTELLECTUAL PROPERTY ASSETS") to the extent arising out of any use, reproduction or distribution of such Third Party Intellectual Property Assets by or through the Company or any of its subsidiaries. (d) Except as is not reasonably likely to have a Material Adverse Effect, neither the Company nor any of its subsidiaries knows of any valid grounds for any bona fide claim to the effect that the licensing or use by the Company or any of its subsidiaries of any product now licensed or used or proposed for license or use by the Company or any of its subsidiaries infringes on any Third Party Intellectual Property Assets, PROVIDED, HOWEVER, that nothing in this Section 2.19(d) shall be deemed to apply to products purchased or licensed by the Company for resale in the ordinary course of the Company's business. (e) The Company and/or each of its subsidiaries has made all necessary filings and recordations to protect and maintain its interest in the patents, patent applications, trademark and service mark registrations, trademark and service mark applications, copyright registrations and copyright applications and licenses included in the Company Intellectual Property Assets, except where the failure to so protect or maintain is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. (f) (i) Each patent, patent application, trademark or service mark registration, and trademark or service mark application and copyright registration or copyright application of the Company and/or each of its subsidiaries included in the Company Intellectual Property Assets is valid and subsisting and (ii) each material license of Company Intellectual Property Assets is valid, subsisting and enforceable. (g) To the knowledge of the Company, there is no material unauthorized use, infringement or misappropriation of any of the Company Intellectual Property Assets by any third party, including any employee, former employee, independent contractor or consultant of the Company or any of its subsidiaries which is reasonably likely, individually or in the aggregate, to result in a Material Adverse Effect. (h) The disclosure under the heading "Year 2000" contained in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 1999 is accurate and in compliance with applicable law in all material respects. SECTION 2.20 INTERESTED PARTY TRANSACTIONS. Except for events as to which the amounts involved do not, in the aggregate, exceed $100,000, since the Company's proxy statement dated April 30, 1999, no event has occurred that would be required to be reported as a Certain Relationship or Related Transaction pursuant to Item 404 of Regulation S-K promulgated by the SEC. SECTION 2.21 INSURANCE. All material fire and casualty, general liability, business interruption, product liability and sprinkler and water damage insurance policies maintained by the Company or any of its subsidiaries are with reputable insurance carriers, provide coverage appropriate in character and amount for the businesses of the Company and its -24- subsidiaries and their respective properties and assets, except as is not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.22 PRODUCT LIABILITY. Since January 1, 1998, the Company has not received written notice of any claim, pending or threatened, against the Company or any of its subsidiaries for injury to person or property of employees or any third parties suffered as a result of the sale of any product or performance of any service by the Company or any of its subsidiaries, including claims arising out of the defective or unsafe nature of its products or services, which is reasonably likely, individually or in the aggregate, to have a Material Adverse Effect. SECTION 2.23 OPINION OF FINANCIAL ADVISOR. The Board of Directors of the Company has been advised by the Financial Advisor to the effect that in its opinion, as of the date of this Agreement, the Per Share Amount is fair to the holders of Shares from a financial point of view. SECTION 2.24 RIGHTS AGREEMENT. The Board of the Directors of the Company has authorized and approved, and the Company has executed, an amendment to the Rights Agreement (as defined in Section 4.02(d)) to the effect that (i) none of Parent, Purchaser or their affiliates, either individually or as a group, shall become an "Acquiring Person" (as defined in the Rights Agreement) by virtue of the approval, execution or delivery of this Agreement, the consummation of the transactions contemplated hereby or any announcement of the same, and (ii) no Distribution Date or Share Acquisition Date (as each such term is defined in the Rights Agreement) (each a "RIGHTS EVENT") shall occur by virtue of the approval, execution or delivery of this Agreement, the consummation of the transactions contemplated hereby or any announcement of the same. The Company will use its reasonable best efforts to cause the Rights Agent (as defined in the Rights Agreement) to execute such amendment as promptly as practicable. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT Except as would not prevent or delay consummation of the Merger or otherwise materially and adversely affect the ability of Parent, BYOWC and Purchaser to perform their respective obligations under this Agreement or as set forth in the disclosure schedule delivered by the Parent to the Company prior to the execution of this Agreement (the "PARENT DISCLOSURE SCHEDULE"), Parent and BYOWC, jointly and severally, hereby represent and warrant to the Company as follows: SECTION 3.01 ORGANIZATION AND GOOD STANDING. BYOWC is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware and has all requisite limited liability company power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Other than Purchaser, Parent has no subsidiaries. -25- SECTION 3.02 AUTHORIZATION; BINDING AGREEMENT. BYOWC, Parent and Purchaser have all requisite limited liability company or corporate power and authority, as the case may be, to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation by Parent, Purchaser and BYOWC of the transactions contemplated hereby (including, but not limited to, the Offer and the Merger), have been duly and validly authorized by the members of BYOWC and by the Boards of Directors of Parent and Purchaser, as applicable, and no other limited liability company or corporate proceedings on the part of Parent, Purchaser or BYOWC are necessary to authorize the execution and delivery of this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by Parent, Purchaser and BYOWC and, assuming due authorization, execution, and delivery by the Company, constitute the legal, valid and binding obligations of Parent, Purchaser and BYOWC. SECTION 3.03 GOVERNMENTAL APPROVALS. No Consent from or with any Governmental Authority on the part of Parent, Purchaser or BYOWC is required in connection with the execution or delivery by Parent, Purchaser and BYOWC of this Agreement, or the consummation by Parent, Purchaser and BYOWC of the transactions contemplated hereby, other than filings with the SEC, any filings under the HSR Act, compliance with applicable Blue-Sky Laws and any applicable Foreign Monopoly Laws, such filings and consents as may be required under any Environmental, Health and Safety Laws, and the filing and recordation of appropriate merger or other documents as required by the DGCL. SECTION 3.04 NO VIOLATIONS. The execution and delivery of this Agreement, the consummation of the transactions contemplated hereby and compliance by Parent, Purchaser and BYOWC with any of the provisions hereof will not (i) conflict with or result in any breach of any provision of the Certificate of Formation and Operating Agreement of BYOWC or the Certificate of Incorporation and Bylaws of Parent and Purchaser, (ii) require any Consent under or result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of, any material note, bond, mortgage, indenture, contract, lease, license, agreement or instrument to which Parent, Purchaser or BYOWC is a party or by which Parent, Purchaser or BYOWC, or any of their assets or property is subject, (iii) result in the creation or imposition of any material lien or encumbrance of any kind upon any of the assets of Parent, Purchaser or BYOWC or (iv) subject to obtaining the Consents from Governmental Authorities referred to in SECTION 3.03 hereof, violate any Law to which Parent, Purchaser or BYOWC or their respective assets or properties are subject, except in any such case for any such conflicts, violations, breaches, defaults or other occurrences that would not prevent or delay consummation of the Offer or the Merger, or otherwise materially and adversely affect the ability of Parent, Purchaser and BYOWC to perform their respective obligations under this Agreement. SECTION 3.05 DISCLOSURE DOCUMENTS. None of the information supplied by Parent, Purchaser or BYOWC or their respective officers, directors, managers, members, representatives, agents or employees (the "PARENT INFORMATION") for inclusion in the Proxy Statement will, at the time the Proxy Statement is filed with the SEC or first mailed to the Company's stockholders, at the time of the Company's stockholders' meeting, contain any untrue statement of a material fact, or will omit to state any material fact necessary in order to -26- make the statements therein, in light of the circumstances in which they were made not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for such stockholders' meeting which has become false or misleading. Neither the Schedule 14D-1 or the Offer Documents or any amendments thereof or supplements thereto nor any of the Parent Information provided specifically for inclusion in the Schedule 13E-4 or the Schedule 14D-9 will, at the respective times the Schedule 14D-1, the Offer Documents, the Schedule 13E-4 or the Schedule 14D-9 are filed with the SEC or first published, sent or given to the Company's stockholders, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, neither Parent nor BYOWC makes any representation or warranty with respect to any information that has been supplied by the Company or its accountants, counsel or other authorized representatives for use in any of the foregoing documents. The Schedule 14D-1 and the Offer Documents will comply as to form in all material respects with the provisions of the Securities Exchange Act. SECTION 3.06 FINDERS AND INVESTMENT BANKERS. Except for Credit Suisse First Boston Corporation ("CSFB"), whose fees and expenses will be paid by Parent, none of BYOWC, Parent, Purchaser, and their respective officers or directors has employed any broker, finder or financial advisor or otherwise incurred any liability for any brokerage fees, commissions or financial advisors' or finders' fees in connection with the transactions contemplated hereby. SECTION 3.07 FINANCING ARRANGEMENTS. (a) Parent has, on or prior to the date of this Agreement, entered into one or more subscription agreements pursuant to which the subscribers thereunder have, subject to the conditions set forth in this Agreement and no other conditions, agreed to make an equity investment in Parent of an aggregate of $80 million in cash or Shares valued at $19.00 per share for use in connection with the Offer and Merger (the "EQUITY INVESTMENT"). (b) Parent has, on or prior to the date hereof, entered into a commitment letter with an investment fund managed by Freeman Spogli & Co. LLC ("FREEMAN SPOGLI") attached hereto as Exhibit 2, pursuant to which Freeman Spogli has agreed, subject to the terms and conditions contained in such letter and no other conditions, to make an equity investment in Parent (the "EQUITY FINANCING") of an aggregate of $130 million in cash for use in connection with the Offer and the Merger. (c) Parent has, on or prior to the date hereof, entered into a commitment letter with CSFB, CIBC Inc. ("CIBC") and CIBC World Markets Corp. ("CIBC WORLD") attached hereto as Exhibit 3, pursuant to which CSFB, CIBC and CIBC World have committed, subject to the conditions contained in such letter and no other conditions, to lend an aggregate of up to $320 million to Purchaser in cash to the Purchaser for purposes of financing the Purchaser Offer (the "DEBT FINANCING" and together with the Equity Financing, the "FINANCING") and, effective upon the initial acceptance for payment of Shares pursuant to the Offer, to make available to the Company and Purchaser a revolving credit facility in the amount of up to $70 million (the "NEW COMPANY CREDIT FACILITY"). -27- (d) The Equity Investment and the Financing are sufficient, together with the Company Contribution Amount, to pay the aggregate consideration to the holder of Shares and Company Options as contemplated by this Agreement and to make all other necessary payments of fees and expenses required to be paid by Parent and Purchaser in connection with the transactions contemplated by this Agreement. SECTION 3.08 NO PRIOR ACTIVITIES. Except for obligations or liabilities incurred in connection with its incorporation or organization or the negotiation and consummation of this Agreement and the transactions contemplated hereby (including any financing in connection therewith), Purchaser has not incurred any obligations or liabilities and has not engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any person or entity. SECTION 3.09 DGCL SECTION 203. Other than by reason of this Agreement or the transactions contemplated hereby, Parent is not an "interested stockholder" of the Company, as that term is defined in Section 203 of the DGCL. SECTION 3.10 BENEFICIAL OWNERSHIP OF SHARES. Except as previously disclosed in writing to the Company, none of Parent, BYOWC or Purchaser "beneficially owns" (as defined in Rule 13d-3 under the Securities Exchange Act) any of the outstanding shares of Company Common Stock or any securities convertible into or exchangeable for Company Common Stock. SECTION 3.11 SURVIVING CORPORATION AFTER THE MERGER. At and immediately after the Effective Time, and after giving effect to the Offer and the Merger, any indebtedness incurred in connection with the Offer and the Merger and any other transactions contemplated in connection therewith (and any changes in the Surviving Corporation's assets and liabilities as a result thereof), the Surviving Corporation will not (i) be insolvent (either because its financial condition is such that the sum of its debts is greater than the fair value of its assets or because the present fair saleable value of its assets will be less than the amount required to pay its probable liabilities on its debts as they mature), (ii) have unreasonably small capital with which to engage in its business, or (iii) have incurred or plan to incur debts beyond its ability to pay as they mature. -28- ARTICLE IV CONDUCT OF BUSINESS PENDING THE MERGER SECTION 4.01 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The Company covenants and agrees that, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, unless Parent shall otherwise agree in writing, and except as set forth in Section 4.01 of the Company Disclosure Schedule, the Company shall conduct its business and shall cause the businesses of its subsidiaries to be conducted only in, and the Company and its subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company shall use reasonable commercial efforts to preserve substantially intact the business organization of the Company and its subsidiaries, to keep available the services of the present officers, employees and consultants of the Company and its subsidiaries and to preserve the present relationships of the Company and its subsidiaries with customers, suppliers and other persons with which the Company or any of its subsidiaries has significant business relations. By way of amplification and not limitation, except as contemplated by this Agreement, neither the Company nor any of its subsidiaries shall, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, and except as set forth in Section 4.01 of the Company Disclosure Schedule, directly or indirectly do, or propose to do, any of the following without the prior written consent of Parent, which in the case of clauses (c), (d)(iv), (e), (f), (h) or (i) will not be unreasonably withheld or delayed: (a) amend or otherwise change the Company's Certificate of Incorporation or By-Laws; (b) issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock, or any other ownership interest (including, without limitation, any phantom interest) in the Company, any of its subsidiaries or affiliates (except for the issuance of shares of Company Common Stock issuable pursuant to Company Options under the Company Stock Option Plans, which options are outstanding on the date hereof); (c) sell, pledge, dispose of or encumber any assets of the Company or any of its subsidiaries (except for (i) sales of assets in the ordinary course of business and in a manner consistent with past practice, (ii) dispositions of obsolete or worthless assets, and (iii) sales of immaterial assets not in excess of $250,000 in the aggregate); (d) (i) declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, except that a wholly-owned subsidiary of the Company may declare and pay a dividend to its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iii) except as required by the terms of any security as in effect on the date hereof or expressly permitted hereunder, amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise -29- acquire, or permit any subsidiary to amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, any of its securities or any securities of its subsidiaries, including, without limitation, shares of Company Common Stock, or any option, warrant or right, directly or indirectly, to acquire any such securities, or propose to do any of the foregoing, or (iv) settle, pay or discharge any claim, suit or other action brought or threatened against the Company with respect to or arising out of a stockholder equity interest in the Company; (e) (i) acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof other than those listed on Section 4.01(e) of the Company Disclosure Schedule; (ii) incur any indebtedness for borrowed money, except for (x) borrowings and reborrowings under the Company's existing credit facilities not in excess of $5 million and (y) other borrowings not in excess of $500,000 or issue any debt securities or assume, guarantee (other than guarantees of the Company's subsidiaries entered into in the ordinary course of business) or endorse or otherwise as an accommodation become responsible for, the obligations of any person, or make any loans or advances, except in the ordinary course of business consistent with past practice; or (iii) authorize any capital expenditures or purchases of fixed assets which are, in the aggregate, in excess of $8,000,000 from the date hereof until March 31, 2000; or (iv) enter into or materially amend any contract, agreement, commitment or arrangement to effect any of the matters prohibited by this Section 4.01(e); (f) except as set forth in Section 4.01(f) of the Company Disclosure Schedule, increase the compensation or severance payable or to become payable to its directors, officers or employees, except for increases in salary or wages of employees of the Company or its subsidiaries (who are not directors or executive officers of the Company) in accordance with past practices, or grant any severance or termination pay (except to make payments required to be made under obligations existing on the date hereof in accordance with the terms of such obligations) to, or enter into any employment or severance agreement, with any new employee of the Company or any of its subsidiaries, except for an agreement entered into in the ordinary course of business and providing for annual base and bonus compensation not to exceed $150,000, or establish, adopt, enter into or amend any collective bargaining agreement, Company Employee Plan (within the meaning of Section 2.11 of this Agreement), trust, fund, policy or arrangement for the benefit of any current or former directors, officers or employees or any of their beneficiaries, except, in each case, as may be required by law or as would not result in a material increase in the cost of maintaining such collective bargaining agreement, Company Employee Plan, trust, fund, policy or arrangement; (g) take any action to change accounting policies or procedures (including, without limitation, procedures with respect to revenue recognition, payments of accounts payable and collection of accounts receivable), except as required by a change in GAAP or SEC position occurring after the date hereof; (h) make any tax election or settle or compromise any United States federal, state, local or non-United States tax liability; -30- (i) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) in excess of $500,000 in the aggregate, other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in the financial statements contained in the Company SEC Reports or incurred in the ordinary course of business and consistent with past practice; or (j) take, or agree in writing or otherwise to take, any of the actions described in Sections 4.01(a) through (i) above, or any action which would make any of the representations or warranties of the Company contained in this Agreement untrue or incorrect (subject to the first sentence of Article II) or prevent the Company from performing or cause the Company not to perform its covenants hereunder. SECTION 4.02 NO SOLICITATION. (a) The Company shall not, directly or indirectly, through any officer, director, employee, representative or agent of the Company or any of its subsidiaries, solicit or encourage the initiation of (including by way of furnishing information) any inquiries or proposals regarding any merger, sale of assets, sale of shares of capital stock (including without limitation by way of a tender offer) or similar transactions involving the Company or any subsidiaries of the Company that if consummated would constitute an Alternative Transaction (as defined in Section 7.01) (any of the foregoing inquiries or proposals being referred to herein as an "ACQUISITION PROPOSAL"). Nothing contained in this Agreement shall prevent the Board of Directors of the Company from (i) furnishing information to a third person which has made a BONA FIDE Acquisition Proposal that is a Superior Proposal (as defined below) not solicited in violation of this Agreement, provided that such person has executed an agreement with confidentiality provisions substantially similar to those then in effect between the Company and BYOWC, or (ii) subject to compliance with the other terms of this Section 4.02, including Sections 4.02(c), considering and negotiating a bona fide Acquisition Proposal that is a Superior Proposal not solicited in violation of this Agreement; PROVIDED, HOWEVER, that, as to each of clauses (i) and (ii), (x) such actions occur at a time prior to the consummation (or, if the Offer is consummated and extended, the initial consummation) of the Offer and (y) the Board of Directors of the Company determines (after due consultation with independent counsel, which may be Jones, Day, Reavis & Pogue) that it is or is reasonably likely to be required to do so in order to discharge properly its fiduciary duties; PROVIDED, FURTHER, that if a third person has made an Acquisition Proposal and the Company cannot determine based upon the information provided by the third person whether the Acquisition Proposal is a Superior Proposal, it may so indicate to the third person. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means any proposal made by a third person to acquire, directly or indirectly, for consideration consisting of cash and/or securities, all of the equity securities of the Company entitled to vote generally in the election of directors or all or substantially all the assets of the Company, on terms which the Board of Directors of the Company reasonably believes (i) (after consultation with a financial advisor of nationally recognized reputation) to be more favorable from a financial point of view to its stockholders than the Offer and the Merger and the transactions contemplated by this Agreement taking into account at the time of determination any changes to the financial terms of this Agreement which as of that time had been proposed by Parent and (ii) to be more favorable to the Company than the Offer and the Merger and the transactions contemplated by this Agreement after taking into account all pertinent factors -31- deemed by the Board of Directors of the Company required under the laws of the State of Delaware. (b) The Company shall notify Parent after receipt of any Acquisition Proposal, or any modification of or amendment to any Acquisition Proposal, or any request for nonpublic information relating to the Company or any of its subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or records of the Company or any subsidiary by any person or entity that informs the Board of Directors of the Company or such subsidiary that it is considering making, or has made, an Acquisition Proposal. Such notice to Parent shall be made orally and in writing, and shall indicate the identity of the person making the Acquisition Proposal or intending to make an Acquisition Proposal or requesting non-public information or access to the books and records of the Company, the terms of any such Acquisition Proposal or modification or amendment to an Acquisition Proposal, and whether the Company is providing or intends to provide the person making the Acquisition Proposal with access to information concerning the Company as provided in Section 4.02(a). The Company shall also promptly notify Parent, orally and in writing, if it enters into negotiations concerning any Acquisition Proposal. (c) Except to the extent the Board of Directors of the Company determines in (after due consultation with independent counsel, which may be Jones, Day, Reavis & Pogue) that it is or is reasonably likely to be required to do so in order to discharge properly its fiduciary duties, neither the Company nor the Board of Directors of the Company shall withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Purchaser, the approval by such Board of Directors of this Agreement, the Offer or the Merger; PROVIDED, HOWEVER, that in no event may the Board of Directors withdraw or modify its recommendation as aforesaid earlier than the second full business day following Parent's receipt of written notice of the intention of the Board of Directors of the Company to do so. (d) The Company and the Board of Directors of the Company shall not (i) redeem the rights (the "RIGHTS") issued under the Rights Agreement, dated as of June 17, 1996, between the Company and State Street Bank and Trust Company NA, as Rights Agent (the "RIGHTS AGREEMENT"), or waive or amend any provision of the Rights Agreement, in any such case to permit or facilitate the consummation of any Acquisition Proposal or Alternative Transaction, or (ii) enter into any agreement with respect to, or otherwise approve or recommend to stockholders, or publicly propose to approve or recommend, any Acquisition Proposal or Alternative Transaction, unless this Agreement has been terminated in accordance with its terms. It is understood and agreed that a deferral of the distribution of Rights following the commencement of a tender offer or exchange offer shall not be prohibited hereunder. (e) Nothing contained in this Section 4.02 shall prohibit the Company from taking and disclosing to its stockholders a position required by Rule 14e-2(a) promulgated under the Securities Exchange Act or from making any disclosure to its stockholders required by applicable law, rule or regulation. (f) The Company shall immediately cease and cause to be terminated any existing discussions or negotiations with any persons (other than Parent) conducted heretofore with respect to any of the foregoing. The Company agrees not to release any third party from the confidentiality and standstill provisions of any agreement to which the Company is a party. -32- (g) The Company shall ensure that the officers and directors of the Company and the Company Significant Subsidiaries and any investment banker or other advisor or representative retained by the Company are aware of the restrictions described in this Section 4.02. The Company shall be responsible for any failure of the Company's officers, directors, investment bankers or other advisors or representatives to comply with such restrictions. ARTICLE V ADDITIONAL AGREEMENTS SECTION 5.01 APPROVAL OF THE MERGER. As promptly as practicable after the date on which the Purchaser and, if required, the Company, complete the purchase of shares in the Offer (the "OFFER COMPLETION DATE") and to the extent required by applicable law, the Company shall prepare and file with the SEC preliminary proxy materials or a preliminary information statement which shall constitute the Proxy Statement. As promptly as practicable after comments are received from the SEC thereon and after the furnishing by Parent of all Parent Information required to be contained therein, the Company shall file with the SEC the definitive Proxy Statement relating to the adoption of this Agreement and approval of the transactions contemplated hereby by the stockholders of the Company pursuant to this Agreement. The Proxy Statement shall contain the recommendation of the Board of Directors of the Company in favor of approval of this Agreement and the Merger. Thereafter, the Company shall take all steps necessary so that this Agreement and the Merger will be presented for the approval of stockholders, either at a stockholders meeting duly called for such purpose or by the written consent of stockholders in lieu of a meeting in accordance with the DGCL. BYOWC, Parent and Purchaser will use their reasonable best efforts to cause such meeting or consent (or the short form merger described in the next sentence) to occur within six months after the Offer Completion Date. The Company shall not be required to take any of the action specified in this Section if Parent or Purchaser may consummate the Merger without the vote or approval of stockholders in accordance with the short form merger provisions of Section 253 of the DGCL. SECTION 5.02 VOTING OF SHARES BY PURCHASER. At any meeting of the Company's stockholders held for the purpose of voting upon this Agreement and the Merger, Parent, Purchaser, BYOWC and any of their respective subsidiaries shall vote all of the Shares then owned by them in favor thereof. SECTION 5.03 ACCESS TO INFORMATION; CONFIDENTIALITY. (a) The Company shall (and shall cause its subsidiaries to): (i) afford to the officers, employees, accountants, counsel, financing sources and other representatives of Parent, reasonable access during normal business hours to its properties, books, contracts, commitments and records; (ii) furnish to Parent all information concerning its business, properties and personnel as Parent may reasonably request or has reasonably requested; and (iii) make available during normal business hours to the officers, employees, accountants, counsel, financing sources and other representatives of Parent the -33- appropriate individuals (including management personnel, attorneys, accountants and other professionals) for discussion of the Company's business, properties, prospects and personnel as Parent may reasonably request. (b) Parent shall keep all information disclosed to it pursuant to this Section 5.03 confidential in accordance with the terms of the confidentiality letter, dated November 22, 1999 (the "CONFIDENTIALITY LETTER"), between BYOWC and the Company. SECTION 5.04 CONSENTS; APPROVALS. The Company, BYOWC and Parent shall each use its commercially reasonable efforts (which efforts, to the extent reasonably practicable, shall be made prior to the consummation of the Offer) to obtain all consents, waivers, approvals, authorizations or orders (including, without limitation, all United States and foreign governmental and regulatory rulings and approvals), and the Company and Parent shall make (or, if applicable, BYOWC will make) all filings (including, without limitation, all filings with United States and foreign governmental or regulatory agencies) required in connection with the authorization, execution and delivery of this Agreement by the Company and Parent and the consummation by them of the transactions contemplated hereby. The Company, BYOWC, Purchaser and Parent shall furnish all information required to be included in the Proxy Statement or for any application or other filing to be made pursuant to the rules and regulations of any United States or foreign governmental body in connection with the transactions contemplated by this Agreement. If a filing under the HSR Act is required with respect to the Merger, each party hereto shall make an appropriate filing of a notification and report form pursuant to the HSR Act with respect to the transactions contemplated hereby within ten business days after the date hereof, shall promptly supply any additional information and documentary material that may be requested pursuant to the HSR Act, and shall use commercially reasonable efforts to obtain early termination of the waiting period under the HSR Act. In addition, each party hereto shall promptly make any other filing that may be required under any antitrust law or by any antitrust authority. SECTION 5.05 INDEMNIFICATION AND INSURANCE. (a) The Certificate of Incorporation and Bylaws of the Surviving Corporation shall contain the provisions with respect to indemnification set forth in the Amended and Restated Certificate of Incorporation and the Bylaws of the Company, which provisions shall not be amended, modified or otherwise repealed for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder as of the Effective Time of individuals who at the Effective Time were directors, officers, employees or agents of the Company, unless such modification is required after the Effective Time by law. (b) The Surviving Corporation shall, to the fullest extent permitted under applicable law or under the Surviving Corporation's Certificate of Incorporation or Bylaws, indemnify and hold harmless, each present and former director, officer or employee of the Company or any of its subsidiaries (collectively, the "INDEMNIFIED PARTIES") against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, (x) arising out of or pertaining to the transactions contemplated by this Agreement or (y) otherwise with respect to any acts or omissions occurring at or prior to the Effective Time, to the same extent as provided -34- in the Company's Amended and Restated Certificate of Incorporation or Bylaws or any applicable contract or agreement as in effect on the date hereof, in each case for a period of six years after the date hereof. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time) and subject to the specific terms of any indemnification contract, (i) any counsel retained by the Indemnified Parties for any period after the Effective Time shall be reasonably satisfactory to the Surviving Corporation (and, for these purposes, Jones, Day, Reavis & Pogue shall be deemed reasonably satisfactory to the Surviving Corporation), (ii) after the Effective Time, the Surviving Corporation shall pay the reasonable fees and expenses of such counsel, promptly after statements therefor are received and (iii) the Surviving Corporation will cooperate in the defense of any such matter; PROVIDED, HOWEVER, that the Surviving Corporation shall not be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld or delayed); and PROVIDED, FURTHER, that, in the event that any claim or claims for indemnification are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until the disposition of any and all such claims. The Indemnified Parties as a group may retain only one law firm to represent them in each applicable jurisdiction with respect to any single action unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties, in which case each Indemnified Person with respect to whom such a conflict exists (or group of such Indemnified Persons who among them have no such conflict) may retain one separate law firm in each applicable jurisdiction. (c) The Surviving Corporation shall honor and fulfill in all respects the obligations of the Company pursuant to indemnification agreements and employment agreements (the employee parties under such agreements being referred to as the "OFFICER EMPLOYEES") with the Company's directors and officers existing at or before the Effective Time. (d) In addition, Parent will provide, or cause the Surviving Corporation to provide, for a period of not less than six years after the Effective Time, the Company's current directors and officers an insurance and indemnification policy that provides coverage for events occurring at or prior to the Effective Time (the "D&O INSURANCE") that is no less favorable than the existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage; PROVIDED, HOWEVER, that Parent and the Surviving Corporation shall not be required to pay an annual premium for the D&O Insurance in excess of 300% of the annual premium currently paid by the Company for such insurance, but in such case shall purchase as much such coverage as possible for such amount. (e) From and after the Effective Time, Parent shall unconditionally guarantee the timely payment of all funds owing by, and the timely performance of all other obligations of, the Surviving Corporation under this Section 5.05. (f) This Section shall survive the consummation of the Merger at the Effective Time, is intended to benefit the Company, the Surviving Corporation, the Indemnified Parties, and the Officer Employees, shall be binding on all successors and assigns of the Surviving Corporation and shall be enforceable by the Indemnified Parties. Without limiting the generality or effect of the foregoing, in the event that the Surviving Corporation or any of its successors or assigns (i) consolidates with or merges with any other person and is not the -35- continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each such case, Parent shall cause proper provision to be made so that the continuing or surviving corporation or purchase of such properties and assets assumes the obligations set forth in this Section 5.05. SECTION 5.06 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to BYOWC and Parent, and BYOWC and Parent shall give prompt notice to the Company, of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which is reasonably likely to cause any representation or warranty of such party contained in this Agreement to be materially untrue or inaccurate, (ii) any failure of the Company or Parent, as the case may be, materially to comply with or satisfy, or the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which is reasonably likely to cause the failure by such party materially to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; (iii) the Company obtaining knowledge of a material breach by Parent, or Parent obtaining knowledge of a material breach by the Company, of their respective representations, warranties, or covenants hereunder of which the breaching party has not already given notice pursuant to clauses (i) or (ii); or (iv) the occurrence of any other event which would be reasonably likely (A) to have a Material Adverse Effect or (B) to cause any condition set forth in ANNEX I or ANNEX II hereto to be unsatisfied in any material respect at any time prior to the consummation of the Offer; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice; and PROVIDED FURTHER that failure to give such notice shall not be treated as a breach of covenant for the purposes of Sections 7.01(h) or affect the rights and remedies of the party obligated to give any notice pursuant to the foregoing clause (iii) unless the failure to give such notice results in material prejudice to the other party. SECTION 5.07 FURTHER ACTION. Upon the terms and subject to the conditions hereof, each of the parties hereto shall use all reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, to obtain in a timely manner all necessary waivers, consents and approvals and to effect all necessary registrations and filings, and otherwise to satisfy or cause to be satisfied all conditions precedent to its obligations under this Agreement. The Company agrees to cooperate reasonably with BYOWC, Purchaser and Parent in connection with the negotiation and documentation of the Debt Financing. SECTION 5.08 PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult with each other before issuing any press release or making any written public statement with respect to the Offer or Merger or this Agreement and shall not issue any such press release or make any such public statement without the prior consent of the other party, which shall not be unreasonably withheld; PROVIDED, HOWEVER, that either party may, without the prior consent of the other, issue such press release or make such public statement as may upon the advice of counsel be required by law or the rules and regulations of The Nasdaq Stock Market, in advance of obtaining such prior consent, if it has used all reasonable efforts to consult with the other party. -36- SECTION 5.09 CONVEYANCE TAXES. Parent and the Company shall cooperate in the preparation, execution and filing of all returns, questionnaires, applications, or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer and stamp taxes, any transfer, recording, registration and other fees, and any similar taxes which become payable in connection with the transactions contemplated hereby that are required or permitted to be filed on or before the Effective Time. SECTION 5.10 OPTION PLANS AND BENEFITS, ETC. Prior to the Effective Time, the parties to this Agreement shall take all such actions as shall be necessary to effectuate the provisions of Section 1.10. SECTION 5.11 EMPLOYEE MATTERS. (a) Parent shall cause the Surviving Corporation to (i) satisfy all obligations of the Company under each existing severance agreement or employment agreement between the Company and any of its officers or employees, and (ii) for a period of one year beginning on the Effective Time, provide each individual who, as of the Effective Time, is an employee of the Company or any subsidiary of the Company (a "Company Employee"), so long as he or she remains employed by the Surviving Corporation or a subsidiary thereof during such one-year period, with (x) health and welfare benefits that are comparable in the aggregate to such benefits as are provided to Company Employees immediately prior to the Effective Time; (y) severance benefits pursuant to the Company's Severance Pay Plan in effect immediately prior to the Effective Time; and (z) 401(k) plan benefits and deferred compensation benefits as in effect under the Company's 401(k) plan and deferred compensation plan in effect immediately prior to the Effective Time. Notwithstanding the foregoing, Parent, the Surviving Corporation, or any subsidiary thereof may (A) terminate, amend or modify any health and welfare employee benefit plan, program or arrangement in any respect, (B) terminate the employment of any employee of, or the service of any independent contractor, leased employee or other service provider to, the Surviving Corporation or any subsidiary thereof, and (C) modify the terms and conditions of the employment of any such employee or the service of any such independent contractor, leased employee or other service provider. (b) It is expressly agreed that the provisions of Section 5.11(a) are not intended to be for the benefit of or otherwise enforceable by any third party, including, without limitation, any Company Employee or any collective bargaining unit or employee organization. (c) The Company shall use its reasonable best efforts to obtain from each holder of a Company Option his or her consent to the provisions of Section 1.10 prior to the initial expiration date of the Offer; PROVIDED, HOWEVER, that, in any event, the Company shall obtain such consent from the holders of 80% of such Company Options within 15 business days from the date hereof. SECTION 5.12 COMPLIANCE WITH STATE PROPERTY TRANSFER STATUTES. The Company agrees that it shall use its reasonable commercial efforts to comply promptly with all requirements of applicable state property transfer laws as may be required by the relevant state agency and shall take all action necessary to cause the transactions contemplated hereby to be effected in compliance with applicable state property transfer laws. The Company, after consultation with Parent, shall determine which actions, if any, must be taken prior to or after the Effective Time to comply with applicable state property transfer laws. The Company agrees to -37- provide Parent with any documents required to be submitted to the relevant state agency prior to submission, and the Company shall not take any action to comply with applicable state property transfer laws without Parent's prior consent, which consent shall not be unreasonably withheld, conditioned or delayed. BYOWC and Parent shall provide to the Company any assistance reasonably requested by the Company with respect to such compliance. SECTION 5.13 FINANCING COVENANTS. (a) Parent covenants and agrees that it will not, without the prior consent of the Company (which consent shall not be unreasonably withheld), enter into any material amendment to, or modification or waiver of, any of the terms of the Equity Investment, the Equity Financing or the Debt Financing if such amendment, modification or waiver would (i) reduce the aggregate amount of funds committed under the Equity Investment, the Equity Financing or the Debt Financing, as the case may be, (ii) add significant additional conditions to the consummation of the Equity Investment, the Equity Financing or the Debt Financing or (iii) have a significant adverse affect on or significantly delay the consummation of the Offer and/or the Merger. BYOWC and Parent shall enforce, to the fullest extent permitted under applicable law, the obligations of the respective investment and financing sources to provide the Equity Investment, the Equity Financing and the Debt Financing and shall use its reasonable best efforts to consummate the Equity Investment, Equity Financing and Debt Financing. BYOWC and Parent shall cause the capitalization and debt of Parent and its subsidiaries (other than the Company) after giving effect to the transactions contemplated hereby, to be satisfactory to the lenders under the Debt Financing. If any of the lenders or investors under the Debt Financing or Equity Financing is provided a solvency opinion, the Company shall be provided, as an addressee, with substantially the same opinion. Parent's obligations under this Section 5.13(a) shall not be construed in any way as restricting the ability of Parent to modify or otherwise alter the terms, conditions or relative amounts of any debt or equity financing (including arranging for substitute providers of such debt or equity financing) as long as such modification or alteration does not (i) reduce the aggregate amount of funds under the commitments for the Equity Investment, the Equity Financing and the Debt Financing entered into on or prior to the date hereof, (ii) add significant additional conditions to the funding of any of the Equity Investment, the Equity Financing or the Debt Financing, or (iii) have a significant adverse affect on or significantly delay the consummation of the Offer and/or the Merger. (b) The Company covenants and agrees that: (i) unless and until the Offer (including for this purpose any extensions pursuant to Section 1.02(d)) is consummated or this Agreement is terminated, the Company shall maintain on hand cash, cash equivalents and/or marketable securities (the "COMPANY OFFER CASH") in an amount equal to the sum of (x) $200,000,000 and (y) the Option Exercise Amount; (ii) the Company shall, simultaneously with Purchaser's first purchase of the Shares tendered in the Offer, fully and unconditionally guarantee (the "GUARANTEE") the Debt Financing and shall, simultaneously with Purchaser's first purchase of Shares tendered in the Offer, secure such Guarantee by a first priority lien on and security interest in (together with the lien and security interest securing the New Company Credit Facility) substantially all of the assets of the Company (including, to the extent not used -38- to purchase Shares in the Company Offer, the Company Offer Cash) on terms reasonably required by the provider of the Debt Financing, as approved by the Board of Directors of the Company (as constituted both before and after Parent has designated Directors pursuant to Section 1.04) provided that the New Company Credit Facility shall at the time have been substituted for the Company's existing bank credit facility; and (iii) simultaneously with Purchaser's first purchase of Shares tendered in the Offer, the Company shall enter into the New Company Credit Facility, and shall, simultaneously with Purchaser's first purchase of Shares tendered in the Offer, secure its obligations under the New Company Credit Facility by a first priority lien on and security interest in (together with the lien and security interest securing the Guarantee) substantially all of the assets of the Company (including, to the extent not used to purchase Shares in the Company Offer, the Company Offer Cash), on the terms set forth in Exhibit 3 and such other customary terms for credit facilities of this nature as shall reasonably be required by the provider for the New Company Credit Facility, as approved by the Board of Directors of the Company (as constituted both before and after Parent has designated Directors pursuant to Section 1.04). (c) The obligations contained in this Section 5.13 are not intended, nor shall they be construed, to benefit or confer any rights upon any third person. ARTICLE VI CONDITIONS TO THE MERGER The respective obligations of each party to effect the Merger shall be subject to the fulfillment or waiver at or prior to the Effective Time of the following conditions: SECTION 6.01 OFFER. The Offer Completion Date shall have occurred; PROVIDED that this condition shall be deemed to have been satisfied with respect to the obligation of Parent and Purchaser to effect the Merger if Purchaser fails to accept for payment or pay for Shares pursuant to the Offer in violation of the terms of the Offer or of this Agreement. SECTION 6.02 STOCKHOLDER APPROVAL. This Agreement shall have been adopted at or prior to the Effective Time by the requisite vote of the stockholders of the Company in accordance with the DGCL. SECTION 6.03 NO INJUNCTION OR ACTION. No order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other Governmental Authority which prohibits or prevents the consummation of the Merger which has not been vacated, dismissed or withdrawn prior to the Effective Time. The Company and Parent shall use all reasonable best efforts to have any of the foregoing vacated, dismissed or withdrawn by the Effective Time. SECTION 6.04 GOVERNMENTAL APPROVALS. All Consents of any Governmental Authority required for the consummation of the Merger and the transactions contemplated by this Agreement shall have been obtained, except for those Consents the failure to obtain which will not have a material adverse effect on the business, assets, condition (financial or other), -39- liabilities or results of operations of the Surviving Corporation and its subsidiaries taken as a whole. ARTICLE VII TERMINATION SECTION 7.01 TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, notwithstanding approval thereof by the stockholders of the Company: (a) subject to Section 1.04, by mutual written consent duly authorized by the Boards of Directors of Parent and the Company; or (b) by either Parent or the Company if the initial consummation of the Offer shall not have occurred on or prior to March 31, 2000; PROVIDED, HOWEVER, that the right to terminate this Agreement under this Section 7.01(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Offer to be consummated on or prior to such date; or (c) by either Parent or the Company if, as the result of the failure of the Minimum Condition or any of the other conditions set forth in Annex I hereto, the Offer shall have terminated or expired in accordance with its terms without Purchaser having purchased any Shares pursuant to the Offer, PROVIDED that if the failure to satisfy any conditions set forth in Annex I shall be a basis for termination of this Agreement under any other clause of this Section 7.01, a termination pursuant to this clause (c) shall be deemed a termination under such other clause; or (d) by either Parent or the Company if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger; or (e) by Parent, if, whether or not permitted to do so by this Agreement, the Board of Directors of the Company or the Company shall (x) (i) withdraw, modify or change its approval or recommendation of the Offer, this Agreement or the Merger in a manner adverse to Parent, (ii) approve or recommend to the stockholders of the Company an Acquisition Proposal or Alternative Transaction; or (iii) approve or recommend that the stockholders of the Company tender their shares in any tender or exchange offer that is an Alternative Transaction or (y) take any public position or make any disclosures to the Company's stockholders, whether or not permitted pursuant to Section 4.02(e), which has the effect of any of the foregoing; or (f) by Parent or the Company, if any representation or warranty of the Company or Parent, respectively, set forth in this Agreement shall be untrue when made (without for this purpose giving effect to qualifications of materiality contained in such representations and warranties), if such failure to be true and correct, individually or in -40- the aggregate, is reasonably likely to have a Material Adverse Effect (a "TERMINATING MISREPRESENTATION"); PROVIDED that, if such Terminating Misrepresentation is curable prior to the Initial Expiration Date (or any extension thereof) by the Company or Parent, as the case may be, through the exercise of its reasonable best efforts and for so long as the Company or Parent, as the case may be, continues to exercise such reasonable best efforts, neither Parent nor the Company, respectively, may terminate this Agreement under this Section 7.01(f); or (g) by Parent or the Company, if any representation or warranty of the Company or Parent, respectively, set forth in this Agreement, shall have become untrue (without for this purpose giving effect to qualifications of materiality contained in such representations and warranties) if such failure to be true and correct, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect (in either case, a "TERMINATING CHANGE"), in either case other than by reason of a Terminating Breach (as hereinafter defined); PROVIDED that, if any such Terminating Change is curable prior to the Initial Expiration Date (or any extension thereof) by the Company or Parent, as the case may be, through the exercise of its reasonable best efforts, and for so long as the Company or Parent, as the case may be, continues to exercise such reasonable best efforts, neither Parent nor the Company, respectively, may terminate this Agreement under this Section 7.01(g); or (h) by Parent or the Company, upon a material breach of any covenant or agreement on the part of the Company or Parent, respectively, set forth in this Agreement (a "TERMINATING BREACH"); PROVIDED THAT, except for any breach of the Company's obligations under Section 4.02, if such Terminating Breach is curable prior to the Initial Expiration Date (or any extension thereof) by the Company or Parent, as the case may be, through the exercise of its reasonable best efforts and for so long as the Company or Parent, as the case may be, continues to exercise such reasonable best efforts, neither Parent nor the Company, respectively, may terminate this Agreement under this Section 7.01(h); PROVIDED THAT, it is expressly agreed that for the purposes of this Section 7.01(h) (x) the Company's failure to obtain the consents required by the proviso of Section 5.11(c) shall be deemed to be material; and (y) a failure by Parent, Purchaser or BYOWC to comply with Section 5.13 shall be deemed to be material; or (i) by the Company, in order to accept a Superior Proposal; provided that (A) the Offer shall not theretofore have been consummated (or, if the Offer is consummated and extended, initially consummated); (B) the Board of Directors of the Company determines (after due consultation with independent counsel, which may be Jones, Day, Reavis & Pogue) that it is or is reasonably likely to be required to accept such proposal in order to discharge properly its fiduciary duties; (C) the Company has given Parent two full business days' advance notice of the Company's intention to accept such Superior Proposal; (D) the Company shall in fact thereafter accept such proposal; (E) the Company shall have paid the Fee and expenses pursuant to Section 7.04(b); and (F) the Company shall have complied in all respects with the provisions of Section 4.02. -41- Notwithstanding the foregoing, the right to terminate this Agreement pursuant to clauses (e), (f), (g) and (h) above shall not be available to Parent if Purchaser or any other affiliate of Parent shall have acquired Shares pursuant to the Offer; As used herein, "ALTERNATIVE TRANSACTION" means any of (i) a transaction pursuant to which any person (or group of persons) other than Parent or its affiliates (a "THIRD PARTY") acquires or would acquire more than 30% of the outstanding shares of any class of equity securities of the Company, whether from the Company or pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or other business combination involving the Company pursuant to which any Third Party acquires more than 30% of the outstanding equity securities of the Company or the entity surviving such merger or business combination, (iii) any transaction pursuant to which any Third Party acquires or would acquire control of assets (including for this purpose the outstanding equity securities of subsidiaries of the Company and securities of the entity surviving any merger or business combination including any of the Company's subsidiaries) of the Company, or any of its subsidiaries having a fair market value (as determined by the Board of Directors of the Company in good faith) equal to more than 30% of the fair market value of all the assets of the Company and its subsidiaries, taken as a whole, immediately prior to such transaction, or (iv) any other consolidation, business combination, recapitalization or similar transaction involving the Company or any of the Company Significant Subsidiaries that are "significant" under Regulation S-X at a level of 30% or more, other than the transactions contemplated by this Agreement; PROVIDED, HOWEVER, that the term Alternative Transaction shall not include any acquisition of securities by a broker dealer in connection with a BONA FIDE public offering of such securities. SECTION 7.02 [INTENTIONALLY OMITTED] SECTION 7.03 EFFECT OF TERMINATION. In the event of the termination of this Agreement pursuant to Section 7.01, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto or any of its affiliates, directors, officers or stockholders except for any obligation of Company, BYOWC or Parent set forth in Section 7.04 hereof. Notwithstanding the foregoing, nothing herein shall relieve the Company, BYOWC or Parent from liability for any willful breach hereof (it being understood that (x) the provisions of Section 7.04 do not constitute a sole or exclusive remedy for such willful breach and (y) the mere existence of a Material Adverse Effect, by itself, shall not constitute such a willful breach), and nothing shall relieve BYOWC or the Company or any of their affiliates of their obligations under the Confidentiality Agreement. SECTION 7.04 FEES AND EXPENSES. (a) Except as set forth in this Section 7.04, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Merger is consummated; PROVIDED, HOWEVER, that Parent and the Company shall share equally all SEC filing fees and printing expenses incurred in connection with the printing and filing of the Proxy Statement (including any preliminary materials related thereto) and any amendments or supplements thereto. (b) The Company shall pay Parent a fee of $14,500,000 (the "FEE") and shall also pay Parent $3,000,000 to reimburse Parent for documented expenses relating to the -42- transactions contemplated by this Agreement (which expenses shall include all fees and expenses payable to any financing sources) upon the first to occur of any of the following events: (i) the termination of this Agreement by Parent or the Company pursuant to Section 7.01(b) or Section 7.01(c), PROVIDED THAT an Alternative Transaction shall be publicly announced by the Company or any third party within nine months following the date of such termination and such transaction shall at any time thereafter be consummated on substantially the terms theretofore announced; PROVIDED, HOWEVER, that for the purpose of this clause (i), all references to "30%" in the definition of Alternative Transaction shall be deemed to refer to "40%;" (ii) the termination of this Agreement by Parent pursuant to Section 7.01(e); or (iii) the termination of this Agreement by the Company pursuant to Section 7.01(i). (c) Upon a termination of this Agreement by Parent pursuant to Section 7.01(f) or 7.01(h), the Company shall pay to Parent Parent's actual, documented and reasonable out-of-pocket expenses relating to the transaction contemplated by this Agreement (including, but not limited to, fees and expenses of counsel and accountants), but in no event more than $3,000,000, and shall also pay to Parent Parent's actual and documented out-of-pocket expenses in the nature of fees, costs and expenses paid to financing sources. (d) Parent shall pay the Company's actual, documented and reasonable out-of-pocket expenses relating to the transactions contemplated by this Agreement (including, but not limited to, fees and expenses of counsel and accountants and out-of-pocket expenses of financial advisors), such payment of Company Expenses not to exceed $3,000,000, upon the termination of this Agreement by the Company pursuant to Section 7.01(f) or 7.01(h). (e) The Fee and expenses payable pursuant to Section 7.03(b), or the expenses payable pursuant to Section 7.03(c), and the expenses payable pursuant to Section 7.03(d), shall be paid within one business day after a demand for payment following the first to occur of any of the events described in Section 7.03(b), Section 7.03(c) or Section 7.03(d), as applicable; PROVIDED THAT, in no event shall the Company be required to pay the Fee or any expenses to Parent, nor shall Parent be required to pay any expenses to the Company if, immediately prior to the termination of this Agreement, the entity entitled to receive such fee and/or expenses was in material breach of its obligations under this Agreement. ARTICLE VIII GENERAL PROVISIONS SECTION 8.01 EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. (a) Except as otherwise provided in this Section 8.01, the representations, warranties and agreements of each party hereto shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any other party hereto, any person controlling any -43- such party or any of their officers or directors, whether prior to or after the execution of this Agreement. The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 7.01, as the case may be, except that the agreements set forth in Article I and Sections 5.05 and any other agreement in this Agreement which contemplates performance after the Effective Time shall survive the Effective Time indefinitely and those set forth in Section 7.03 shall survive termination indefinitely. The Confidentiality Letter shall survive termination of this Agreement. (b) Any disclosure made with reference to one or more Sections of the Company Disclosure Schedule shall be deemed disclosed with respect to each other section therein as to which such disclosure is relevant provided that such relevance is reasonably apparent. Disclosure of any matter in the Company Disclosure Schedule shall not be deemed an admission that such matter is material. No statement contained in any certificate or schedule required to be furnished by any party pursuant to this Agreement, including the Company Disclosure Schedule, shall contain any untrue statement of a material fact or omit to state any material facts necessary under the circumstances, in order to make the other statements contained therein not misleading. SECTION 8.02 CERTAIN LIMITATIONS. (a) The representations and warranties made in this Agreement by the Company shall be deemed for all purposes to be qualified by the disclosures made in the Company Disclosure Schedule, regardless of whether in the case of any particular representation or warranty such representation or warranty refers to the specific section of the Company Disclosure Schedule in which disclosure is made or to any other portion thereof, so long as the relevance of a disclosure to the matter in question in another portion of the Company Disclosure Schedule is reasonably apparent. (b) The parties hereto expressly acknowledge that regardless of the facts or circumstances, (i) no financial advisor, attorney, director, officer, employee, member, manager, stockholder or other representative of any party (a "REPRESENTATIVE") had, has or will have any duty to any other party in connection with this Agreement or the transaction contemplated hereby and (ii) no party will have any right of recovery against a Representative of any other party by reason of this Agreement or the transactions contemplated hereby on any theory, whether for alleged breach of contract, negligent misrepresentation, actual or constructive fraud, federal or state securities or other laws or otherwise; PROVIDED, HOWEVER, that nothing in this Section shall relieve any party of liability for the acts or omissions of its Representatives to the extent such liability attaches under this Agreement or applicable principles of law. (c) The parties hereto hereby waive any and all claims or causes of action that might be asserted in connection with the transactions contemplated by this Agreement, including under common law (including common law fraud, constructive fraud, negligent misrepresentation or similar theories) or federal or state securities law including Rule 10b-5 under the Securities Exchange Act, trade regulation, environmental or other laws, except for claims or causes of action brought under and subject to the terms of this Agreement. (d) Each of the parties is a sophisticated legal entity that was advised by experienced counsel and, to the extent it deemed necessary, other advisors in connection with this Agreement, the events giving rise hereto and the transactions contemplated hereby, including -44- the Merger (collectively, the "Transaction"). Accordingly, each of the parties hereby acknowledges and agrees (on behalf of itself and its affiliates) that: (i) No party has relied or will rely upon any written or oral information previously furnished to or discovered by it or its representatives (including without limitation data room information or oral or written information previously furnished by or on behalf of the Company in connection with the Transaction, including without limitation information furnished by the Company, any affiliate of any of the Company or any of their respective Representatives, other than this Agreement (including the Schedules hereto); (ii) There are no representations or warranties by or on behalf of any party hereto, the Company, any of their respective affiliates or any Company Representative in respect of the Transaction other than those expressly set forth in this Agreement (including the Schedules hereto); and (iii) The parties' respective rights, obligations and remedies with respect to the Transaction will be solely pursuant to this Agreement. SECTION 8.03 NOTICES. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made if and when delivered personally or by overnight courier to the parties at the following addresses or sent by electronic transmission, with confirmation received, to the telecopy numbers specified below (or at such other address or telecopy number for a party as shall be specified by like notice): (a) If to Parent: BYOWC Partners LLC 9965 Wilshire Blvd. Beverly Hills, CA 90212 Attn: Alfred D. Boyer Telecopy: (310) 937-6149 Confirm: (310) 247-2711 With a copy to: Kramer Levin Naftalis & Frankel LLP 919 Third Avenue New York, NY 10022 Attn: Joshua M. Berman, Esq. Telecopy: (212) 715-8000 Confirm: (212) 715-9100 -45- (b) If to the Company: Micro Warehouse, Inc. 535 Connecticut Avenue Norwalk, CT 06854 Attn: Bruce L. Lev, Esq. Telecopy: (203) 899-4000 Confirm: (203) 899-4312 With a copy to: Jones, Day, Reavis & Pogue 599 Lexington Avenue New York, New York 10022 Attn: Randi L. Strudler, Esq. Telecopy: (212) 755-7306 Confirm: (212) 326-3939 SECTION 8.04 CERTAIN DEFINITIONS. For purposes of this Agreement, the term: (a) "affiliates" means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; (b) "business day" means any day other than a day on which banks in New York are required or authorized to be closed, except that for the purpose of determining any period of time prescribed by the rules and regulations of the SEC, "business day" shall mean any day other than a day on which the SEC is officially closed; (c) "control" (including the terms "controlled by" and "under common control with") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement or otherwise; (d) "knowledge of the Company" means the actual knowledge of the executive officer of the Company and those persons employed by the Company who have primary responsibility for the matter in question after reasonable review of the applicable files in such person's possession, without a duty to conduct any special investigation outside of the ordinary course of business; (e) "person" means an individual, corporation, partnership, limited liability company, association, trust, unincorporated organization, other entity or group (as defined in Section 13(d)(3) of the Securities Exchange Act); and (f) "subsidiary" or "subsidiaries" of the Company, the Surviving Corporation, Parent, BYOWC or any other person means any corporation, partnership, joint venture or other legal entity of which the Company, the Surviving Corporation, Parent, BYOWC or -46- such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests the 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. SECTION 8.05 AMENDMENT. This Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; PROVIDED, HOWEVER, that, after approval of the Merger and this Agreement by the stockholders of the Company, no amendment may be made which by law requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 8.06 WAIVER. At any time prior to the Effective Time, any party hereto may with respect to any other party hereto (a) extend the time for the performance of any of the obligations or other acts, (b) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto, or (c) waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. SECTION 8.07 HEADINGS. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 8.08 SEVERABILITY. (a) 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 contemplated hereby is not affected in any manner adverse to any party. Upon a 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. (b) The Company and Parent agree that the Fee and expense provisions in Section 7.04 are fair and reasonable in the circumstances. If a court of competent jurisdiction shall nonetheless, by a final, non-appealable judgment, determine that the amount of either the Fee or the expenses exceeds the maximum amount permitted by law, then the amount of such Fee or expenses shall be reduced to the maximum amount permitted by law in the circumstances, as determined by such court of competent jurisdiction. SECTION 8.09 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and supersedes all prior agreements and undertakings (other than the Confidentiality Letter, except to the extent specifically superseded hereby), both written and oral, among the parties, or any of them, with respect to the subject matters hereof and thereof, except as otherwise expressly provided herein or therein. SECTION 8.10 ASSIGNMENT; MODIFICATION OF STRUCTURE. (a) This Agreement shall not be assigned by operation of law or otherwise; except that all or any of the -47- rights of Parent and/or Purchaser hereunder may be assigned to any subsidiary of BYOWC; provided that no such assignment shall relieve the assigning party of its obligations hereunder. (b) At the election of Parent, BYOWC, Parent, Purchaser and the Company shall take all steps necessary such that the merger of Purchaser and the Company shall be structured as a merger of Purchaser with and into the Company, with the Company being the Surviving Corporation, in accordance with the provisions of the DGCL. Except as may be necessary to reflect this change in transaction structure, the terms of this Agreement and the obligations of the parties pursuant hereto shall remain unchanged. SECTION 8.11 PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement, including, without limitation, by way of subrogation, other than Section 5.05 (which is intended to be for the benefit of the Indemnified Parties and Officer Employees and may be enforced by such Indemnified Parties and Officer Employees). SECTION 8.12 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. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 8.13 ENFORCEMENT; GOVERNING LAW; JURISDICTION. (a) This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Delaware applicable to contracts executed and fully performed within the State of Delaware, regardless of laws that might otherwise govern under applicable principles of conflict of laws thereof. (b) The parties agree that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Federal court located in the State of Delaware or in Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. (c) Each of the parties hereto (I) (a) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement and (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, and (II) (a) agrees that any action under this Agreement may also be brought in any Federal or state court located in the City of New York, Borough of Manhattan and (b) agrees that it will not by motion or other action contest the -48- bringing of any such action in the above mentioned courts rather than in any other venue or forum. SECTION 8.14 COUNTERPARTS. This Agreement may be executed in two or more 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. A facsimile copy of a signature page shall be deemed and original signature page. SECTION 8.15 WAIVER OF JURY TRIAL. BYOWC, PARENT AND PURCHASER AND THE COMPANY HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 8.16 OBLIGATIONS OF BYOWC. BYOWC shall be jointly and severally responsible with Parent and/or Purchaser for each and every obligation of Parent or Purchaser under this Agreement to be performed at or prior to the Effective Time. SECTION 8.17 INTERPRETATION. When a reference is made in this Agreement to an Article, Section or Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. The table of contents to this Agreement is for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. -49- IN WITNESS WHEREOF, BYOWC, Parent, Purchaser and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. BYOWC PARTNERS LLC By: /s/ Alfred D. Boyer --------------------------------- Name: Alfred D. Boyer Title: Managing Member BRIDGEPORT HOLDINGS INC. By: /s/ Alfred D. Boyer --------------------------------- Name: Alfred D. Boyer Title: Vice President BRIDGEPORT ACQUISITION CORPORATION By: /s/ Alfred D. Boyer --------------------------------- Name: Alfred D. Boyer Title: Vice President MICRO WAREHOUSE, INC. By: /s/ Bruce L. Lev --------------------------------- Name: Bruce L. Lev Title: Executive Vice President -50- ANNEX I CONDITIONS TO THE OFFER. Notwithstanding any other provision of the Purchaser Offer, 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) promulgated under the Securities Exchange Act (relating to the obligation of Purchaser to pay for or return tendered Shares promptly after termination or withdrawal of the Purchaser Offer), pay for, and (subject to any such rules or regulations) may delay the acceptance for payment of any tendered Shares and (except as provided in this Agreement) amend or terminate the Purchaser Offer if (i) there shall not be validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares such that, upon consummation of the Offer and contribution to the Purchaser of the Shares owned by BYOWC, Purchaser would own at least 51% of the total number of issued and outstanding Shares on a fully diluted basis, (the "MINIMUM CONDITION") or (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated prior to the expiration of the Offer or (iii) at any time after the date of this Agreement and before the initial time of acceptance of Shares for payment pursuant to the Offer, any of the following conditions exists, (a) there shall be in effect an injunction or other order, decree, judgment or ruling by a Governmental Authority of competent jurisdiction or a law, rule or regulation shall have been promulgated, or enacted by a Governmental Authority of competent jurisdiction which in any such case (i) restrains or prohibits the making or consummation of the Offer or the consummation of the Merger, or (ii) prohibits or restricts the ownership or operation by Parent (or any of its affiliates or subsidiaries) of any portion of the Company's business or assets, which is material to the business of the Company taken as a whole or which would substantially deprive Parent and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, or compels Parent (or any of its affiliates or subsidiaries) to dispose of or hold separate any portion of the Company's business or assets, or its or BYOWC's business or assets, or which would substantially deprive Parent and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, or (iii) imposes material limitations on the ability of Purchaser effectively to acquire or to hold or to exercise full rights of ownership of the Shares, including, without limitation, the right to vote Shares purchased by Purchaser pursuant to the Offer or acquired by Parent in the Merger on all matters properly presented to the stockholders of the Company, or (iv) imposes any material limitations on the ability of Parent and/or its affiliates or subsidiaries effectively to control in any material respect the business and operations of the Company (other than, prior to the Effective Time, by reason of there being minority stockholder in the Company); or (b) there shall have been instituted, pending or threatened (in writing or by public announcement) an action by a Governmental Authority seeking (i) to restrain or prohibit the making or consummation of the Offer or the consummation of the Merger or (ii) to impose any other restriction, prohibition or limitation referred to in the foregoing paragraph (a); or (c) this Agreement shall have been terminated by the Company or Parent in accordance with its terms; or (d) Parent and the Company shall have agreed in writing that Purchaser shall amend the Offer to terminate the Offer or postpone the payment for Shares pursuant thereto; or -51- (e) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in the Shares on NASDAQ or (ii) a declaration of a banking moratorium or any general suspension of payments in respect of banks in the United States; or (f) all proceeds of the Financing necessary to consummate the Offer shall not have been received by Purchaser or the New Company Credit Facility shall not be in effect; PROVIDED that this condition shall not apply if (x) the failure of Purchaser to receive the proceeds of the Financing or the failure of the New Company Credit Facility to be in effect shall have been occasioned by the action or inaction by BYOWC or Parent, which action or inaction also constitutes a breach of any material covenant, representation or warranty of BYOWC or Parent under this Agreement or (y) the failure of Purchaser to receive the proceeds of the Equity Financing shall have been occassioned by the inability to document such financing in a manner reasonably satisfactory to Freeman Spogli; or (g) any of the representations and warranties made by the Company in this Agreement shall not have been true and correct when made, or shall thereafter have ceased to be true and correct as if made as of such later date (other than representations and warranties made as of a specified date) (in each case without for this purpose giving effect to qualifications of materiality contained in such representation and warranty), or the Company shall not have performed each obligation and agreement and complied with each covenant to be performed and complied with by it under this Agreement, if such failure to be true and correct or such failure to perform, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect, PROVIDED, HOWEVER, that such breach or failure to perform is incapable of being cured or has not been cured the Initial Expiration Date (as it may be extended); or (h) the Company's Board of Directors shall have modified or amended its recommendation of the Offer in any manner adverse to Parent or shall have withdrawn its recommendation of the Offer, or shall have recommended acceptance of any Acquisition Proposal or shall have resolved to do any of the foregoing; or (i) (i) any corporation, entity or "group" (as defined in Section 13(d)(3) of the Securities Exchange Act) ("PERSON/GROUP"), other than Parent and Purchaser and any person/group identified in the Company's Proxy Statement dated June 3, 1999), shall have acquired beneficial ownership of more than 15% of the outstanding Shares, or shall have been granted any options or rights, conditional or otherwise, to acquire a total of more than 15% of the outstanding Shares and which, in each case, does not tender the Shares beneficially owned by it in the Offer; (ii) any new group shall have been formed which beneficially owns more than 15% of the outstanding Shares and which does not tender the Shares beneficially owned by it in the Offer; or (iii) any person/group (other than Parent or one or more of its affiliates) shall have entered into an agreement in principle or definitive agreement with the Company with respect to a tender or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Company; or (j) any change, development, effect or circumstance shall have occurred or be threatened that is reasonably likely to have a Material Adverse Effect with respect to the Company; or (k) the Rights shall have become exercisable; or -52- (l) the Company shall commence a case under any chapter of Title XI of the United States Code or any similar law or regulation; or a petition under any chapter of Title XI of the United States Code or any similar law or regulation is filed against the Company which is not dismissed within 2 business days; or (m) the Company Offer shall not be consummated at the same time as the Purchaser Offer (other than by reason of the fact that the number of Shares tendered in the Offer were not sufficient to require the purchase of Shares by the Company in the Offer pursuant to Section 1.02). The foregoing conditions are for the sole benefit of Parent and Purchaser and may be asserted by Parent and Purchaser regardless of the circumstances giving rise to any such condition, and may be waived by Parent and Purchaser, in whole or in part, at any time and from time to time, in the sole discretion of Parent and Purchaser. The failure by Parent and Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any right, the waiver of such right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right shall be deemed an ongoing right which may be asserted at any time and from time to time. Should the Purchaser Offer be terminated pursuant to the foregoing provisions, all tendered Shares not theretofore accepted for payment pursuant thereto shall forthwith be returned to the tendering stockholders. -53- ANNEX II CONDITIONS TO THE OFFER. Notwithstanding any other provision of the Company Offer, the Company shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Securities Exchange Act (relating to the obligation of the Company to pay for or return tendered Shares promptly after termination or withdrawal of the Company Offer), pay for, and (subject to any such rules or regulations) `may delay the acceptance for payment of any tendered Shares and (except as provided in this Agreement) amend or terminate the Company Offer for if (i) there shall not be validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares such that, upon consummation of the Offer and contribution to the Purchaser of the BYOWC Shares, Purchaser would own at least 51% of the total number of issued and outstanding Shares on a fully diluted basis, (the "MINIMUM CONDITION") or (ii) any applicable waiting period under the HSR Act shall not have expired or been terminated prior to the expiration of the Offer or (iii) at any time after the date of this Agreement and before the initial time of acceptance of Shares for payment pursuant to the Offer, any of the following conditions exists, (a) there shall be in effect an injunction or other order, decree, judgment or ruling by a Governmental Authority of competent jurisdiction or a law, rule or regulation shall have been promulgated, or enacted by a Governmental Authority of competent jurisdiction which in any such case restrains or prohibits the making or consummation of the Offer or the consummation of the Merger; or (b) there shall have been instituted, pending or threatened (in writing or by public announcement) an action by a Governmental Authority seeking to restrain or prohibit the making or consummation of the Offer or the consummation of the Merger; or (c) this Agreement shall have been terminated by the Company or Parent in accordance with its terms, including by the Company pursuant to Section 7.01(i); or (d) Parent and the Company shall have agreed that Purchaser shall amend the Offer to terminate the Offer or postpone the payment for Shares pursuant thereto; or (e) there shall have occurred (i) any general suspension of, or limitation on prices for, trading in the Shares on NASDAQ or (ii) a declaration of a banking moratorium or any general suspension of payments in respect of banks in the United States; or (f) any of the representations and warranties made by Parent in the Merger Agreement shall not have been true and correct when made, or shall thereafter have ceased to be true and correct as if made as of such later date (other than representations and warranties made as of a specified date) (in each case without for this purpose giving effect to qualifications of materiality contained in such representation and warranty), or Parent shall not have performed each obligation and agreement and complied with each covenant to be performed and complied with by it under this Agreement, if such failure to be true and correct or such failure to perform, individually or in the aggregate, is reasonably likely to have a Material Adverse Effect, PROVIDED, however, that such breach or failure to perform is incapable of being cured or has not been cured the Initial Expiration Date (as it may be extended); or -54- (g) the New Company Credit Facility shall not be in effect, PROVIDED that this condition shall not apply if the failure of the New Company Credit Facility to be in effect shall have been occasioned by the action or inaction of the Company, which action or inaction also constitutes a breach of any material covenant, representation or warranty of the Company under this Agreement; or (h) the Purchaser Offer shall not be consummated at the same time as the Company Offer. The foregoing conditions are for the sole benefit of the Company and may be asserted by the Company regardless of the circumstances giving rise to any such condition, and may be waived by the Company, in whole or in part, at any time and from time to time, in the sole discretion of the Company. The failure by the Company at any time to exercise any of the foregoing rights shall not be deemed a waiver of any right, the waiver of such right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right shall be deemed an ongoing right which may be asserted at any time and from time to time. Should the Company Offer be terminated pursuant to the foregoing provisions, all tendered Shares not theretofore accepted for payment pursuant thereto shall forthwith be returned to the tendering stockholders. -55- EXHIBIT 1 TO THE AGREEMENT AND PLAN OF MERGER BY AND AMONG BYOWC PARTNERS LLC, BRIDGEPORT HOLDINGS INC. BRIDGEPORT ACQUISITION CORPORATION AND MICRO WAREHOUSE, INC. SUMMARY OF TERMS OF WARRANT* ISSUER: Surviving Corporation SECURITY: Warrant to purchase common stock. NUMBER OF SHARES: The sum of (i) the number of Shares purchased by the Company in the Offer; (ii) the number of shares exchanged for cash consideration in the Merger; and (iii) the number of Dissenting Shares. EXERCISE PRICE: $19 per share in cash. DATE OF ISSUANCE: The Closing Date of the Merger. TERM: 10 years from the date of issuance. ANTI-DILUTION: Subject to customary anti-dilution provisions. Assumes an initial number of shares of common stock of the Surviving Corporation equal to the number of Shares held by BYOWC, Parent, Purchaser or any direct or indirect wholly owned subsidiary of BYOWC immediately prior to the Effective Time. - -------- * Defined terms have the meanings assigned to them in the Merger Agreement. -56- EXHIBIT 2 December 20, 1999 BYOWC Partners LLC 9965 Wilshire Boulevard Beverly Hills, California 90212 RE: PROJECT BRIDGEPORT Gentlemen: The purpose of this letter is to set forth the undersigned's commitment to provide preferred and common equity financing for the acquisition, by a new company ("Acquisition") to be formed by the undersigned and you and your associates, of all of the common stock of Bridgeport, Inc. in a combined tender offer, self tender and merger pursuant to an acquisition agreement (the "Acquisition Agreement") in form and substance satisfactory to the undersigned and you. Attached hereto are Summary Term Sheets for (i) a Securities Purchase Agreement pursuant to which the undersigned would purchase preferred stock (the "Preferred Shares") of Acquisition's parent ("Holdings") and 50 percent of the common stock (the "Common Shares") of Holdings (with the other 50 percent of the Common Shares to be purchased by you and your associates), (ii) warrants to purchase Common Shares representing 20 percent of the initial primary Common Shares, which would be acquired by you and your associates, and (iii) a Securityholders Agreement providing for certain matters relating to, among other things, the composition of Holding's board of directors and its governance and certain rights and obligations, including registration rights, relating to exit transactions. We are pleased to commit, subject to the conditions set forth herein and in the attachments hereto, to purchase, at the Closing under the Acquisition Agreement, (i) the Preferred Shares, for an aggregate of $50 million, and (ii) 50 percent of the Common Shares, for an aggregate of $80 million. This commitment is subject to the following conditions: 1. The negotiation, execution and delivery of the documentation referenced herein in form and substance reasonably satisfactory to us (it being understood that we have reviewed the Acquisition Agreement and are satisfied with it, provided that it is not be amended without our consent). 2. The availability of debt financing, including a term loan and a revolver, in amounts and on terms and conditions consistent with the form of Commitment Letter attached hereto. 3. The satisfaction of the conditions described in the attachments hereto. FS Equity Partners IV, L.P. is excited about the opportunity to invest in Bridgeport. We are available to discuss this commitment letter at your earliest convenience. Please contact Charles Rullman at (310) 444-1833 or Jon Ralph at (310) 444-1842 with any questions regarding this letter. Sincerely yours, FS Equity Partners IV, L.P. By: FS Capital Partners LLC, its general partner By: /s/ Charles P. Rullman --------------------------------------- Name: Charles P. Rullman Title: Vice President AGREED AND ACCEPTED: BYOWC Partners LLC By: /s/ Alfred D. Boyer ------------------------------- Name: Alfred D. Boyer Title: Managing Member PROJECT BRIDGEPORT SUMMARY OF TERMS FOR SECURITIES PURCHASE AGREEMENT ISSUER: Bridgeport Holdings Inc. PURCHASER: FS Equity Partners IV, L.P. and its designees (collectively, "FS Fund") (any reference herein to a right of FS Fund may be exercised by a majority in interest of the persons comprising FS Fund). SECURITIES PURCHASED: o 50% of the Common Shares issued and outstanding at closing, as per the attached Schedule 1. o $50 million liquidation preference of Preferred Shares. The Preferred Shares will have the terms set forth on Schedule 2 attached hereto. REPRESENTATIONS AND WARRANTIES: Customary representations and warranties as to corporate housekeeping matters. CONDITIONS: o The negotiation, execution and delivery of the various transaction agreements in form and substance satisfactory to FS Fund (it being understood that FS Fund has reviewed and is satisfied with the form of Acquisition Agreement, provided that it is not amended without the consent of FS Fund). o The satisfaction (and not, unless FS Fund consents in writing, the waiver) of each condition to the obligations of Purchaser to purchase shares in the offer as set forth in the Acquisition Agreement, including the absence of a material adverse change. o The continuing favorable recommendation of the Board of Directors of Bridgeport of the transactions contemplated by the Acquisition Agreement. o The absence of any legal prohibition on FS Fund purchasing the Common Shares and Preferred Shares and executing, delivering and performing under the transaction documentation. o The availability of debt financing, including a term loan and a revolver, as contemplated by the debt financing commitment letter. o BYOWC and its designees shall have purchased the Common Shares to be purchased by them as per Schedule 1. SCHEDULE 1 PROJECT BRIDGEPORT CAPITAL STRUCTURE The contemplated acquisition of Bridgeport, Inc. (the "Company") will be accomplished through tender offers for the outstanding shares of the Company made by Bridgeport Acquisition, Inc. ("Acquisition") and the Company. The purchase of shares by Acquisition pursuant to the tender offers will be funded by the equity contributions referred to below and bank financing. Upon consummation of the tender offers, Acquisition will own at least 51% of the shares of the Company on a fully diluted basis. Following the tender offers, Acquisition will be merged with the Company, and Acquisition will be the surviving corporation. Acquisition will be wholly owned by Bridgeport Holdings Inc. ("Holdings"). Following the merger, the surviving corporation will be wholly owned by Holdings. The following describes the capital structure of Holdings, which will be in effect upon consummation of the tender offers except as noted: 1. FREEMAN SPOGLI. Freeman Spogli and its designees will contribute $80,000,000 to Holdings and will receive 50% of the common equity of Holdings. In addition, Freeman Spogli and its designees will contribute $50,000,000 for the purchase of Preferred Shares of Holdings. Upon consummation of the merger, such securities may be exchanged for Preferred Shares of the Company having substantially identical terms. 2. BYOWC. BYOWC, and other investors identified by it, will contribute $80,000,000 in cash or common stock of the Company and will receive 50% of the common equity of Holdings. 3. WARRANTS. BYOWC will receive warrants to acquire Common Shares of Holdings exercisable for a number of shares equal to 20% of the common equity referred to in (1) and (2) above. 4. MANAGEMENT OPTIONS. Following consummation of the merger, management may receive options to acquire Common Shares of Holdings equal to up to 10% of the common equity referred to in (1) and (2) above. Sch. 1-1 SCHEDULE 2 - SUMMARY OF TERMS FOR PREFERRED SHARES ISSUER: Initially Bridgeport Holdings Inc., but may be exchanged for preferred shares of the Bridgeport (the "Company") on substantially identical terms following consummation of the merger contemplated by the Acquisition Agreement (the "Merger"). PURCHASER: FS Fund. SECURITY: 14% Preferred Stock with option to capitalize dividend (if the Preferred Shares are held by any person other than FS Fund, the option to capitalize dividend shall expire after five years; PROVIDED, HOWEVER, that payment of cash dividends is permitted or allowed for under the terms of the Company's bank financing). AMOUNT: $50.0 million ($1,000 per share). DIVIDENDS: At a rate payable or capitalized semi-annually to yield 14.00% per year. MATURITY: 8 years. OPTIONAL REDEMPTION: None. MANDATORY REDEMPTION: In the event of a change of control, Issuer must offer to purchase for cash all outstanding Preferred Shares at a price of 101% plus accrued dividends. Redeemable in full at maturity. LIQUIDATION PREFERENCE: Holders of Preferred Shares will have a senior liquidation preference equal to $1,000 per share, plus accrued dividends. SYNDICATION RIGHT: FS Fund may sell down any amount of the Preferred Shares at any time. Any equity necessary to syndicate the Preferred Shares will be provided by FS Fund. Issuer and FS Fund will cooperate and coordinate with respect to such syndication process. PROTECTIVE PROVISIONS: Issuer will not issue preferred stock that is senior to or pari passu with the Preferred Shares, and no subsidiary of Issuer will issue any preferred stock, Sch. 2-1 in each case without the consent of the holders of a majority of the Preferred Shares. BOARD RIGHT: If Issuer fails to redeem the Preferred Shares at maturity, the holders of a majority in interest of the Preferred Shares will have the right to appoint one director to Issuer's board of directors. Sch. 2-2 PROJECT BRIDGEPORT SUMMARY OF TERMS FOR WARRANTS ISSUER: Bridgeport Holdings Inc. PURCHASER: BYOWC. SECURITY: Warrants to purchase Common Shares. AMOUNT: Warrants to purchase Common Shares representing 20% of the Common Shares issued at closing, as provided on Schedule I, for an aggregate initial exercise price of $32,000,000. EXERCISE PRICE: The date of issuance of the Warrants and each anniversary of such date is hereinafter referred to as an "Anniversary Date". The aggregate exercise price of all of the Warrants from and after the date of issuance of the Warrants through the date six months following such date shall be $32,000,000. On the day following such date, and every six months thereafter, the exercise price shall be increased by 15% of the exercise price on the most recent Anniversary Date. EXERCISE DATE: The Warrants will be exercisable at any time after the third anniversary of the transactions contemplated by the Acquisition Agreement or in the event of a change of control of Issuer. Once exercisable, the Warrants can be exercised for cash or, following an initial public offering or other liquidation event, by tendering shares or Warrants. The right to exercise the Warrants will expire upon the eighth anniversary of the transactions contemplated by the Acquisition Agreement. REGISTRATION RIGHTS: The Issuer will afford customary resale demand and piggyback registration rights to the holders of the Warrants and the Common Shares underlying the Warrants beginning six months after the Issuer's initial public offering of the Common Shares. In addition, to the extent permitted under the rules and 1 practices of the Securities and Exchange Commission, the Issuer will register the issuance of the Common Shares issuable upon exercise of the Warrants to a purchaser in a registered resale thereof. OTHER PROVISIONS: Such other provisions as are reasonable and customary, including anti-dilution protection for stock splits and stock distribution and the treatment of the Warrants in a business combination transaction in which the Issuer is not the surviving public company. 2 PROJECT BRIDGEPORT SUMMARY OF TERMS FOR SECURITYHOLDERS AGREEMENT [To be executed by holders of] Common Shares and Warrants] BOARD REPRESENTATION: The securityholders will agree to vote their securities to cause the election of three nominees of FS Equity Partners IV, L.P. ("FS Equity Partners") and four nominees of BYOWC to the board of directors of Issuer. GOVERNANCE: Issuer will not take any of the following actions without the affirmative vote of five directors: (i) consummate or submit to securityholders a merger, sale or change of control transaction, (ii) purchase or sell material assets, (iii) enter into any material financing transaction or sell any securities to the public, (iv) consummate any transaction with an affiliate of any securityholder, (v) enter into any line of business other than lines of business Issuer or its competitors currently conduct, (vi) hire or terminate Issuer's chief executive officer, (vii) dissolve, liquidate or wind-up Issuer, (viii) declare voluntary bankruptcy or (ix) amend Issuer's certificate of incorporation or bylaws. INFORMATION RIGHTS: Issuer will furnish the securityholders with (i) quarterly financial statements no later than 45 days following the end of each fiscal quarter and (ii) audited annual financial statements no later than 90 days following the end of each fiscal year. RIGHT OF FIRST OFFER: Securityholders will have the right to purchase their pro-rata share (based on the number of Common Shares held by such person) of any Common Shares or warrants proposed to be transferred by other securityholders to third parties (other than transfers to permitted transferees, transfers pursuant to an underwritten public offering or transfers in the public securities market following the Issuer's initial public offering). 1 TAG-ALONG RIGHTS: Securityholders will have the right to tag-along on a pro-rata basis (based on the number of Common Shares held by such person) in transfers by other securityholders of Common Shares aggregating in excess of one percent of the then outstanding Common Shares (other than transfers to permitted transferees, transfers pursuant to an underwritten public offering or transfers in the public securities market following the Issuer's initial public offering.) SYNDICATION RIGHTS: Notwithstanding anything to the contrary herein, transfers of Preferred Shares held immediately after the closing by FS Fund will not be subject to the rights of first offer or tag-along rights described above. FS Fund will also be entitled to transfer such Preferred Shares, together with such number of Common Shares as FS Fund shall determine, as an investment unit and the transfer of Common Shares as part of such investment unit also will not be subject to the rights of first offer or tag-along rights described above. The purchasers of such investment unit will, in FS Fund's discretion, execute either the Securityholders Agreement or alternative documentation providing that the purchaser will be subject to all of the obligations (other than obligations to give tag-along rights) and may succeed to certain of the rights of FS Fund contained in the Securityholders Agreement. FS Equity Partners may, in its discretion, assign to any such purchaser its rights to nominate not more than one director of Issuer. PREEMPTIVE RIGHTS: Securityholders will have the right to purchase on a pro-rata basis (based on the number of Common Shares held by such person) any equity securities (or securities convertible into or exchangeable for equity securities) issued by Issuer. Preemptive rights will not apply to (i) issuances to employees, officer and directors approved by the board of directors of Issuer, (ii) issuances as consideration in mergers and acquisitions, (iii) any issuance in or following the Issuer's initial public offering of Common Shares and (iv) other customary exceptions. 2 REGISTRATION RIGHTS: (1) PREFERRED DEMAND RIGHTS: If at any time after 12 months from the date of the Merger the holders of at least 25% of the outstanding Preferred Shares requests that Issuer file a registration statement for the sale of at least 20% of the Preferred Shares then outstanding, Issuer will use its best efforts to cause such Preferred Shares to be registered. Issuer shall not be obligated to effect more than two demand registration on behalf of the holders of Preferred Shares. (2) COMMON DEMAND RIGHTS: If, at any time after the date six months after the effective date of Issuer's initial registration statement on Form S-1 with the U.S. Securities and Exchange Commission, a securityholder holding at least 15% of the initially outstanding Common Shares requests that Issuer file a registration statement for the sale of Common Shares having an aggregate market value of at least $20,000,000, Issuer will use its best efforts to cause such Common Shares to be registered. Issuer shall not be obligated to effect more than three demand registrations on behalf of FS Fund and three demand registrations on behalf of BYOWC and its principals. (3) PIGGY-BACK RIGHTS: The securityholders will be entitled to "piggy-back" registration rights on any registration statement of Issuer on Issuer's behalf or on the behalf of other securityholders, subject to certain rights, however, of Issuer or its underwriters to reduce the number of securities proposed to be registered in view of market conditions. (4) EXPENSES: Issuer will pay for the fees and expenses associated with all demand registrations and all "piggy-back" registrations, exclusive of underwriting discounts and commissions. (5) TRANSFER OF RIGHTS: The registration rights may be freely transferred in connection with transfers of the Preferred Shares or 3 Common Shares, provided Issuer is given written notice thereof. (6) OTHER PROVISIONS: Such other provisions as are reasonable and customary, including the terms for Issuer's best efforts to register the Preferred Shares or Common Shares, the time registration is required to remain effective, Issuer's ability to delay filing a demand registration for a period of 60 days, the information to be provided by the selling securityholders, the documents to be delivered to the selling securityholders, the terms of any underwritten offering and the selection of an underwriter, and indemnification provisions. RIGHTS AND OBLIGATIONS OF BYOWC: If, following the Merger, BYOWC is dissolved and its Common Shares distributed to its members, each of the members will be subject to the obligations of BYOWC under the Securityholders Agreement, and the rights of BYOWC under the Securityholders Agreement will be collectively exercisable by the members as determined by the members in their discretion. 4 EXHIBIT 3 CREDIT SUISSE FIRST BOSTON Eleven Madison Avenue New York, NY 10010 CIBC INC. CIBC WORLD MARKETS CORP. 425 Lexington Avenue New York, NY 10017 December 20, 1999 BYOWC Partners LLC 9965 Wilshire Blvd. Beverly Hills, CA 90212 Attention of Alfred D. Boyer Managing Member FS Equity Partners IV, L.P. c/o Freeman Spogli & Co. LLC 11100 Santa Monica Blvd. -- Suite 1900 Los Angeles, CA 90025 Attention of Charles P. Rullman PROJECT BRIDGEPORT $390,000,000 SENIOR SECURED CREDIT FACILITIES COMMITMENT LETTER Ladies and Gentlemen: You have advised Credit Suisse First Boston ("CSFB"), CIBC Inc. ("CIBC" and, together with CSFB, the "Initial Lenders") and CIBC World Markets Corp. ("CIBCWM" and, together with CSFB, the "Agents") that you intend to acquire all the capital stock of a public company previously identified to us and referred to herein as "Bridgeport" or the "Company" and to consummate the other Transactions (such term and each other capitalized term used but not defined herein having the meaning assigned to it in the Summary of Principal Terms and Conditions attached hereto as Exhibit A (the "Term Sheet")). You have further advised us that, in connection therewith, (a) Merger Sub will obtain senior secured credit facilities (the "Term Facilities") described in the Term Sheet, in an aggregate principal amount of up to $320,000,000, and (b) the Company and Merger Sub will obtain a senior secured credit facility (the "Revolving Facility" and, together with the Term Facilities, the "Facilities") described in the Term Sheet, in an aggregate principal amount of up to $70,000,000. In connection with the foregoing, you have requested that (a) CSFB agree to structure, arrange and syndicate the Facilities, commit to provide 60% of the Facilities and agree to serve as administrative agent, book manager and lead arranger therefor, (b) CIBC commit to provide 40% of the Facilities and (c) CIBCWM agree to serve as syndication agent for the Facilities. 2 CSFB is pleased to advise you (a) that it is willing to act as exclusive administrative agent, book manager and lead arranger for the Facilities and (b) of its commitment to provide up to 60% of the Facilities, in each case upon the terms and subject to the conditions set forth or referred to in this commitment letter (the "Commitment Letter") and in the Term Sheet. CIBCWM is pleased to advise you that it is willing to act as exclusive syndication agent for the Facilities, and CIBC is pleased to advise you of its commitment to provide up to 40% of the Facilities, in each case upon the terms and subject to the conditions set forth or referred to in this Commitment Letter and in the Term Sheet. The commitments of CSFB and CIBC hereunder are several and not joint and shall be allocated ratably among the Facilities. It is agreed that (a) CSFB will act as the sole and exclusive administrative agent (and shall have the right to appoint a collateral agent (which may be CSFB or one of its affiliates)), book manager and lead arranger for the Facilities, and (b) CIBCWM will act as the sole and exclusive syndication agent for the Facilities. We intend to syndicate the Facilities to a group of financial institutions (together with the Initial Lenders, the "Lenders") identified by us in consultation with and reasonably acceptable to you. We intend to commence syndication efforts promptly upon the execution of this Commitment Letter, and you agree actively to assist us in completing a syndication satisfactory to us. Such assistance shall include (a) your using commercially reasonable efforts to ensure that the syndication efforts benefit materially from your existing lending relationships, (b) direct contact between senior management, representatives and advisors of you and the Company, on the one hand, and the proposed Lenders, on the other hand (including, without limitation, the active participation of Jerome B. York, in the capacity of an equity investor in BYOWC and the prospective chairman of the board of directors and prospective acting chief executive officer of the Company), (c) assistance by you and the Company in obtaining credit ratings for the Facilities and in the preparation of a Confidential Information Memorandum for the Facilities and other marketing materials to be used in connection with the syndication and (d) the hosting, with the Initial Lenders, of one or more meetings of prospective Lenders (it being understood that the general Lenders' meeting will occur no later than January 7, 2000). The Agents will manage, in consultation with you, all aspects of the syndication, including decisions as to the selection of institutions to be approached and when they will be approached, when their commitments will be accepted, which institutions will participate (such institutions to be reasonably satisfactory to you), the allocation of the commitments among the Lenders and the amount and distribution of fees among the Lenders. To assist us in our syndication efforts, you agree promptly to prepare and provide to us all information with respect to Holdings, the Company and their respective subsidiaries, the Transactions and the other transactions contemplated hereby, including all financial information and projections (the "Projections"), as we may reasonably request and which you can reasonably obtain, considering that you will have contractual rights to obtain information from and the cooperation of the Company but that you will not control the Company until the consummation of the Tender Offer. You hereby represent and covenant that (a) all information other than the Projections (the "Information") that has been or will be made available to the Initial Lenders by you or any of your representatives is or will be, when furnished, correct in all material respects 3 and does not or will not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made and (b) the Projections that have been or will be made available to us by you or any of your representatives have been or will be prepared in good faith based upon assumptions that are reasonable at the time made and at the time the related Projections are made available to us. You agree that if, at any time from and including the date hereof until the closing of the Facilities, any of the representations in the preceding sentence would be incorrect if the Information and Projections were being furnished, and such representations were being made, at such time, then you will promptly supplement the Information and the Projections so that such representations will be correct under those circumstances, except that if the representations are incorrect with respect to Information and Projections furnished or prepared by the Company, you will supplement such Information and Projections promptly after you become aware that such representations are incorrect. In arranging and syndicating the Facilities, we will be entitled to use and rely primarily on the Information and the Projections without responsibility for independent verification thereof. As consideration for the Initial Lenders' commitments hereunder and agreements to perform the services described herein, you agree to pay (or to cause the Borrowers to pay) to CSFB, when due, the nonrefundable fees set forth in the Term Sheet and in the Fee Letter and the Administrative Agent Fee Letter, each dated the date hereof and delivered herewith with respect to the Facilities (the "Fee Letters"). The Initial Lenders' commitments hereunder and our agreements to perform the services described herein are subject to (a) our not having discovered or otherwise become aware of any information not previously disclosed to us that we reasonably believe to be inconsistent in a material and adverse manner with the information provided to us prior to the date hereof, with respect to the business, assets, operations, condition (financial or otherwise), or prospects of the Company and its subsidiaries, (b) there not having occurred since September 30, 1999, any change, effect or circumstance that is or could reasonably be expected to be materially adverse to the business, assets, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, (c) there not having occurred after the date hereof a material disruption of or material adverse change in financial, banking or capital market conditions that, in our reasonable judgment, could reasonably be expected to materially and adversely affect the syndication of the Facilities, (d) our satisfaction that, prior to and during the syndication of the Facilities, there shall be no competing issues of debt securities or commercial bank or other credit facilities of Holdings, the Company or their respective subsidiaries being offered, placed or arranged, (e) the negotiation, execution and delivery of definitive documentation with respect to the Facilities reasonably satisfactory to us and our counsel, (f) the initial advance of funds under the Facilities not being made prior to January 28, 2000, and (g) the other conditions set forth in the Term Sheet. You agree, jointly and severally, (a) to indemnify and hold harmless each Initial Lender and Agent and their respective officers, directors, employees, affiliates, agents and controlling persons from and against any and all losses, claims, damages, liabilities and expenses, joint or several, to which any such persons may become subject arising out of or in connection with this Commitment Letter, the Fee Letters, the Term Sheet, the Transactions, the Facilities or any related transaction or any claim, litigation, 4 investigation or proceeding relating to any of the foregoing, regardless of whether any of such indemnified parties is a party thereto, and to reimburse each of such indemnified parties upon demand for any reasonable legal or other expenses incurred in connection with investigating or defending any of the foregoing, PROVIDED that the foregoing indemnity will not, as to any indemnified party, apply to losses, claims, damages, liabilities or related expenses to the extent they are found in a final judgment of a court to have resulted from the willful misconduct or gross negligence of such indemnified party and (b) (i) if the Closing Date occurs or (ii) to the extent you otherwise are entitled to reimbursement of expenses pursuant to the Merger Agreement (but, in the case of this clause (ii), subject to pro rata reduction to the extent the aggregate amount of your reimbursable expenses and our reimbursable expenses exceeds the cap on reimbursement set forth in the Merger Agreement), to reimburse each Initial Lender and Agent from time to time, upon presentation of a reasonably satisfactory summary statement, for all reasonable out-of-pocket expenses (including but not limited to expenses of the Initial Lenders' due diligence investigation, consultants' fees, syndication expenses, travel expenses and reasonable fees, disbursements and other charges of counsel), in each case incurred in connection with the Facilities and the preparation of this Commitment Letter, the Term Sheet, the Fee Letters, the definitive documentation for the Facilities and any security arrangements in connection therewith. Notwithstanding any other provision of this Commitment Letter, no indemnified person shall be liable for any indirect or consequential damages in connection with its activities related to the Facilities. You acknowledge that the Initial Lenders and their respective affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you may have conflicting interests regarding the transactions described herein and otherwise. We will not use confidential information obtained from you by virtue of the transactions contemplated by this Commitment Letter or our other relationships with you in connection with the performance by us of services for other companies, and we will not furnish any such information to other companies. You also acknowledge that we have no obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you, confidential information obtained by us from other companies. Without limiting the foregoing, we acknowledge that non-public information concerning the Company that you have obtained from the Company is subject to a confidentiality agreement between you and the Company, a copy of which has been delivered to us, and we agree to treat such information in accordance with said confidentiality agreement. This Commitment Letter and the Initial Lenders' commitments hereunder shall not be assignable by you without the prior written consent of the Initial Lenders (and any attempted assignment without such consent shall be null and void), are intended to be solely for the benefit of the parties hereto (and the indemnified persons), are not intended to confer any benefits upon, or create any rights in favor of, any person other than the parties hereto (and the indemnified persons) and are not intended to create a fiduciary relationship between the parties hereto. Each Initial Lender may assign its commitment hereunder to any of its affiliates or any Lender reasonably acceptable to you. Any such assignment to an affiliate will not relieve the assignor from any of its obligations hereunder unless and until such affiliate shall have funded the portion of the commitment so assigned. Any assignment to a Lender shall be by novation and shall release the assignor from the portion of its commitment hereunder so assigned. This Commitment Letter may not be amended or any provision hereof waived or modified except by an 5 instrument in writing signed by each of the parties hereto. This Commitment Letter may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together, shall constitute one agreement. Delivery of an executed counterpart of a signature page of this Commitment Letter by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. This Commitment Letter and the Fee Letters are the only agreements that have been entered into between us with respect to the Facilities and set forth the entire understanding of the parties with respect thereto. This Commitment Letter shall be governed by, and construed in accordance with, the laws of the State of New York. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR ARISING OUT OF THIS COMMITMENT LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER. This Commitment Letter is delivered to you on the understanding that neither this Commitment Letter, the Term Sheet or the Fee Letters nor any of their terms or substance shall be disclosed, directly or indirectly, to any other person except (a) to your officers, members, employees, attorneys, accountants and advisors on a confidential and need-to-know basis or (b) as required by applicable law or compulsory legal process (in which case you agree to inform us promptly thereof); PROVIDED that, after your acceptance of this Commitment Letter and the Fee Letters in the manner provided below, you may disclose this Commitment Letter, the Term Sheet and the contents hereof and thereof (but not the Fee Letters or the contents thereof) (i) to the Company and Holdings and their respective attorneys, accountants and advisors, in each case in connection with the Acquisition and on a confidential and need-to-know basis and (ii) in any public filing relating to the Acquisition. The compensation, reimbursement, indemnification and confidentiality provisions contained herein and in the Fee Letters shall remain in full force and effect regardless of whether definitive financing documentation shall be executed and delivered and notwith standing the termination of this Commitment Letter or the Initial Lenders' commitments hereunder; PROVIDED that your obligations under this Commitment Letter, other than those relating to confidentiality and to your assistance in connection with the syndication of the Facilities, shall automatically terminate and be superseded by the definitive documentation relating to the Facilities upon the initial funding thereunder, and you shall be released from all liability in connection therewith at such time. If the foregoing correctly sets forth our agreement, please indicate your acceptance of the terms hereof and of the Term Sheet and the Fee Letters by returning to us executed counterparts hereof and of the Fee Letters not later than 11:59 p.m., New York City time, on December 20, 1999. The Initial Lenders' commitments hereunder and our agreements contained herein will expire at such time in the event that we have not received such executed counterparts in accordance with the immediately preceding sentence. In the event that the initial borrowing in respect of the Facilities does not occur on or before February 29, 2000, then this Commitment Letter and the Initial Lenders' commitments and undertakings hereunder shall automatically terminate unless we shall, in our discretion, agree to an extension. Before such date, we may terminate our commitments under this Commitment Letter if any event occurs or information has 6 become available that, in our reasonable judgment, results or is likely to result in the failure to satisfy any condition precedent to borrowing set forth herein or in the Term Sheet, provided that such failure could not reasonably be expected to be cured prior to the expiration of the commitment. 7 We are pleased to have been given the opportunity to assist you in connection with the financing for the Transactions. Very truly yours, CREDIT SUISSE FIRST BOSTON, by /s/ Richard B. Carry -------------------------------- Name: Richard B. Carry Title: Director by /s/ Christopher G. Cunningham -------------------------------- Name: Christopher G. Cunningham Title: Director CIBC INC., by /s/ Matthew Jones ------------------------------- Name: Matthew Jones Title: Managing Director CIBC WORLD MARKETS CORP., by /s/ Matthew Jones ------------------------------- Name: Matthew Jones Title: Managing Director Accepted and agreed to as of the date first above written: BYOWC PARTNERS LLC, by /s/ Alfred D. Boyer ----------------------- Name: Alfred D. Boyer Title: Managing Member 8 by FS EQUITY PARTNERS IV, L.P. by FS Capital Partners LLC, its General Partner by /s/ Charles P. Rullman --------------------------------- Name: Charles P. Rullman Title: Vice President CONFIDENTIAL December 20, 1999 EXHIBIT A PROJECT BRIDGEPORT $390,000,000 SENIOR SECURED CREDIT FACILITIES SUMMARY OF PRINCIPAL TERMS AND CONDITIONS BORROWERS: (A) With respect to the Term Facilities (as defined below), Merger Sub (as defined below). (B) With respect to the Revolving Facility (as defined below), (i) a Delaware corporation referred to herein as "Bridgeport" or the "Company" and (ii) Merger Sub. (C) Upon consummation of the Merger (as defined below), the Company shall assume all obligations of Merger Sub with respect to the Facilities. (D) References herein to the "Borrower" or the "Borrowers" shall refer to Merger Sub, Bridgeport or the surviving corporation of the Merger, as the context may require. TRANSACTIONS: A Delaware corporation ("Holdings") to be formed by BYOWC Partners LLC ("BYOWC") and FS Equity Partners IV, L.P. (the "Sponsors"), intends to acquire (the "Acquisition"), through a wholly owned acquisition subsidiary of Holdings to be incorporated under the laws of the State of Delaware ("Merger Sub"), all the capital stock (the "Shares") of Bridgeport pursuant to an agreement and plan of merger (the "Merger Agreement") to be entered into among Holdings, Merger Sub, BYOWC and the Company. The Merger Agreement will provide that Merger Sub and the Company will make a tender offer (the "Tender Offer") to acquire up to 100% of the outstanding Shares. As promptly as practicable following the acceptance of Shares pursuant to the Tender Offer (a) the Company will merge (the "Merger") with and into Merger Sub, with Merger Sub being the surviving corporation in the Merger and a wholly owned subsidiary of Holdings and (b) subject to stockholders' appraisal rights, each outstanding Share not acquired in the Tender Offer (the "Untendered Shares") will be converted into the right to receive an amount in cash equal to the price paid in connection with the Tender Offer. In connection with the foregoing, (a) the Sponsors, together with certain other equity investors, will contribute an aggregate amount of not less than 2 $210 million in cash and Shares to Holdings as common and/or preferred equity, (b) Holdings will contribute the amount so received to Merger Sub as common equity in exchange for the issuance to Holdings of all the common stock of Merger Sub (the equity contributions described in clauses (a) and (b) being referred to herein collectively as the "Sponsor Equity Contribution"), (c) the Company will repay all amounts outstanding under, and terminate, its existing credit facility (the "Existing Credit Facility"), (d) the Borrowers will obtain the senior secured credit facilities described below under the caption "Facilities" and (e) fees and expenses incurred in connection with the foregoing (the "Transaction Costs") will be paid. The transactions described in this paragraph and the preceding paragraph, together with the Acquisition, are collectively referred to herein as the "Transactions". SOURCES AND USES: The sources and uses of the funds necessary to consummate the Transactions are set forth on Annex II hereto. ADMINISTRATIVE AGENT: Credit Suisse First Boston ("CSFB") will act as sole and exclusive administrative agent and collateral agent (collectively, the "Administrative Agent") for a syndicate of financial institutions (together with CSFB, the "Lenders"), and will perform the duties customarily associated with such roles. BOOK MANAGER AND LEAD ARRANGER: CSFB. SYNDICATION AGENT: CIBC World Markets Corp. ("CIBC" and, together with CSFB, the "Agents"). FACILITIES: (A) Two Senior Secured Term Loan Facilities in an aggregate principal amount of up to $320,000,000 (the "Term Facilities"), such aggregate principal amount to be allocated between (i) a Tranche A Facility in an aggregate principal amount of $155,000,000 (the "Tranche A Facility") and (ii) a Tranche B Term Loan Facility in an aggregate principal amount of $165,000,000 (the "Tranche B Facility"). (B) A Senior Secured Revolving Credit Facility in an aggregate principal amount of up to $70,000,000 (the "Revolving Facility" and, together with the 3 Term Facilities, the "Facilities"), of which up to an amount to be agreed upon will be available in the form of letters of credit. In connection with the Revolving Facility, CSFB will make available to the Borrower a swingline facility under which the Borrower may make short-term borrowings of up to an amount to be agreed upon. Except for purposes of calculating the Commitment Fee described below, any such swingline borrowings will reduce availability under the Revolving Facility on a dollar-for-dollar basis. Each Lender under the Revolving Facility shall, promptly upon request by CSFB, fund to CSFB its pro rata share of any swingline borrowings. PURPOSE: (A) The proceeds of the Term Facilities will be used by Merger Sub, (i) on the date of the initial borrowing under the Facilities (the "Closing Date"), together with the proceeds of the Sponsor Equity Contribution, solely to pay the cash consideration payable in respect of Shares purchased by Merger Sub in the Tender Offer, (ii) following the Closing Date, to purchase Shares tendered and accepted during any extension of the Tender Offer pursuant to the Merger Agreement, (iii) on the date the Merger is consummated, to pay the cash merger consideration to be paid to the holders of the Untendered Shares, if any, in connection with the Merger, including any amounts to be paid in connection with the exercise by such holders of their appraisal rights, and (iv) to pay related Transaction Costs. (B) The proceeds of loans under the Revolving Facility will be used by the Company solely for general corporate purposes (other than for the purchase of Shares), including the refinancing of amounts outstanding under the Existing Credit Facility on the Closing Date. In addition, at any time on or prior to the date the Merger is consummated, up to $20,000,000 of loans under the Revolving Facility may be used by Merger Sub solely to pay interest and commitment fees on the loans and unused commitments, respectively, under the Term Facilities. (C) Letters of credit will be used by the Borrower solely for general corporate purposes. 4 AVAILABILITY: (A) The full amount of the Tranche B Facility must be drawn in a single drawing on the Closing Date. Loans under the Tranche A Facility will be available during the period beginning on and including the Closing Date and ending on and including the earlier of (i) the 180th day after the Closing Date and (ii) the date the Merger is consummated (the "Tranche A Cutoff Date"). Any unused commitments in respect of the Tranche A Facility shall automatically terminate on the Tranche A Cutoff Date. Amounts borrowed under the Term Facilities that are repaid or prepaid may not be reborrowed. (B) Loans under the Revolving Facility will be available on and after the Closing Date and at any time prior to the final maturity of the Revolving Facility, in minimum principal amounts to be agreed upon. Amounts repaid under the Revolving Facility may be reborrowed. INTEREST RATES AND FEES: As set forth on Annex I hereto. DEFAULT RATE: The applicable interest rate plus 2% per annum. LETTERS OF CREDIT: Letters of credit under the Revolving Facility will be issued by CSFB or one of its affiliates (the "Issuing Bank"). Each letter of credit shall expire not later than the earlier of (a) 12 months after its date of issuance and (b) the fifth business day prior to the final maturity of the Revolving Facility. Drawings under any letter of credit shall be reimbursed by the Borrower on the same business day. To the extent that the Borrower does not reimburse the Issuing Bank on the same business day, the Lenders under the Revolving Facility shall be irrevocably obligated to reimburse the Issuing Bank pro rata based upon their respective Revolving Facility commitments. The issuance of all letters of credit shall be subject to the customary procedures of the Issuing Bank. FINAL MATURITY AND AMORTIZATION: (A) TRANCHE A FACILITY The Tranche A Facility will mature on the 180th day after the Closing Date (the "Initial Maturity Date"), unless the Merger shall have been consummated on or prior to such date, in which 5 case the Tranche A Facility will mature on the date that is five years after the Closing Date, and will amortize in quarterly installments under a schedule to be agreed upon. (B) TRANCHE B FACILITY The Tranche B Facility will mature on the Initial Maturity Date, unless the Merger shall have been consummated on or prior to such date, in which case the Tranche B Facility will mature on the date that is seven years after the Closing Date, and will amortize in equal quarterly installments in an annual amount equal to 1% during the first six years of the Tranche B Facility and 94% during the seventh year of the Tranche B Facility. (C) REVOLVING FACILITY The Revolving Facility will mature on the date that is five years after the Closing Date. GUARANTEES: All obligations of each Borrower under the Facilities and under any interest rate protection or other hedging arrangements entered into with a Lender (or any affiliate thereof) will be unconditionally guaranteed (the "Guarantees") by Holdings, by the other Borrower and by each existing and subsequently acquired or organized domestic and, to the extent no adverse tax consequences to a Borrower would result therefrom, foreign subsidiary of Holdings. Notwithstanding the foregoing, the Company and its subsidiaries shall not be required to issue their Guarantees until the Closing Date. SECURITY: The Facilities, the Guarantees and any interest rate protection or other hedging arrangements entered into with a Lender (or any affiliate thereof) will be secured by substantially all the assets of Holdings, each Borrower and each existing and subsequently acquired or organized domestic (and, to the extent no adverse tax consequences to a Borrower would result therefrom, foreign) subsidiary of Holdings (collectively, the "Collateral"), including but not limited to: (a) a first-priority pledge of the capital stock of Merger Sub, (b) a first-priority pledge of all other capital stock (including the Shares) held by Holdings, Merger Sub or the Company or any domestic (or, subject to the foregoing limitation, 6 foreign) subsidiary of Holdings (which pledge, in the case of any foreign subsidiary, shall be limited to 65% of the voting stock of such foreign subsidiary to the extent the pledge of any greater percentage would result in adverse tax consequences to Holdings) and (c) perfected first- priority (subject to customary exceptions) security interests in, and mortgages on, substantially all tangible and intangible assets of Holdings, each Borrower and each existing or subsequently acquired or organized domestic (or, subject to the foregoing limitation, foreign) subsidiary of Holdings (including but not limited to accounts receivable, inventory, general intangibles, investment property, intellectual property, real property, cash and proceeds of the foregoing). All the above-described pledges, security interests and mortgages shall be created on terms, and pursuant to documentation, satisfactory to the Lenders, and none of the Collateral shall be subject to any other pledges, security interests or mortgages (subject to customary exceptions). MANDATORY PREPAYMENTS: Loans under the Term Facilities shall be prepaid with (a) a percentage to be agreed upon of Excess Cash Flow (to be defined), (b) 100% of the net cash proceeds of all non-ordinary course asset sales or other dispositions of property by Holdings and its subsidiaries (including insurance and condemnation proceeds), (c) 100% of the net cash proceeds of issuances of debt obligations of Holdings and its subsidiaries and (d) 50% of the net cash proceeds of issuances of equity securities of Holdings and its subsidiaries, in each case subject to exceptions to be agreed upon. In addition, on the date the Merger is consummated, Loans under the Term Facilities shall be prepaid with the amount on deposit in the Cash Collateral Account (as defined below). The above-described mandatory prepayments shall be allocated between the Term Facilities pro rata. Within each Term Facility, mandatory prepayments shall be applied pro rata to the remaining amortization payments under each Term Facility. VOLUNTARY PREPAYMENTS AND REDUCTIONS IN COMMITMENTS: Voluntary reductions of the unutilized portion of the Facilities commitments and prepayments of borrowings will be permitted at any time, in minimum principal amounts to be agreed upon, 7 without premium or penalty, subject to reimbursement of the Lenders' redeployment costs in the case of a prepayment of Adjusted LIBOR borrowings other than on the last day of the relevant interest period. All voluntary prepayments of the Term Facilities will be allocated between the Term Facilities in the discretion of the Borrower. Within each Term Facility, voluntary prepayments will be applied first, to the scheduled installments of principal due within 12 months of such prepayment and then, pro rata to the remaining amortization payments under such Facility. REPRESENTATIONS AND WARRANTIES: Usual for facilities and transactions of this type and others to be reasonably specified by the Agents, including, without limitation, accuracy of financial statements and other information; no material adverse change; absence of litigation; no violation of agreements or instruments; compliance with laws (including ERISA, margin regulations and environmental laws); payment of taxes; ownership of properties; inapplicability of the Investment Company Act and the Public Utility Holding Company Act; solvency; effectiveness of governmental approvals; labor matters; environ mental matters; Year 2000 matters; and validity, priority and perfection of security interests in the Collateral. CONDITIONS PRECEDENT TO INITIAL BORROWING: Usual for facilities and transactions of this type, those specified below and others to be reasonably specified by the Agents, including, without limitation, delivery of satisfactory legal opinions and financial information; first-priority perfected security interests in the Collateral (free and clear of all liens, subject to customary exceptions); execution of the Guarantees, which shall be in full force and effect; accuracy of representations and warranties; absence of defaults, prepayment events or creation of liens under debt instruments or other agreements as a result of the Transactions; evidence of authority; compliance with applicable laws and regulations (including but not limited to ERISA, margin regulations and environmental laws); absence of material adverse change; and payment of fees and expenses. The Board of Directors of the Company shall have approved the Merger Agreement and shall have recommended to the shareholders of the Company 8 that such shareholders accept the Tender Offer, and such approval and recommendation shall not have been withdrawn. Neither the Merger Agreement nor the Tender Offer shall have been amended or modified in any material respect without the consent of the Initial Lenders (as defined below). All conditions to the purchase of Shares in the Tender Offer shall have been satisfied without giving effect to any waiver or amendment thereof not approved by the Initial Lenders, and Merger Sub shall have acquired pursuant to the Tender Offer a number of Shares that, on a fully diluted basis and when aggregated with all other Shares owned by Merger Sub, shall be sufficient to enable Merger Sub, without the vote of any other stockholder of the Company, to effect stockholder approval of the Merger under applicable law and under the certificate of incorporation and by-laws of the Company. Not more than $5,000,000 shall have been outstanding under the Existing Credit Facility on the Closing Date; the Existing Credit Facility shall have been paid in full, any security therefor released and any commitments to lend thereunder permanently terminated, and the Administrative Agent shall have received reasonably satisfactory evidence thereof. The Sponsor Equity Contribution shall have been made on the terms previously disclosed to the Initial Lenders. The Company shall have deposited into a cash collateral account (the "Cash Collateral Account") with the Administrative Agent, as security for its obligations under its Guarantee, an amount in cash equal to $193,300,000, less the amount used by the Company to acquire Shares in the Tender Offer upon the initial consummation thereof. After giving effect to the Transactions and the other transactions contemplated hereby, Holdings and its subsidiaries shall have outstanding no indebtedness or preferred stock other than (a) the loans and other extensions of credit under the Facilities, (b) the preferred equity of Holdings issued as part of the Sponsor Equity Contribution and (c) other limited indebtedness to be agreed upon. 9 The Lenders shall have received an opinion, in form and substance and from an independent investment banking or appraisal firm satisfactory to the Agents, as to the solvency of the Company and its subsidiaries on a consolidated basis after giving effect to the Transactions and the other transactions contemplated hereby. No member of management who is also a stockholder of the Company during the Tender Offer shall receive any direct or indirect consideration for accepting the Tender Offer (including, without limitation, securities or options to acquire securities in Holdings or the Company following the consummation of the Tender Offer) other than (a) payment of the cash consideration paid to all accepting stockholders in the Tender Offer and (b) pursuant to contractual arrangements that were in place on or prior to October 18, 1999. All requisite governmental authorities and third parties shall have approved or consented to the Transactions and the other transactions contemplated hereby to the extent required and to the extent the failure to obtain the same could reasonably be expected to result in a material adverse effect on Holdings, the Company, the Transactions or the other transactions contemplated hereby, all applicable appeal periods shall have expired, and there shall be no litigation, governmental or judicial action, actual or threatened, that could reasonably be expected to (a) restrain or prevent the Transactions or the other transactions contemplated hereby or (b) materially impair (i) the ability of Holdings or Merger Sub, as the case may be, to operate the Company following the consummation of the Tender Offer or (ii) the financing arrangements contemplated hereby, in each case specifically excluding, however, any private litigation based upon state law fiduciary duty claims based upon the transactions contemplated by the Merger Agreement where the only remedy that could reasonably be expected to be awarded is monetary damages. As used herein, the term "Initial Lenders" means CSFB, CIBC Inc. and each other person that shall have become a party to the definitive credit documentation for the Facilities as a "Lender" thereunder. 10 AFFIRMATIVE COVENANTS: Usual for facilities and transactions of this types and others to be reasonably specified by the Agents and reasonably acceptable to Holdings and Merger Sub (to be applicable to Holdings, Merger Sub and its subsidiaries), including, without limitation, maintenance of corporate existence and rights; performance of obligations; delivery of financial statements and other financial information; delivery of notices of default, litigation and material adverse change; maintenance of properties in good working order; maintenance of satisfactory insurance; compliance with laws; inspection of books and properties; further assurances; and payment of taxes. NEGATIVE COVENANTS: Usual for facilities and transactions of this type and others to be reasonably specified by the Agents and reasonably acceptable to Holdings and Merger Sub (to be applicable to Holdings, Merger Sub and its subsidiaries), including, without limitation, prohibition of dividends on, and redemptions and repurchases of, capital stock; limitations on prepayments, redemptions and repurchases of debt (other than loans under the Facilities); limitations on liens and sale-leaseback transactions; limitations on loans and investments; limitations on debt and hedging arrangements; limitations on mergers, acquisitions and asset sales; limitations on transactions with affiliates; limitations on changes in business conducted by Holdings and its subsidiaries; limitations on amendments of debt and other material agreements; and limitations on capital expenditures. Notwithstanding, the foregoing, the Company will be permitted to withdraw cash from the Cash Collateral Account for the purpose of (a) paying for Shares tendered and accepted during the Tender Offer and (b) paying the cash consideration in the Merger in respect of Untendered Shares. SELECTED FINANCIAL COVENANTS: Usual for facilities and transactions of this type (with financial definitions and levels to be agreed upon), including, without limitation, (a) maximum ratios of (i) Total Debt to EBITDA and (ii) Senior Debt to EBITDA, (b) minimum interest coverage ratios and (c) minimum fixed charge coverage ratios. EVENTS OF DEFAULT: Usual for facilities and transactions of this type and 11 others to be reasonably specified by the Agents and reasonably acceptable to Holdings and Merger Sub, including, without limitation, nonpayment of principal or interest, violation of covenants, incorrectness of representations and warranties in any material respect, cross default and cross acceleration, bankruptcy, material judgments, ERISA, actual or asserted invalidity of guarantees or security documents and Change in Control (to be defined). VOTING: Amendments and waivers of the definitive credit documentation will require the approval of Lenders holding more than 50% of the aggregate amount of the loans and commitments under the Facilities, except that the consent of each Lender adversely affected thereby shall be required with respect to, among other things, (a) increases in the commitment of such Lender, (b) reductions of principal, interest or fees, (c) extensions of final maturity or scheduled amortization and (d) releases of guarantors or all or any substantial part of the Collateral (other than in connection with any sale of Collateral permitted by the definitive credit documentation). COST AND YIELD PROTECTION: Usual for facilities and transactions of this type. ASSIGNMENTS AND PARTICIPATIONS: The Lenders will be permitted to assign loans and commitments to other Lenders (or their affiliates) without restriction, or to other financial institutions with the consent of the Borrower and the Administrative Agent, in each case not to be unreasonably withheld. Each assignment (except to other Lenders or their affiliates) will be in a minimum amount of $5,000,000. The Administrative Agent will receive a processing and recordation fee of $3,500, payable by the assignor and/or the assignee, with each assignment. Assignments will be by novation and will not be required to be pro rata among the Facilities. The Lenders will be permitted to participate loans and commitments without restriction to other financial institutions. Voting rights of participants shall be limited to matters in respect of (a) increases in commitments, (b) reductions of principal, interest or fees, (c) extensions of final maturity or scheduled amortization and (d) releases of guarantors or all or any substantial part of the 12 Collateral (other than in connection with any sale or collateral permitted by the definitive credit documentation). EXPENSES AND INDEMNIFICATION: All reasonable out-of-pocket expenses (including, without limitation, expenses incurred in connection with due diligence) of CSFB and CIBC associated with the syndication of the Facilities and with the preparation, execution and delivery, administration, waiver or modification and enforcement of the definitive credit documentation contemplated hereby (including the reasonable fees, disbursements and other charges of counsel) are to be paid by the Borrowers. In addition, all reasonable out-of-pocket expenses of the Lenders for enforcement costs and documentary taxes associated with the Facilities are to be paid by the Borrowers. The Borrowers will indemnify CSFB, CIBC and the other Lenders and hold them harmless from and against all costs, expenses (including reasonable fees, disbursements and other charges of counsel) and liabilities of CSFB, CIBC and the other Lenders arising out of or relating to any claim or any litigation or other proceeding (regardless of whether CSFB, CIBC or any other Lender is a party thereto) that relates to the Transactions, including the financing contemplated hereby, the Tender Offer, the Merger or any transactions connected therewith, PROVIDED that none of CSFB, CIBC or any other Lender will be indemnified for any cost, expense or liability to the extent determined in the final judgment of a court of competent jurisdiction to have resulted from its gross negligence or willful misconduct. GOVERNING LAW AND FORUM: New York. COUNSEL TO CSFB AND CIBC: Cravath, Swaine & Moore. ANNEX I INTEREST RATES: The interest rates under the Facilities will be as follows: REVOLVING FACILITY AND TRANCHE A FACILITY At the Borrower's option, Adjusted LIBOR plus 3.25% or ABR plus 2.25%. TRANCHE B FACILITY At the Borrower's option, Adjusted LIBOR plus 3.75% or ABR plus 2.75%. ALL FACILITIES The Borrower may elect interest periods of 1, 2, 3 or 6 months for Adjusted LIBOR borrowings. Calculation of interest shall be on the basis of the actual days elapsed in a year of 360 days (or 365 or 366 days, as the case may be, in the case of ABR loans based on the Prime Rate) and interest shall be payable at the end of each interest period and, in any event, at least every 3 months. ABR is the Alternate Base Rate, which is the higher of CSFB's Prime Rate and the Federal Funds Effective Rate plus 1/2 of 1%. Adjusted LIBOR will at all times include statutory reserves. LETTER OF CREDIT FEE: A per annum fee equal to the spread over Adjusted LIBOR under the Revolving Facility will accrue on the aggregate face amount of outstanding letters of credit under the Revolving Facility, payable in arrears at the end of each quarter and upon the termination of the Revolving Facility, in each case for the actual number of days elapsed over a 360- day year. Such fees shall be distributed to the Lenders participating in the Revolving Facility pro rata in accordance with the amount of each such Lender's Revolving Facility commitment. In addition, the Borrower shall pay to the Issuing Bank, for its own account, (a) a fronting fee equal to a percentage per annum to be agreed upon of the aggregate face amount of outstanding letters of credit, payable in arrears at the end of each quarter and upon the termination of the Revolving Facility, calculated based upon the actual number of days 2 elapsed over a 360-day year, and (b) customary issuance and administration fees. COMMITMENT FEES: A commitment fee equal to (a) 1.00% per annum on the undrawn portion of the commitments in respect of the Tranche A Facility and (b) 0.50% per annum on the undrawn portion of the commitments in respect of the other Facilities, will accrue, commencing upon the execution and delivery of the Credit Agreement, and be payable quarterly in arrears thereafter and upon the termination of the commitments, calculated based on the number of days elapsed in a 360-day year. CHANGES IN INTEREST RATES: The definitive credit documentation for the Facilities will contain provisions under which, from and after the date of delivery of the Borrower's financial statements for the period ended March 31, 2000, and so long as no default shall have occurred and be continuing, the interest rate spreads under the Facilities will be reduced in increments to be agreed upon based upon performance goals to be agreed upon. ANNEX II Sources and Uses of Funds (in millions of dollars) (all figures are approximate)
USES OF FUNDS SOURCES OF FUNDS - ------------- ---------------- Purchase Shares $697.3 Revolving Facility1/ $ 0.0 Transaction Costs2/ 26.0 Tranche A Facility 155.0 ------ Tranche B Facility 165.0 Cash on Hand3/ 193.3 Sponsor Cash Equity Contribution 210.0 ------ TOTAL USES $723.3 TOTAL SOURCES $723.3 ====== ======
- -------------------- 1/ Represents amount to be drawn under the $70 million Revolving Facility on the Closing Date. 2/ Excludes transaction costs and change-in-control payments to be paid by the Company. 3/ Or additional Sponsor Equity, to the extent cash on hand is less than $193.3 million. EX-99.(C)(4) 14 EXHIBIT 99(C)(4) Exhibit 99(c)(4) STOCKHOLDER'S AGREEMENT THIS STOCKHOLDER'S AGREEMENT is made and entered into as of this 20th day of December 1999, among BRIDGEPORT HOLDINGS INC., a Delaware corporation ("PARENT"), BRIDGEPORT ACQUISITION CORPORATION, a Delaware corporation and a wholly owned subsidiary of Parent ("PURCHASER"), and Peter Godfrey (the "STOCKHOLDER"). WHEREAS the Stockholder desires that Micro Warehouse, Inc., a Delaware corporation (the "COMPANY"), Parent and Purchaser enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented, the "MERGER AGREEMENT") with respect to the merger of Purchaser with and into the Company (the "MERGER"); and WHEREAS the Stockholder is executing this Agreement as an inducement to Parent to enter into and execute, and to cause Purchaser to enter into and execute, the Merger Agreement. NOW, THEREFORE, in consideration of the execution and delivery by Parent and Purchaser of the Merger Agreement and the mutual covenants, conditions and agreements contained herein and therein, the parties agree as follows: SECTION 1. REPRESENTATIONS AND WARRANTIES. The Stockholder represents and warrants to Parent and Purchaser as follows: (a) The Stockholder is the record and beneficial owner of the number of shares of Common Stock of the Company (the "COMPANY COMMON STOCK") set forth opposite the Stockholder's name in SCHEDULE A hereto (as may be adjusted from time to time pursuant to Section 5, the Stockholder's "SHARES"). Except for the Stockholder's Shares and any other shares of Company Common Stock subject hereto, the Stockholder is not the record or beneficial owner of any shares of Company Common Stock. (b) This Agreement has been duly authorized, executed and delivered by the Stockholder and constitutes the legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally. Neither the execution and delivery of this Agreement nor the consummation by the Stockholder of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which the Stockholder is a party or bound or to which the Stockholder's Shares are subject. To the best of the Stockholder's knowledge, consummation by the Stockholder of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to the Stockholder or the Stockholder's Shares. (c) The Stockholder's Shares and the certificates representing such Shares are now and at all times during the term hereof will be held by the Stockholder, or by a nominee or custodian for the benefit of the Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. (d) No broker, investment banker, financial adviser or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission from Parent, Purchaser or the Company in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Stockholder in his individual capacity. (e) The Stockholder understands and acknowledges that Parent is entering into, and causing Purchaser to enter into, the Merger Agreement in reliance upon the Stockholder's execution and delivery of this Agreement. SECTION 2. AGREEMENT TO TENDER OR SELL. The Stockholder hereby agrees that he shall tender all of his Shares into the Offer (as defined in the Merger Agreement) and that he shall not withdraw any Shares so tendered. SECTION 3. COVENANTS. The Stockholder agrees with, and covenants to, Parent and Purchaser as follows: (a) The Stockholder shall not, except as contemplated by the terms of this Agreement, (i) transfer (the term "TRANSFER" shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Stockholder's Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of such Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to such Shares except with respect to election of directors at the Company's annual meeting, (iv) deposit such Shares into a voting trust or enter into a voting agreement or arrangement with respect to such Shares or (v) subject to Section 8, take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby. (b) Subject to Section 8, the Stockholder shall not, nor shall he permit any investment banker, attorney or other adviser or representative of the Stockholder to, directly or indirectly, (i) solicit, initiate or encourage the submission of, any Acquisition Proposal or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, 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, attorney or other adviser or representative of the Stockholder shall be deemed to be a violation of this Section 3(b) by the Stockholder. SECTION 4. COMPETING TRANSACTIONS. Subject to Section 8, the Stockholder hereby agrees to vote against or refrain from giving any consent in favor of (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, joint venture, recapitalization, dissolution, liquidation or winding up of or by the Company and (ii) any amendment of the Company's Certificate of Incorporation or By-laws or other proposal or transaction (including any consent -2- solicitation to remove or elect any directors of the Company) involving the Company or any of its subsidiaries which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify, or result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under or with respect to, the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement (each of the foregoing in clause (i) or (ii) above, a "COMPETING TRANSACTION"). SECTION 5. CERTAIN EVENTS. The Stockholder agrees that this Agreement and the obligations hereunder shall attach to the 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 without limitation the Stockholder's heirs, guardians, administrators or successors. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock, or the acquisition of additional shares of Company Common Stock or other securities or rights of the Company by any Stockholder, the number of Shares listed on Schedule A beside the name of the Stockholder shall be adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Company Common Stock or other securities or rights of the Company issued to or acquired by the Stockholder. SECTION 6. STOP TRANSFER. [Intentionally Omitted]. SECTION 7. VOIDABILITY. If prior to the execution hereof, the Board of Directors of the Company shall not have duly and validly authorized and approved by all necessary corporate action the acquisition of Company Common Stock by Parent and Purchaser and the other transactions contemplated by this Agreement and the Merger Agreement, so that by the execution and delivery hereof Parent or Purchaser would become, or could reasonably be expected to become, an "Interested Stockholder" with whom the Company would be prevented for any period pursuant to Section 203 of the Corporation Law from engaging in any "Affiliated transaction" (as such terms are defined in Section 203 of the Corporation Law), then this Agreement shall be void and unenforceable until such time as such authorization and approval shall have been duly and validly obtained. SECTION 8. STOCKHOLDER CAPACITY. The Stockholder does not make any agreement or understanding in his capacity as director or officer of the Company. The Stockholder signs solely in his capacity as the record holder and beneficial owner of the Stockholder's Shares and nothing herein shall limit or affect or be affected by any actions taken by the Stockholder in his capacity as an officer or director of the Company to the extent specifically permitted by the Merger Agreement. SECTION 9. FURTHER ASSURANCES. The Stockholder shall, upon request of Parent or Purchaser execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent or Purchaser to be necessary or desirable to carry out the provisions hereof. SECTION 10. TERMINATION. This Agreement, and all rights and obligations of the parties hereunder, shall terminate upon the earlier of (a) the date upon which the Merger Agreement is -3- terminated in accordance with its terms or (b) the date that Parent, Purchaser or the Company shall have purchased and paid for the Shares of the Stockholder pursuant to Section 2; PROVIDED, HOWEVER, that the termination of this Agreement shall not relieve any party of liability for breach of this Agreement prior to termination. SECTION 11. PUBLIC ANNOUNCEMENTS. The Stockholder will consult with Parent before issuing, and provide Parent with the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Merger Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange. SECTION 12. MISCELLANEOUS. (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Parent or Purchaser, to the address set forth in Section 8.03 of the Merger Agreement; and (ii) if to the Stockholder, to the address set forth on Schedule A hereto, or such other address as may be specified in writing by the Stockholder. (c) 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. (d) This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of Parent, Purchaser and the Stockholder and delivered to Parent, Purchaser and the Stockholder. (e) This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. (g) 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 by laws of descent. Any assignment in violation of the foregoing shall be void. (h) If any term, provision, covenant or restriction herein, or the application thereof to any circumstance, shall, to any event, be held by a court of competent jurisdiction to -4- be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions herein and the application thereof to any other circumstances, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated, and shall be enforced to the fullest extent permitted by law. (i) The Stockholder agrees that irreparable damage would occur and that Parent and Purchaser would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that Parent and Purchaser shall be entitled to an injunction or injunctions to prevent breaches by the Stockholder of this Agreement and to enforce specifically the terms and provisions of this Agreement. Each of the parties hereto (i) consents to submit to the personal jurisdiction of the courts specified in Section 8.13 of the Merger Agreement, and (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. The prevailing party in any judicial action shall be entitled to receive from the other party reimbursement for the prevailing party's reasonable attorneys' fees and disbursements, and court costs. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. -5- IN WITNESS WHEREOF, Parent, Purchaser and the Stockholder have caused this Agreement to be duly executed and delivered as of the date first written above. /S/ PETER GODFREY ---------------------------------- Peter Godfrey Stockholder BRIDGEPORT HOLDINGS INC. By: /S/ ALFRED D. BOYER ---------------------------------- Name: Alfred D. Boyer Title: Vice President BRIDGEPORT ACQUISITION CORPORATION By: /S/ ALFRED D. BOYER ---------------------------------- Name: Alfred D. Boyer Title: Vice President -6- SCHEDULE A Peter Godfrey 2,800,962 -7- EX-99.(C)(5) 15 EXHIBIT 99(C)(5) Exhibit 99(c)(5) STOCKHOLDER'S AGREEMENT THIS STOCKHOLDER'S AGREEMENT is made and entered into as of this 20th day of December 1999, among BRIDGEPORT HOLDINGS INC., a Delaware corporation ("PARENT"), BRIDGEPORT ACQUISITION CORPORATION, a Delaware corporation and a wholly owned subsidiary of Parent ("PURCHASER"), and Felix Dennis (the "STOCKHOLDER"). WHEREAS the Stockholder desires that Micro Warehouse, Inc., a Delaware corporation (the "COMPANY"), Parent and Purchaser enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented, the "MERGER AGREEMENT") with respect to the merger of Purchaser with and into the Company (the "MERGER"); and WHEREAS the Stockholder is executing this Agreement as an inducement to Parent to enter into and execute, and to cause Purchaser to enter into and execute, the Merger Agreement. NOW, THEREFORE, in consideration of the execution and delivery by Parent and Purchaser of the Merger Agreement and the mutual covenants, conditions and agreements contained herein and therein, the parties agree as follows: SECTION 1. REPRESENTATIONS AND WARRANTIES. The Stockholder represents and warrants to Parent and Purchaser as follows: (a) The Stockholder is the record and beneficial owner of the number of shares of Common Stock of the Company (the "COMPANY COMMON STOCK") set forth opposite the Stockholder's name in SCHEDULE A hereto (as may be adjusted from time to time pursuant to Section 5, the Stockholder's "SHARES"). Except for the Stockholder's Shares and any other shares of Company Common Stock subject hereto, the Stockholder is not the record or beneficial owner of any shares of Company Common Stock. (b) This Agreement has been duly authorized, executed and delivered by the Stockholder and constitutes the legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally. Neither the execution and delivery of this Agreement nor the consummation by the Stockholder of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which the Stockholder is a party or bound or to which the Stockholder's Shares are subject. To the best of the Stockholder's knowledge, consummation by the Stockholder of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to the Stockholder or the Stockholder's Shares. (c) The Stockholder's Shares and the certificates representing such Shares are now and at all times during the term hereof will be held by the Stockholder, or by a nominee or custodian for the benefit of the Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder. (d) No broker, investment banker, financial adviser or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission from Parent, Purchaser or the Company in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Stockholder in his individual capacity. (e) The Stockholder understands and acknowledges that Parent is entering into, and causing Purchaser to enter into, the Merger Agreement in reliance upon the Stockholder's execution and delivery of this Agreement. SECTION 2. AGREEMENT TO TENDER OR SELL. The Stockholder hereby agrees that he shall tender all of his Shares into the Offer (as defined in the Merger Agreement) and that he shall not withdraw any Shares so tendered. SECTION 3. COVENANTS. The Stockholder agrees with, and covenants to, Parent and Purchaser as follows: (a) The Stockholder shall not, except as contemplated by the terms of this Agreement, (i) transfer (the term "TRANSFER" shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Stockholder's Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of such Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to such Shares except with respect to election of directors at the Company's annual meeting, (iv) deposit such Shares into a voting trust or enter into a voting agreement or arrangement with respect to such Shares or (v) subject to Section 8, take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby. (b) Subject to Section 8, the Stockholder shall not, nor shall he permit any investment banker, attorney or other adviser or representative of the Stockholder to, directly or indirectly, (i) solicit, initiate or encourage the submission of, any Acquisition Proposal or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, 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, attorney or other adviser or representative of the Stockholder shall be deemed to be a violation of this Section 3(b) by the Stockholder. SECTION 4. COMPETING TRANSACTIONS. Subject to Section 8, the Stockholder hereby agrees to vote against or refrain from giving any consent in favor of (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, joint venture, recapitalization, dissolution, liquidation or winding up of or by the Company and (ii) any amendment of the Company's Certificate of Incorporation or By-laws or other proposal or transaction (including any consent -2- solicitation to remove or elect any directors of the Company) involving the Company or any of its subsidiaries which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify, or result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under or with respect to, the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement (each of the foregoing in clause (i) or (ii) above, a "COMPETING TRANSACTION"). SECTION 5. CERTAIN EVENTS. The Stockholder agrees that this Agreement and the obligations hereunder shall attach to the 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 without limitation the Stockholder's heirs, guardians, administrators or successors. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock, or the acquisition of additional shares of Company Common Stock or other securities or rights of the Company by any Stockholder, the number of Shares listed on Schedule A beside the name of the Stockholder shall be adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Company Common Stock or other securities or rights of the Company issued to or acquired by the Stockholder. SECTION 6. STOP TRANSFER. [Intentionally Omitted]. SECTION 7. VOIDABILITY. If prior to the execution hereof, the Board of Directors of the Company shall not have duly and validly authorized and approved by all necessary corporate action the acquisition of Company Common Stock by Parent and Purchaser and the other transactions contemplated by this Agreement and the Merger Agreement, so that by the execution and delivery hereof Parent or Purchaser would become, or could reasonably be expected to become, an "Interested Stockholder" with whom the Company would be prevented for any period pursuant to Section 203 of the Corporation Law from engaging in any "Affiliated transaction" (as such terms are defined in Section 203 of the Corporation Law), then this Agreement shall be void and unenforceable until such time as such authorization and approval shall have been duly and validly obtained. SECTION 8. STOCKHOLDER CAPACITY. The Stockholder does not make any agreement or understanding in his capacity as director or officer of the Company. The Stockholder signs solely in his capacity as the record holder and beneficial owner of the Stockholder's Shares and nothing herein shall limit or affect or be affected by any actions taken by the Stockholder in his capacity as an officer or director of the Company to the extent specifically permitted by the Merger Agreement. SECTION 9. FURTHER ASSURANCES. The Stockholder shall, upon request of Parent or Purchaser execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent or Purchaser to be necessary or desirable to carry out the provisions hereof. SECTION 10. TERMINATION. This Agreement, and all rights and obligations of the parties hereunder, shall terminate upon the earlier of (a) the date upon which the Merger Agreement is -3- terminated in accordance with its terms or (b) the date that Parent, Purchaser or the Company shall have purchased and paid for the Shares of the Stockholder pursuant to Section 2; PROVIDED, HOWEVER, that the termination of this Agreement shall not relieve any party of liability for breach of this Agreement prior to termination. SECTION 11. PUBLIC ANNOUNCEMENTS. The Stockholder will consult with Parent before issuing, and provide Parent with the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Merger Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange. SECTION 12. MISCELLANEOUS. (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Parent or Purchaser, to the address set forth in Section 8.03 of the Merger Agreement; and (ii) if to the Stockholder, to the address set forth on Schedule A hereto, or such other address as may be specified in writing by the Stockholder. (c) 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. (d) This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of Parent, Purchaser and the Stockholder and delivered to Parent, Purchaser and the Stockholder. (e) This Agreement (including the documents and instruments referred to herein) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. (f) This Agreement shall be governed by, and construed in accordance with, the laws of the Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. (g) 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 by laws of descent. Any assignment in violation of the foregoing shall be void. (h) If any term, provision, covenant or restriction herein, or the application thereof to any circumstance, shall, to any event, be held by a court of competent jurisdiction to -4- be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions herein and the application thereof to any other circumstances, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated, and shall be enforced to the fullest extent permitted by law. (i) The Stockholder agrees that irreparable damage would occur and that Parent and Purchaser would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that Parent and Purchaser shall be entitled to an injunction or injunctions to prevent breaches by the Stockholder of this Agreement and to enforce specifically the terms and provisions of this Agreement. Each of the parties hereto (i) consents to submit to the personal jurisdiction of the courts specified in Section 8.13 of the Merger Agreement, and (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. The prevailing party in any judicial action shall be entitled to receive from the other party reimbursement for the prevailing party's reasonable attorneys' fees and disbursements, and court costs. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any party unless it shall be in writing and signed by such party. -5- IN WITNESS WHEREOF, Parent, Purchaser and the Stockholder have caused this Agreement to be duly executed and delivered as of the date first written above. /S/ FELIX DENNIS ---------------------------------- Felix Dennis Stockholder BRIDGEPORT HOLDINGS INC. By: /S/ ALFRED D. BOYER ---------------------------------- Name: Alfred D. Boyer Title: Vice President BRIDGEPORT ACQUISITION CORPORATION By: /S/ ALFRED D. BOYER ---------------------------------- Name: Alfred D. Boyer Title: Vice President -6- SCHEDULE A Felix Dennis 1,275,963 -7- -----END PRIVACY-ENHANCED MESSAGE-----