EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
DATED
SEPTEMBER 2, 1998
AMONG
DST SYSTEMS, INC.,
DST ACQUISITIONS, INC.
AND
USCS INTERNATIONAL, INC.
TABLE OF CONTENTS
PAGE
----
ARTICLE I
The Merger and Related Matters
Section 1.1 The Merger........................................................ 2
Section 1.2 Effective Time of the Merger...................................... 3
ARTICLE II
Conversion of Capital Stock
Section 2.1 Conversion of Stock............................................... 3
Section 2.2 Exchange of Certificates.......................................... 4
Section 2.3 Dividends and Other Distributions................................. 5
Section 2.4 No Fractional Shares.............................................. 6
Section 2.5 No Liability...................................................... 6
Section 2.6 Lost Certificates................................................. 6
Section 2.7 Treatment of Stock Options, Etc................................... 7
Section 2.8 Closing of USCS' Transfer Books................................... 7
Section 2.9 Closing........................................................... 7
Section 2.10 No Repurchase Rights.............................................. 7
ARTICLE III
-----------
Representations and Warranties of USCS
Section 3.1 Organization and Qualification.................................... 8
Section 3.2 Capitalization.................................................... 8
Section 3.3 Subsidiaries...................................................... 9
Section 3.4 Authority Relative to this Agreement 9
Section 3.5 No Breach; Required Consents...................................... 10
Section 3.6 Consents and Approvals............................................ 10
Section 3.7 Reports and Financial Statements.................................. 10
Section 3.8 Compliance with Law; Litigation................................... 11
Section 3.9 Title to Assets................................................... 12
Section 3.10 Employee Matters.................................................. 12
Section 3.11 ERISA............................................................. 12
Section 3.12 Approval.......................................................... 14
Section 3.13 Financial Advisor/Investment Banker............................... 14
Section 3.14 Taxes............................................................. 15
Section 3.15 Environmental Laws................................................ 15
Section 3.16 Transactions with Affiliates...................................... 15
Section 3.17 Material Contracts................................................ 15
Section 3.18 Intellectual Property............................................. 16
Section 3.19 Year 2000 Compliance.............................................. 17
PAGE
----
ARTICLE IV
Representations and Warranties of DST and Acquisition Sub
Section 4.1 Organization and Qualification......................................................................... 18
Section 4.2 Capitalization......................................................................................... 18
Section 4.3 Authority Relative to this Agreement................................................................... 18
Section 4.4 No Breach; Required Consents........................................................................... 19
Section 4.5 Consents and Approvals................................................................................. 19
Section 4.6 Reports and Financial Statements....................................................................... 19
Section 4.7 Litigation............................................................................................. 20
Section 4.8 No Broker.............................................................................................. 20
Section 4.9 Approval............................................................................................... 21
ARTICLE V
Conduct of Business Pending the Merger
Section 5.1 Conduct of Business of USCS............................................................................ 21
Section 5.2 Conduct of Business of DST............................................................................. 24
ARTICLE VI
Additional Agreements
Section 6.1 Access and Information................................................................................. 25
Section 6.2 SEC Filings............................................................................................ 25
Section 6.3 Meetings of Stockholders............................................................................... 28
Section 6.4 Compliance with the Securities Act..................................................................... 29
Section 6.5 Other Actions.......................................................................................... 29
Section 6.6 Confidentiality and Public Announcements............................................................... 29
Section 6.7 Notification........................................................................................... 30
Section 6.8 HSR Act Filings........................................................................................ 30
Section 6.9 USCS Director and Officer Indemnification.............................................................. 30
Section 6.10 Termination of USCS Rights Agreement................................................................... 31
Section 6.11 Actions Under Stockholder Agreement.................................................................... 31
Section 6.12 Consents/Waivers....................................................................................... 31
Section 6.13 USCS Deferred Compensation Plans....................................................................... 31
ARTICLE VII
Conditions Precedent
Section 7.1 Conditions to Each Party's Obligation to Effect the Merger............................................. 31
Section 7.2 Conditions to Obligation of USCS to Effect the Merger.................................................. 32
Section 7.3 Conditions to Obligations of DST and Acquisition Sub to Effect the Merger.............................. 33
PAGE
----
ARTICLE VIII
Termination, Amendment and Waiver
Section 8.1 Termination..................................................................................... 34
Section 8.2 Remedies........................................................................................ 35
Section 8.3 Amendment....................................................................................... 35
Section 8.4 Waiver.......................................................................................... 36
ARTICLE IX
Definitions; General Provisions
Section 9.1 Definitions..................................................................................... 36
Section 9.2 Other Definitions............................................................................... 38
Section 9.3 Use of Terms.................................................................................... 40
Section 9.4 Non-Survival of Representations, Warranties and Agreements..................................... 40
Section 9.5 Notices......................................................................................... 40
Section 9.6 Fees and Expenses............................................................................... 41
Section 9.7 Specific Performance............................................................................ 41
Section 9.8 Entire Agreement; Miscellaneous................................................................. 41
Section 9.9 Governing Law and Venue; Waiver of Jury Trial................................................... 42
EXHIBITS
EXHIBIT DESCRIPTION
A USCS Disclosure Schedule
6.4 Form of USCS Affiliate Agreement
7.2(e)(i) Form of DST Affiliate Agreement
E-1 Form of USCS Stockholder Agreement
E-2 Form of DST Stockholder Agreement
7.2(e)(ii) Legal Opinion of Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
7.2(e)(iv) Registration Rights Agreement
7.3(c)(iii) Legal Opinion of Xxxxxx & Xxxxx LLP
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated September 2,
1998 and is entered into by and among DST Systems, Inc., a Delaware corporation
("DST"), DST Acquisitions, Inc., a Delaware corporation and a wholly-owned
subsidiary of DST ("Acquisition Sub") and USCS International, Inc., a Delaware
corporation ("USCS").
RECITALS
A. DST and USCS desire to enter into a transaction in which Acquisition
Sub will merge with and into USCS (the "Merger"). At the effective time of the
Merger, the outstanding shares of the capital stock of USCS shall be converted
into the right to receive shares of common stock of DST (except as provided
herein). As a result, DST will become the holder of all the outstanding shares
of capital stock of USCS and the holders of shares of capital stock of USCS
outstanding immediately prior to the Merger will become holders of shares of
common stock of DST.
B. The Boards of Directors of DST, USCS and Acquisition Sub each have
determined that the transactions described herein are in the best interests of
their respective corporations and stockholders.
C. It is intended that, for federal income tax purposes, the Merger shall
qualify as a reorganization under the provisions of Section 368(a) of the Code.
D. It is intended that for financial accounting purposes, the Merger
shall be accounted for as a "pooling-of-interests" under generally accepted
accounting principles.
E. Parties owning more than 35% of the outstanding shares of (i) USCS
Common Stock (the "USCS Major Stockholders") and of (ii) DST Common Stock (the
"DST Major Stockholder") are contemporaneously with the execution and delivery
of this Agreement executing and delivering the respective Stockholder Agreements
attached hereto as Exhibits E-1 and E-2.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained in this Agreement, the
parties to this Agreement agree as follows:
ARTICLE I
The Merger and Related Matters
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement and applicable provisions of the Delaware General Corporation Law
("DGCL"), at the Effective Time: (i) Acquisition Sub will be merged with and
into USCS; (ii) the separate existence of Acquisition Sub will cease and USCS
will continue as the surviving corporation in the Merger (the "Surviving
Corporation"); and (iii) the name of the Surviving Corporation will be USCS
1
from and after the Effective Time, and without any further action on the part of
any Person, the Merger will have all the effects provided by applicable Legal
Requirements, including Sections 251 and 259 of the DGCL, the effects described
in Section 2.1 with respect to the capital stock of Acquisition Sub and USCS
and, subject to applicable Legal Requirements, the following additional effects
as of the Effective Time:
(A) CERTIFICATE OF INCORPORATION. The certificate of incorporation of
Acquisition Sub (the "Certificate of Incorporation"), will become the
certificate of incorporation of the Surviving Corporation, and such Certificate
of Incorporation may thereafter be amended and/or restated as provided therein
and by the DGCL.
(B) BYLAWS. The bylaws of Acquisition Sub, as in effect immediately prior
to the Effective Time, will become the bylaws of the Surviving Corporation, and
such bylaws may thereafter be amended or repealed in accordance with their terms
and the Certificate of Incorporation and as provided by the DGCL.
(C) DIRECTORS. The directors of Acquisition Sub immediately prior to the
Effective Time will become the directors of the Surviving Corporation, each to
hold office in accordance with the Certificate of Incorporation and bylaws of
the Surviving Corporation and the DGCL and until the earlier of such director's
resignation or removal or such director's successor is duly elected and
qualified, as the case may be.
(D) OFFICERS. The officers of USCS immediately prior to the Effective Time
will become the officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and bylaws of the Surviving
Corporation and the DGCL and until the earlier of such officer's resignation or
removal or such officer's successor is duly appointed and qualified, as the case
may be.
(E) PROPERTIES AND LIABILITIES. All the properties, rights, privileges,
powers and franchises of USCS and Acquisition Sub will vest in the Surviving
Corporation, and all debts, liabilities, agreements and duties of USCS and
Acquisition Sub will become the debts, liabilities, agreements and duties of the
Surviving Corporation.
(F) NEW DST DIRECTORS. Xxxxxx Xxxxxxx and Xxxxx Xxxxxx, Directors of USCS,
will become members of the Board of Directors of DST, in the classes with terms
expiring, respectively, in 2001 and 2000, to hold office in accordance with the
certificate of incorporation and bylaws of DST and the DGCL and until the
earlier of their resignation or removal or their successors are duly elected and
qualified.
SECTION 1.2 EFFECTIVE TIME OF THE MERGER. Subject to the terms and
conditions of this Agreement, on the Closing Date the parties will prepare, sign
and acknowledge, in accordance with the DGCL, a certificate of merger (the
"Certificate of Merger") and deliver the Certificate of Merger to the Secretary
of State of the State of Delaware (the "Secretary") for filing pursuant to the
DGCL. The Merger will become effective upon the filing of the Certificate of
Merger with the Secretary. As used in this Agreement, the "Effective Time" means
the time at which the Certificate of Merger is filed with the Secretary.
2
ARTICLE II
CONVERSION OF CAPITAL STOCK
SECTION 2.1 CONVERSION OF STOCK. At the Effective Time, by virtue of the
Merger and without any action on the part of DST, Acquisition Sub, USCS or the
holders of any of the following securities:
(a) Each share of USCS Common Stock outstanding immediately prior to the
Effective Time (except shares subject to Section 2.1(b)), shall be converted
into the right to receive, and there shall be paid and issued as provided in
this Agreement in exchange for such share, .62 shares of DST Common Stock (the
"Exchange Ratio"), plus cash in lieu of any fractional share as provided in
Section 2.4.
(b) Each share of capital stock of USCS (the "USCS Stock") issued and
outstanding immediately prior to the Effective Time and owned directly or
indirectly by USCS or any Subsidiary of USCS, or by DST or any Subsidiary of
DST, if any, will be canceled and retired, and no DST Common Stock or other
consideration will be delivered in exchange therefor.
(c) The shares of common stock, par value $.01 per share, of Acquisition
Sub issued and outstanding immediately prior to the Effective Time will be
converted into and will thereafter evidence and become one thousand (1,000)
shares of validly issued, fully paid, and nonassessable common stock, par value
$.01 per share, of the Surviving Corporation.
(d) In the event DST changes the number of shares of DST Common Stock
issued and outstanding after the date of this Agreement and prior to the
Effective Time as a result of a stock split, stock dividend, or similar
recapitalization with respect to DST Common Stock and the record date therefor
(in the case of a stock dividend) or the effective date thereof (in the case of
a stock split or similar recapitalization for which a record date is not
established) is after the date of this Agreement and prior to the Effective
Time, the Exchange Ratio will be appropriately adjusted to reflect such stock
split, stock dividend or similar recapitalization. The issuance of shares of
DST Common Stock upon exercise of options, warrants or other rights to purchase
such stock shall not be deemed an event requiring any adjustment pursuant to
this Section 2.1(d).
SECTION 2.2 EXCHANGE OF CERTIFICATES.
(A) EXCHANGE AGENT. As of the Effective Time, DST shall enter into an
agreement with a bank or trust company selected by DST and reasonably acceptable
to USCS to act as exchange agent (the "Exchange Agent") in connection with the
surrender of certificates that, prior to the Effective Time, evidenced
outstanding shares of USCS Common Stock ("USCS Stock Certificates"). On or
prior to the Closing Date, DST will deposit with the Exchange Agent for exchange
in accordance with this Section 2.2 certificates evidencing the shares of DST
Common Stock to be issued in the Merger ("DST Certificates"), which shares of
DST Common Stock will be deemed to be issued at the Effective Time. At and
following the Effective Time, DST will deliver to the Exchange Agent such cash
as may be required from time to time to make payments of cash in lieu of
fractional shares of DST Common Stock in accordance with Section 2.4.
3
(B) EXCHANGE. As soon as practicable after the Effective Time, DST will
cause the Exchange Agent to mail to each Person who was a holder of record of
USCS Common Stock at the Effective Time: (i) a letter of transmittal (which will
specify that delivery will be effective, and risk of loss and title to any USCS
Stock Certificates will pass, only upon delivery of USCS Stock Certificates to
the Exchange Agent and will be in such form and will have such other provisions
that are specified by DST and reasonably acceptable to USCS); and (ii)
instructions for use in effecting the surrender of USCS Stock Certificates in
exchange for DST Certificates (together with any dividend or distribution with
respect thereto made after the Effective Time and any cash to be paid in lieu of
fractional shares of DST Common Stock pursuant to Section 2.4). Upon surrender
of a USCS Stock Certificate for cancellation to the Exchange Agent or to such
other agent or agents as may be appointed by DST, together with such letter of
transmittal, duly executed, and such other documents as may be required by the
Exchange Agent or such other agent, the holder of such USCS Stock Certificate
will be entitled to receive in exchange therefor DST Certificates representing
the number of whole shares of DST Common Stock that such holder has the right to
receive pursuant to this Agreement (together with any dividend or distribution
with respect thereto made after the Effective Time and any cash to be paid in
lieu of fractional shares of DST Common Stock pursuant to Section 2.4) and each
USCS Stock Certificate so surrendered will be canceled. In the event of a
transfer of ownership of USCS Common Stock that is not registered in the
transfer records of USCS, DST Certificates representing the proper number of
shares of DST Common Stock may be issued to a Person other than the Person in
whose name the surrendered USCS Stock Certificate is registered if the USCS
Stock Certificate representing such USCS Common Stock is presented to the
Exchange Agent accompanied by all documents required to evidence and effect such
transfer and by evidence reasonably satisfactory to DST that any applicable
stock transfer tax has been paid. DST will not directly or indirectly pay or
reimburse any Person for any transfer taxes. If any DST Certificates are to be
delivered to a Person other than the Person in whose name USCS Stock
Certificates surrendered in exchange therefor are registered, it will be a
condition to the delivery of such DST Certificates that USCS Stock Certificates
so surrendered are properly endorsed or accompanied by appropriate stock powers
and otherwise in proper form for transfer, that such transfer otherwise is
proper and that the Person requesting such transfer pay to the Exchange Agent
any transfer or other taxes payable by reason of the foregoing or establishes to
the satisfaction of the Exchange Agent that such taxes have been paid or are not
required to be paid.
(C) CERTIFICATES NOT EXCHANGED. After the Effective Time, each outstanding
USCS Stock Certificate will, until surrendered for exchange in accordance with
this Section 2.2, be deemed for all purposes to evidence ownership of the number
of whole shares of DST Common Stock into which the shares of USCS Common Stock
(which, prior to the Effective Time, were represented thereby) are converted in
accordance with Section 2.1, together with the right to receive any dividend or
distribution with respect thereto made after the Effective Time, subject to
Section 2.3, and any cash to be paid in lieu of fractional shares of DST Common
Stock pursuant to Section 2.4.
(D) EXPENSES. Except as otherwise expressly provided in this Agreement,
DST will pay all charges and expenses, including those of the Exchange Agent, in
connection with the exchange of shares of DST Common Stock for shares of USCS
Common Stock, except any charges or expenses that are otherwise solely the
liability of one or more holders of USCS
4
Common Stock. Any DST Certificates deposited with the Exchange Agent that remain
unclaimed by the former stockholders of USCS after six months following the
Effective Time will be delivered to DST upon its demand, and any former
stockholders of USCS who have not then complied with the instructions for
exchanging their USCS Stock Certificates will thereafter look only to DST for
exchange of USCS Stock Certificates and for any dividend or distribution with
respect thereto made after the Effective Time and any cash to be paid in lieu of
fractional shares of DST Common Stock pursuant to Section 2.4.
SECTION 2.3 DIVIDENDS AND OTHER DISTRIBUTIONS. No dividends or other
distributions declared or made after the Effective Time with respect to shares
of DST Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered USCS Stock Certificate with respect to the
shares of DST Common Stock issuable upon surrender thereof until the holder of
such USCS Stock Certificate surrenders such USCS Stock Certificate in accordance
with Section 2.2. Subject to the effect of applicable Legal Requirements,
following surrender of any such USCS Stock Certificate, DST will pay or cause to
be paid, without interest, to the record holder of DST Certificates issued in
exchange therefor, (a) at the time of such surrender, the amount of cash in lieu
of fractional shares of DST Common Stock to which such holder is entitled
pursuant to Section 2.4 and the amount, if any, of dividends or other
distributions by DST with a record date after the Effective Time theretofore
paid with respect to such whole shares of DST Common Stock and (b) at the
appropriate payment date, the amount of dividends or other distributions (if
any) by DST with a record date after the Effective Time but prior to surrender
of such USCS Stock Certificate and a payment date subsequent to such surrender
payable with respect to such whole shares of DST Common Stock.
SECTION 2.4 NO FRACTIONAL SHARES.
(A) CASH PAYMENT IN LIEU OF FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of DST Common Stock will be issued upon the
surrender of USCS Stock Certificates pursuant to Section 2.2. No such
fractional interest will entitle the owner thereof to any rights as a security
holder of DST. In lieu of any such fractional shares of DST Common Stock, each
holder of USCS Common Stock entitled to receive shares of DST Common Stock in
the Merger, upon surrender of such Person's USCS Stock Certificates for exchange
pursuant to Section 2.2, will be entitled to receive an amount in cash (without
interest), rounded up to the nearest cent, determined by multiplying the
fractional share interest in DST Common Stock to which such holder would
otherwise be entitled (after taking into account all shares of USCS Common Stock
held of record by such holder immediately prior to the Effective Time) by the
Market Price of one share of DST Common Stock at the Effective Time.
(B) DEPOSIT WITH EXCHANGE AGENT. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of shares of
USCS Common Stock in lieu of any fractional shares of DST Common Stock, DST will
promptly deposit with the Exchange Agent cash in the required amounts and the
Exchange Agent will mail such amounts without interest to such holders; provided
however, that no such amount will be paid to any holder with respect to any USCS
Stock Certificate prior to the surrender by such holder of such USCS Stock
Certificate.
5
SECTION 2.5 NO LIABILITY. None of DST, Acquisition Sub, USCS, the
Surviving Corporation or the Exchange Agent will be liable to any holder of
shares of USCS Common Stock for any shares of DST Common Stock, dividends or
distributions with respect thereto or cash payable in lieu of fractional shares
of DST Common Stock delivered to a state abandoned property administrator or
other public official pursuant to any applicable abandoned property, escheat or
similar law.
SECTION 2.6 LOST CERTIFICATES. If any USCS Stock Certificate is lost,
stolen or destroyed, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed USCS Stock Certificate the shares of DST Common Stock (and
any dividend or distribution with respect thereto made after the Effective Time
and any cash payable in lieu of fractional shares of DST Common Stock pursuant
to Section 2.4) deliverable in respect thereof as determined in accordance with
the terms of this Agreement, subject to the condition that the Person to whom
the DST Common Stock (and any dividend or distribution with respect thereto made
after the Effective Time and any cash payable in lieu of fractional shares
pursuant to Section 2.4) is to be issued shall have (a) delivered to DST an
affidavit claiming such USCS Stock Certificate to be lost, stolen, or destroyed
and (b) if required by DST, give DST an indemnity agreement and bond
satisfactory to DST against any claim that may be made against DST with respect
to USCS Stock Certificate alleged to have been lost, stolen or destroyed.
SECTION 2.7 TREATMENT OF STOCK OPTIONS, ETC. At the Effective Time, each
outstanding stock option, warrant or other right to acquire shares of USCS
Common Stock, identified in Section 3.2(b) of the USCS Disclosure Schedule
("USCS Options"), whether or not exercisable, as of the Effective Time will be
converted into and become rights with respect to DST Common Stock, and DST shall
assume each USCS Option, in accordance with the terms and conditions of the
stock option, warrant or other agreement by which it is evidenced (including,
without limitation, continuing the qualification as incentive stock options of
any options that qualify as such under Section 422 of the Code), except that
from and after the Effective Time, (i) each USCS Option assumed by DST may be
exercised solely for shares of DST Common Stock, (ii) the number of shares of
DST Common Stock subject to such USCS Option will be equal to the number of
shares of USCS Common Stock subject to such USCS Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole share, and (iii) the per share exercise price under each such USCS Option
will be adjusted by dividing the per share exercise price under each such USCS
Option by the Exchange Ratio and rounding up to the nearest cent.
Notwithstanding the provisions of clause (ii) of the preceding sentence, DST
will not be obligated to issue any fraction of a share of DST Common Stock upon
exercise of USCS Options.
SECTION 2.8 CLOSING OF USCS' TRANSFER BOOKS. At the Effective Time, the
stock transfer books of USCS will be closed and no transfer of shares of USCS
Common Stock will be made thereafter. In the event that, after the Effective
Time, USCS Stock Certificates are presented to the Surviving Corporation, they
will be canceled and exchanged for DST Certificates (and, if required, cash) as
provided in Section 2.2(b) and Section 2.4.
SECTION 2.9 CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") will take place (i) at the offices of Xxxxxxxxxxxx
Xxxx & Xxxxxxxxx, 0000 Xxxx Xxxxxx, Xxxxx 0000, Xxxxxx Xxxx, Xxxxxxxx, at 10:00
a.m. local time on the date that is the first
6
Business Day after the day on which the last of the conditions set forth in
Article VII (excluding delivery of opinions and certificates) is fulfilled or
waived or (ii) at such other place and time as DST and USCS agree in writing.
The date on which the Closing occurs is referred to in this Agreement as the
"Closing Date."
SECTION 2.10 NO REPURCHASE RIGHTS. The holders of DST Common Stock
received pursuant to the Merger or issuable pursuant to USCS Options shall have
no right to require DST or its Affiliates to repurchase any such shares of DST
Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF USCS
USCS REPRESENTS AND WARRANTS TO DST AS FOLLOWS:
SECTION 3.1 ORGANIZATION AND QUALIFICATION. USCS is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to carry on its
business as it is now being conducted. USCS is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified will not, individually or in the aggregate, have a Material Adverse
Effect upon it. Set forth in Section 3.1 of the USCS Disclosure Schedule
(Exhibit A hereto) is a list of all jurisdictions in which USCS and its
Subsidiaries, Cabledata, Inc. and International Billing Services, Inc. are each
qualified as a foreign corporation.
SECTION 3.2 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of USCS
consisted of: (i) 40,000,000 shares of USCS Common Stock, of which 23,296,188
shares were issued and outstanding as of August 31, 1998; (ii) 10,000,000 shares
of preferred stock, $.05 par value per share, none of which are issued and
outstanding; and (iii) 2,532,280 shares of USCS Common Stock issuable as of
September 2, 1998 with respect to all outstanding options to acquire shares of
USCS Common Stock.
(b) Set forth in Section 3.2(b) of the USCS Disclosure Schedule is a
schedule of all options, warrants, calls, subscriptions or other rights,
agreements or commitments of any kind (including preemptive rights), to which
USCS or any of its Subsidiaries is a party, relating to the issued or unissued
capital stock or other securities of USCS. Such schedule sets forth for all
such options, warrants, calls, subscriptions or other rights, agreements or
commitments that are outstanding (i) the names of the holders, (ii)
identification of the plan under which each such USCS Option was issued, (iii)
the number of shares of USCS Common Stock issuable pursuant thereto, (iv) the
exercise or conversion price, (v) the date of grant and date of expiration, and
(vi) as to options, which options are "incentive stock options" as defined in
Section 422(b) of the Code. All such options, warrants, calls, subscriptions,
rights, agreements and commitments have been validly issued in accordance with
the provisions of applicable plans or agreements and Legal Requirements.
7
(c) All issued and outstanding shares of USCS Stock have been duly
authorized and validly issued and are fully paid and nonassessable, are not
subject to, and have not been issued in violation of, any preemptive rights, and
have not been issued in violation of any federal or state securities laws or any
other Legal Requirement and all corporate and other action on behalf of USCS and
the USCS Option Holders to permit assumption of the USCS Options contemplated in
Section 2.7 has been taken.
(d) Except as set forth in Section 3.2(d) of the USCS Disclosure Schedule,
since June 20, 0000 XXXX has not reacquired any of its Common Stock or other
equity securities and all securities identified in such schedule were reacquired
in compliance with applicable Legal Requirements solely for use in connection
with Employee Benefit Plans and not in a manner that would prevent the Merger
from being accounted for as a "pooling-of-interest."
SECTION 3.3 SUBSIDIARIES. Set forth in Section 3.3 of the USCS Disclosure
Schedule is a schedule listing all the Equity Affiliates of USCS including the
percentage and nature of USCS' ownership of each Subsidiary and Equity Affiliate
of USCS. Each of USCS' Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or formation and has the corporate power to carry on its business
as it is now being conducted or currently proposed to be conducted. Each of
USCS' Subsidiaries is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes such
qualification necessary except where the failure to be so qualified will not
have a Material Adverse Effect on USCS. All the outstanding shares of capital
stock of each of USCS' Subsidiaries are validly issued, fully paid and
nonassessable. Except as set forth in Section 3.3 of the USCS Disclosure
Schedule, the shares of capital stock or other ownership interests in each of
USCS' Subsidiaries or Equity Affiliates that are owned by USCS or by a
Subsidiary of USCS are owned free and clear of any Liens, are not subject to and
have not been issued in violation of any preemptive rights and have not been
issued in violation of any federal or state securities laws or any other Legal
Requirement. Except as set forth in Section 3.3 of the USCS Disclosure
Schedule, there are not, as of the date hereof, and at the Effective Time there
will not be, any outstanding options, warrants, calls or other rights,
agreements or commitments of any character, to which USCS or any of its
Subsidiaries is a party, relating to the issued or unissued capital stock, other
securities or other ownership interests in any of the Subsidiaries or Equity
Affiliates of USCS.
SECTION 3.4 AUTHORITY RELATIVE TO THIS AGREEMENT. USCS has all requisite
corporate power and authority to execute and deliver this Agreement and, subject
to approval of this Agreement by the holders of USCS Stock, to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by USCS' Board of Directors. Except for the
approval of the holders of USCS Stock, no other corporate proceedings on the
part of USCS are necessary to authorize this Agreement and the transactions
contemplated by this Agreement. The Board of Directors of USCS has received the
opinion of Xxxxxxx Xxxxx & Co. as financial advisor to USCS dated as of the date
of this Agreement satisfactory to USCS and its Board of Directors to the effect
that, as of the date of this Agreement, the Exchange Ratio is fair to USCS'
stockholders from a financial point of view. This Agreement constitutes a valid
and binding obligation of USCS enforceable in accordance
8
with its terms except (i) as enforcement may be limited by bankruptcy,
insolvency or other similar Legal Requirements affecting the enforcement of
creditors' rights generally, (ii) as the availability of indemnification and
other remedies may be limited by federal and state securities laws and (iii) for
limitations imposed by general principles of equity.
SECTION 3.5 NO BREACH; REQUIRED CONSENTS. The execution and delivery of
this Agreement by USCS does not, and the consummation of the transactions
contemplated by this Agreement by USCS will not: (a) subject to the approval of
holders of USCS Stock, violate or conflict with the certificate of incorporation
or bylaws of USCS; (b) except as set forth in Section 3.5 of the USCS Disclosure
Schedule, constitute a breach or default (or an event that with notice or lapse
of time or both would become a breach or default) or give rise to any Lien,
third-party right of termination, cancellation, modification or acceleration
under any agreement or undertaking to which USCS is a party or by which it is
bound, except where such breach, default, Lien, third-party right of
termination, cancellation, modification, or acceleration would not have a
Material Adverse Effect on USCS; or (c) subject to obtaining the consents,
approvals or authorizations and making the filings or registrations described in
Section 3.6, constitute a violation of any Legal Requirement.
SECTION 3.6 CONSENTS AND APPROVALS. Except as set forth in Section 3.6 of
the USCS Disclosure Schedule, neither the execution and delivery of this
Agreement by USCS nor the consummation of the transactions contemplated by this
Agreement by USCS will require USCS to make any filing or registration with, or
obtain any authorization, consent or approval of, any Governmental Entity or any
other Person, except those required in connection, or in compliance, with the
provisions of (i) the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (ii) the Securities Act, (iii) the Exchange Act and
(iv) the corporation, securities or blue sky laws or regulations, or similar
Legal Requirements, of the various states of the United States.
SECTION 3.7 REPORTS AND FINANCIAL STATEMENTS.
(A) SEC REPORTS. USCS has filed all required forms, reports and documents
required to be filed with the SEC since June 20, 1996 (collectively, the "USCS
SEC Reports"). As of their respective dates or effective dates and except as
the same may have been corrected, updated or superseded by means of a subsequent
filing with the SEC prior to the date of this Agreement, none of USCS SEC
Reports, including any financial statements or schedules included or
incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading insofar as
such statements relate to or affect USCS or its Subsidiaries. USCS has delivered
or made available to DST, in the form filed with the SEC, all USCS SEC Reports.
(B) FINANCIAL STATEMENTS. The audited consolidated financial statements of
USCS contained in USCS SEC Reports comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and present fairly USCS' consolidated financial
9
condition and the results of its operations as of the relevant dates thereof and
for the periods covered thereby. The unaudited consolidated interim financial
statements of USCS contained in USCS SEC Reports comply in all material respects
with applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, were prepared on a basis consistent
with prior interim periods (except as required by applicable changes in GAAP or
in SEC accounting policies) and include all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of USCS'
consolidated financial condition and results of operations for such periods.
(C) ABSENCE OF CERTAIN CHANGES. Except as set forth in Section 3.7(c) of
the USCS Disclosure Schedule, since the date of the most recent consolidated
balance sheet of USCS included in USCS' Quarterly Report on Form 10-Q filed with
the SEC for the quarter ended June 30, 1998 (the "Most Recent USCS Balance
Sheet"), there has not been any: (i) transaction, commitment, dispute or other
event or condition (financial or otherwise) of any character (whether or not in
the ordinary course of business) that, individually or in the aggregate, has
had, or would have, a Material Adverse Effect on USCS; (ii) any declaration,
setting aside or payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the capital stock of USCS; or (iii) entry
into any commitment or transaction material to USCS and its Subsidiaries taken
as a whole (including any borrowing or sale of assets) except in the ordinary
course of business consistent with past practice.
(D) ABSENCE OF UNDISCLOSED LIABILITIES. USCS does not have any
indebtedness, liability or obligation required by GAAP to be reflected on a
balance sheet that is not reflected or reserved against in the Most Recent USCS
Balance Sheet except (i) liabilities, obligations and contingencies that were
incurred after the date of the Most Recent USCS Balance Sheet in the ordinary
course of business and which would not in the aggregate have a Material Adverse
Effect on USCS or its Subsidiaries and (ii) other liabilities, obligations and
contingencies that would not, in the aggregate, have a Material Adverse Effect
on USCS.
SECTION 3.8 COMPLIANCE WITH LAW; LITIGATION.
(a) Except as set forth in Section 3.8 of the USCS Disclosure Schedule,
USCS and its Subsidiaries hold all permits, licenses, franchises, variances,
exemptions, concessions, leases, instruments, orders and approvals (the "USCS
Permits") of all Governmental Entities required to be held under applicable
Legal Requirements and will not lose any USCS Permit as a result of the Merger,
except such USCS Permits the failure of which to hold, individually or in the
aggregate, does not have and, to the Knowledge of USCS, in the future is not
likely to have, a Material Adverse Effect on USCS. USCS and its Subsidiaries
are in compliance with the terms of USCS Permits, except for such failures to
comply that, individually or in the aggregate, would not have a Material Adverse
Effect on USCS. The businesses of USCS and its Subsidiaries are not being
conducted in violation of any Legal Requirement, except for such violations
which, individually or in the aggregate, would not have a Material Adverse
Effect on USCS. No investigation or review by any Governmental Entity with
respect to USCS or any of its Subsidiaries is pending, or, to the Knowledge of
USCS, threatened, nor has any Governmental Entity indicated to USCS in writing
an intention to conduct the same.
10
(b) Set forth in Section 3.8(b) of the USCS Disclosure Schedule is a
schedule listing every suit, action or proceeding pending or, to the Knowledge
of USCS, threatened against or affecting USCS or any of its Subsidiaries and
every judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against USCS or any of its Subsidiaries and none of the
suits, actions, proceedings, judgments, decrees, injunctions, rules or orders
listed in that Schedule has had or is likely to have a Material Adverse Effect
on USCS.
(c) Neither USCS nor any of its Subsidiaries is subject to Section 2115 of
the California Corporation Code.
SECTION 3.9 TITLE TO ASSETS. USCS and its Subsidiaries have valid title
to all material assets reflected on the Most Recent USCS Balance Sheet, free and
clear of any Lien except: (a) landlord's Liens and Liens for property taxes not
delinquent; (b) Liens that were created in the ordinary course of business and
do not materially detract from the value of such assets or materially impair the
use thereof in the operation of USCS' business; (c) leased interests in property
owned by others; and leased interests in property leased to others; and (d)
zoning, building or similar restrictions, easements, rights-of-way, reservations
of rights, conditions, or other restrictions or encumbrances relating to or
affecting real property that do not, individually or in the aggregate,
materially interfere with the use of such real property in the operation of
USCS' business.
SECTION 3.10 EMPLOYEE MATTERS. Except as set forth in Section 3.10 of the
USCS Disclosure Schedule, USCS and its Subsidiaries are in compliance with all
applicable Legal Requirements relating to the employment of employees, including
any obligations relating to employment standards legislation, pay equity,
occupational health and safety, labor relations and human rights legislation
except for such failures to comply as do not have, and to USCS' Knowledge are
not likely to have, a Material Adverse Effect on USCS. None of the employees of
USCS or its Subsidiaries are represented by any labor union and there is to the
knowledge of USCS no organizing effort underway currently to form any such
union.
SECTION 3.11 ERISA.
(a) Set forth in Section 3.11(a) of the USCS Disclosure Schedule is a
schedule listing all "employee benefit plans," as defined in ERISA, and all
other material employee benefit arrangements, programs or payroll practices,
including severance pay, sick leave, vacation pay, salary continuation for
disability, deferred compensation, retirement income, bonus, stock purchase or
option, hospitalization, medical insurance, life insurance, tuition
reimbursement, employee assistance and employee discounts, that USCS or any of
its ERISA Affiliates maintains or has or may have an obligation to make
contributions to (the "USCS Benefit Plans").
(b) Neither USCS nor any of its ERISA Affiliates is or has been a
participating employer in any multiemployer plan within the meaning of Section
3(37) of ERISA. Neither USCS nor any of its ERISA Affiliates has incurred any
unsatisfied withdrawal liability, as defined in Section 4201 of ERISA, with
respect to any multiemployer plan, nor has any of them incurred any liability
due to the termination or reorganization of any multiemployer plan, except any
such liability that would not have a Material Adverse Effect on USCS. To the
Knowledge of USCS, neither USCS nor any of its ERISA Affiliates reasonably
expects to incur any liability
11
due to a withdrawal from or termination or reorganization of a multiemployer
plan, except any such liability that would not have a Material Adverse Effect on
USCS.
(c) Except as set forth in Section 3.11(c) of the USCS Disclosure Schedule,
each USCS Benefit Plan that is intended to qualify under Section 401 of the
Code, and a form of trust that is similar in all material respects to the trust
maintained pursuant thereto, have been determined to be exempt from federal
income taxation under Section 501 of the Code by the Internal Revenue Service,
and to the Knowledge of USCS, nothing has occurred with respect to any such plan
since such determination that is likely to result in the loss of such exemption
or the imposition of any material liability, penalty or tax under ERISA or the
Code.
(d) Each USCS Benefit Plan has at all times been maintained and operated in
all material respects, by its terms and in operation, in accordance with all
applicable Legal Requirements.
(e) All contributions (including all employer contributions and employee
salary reduction contributions) required to have been made under USCS Benefit
Plans or pursuant to applicable Legal Requirements (without regard to any
waivers granted under Section 412 of the Code) to any funds or trusts
established thereunder or in connection therewith have been made by the due date
thereof (including any valid extension or grace period) and no accumulated
funding deficiency exists with respect to any of USCS Benefit Plans subject to
Section 412 of the Code.
(f) Except as set forth in Section 3.11(f) of the USCS Disclosure Schedule,
to the Knowledge of USCS, there have been no violations of ERISA or the Code
with respect to the filing of applicable reports, documents and notices
regarding USCS Benefit Plans with the Secretary of Labor, the Pension Benefit
Guaranty Corporation, and the Secretary of the Treasury or the furnishing of
such reports, documents and notices to the participants or beneficiaries of USCS
Benefit Plans, except such violations that, individually or in the aggregate,
would not have a Material Adverse Effect on USCS.
(g) There are no pending actions, claims or lawsuits that have been
asserted or instituted against USCS Benefit Plans, the assets of any of the
trusts under such plans or the plan sponsor or the plan administrator, or
against any fiduciary of USCS Benefit Plans, with respect to the operation of
such plans (other than routine benefit claims), nor does USCS have Knowledge of
facts that reasonably could be expected to form the basis for any such action,
claim or lawsuit.
(h) Neither USCS nor any of its ERISA Affiliates maintain, or has in the
past maintained, a defined benefit pension plan which is or was subject to Title
IV of ERISA.
(i) The current value of vested accrued benefits under each USCS Benefit
Plan which is subject to Title IV of ERISA does not exceed the current value of
all of the assets of such Plan allocable to such vested accrued benefits. For
purposes of the representations in the preceding sentence, the terms "current
value" and "accrued benefit" have the meanings specified in Section 3 of ERISA.
12
(j) There are no accrued liabilities under any USCS Benefit Plan which are
not provided for on the books or financial statements of USCS or its ERISA
Affiliates, or which have not been fully provided for by contributions to such
Plans.
SECTION 3.12 APPROVAL.
(a) The Board of Directors of USCS at a meeting duly called and held: (i)
determined that the Merger is advisable and fair and in the best interests of
USCS and its stockholders; (ii) approved the Merger and this Agreement and the
transactions contemplated by this Agreement in accordance with the provisions of
Section 251 of the DGCL; (iii) recommended the approval of this Agreement and
the Merger by the holders of USCS Stock and directed that the Merger be
submitted for consideration by USCS' stockholders at the Meeting; and (iv)
adopted a resolution having the effect of causing the Merger not to be subject
to Section 203 of the DGCL or to the USCS Rights Plan.
(b) The vote of a majority of the outstanding shares of USCS Stock is the
vote required for the adoption and approval of this Agreement, the Merger and
the other transactions contemplated by this Agreement.
SECTION 3.13 FINANCIAL ADVISOR/INVESTMENT BANKER. Except for amounts
payable to Xxxxxxx Xxxxx & Co., pursuant to the letter agreement dated July 21,
1998, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of USCS or its Subsidiaries. There has been delivered to DST a true
and complete copy of the agreement pursuant to which Xxxxxxx Xxxxx & Co. has
been retained to act as financial advisor to USCS in connection with the Merger.
SECTION 3.14 TAXES. USCS and each of its Subsidiaries have timely filed
all Tax returns required to be filed by any of them and have timely paid or have
established an adequate reserve for the payment of all Taxes owed in respect of
the periods covered by such returns. The information contained in such Tax
returns is complete and accurate in all material respects. Neither USCS nor any
Subsidiary of USCS is delinquent in the payment of any Tax or other amount owed
to any Governmental Entity. Except as set forth in Section 3.14 of the USCS
Disclosure Schedule, there are no claims or investigations pending or, to USCS'
Knowledge, threatened against USCS or any of its Subsidiaries for past Taxes,
except claims and investigations that would not have a Material Adverse Effect
on USCS and adequate provision for which has been made on the Most Recent
Balance Sheet. None of USCS or its Subsidiaries has waived or extended any
applicable statute of limitations relating to the assessment of any Taxes that
would be payable by USCS or such Subsidiary.
SECTION 3.15 ENVIRONMENTAL LAWS.
(a) Each of USCS and its Subsidiaries is in compliance in all respects with
all Environmental Laws, except where the failure to so comply would not have a
Material Adverse Effect on USCS; and
13
(b) No orders, directions or notices have been received by USCS or its
Subsidiaries during the past five years pursuant to any Environmental Law and no
Governmental Entity has submitted to any of USCS and its Subsidiaries any
request for information pursuant to any Environmental Law, except as set forth
in Section 3.15(b) of the USCS Disclosure Schedule.
SECTION 3.16 TRANSACTIONS WITH AFFILIATES. Except as disclosed in USCS
SEC Reports, or as set forth in Section 3.16 of the USCS Disclosure Schedule,
there is no lease, sublease, indebtedness, contract, agreement, commitment,
understanding or other arrangement of any kind entered into by USCS with any
officer, director or stockholder of USCS or any "affiliate" or "associate" of
any of them (as those terms are defined in the Exchange Act) or of USCS, except,
in each case, for compensation paid to directors and officers consistent with
previously established policies, reimbursements of ordinary and necessary
expenses incurred in connection with their employment and amounts paid or
benefits granted pursuant to USCS Benefit Plans.
SECTION 3.17 MATERIAL CONTRACTS. Set forth in Section 3.17 of the USCS
Disclosure Schedule is a schedule of each contract or agreement to which USCS or
any of its Subsidiaries is a party which involves more than $2.5 Million in
expenses per year or more than $3.0 Million in revenues per year. Each of USCS
and its Subsidiaries are in compliance with each contract or agreement listed in
Section 3.17 of the USCS Disclosure Schedule, and each such contract or
agreement is in full force and effect, without default by USCS or any such
Subsidiary and, to the Knowledge of USCS, without any breach or default by any
other party thereto, except where such breach or default would not result in a
Material Adverse Effect. Except as set forth in Section 3.17 of the USCS
Disclosure Schedule, no written notice has been received by USCS or any such
Subsidiary or, to USCS' Knowledge, threatened regarding termination, suspension
or material alteration or amendment of any such contract or agreement. Each
such contract or agreement is a valid and binding obligation of USCS or its
Subsidiary, as the case may be, in accordance with its terms, except (i) as
enforcement may be limited by bankruptcy, insolvency or other similar Legal
Requirements affecting the enforcement of creditors' rights generally, (ii) as
the availability of indemnification and other remedies may be limited by federal
and state securities laws and (iii) for limitations imposed by general
principles of equity. Also set forth in Section 3.17 of the USCS Disclosure
Schedule is a list of the companies who have indicated an intention to convert
cable subscribers to USCS' software and systems within the next 18 months and
the approximate number of such intended subscribers.
SECTION 3.18 INTELLECTUAL PROPERTY. Set forth in Section 3.18 of the USCS
Disclosure Schedule is a schedule listing all material Intellectual Property
which is owned by, registered in the name of, licensed to, or used in the
business of, USCS or its Subsidiaries, except for "shrink-wrapped end-user
licenses." USCS has a policy of obtaining a license for all computer software
and to USCS' Knowledge this policy is enforced except for non-material
violations. The Intellectual Property identified in Section 3.18 of the USCS
Disclosure Schedule is sufficient to conduct USCS' business as currently
operated by USCS. Except as described in Section 3.18 of the USCS Disclosure
Schedule, (a) to USCS' Knowledge, there is no restriction affecting the use of
any of the Intellectual Property, except for restrictions on the use of
Intellectual Property licensed to USCS as set forth in the applicable license
agreement and except for such restrictions that do not have a Material Adverse
Effect, (b) no license with a term of more than ten years, or which authorizes a
sub-license of any license, has been granted by USCS or its Subsidiaries to any
third party with respect thereto, and (c) to USCS' Knowledge, no third party has
any
14
right, title or interest in, or claims to, the Intellectual Property, except for
rights granted to USCS pursuant to licenses. Each item of Intellectual Property
owned by, or licensed to, USCS or its Subsidiaries, is valid and enforceable,
and to USCS' Knowledge and except as set forth in Section 3.17 of the USCS
Disclosure Schedule, (a) is not being, and has not been, challenged or
infringed, (b) is not, and has not been, involved in any pending or threatened
administrative or judicial proceeding, and (c) has not conflicted, and does not
conflict, with any rights or alleged rights of any Person. To USCS' Knowledge
and except as set forth in Section 3.17 of the USCS Disclosure Schedule, none of
USCS' products or operations, or any products or operation of any of its
Subsidiaries, involves any infringement of any proprietary or contractual right
of any Person. None of the items of Intellectual Property owned by, or licensed
to, USCS or its Subsidiaries, are subject to any liens or limitations on use by
USCS or its Subsidiaries, or to USCS' Knowledge, by any party granting rights to
the Intellectual Property to USCS or its Subsidiaries. To USCS' Knowledge and
except as set forth in Section 3.17 of the USCS Disclosure Schedule, no event
has occurred that has resulted in a default or violation, or which constitutes
or may constitute a default or violation, by USCS or its Subsidiaries with
respect to any of the Intellectual Property or with respect to any agreement
relating directly to, or affecting USCS' ownership rights in, the Intellectual
Property.
SECTION 3.19 YEAR 2000 COMPLIANCE. USCS believes, and it has no
information to the contrary, that it has taken and is taking all reasonable
steps to assure that all of its proprietary hardware and proprietary computer
software that is licensed to others or used by USCS to provide services to its
clients or used otherwise in its business ("USCS Products") will be year 2000
compliant in accordance with Schedule 3.19. As used in this Agreement "year
2000 compliant" shall mean that the USCS Products will perform in accordance
with its specifications and the agreements under which they are provided to
USCS' clients or licensed or used to provide services to USCS' clients
regardless of the year of the date data encountered by such products, provided,
that such date data falls within the period ending in the year 2060; provided,
further, that (i) all date data received for use by the USCS Products are
accurate and in formats defined by the USCS Products from time to time, and (ii)
all date data generated by the USCS Products are accepted in formats defined by
the USCS Products from time to time. Notwithstanding the foregoing, USCS makes
no representation or warranty respecting user defined fields that contain dates,
or as to the functionality of the USCS Products in circumstances where data
received from any third party system are invalid, incorrect or otherwise
corrupt. Notwithstanding the foregoing, USCS further represents and warrants
that it is not currently in violation of any year 2000 warranty in any contract
to which it is a party and that it is taking all reasonable steps under its year
2000 compliance program to avoid any future violation of any such warranty.
Section 3.19 of the USCS Disclosure Schedule lists all contracts in which USCS
has made a specific year 2000 warranty. USCS further represents and warrants
that (i) it has made adequate provision for the costs of its year 2000
compliance program in its current year budget and in all financial projections
for 1998, 1999 and 2000 which have been provided to DST and (ii) it has taken
the appropriate steps in connection with achieving year 2000 compliance of the
USCS Products including but not limited to:
(a) It has identified all hardware, systems and applications that must be
modified except where the absence of Year 2000 compliance for any such
hardware, systems or applications would not have a Material Adverse
Effect;
15
(b) It has evaluated alternatives (modification, replacement or
discontinuance); and
(c) It has established plans and programs which include timely milestones
and appropriate testing to ensure that such hardware, systems and
applications identified in subparagraph (a) above shall be year 2000
compliant by June 30, 1999.
USCS further represents and warrants that its year 2000 compliance program
includes (i) projects to ensure that third parties are year 2000 compliant
respecting software, equipment and services provided to USCS; (ii) selection of
alternative vendors on a timely basis; and (iii) interoperability testing with
clients and other third parties.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DST AND ACQUISITION SUB
DST and Acquisition Sub represent and warrant to USCS as follows:
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Each of DST and Acquisition
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has all requisite corporate power and
authority to carry on its business as it is now being conducted. Each of DST
and Acquisition Sub is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities make such
qualification necessary, except where the failure to be so qualified will not,
individually or in the aggregate, have a Material Adverse Effect on it.
SECTION 4.2 CAPITALIZATION.
(a) As of the date of this Agreement, the authorized capital stock of DST
consisted of: (i) 125,000,000 shares of DST Common Stock, of which 48,997,772
were issued and outstanding as of August 31, 1998; (ii) 10,000,000 shares of
preferred stock, par value $.01 per share, of which no shares are issued and
outstanding; and (iii) 3,658,090 shares of DST Common Stock issuable as of
August 31, 1998 with respect to all outstanding options to acquire shares of DST
Common Stock.
(b) All shares of DST Common Stock to be issued in connection with the
Merger, when issued in accordance with this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable, and, assuming the information
provided to DST by USCS is accurate and complete, will be issued in material
compliance with all federal and state securities laws and any other Legal
Requirements.
(c) As of the date of this Agreement, the authorized capital stock of
Acquisition Sub consisted of 1,000 shares of Common Stock. Acquisition Sub is a
direct, wholly owned subsidiary of DST. DST will own all of the issued and
outstanding stock of (i) Acquisition Sub immediately prior to the Effective Time
and (ii) Surviving Corporation immediately after the Effective Time.
16
SECTION 4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. DST has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
by this Agreement by DST have been duly authorized by the Board of Directors of
DST, and no other corporate proceedings on the part of DST (other than the
approval of DST stockholders as contemplated by this Agreement) are necessary to
authorize this Agreement and the transactions contemplated by this Agreement.
This Agreement constitutes a valid and binding obligation of DST enforceable
against it in accordance with its terms, except (i) as enforcement may be
limited by bankruptcy, insolvency or other similar Legal Requirements affecting
the enforcement of creditors' rights generally, (ii) as the availability of
indemnification and other remedies may be limited by federal and state
securities laws and (iii) for limitations imposed by general principles of
equity.
SECTION 4.4 NO BREACH; REQUIRED CONSENTS. The execution and delivery of
this Agreement by DST does not, and the consummation of the transactions
contemplated by this Agreement by DST and Acquisition Sub will not: (a) subject
to approval of holders of DST Common Stock, violate or conflict with the
certificate of incorporation or bylaws of DST or Acquisition Sub; (b) constitute
a breach or default (or an event that with notice or lapse of time or both would
become a breach or default) or give rise to any Lien, third-party right of
termination, cancellation, modification or acceleration under any agreement or
undertaking to which DST or Acquisition Sub is a party or by which any of them
is bound, except where such breach, default, Lien, third-party right of
termination, cancellation, modification or acceleration would not have a
Material Adverse Effect on DST or Acquisition Sub; or (c) subject to obtaining
the approvals and making the filings described in Section 4.5, constitute a
violation of any applicable Legal Requirement.
SECTION 4.5 CONSENTS AND APPROVALS. Neither the execution and delivery of
this Agreement by DST nor the consummation of the transactions contemplated by
this Agreement by DST and Acquisition Sub will require DST or Acquisition Sub to
make any filing or registration with, or obtain any authorization, consent or
approval of, any Governmental Entity, except those required in connection, or in
compliance, with the provisions of (i) the HSR Act, (ii) the Securities Act of
1933, as amended (the "Securities Act"), (iii) the Securities Exchange Act of
1934, as amended (the "Exchange Act") and (iv) the corporation, securities or
blue sky laws or regulations, or similar Legal Requirements, of various states
of the United States.
SECTION 4.6 REPORTS AND FINANCIAL STATEMENTS.
(A) SEC REPORTS. DST has filed all required forms, reports and documents
required to be filed with the SEC since December 31, 1995 (collectively, the
"DST SEC Reports"). As of their respective dates or effective dates and except
as the same may have been corrected, updated or superseded by means of a
subsequent filing with the SEC prior to the date of this Agreement, none of the
DST SEC Reports, including any financial statements or schedules included or
incorporated by reference therein, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated or incorporated
by reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading insofar as
such statements relate to or affect DST or its Subsidiaries.
17
(B) FINANCIAL STATEMENTS. The audited consolidated financial statements of
DST contained in the DST SEC Reports comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and present fairly DST's consolidated financial condition and
the results of its operations as of the relevant dates thereof and for the
periods covered thereby. The unaudited consolidated interim financial
statements of DST contained in the DST SEC Reports comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, were prepared on a basis
consistent with prior interim periods (except as required by applicable changes
in GAAP or in SEC accounting policies) and include all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of DST's
consolidated financial condition and results of operations for such periods.
(C) ABSENCE OF CERTAIN CHANGES. Since the date of the most recent
consolidated balance sheet of DST included in DST's Quarterly Report on Form 10-
Q filed with the SEC for the quarter ended June 30, 1998 (the "Most Recent DST
Balance Sheet"), there has not been any: (i) transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) that, individually or in the
aggregate, has had, or would have, a Material Adverse Effect on DST; (ii) any
declaration, setting aside or payment of any dividend or other distribution
(whether in cash, stock or property) with respect to the capital stock of DST;
or (iii) entry into any commitment or transaction material to DST and its
Subsidiaries taken as a whole (including any borrowing or sale of assets) except
in the ordinary course of business consistent with past practice.
(D) ABSENCE OF UNDISCLOSED LIABILITIES. DST does not have any
indebtedness, liability or obligation required by GAAP to be reflected on a
balance sheet that is not reflected or reserved against in the Most Recent DST
Balance Sheet except (i) liabilities, obligations and contingencies that were
incurred after the date of the Most Recent DST Balance Sheet in the ordinary
course of business and which would not, in the aggregate, have a Material
Adverse Effect and (ii) other liabilities, obligations and contingencies that
would not, in the aggregate, have a Material Adverse Effect on DST.
SECTION 4.7 LITIGATION. Except as set forth in Section 4.7 of the DST
Disclosure Schedule, there is no suit, action or proceeding pending, or to the
knowledge of DST, threatened against or affecting DST or any of its Subsidiaries
or any judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against DST or any of its Subsidiaries that has had or is
likely to have a Material Adverse Effect on DST.
SECTION 4.8 NO BROKER. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of DST or Acquisition Sub.
18
SECTION 4.9 APPROVAL.
(a) The Board of Directors of DST and Acquisition Sub at meetings duly
called and held, respectively: (i) determined that the Merger is advisable and
fair and in the best interests of DST and its stockholders and Acquisition Sub
and its stockholder; (ii) approved the Merger and this Agreement and the
transactions contemplated by this Agreement; and (iii) recommended the approval
of this Agreement and the Merger by the holders of DST Common Stock and by DST
as the sole stockholder of Acquisition Sub and directed that the Merger be
submitted for consideration by DST's stockholders at the Meeting.
(b) The majority vote of the total votes cast at the Meeting with respect
to this Agreement and the Merger is the minimum vote required for the adoption
and approval of this Agreement, the Merger and the other transactions
contemplated by this Agreement.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 CONDUCT OF BUSINESS OF USCS. Prior to the Effective Time,
except as contemplated, permitted or required by this Agreement:
(a) Except as set forth in Section 5.1 of the USCS Disclosure Schedule,
USCS will conduct, and will cause each of its Subsidiaries to conduct, its
business in the ordinary course in accordance with past practice, and will use,
and will cause each of its Subsidiaries to use, its reasonable best efforts to
preserve intact its present business organization and to preserve relationships
with customers, suppliers and others having business dealings with them.
(b) USCS will not, and will not permit any of its Subsidiaries to: (i)
amend or propose to amend the certificate of incorporation or bylaws of USCS or
any of its Subsidiaries; (ii) split, combine or reclassify the outstanding
capital stock of, or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of capital
stock of, or other ownership interests in, USCS or any of its Subsidiaries;
(iii) or declare, set aside or pay any dividend, distribution, or similar
payment to any stockholder, director or officer of USCS or any of its
Subsidiaries; (iv) directly or indirectly redeem, purchase or otherwise acquire
or agree to redeem, purchase or otherwise acquire any shares of capital stock
of, or other ownership interests in, USCS or any of its Subsidiaries; or (v)
agree to do any of the foregoing.
(c) USCS will not, and will not permit any of its Subsidiaries to: (i)
encumber, issue, deliver or sell or agree to issue, deliver or sell any shares
of capital stock of, or other equity interests (including any option, warrant or
other similar right to acquire any equity interest) in USCS or any of its
Subsidiaries, except for shares issued upon exercise of options outstanding at
the date of this Agreement which are exercised in accordance with the terms of
such options); (ii) acquire, lease or dispose of any assets other than in the
ordinary course of business consistent with past practice; (iii) create, assume
or incur any indebtedness except in the ordinary course of business consistent
with past practice; (iv) encumber any of its assets other than in connection
with equipment leases incurred in the ordinary course of business consistent
19
with past practice; (v) enter into any other material transaction; (vi) make any
payment with respect to any indebtedness of USCS or its Subsidiaries except such
payments that are scheduled to come due prior to the Effective Time; (vii)
acquire by merging or consolidating with, or by acquiring assets of, or by
purchasing an ownership interest in, or by any other method, any business or any
other Person, except pursuant to agreements identified in Section 5.1(c) of the
USCS Disclosure Schedule; or (viii) agree to do any of the foregoing.
(d) Except as required to comply with applicable Legal Requirements or
existing USCS Benefit Plans, USCS will not, and will not permit any of its
Subsidiaries to: (i) adopt, terminate or amend any bonus, profit sharing,
compensation, severance, termination, stock option, pension, retirement,
deferred compensation, employment or other USCS Benefit Plan, agreement, trust,
fund or other arrangement for the benefit or welfare of any director, officer or
current or former employee; (ii) increase in any manner the compensation or
benefits of any director, officer or employee (except normal increases in the
ordinary course of business consistent with past practice); (iii) grant any
award or option under any bonus, incentive, performance or other compensation
plan or arrangement or USCS Benefit Plan (except as set forth in Section 5.1(d)
to the USCS Disclosure Schedule); (iv) take any action to fund or in any other
way secure the payment of compensation or benefits (including any option,
warrant or other similar right to acquire any equity interest) under any
employee plan, agreement, contract or arrangement or USCS Benefit Plan (except
in the ordinary course of business consistent with past practice); or (v) agree
to do any of the foregoing.
(e) USCS will not take or agree to take, and will cause its Subsidiaries
not to take or agree to take, any action that would: (i) make any representation
or warranty of USCS set forth in this Agreement untrue or incorrect so as to
cause the conditions set forth in Article VII of this Agreement not to be
fulfilled as of the Effective Time; or (ii) result in any breach of this
Agreement or cause any of the other conditions of this Agreement not to be
satisfied as of the Effective Time.
(f) USCS will not, and will not permit any of its Subsidiaries to enter
into any transaction with any officer, stockholder, director, consultant or
employee of USCS or any Subsidiary thereof or any person or entity that is an
"affiliate" or "associate" of any of the foregoing, as those terms are defined
in Rule 12b-2 under the Exchange Act, whether or not such transaction would be
in the ordinary course of business.
(g) USCS will take no action that reasonably could be expected to adversely
affect the qualification of the Merger for pooling-of-interests accounting
treatment under GAAP.
(h) USCS and its Subsidiaries will (i) not take any action to initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its stockholders) with respect to a merger, acquisition,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, USCS or any of
its Subsidiaries (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal"), or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person or other entity or group, as defined in Section 13(d)(3) of the Exchange
Act, relating to an Acquisition Proposal, or otherwise facilitate any effort or
20
attempt to make or implement an Acquisition Proposal; (ii) immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties previously conducted with respect to any of the foregoing and take
the necessary steps to inform the individuals or entities referred to above of
the obligations undertaken in this Section 5.1(h); and (iii) notify DST
immediately if any such inquiries or proposals are received by, any such
information is requested from or any such negotiations or discussions are sought
to be initiated or continued with, USCS or any of its Subsidiaries. Nothing
contained in this Section 5.1(h) will prohibit the Board of Directors of USCS
from (1) furnishing information to, or entering into discussions or negotiations
with, any person or other entity or group that makes an Acquisition Proposal or
recommending to its stockholders that they accept such Acquisition Proposal, if
(A) the Board of Directors of USCS reasonably determines in good faith, after
consultation with outside legal counsel, that such action is compelled by its
fiduciary duties to stockholders imposed by law, (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, USCS provides written notice to DST to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or entity, and (C) subject to any confidentiality agreement with
such other party (which USCS determines in good faith, after consultation with
outside counsel, is required to be executed in order for the Board of Directors
to act in accordance with its fiduciary duties to stockholders imposed by law),
USCS keeps DST informed of the status (not the terms) of any such discussions or
negotiations; and (2) to the extent applicable, complying with Rule 14e-2
promulgated under the Exchange Act with regard to an Acquisition Proposal.
Nothing in this Section 5.1(h) shall (x) permit any party to terminate this
Agreement (except as specifically provided in Section 8.1(d)), (y) permit any
party to enter into any agreement with respect to an Acquisition Proposal during
the term of this Agreement (it being agreed that during the term of this
Agreement, no party shall enter into any agreement with any person that provides
for, or in any way facilitates, an Acquisition Proposal (other than a
confidentiality agreement in customary form)), or (z) breach any obligation of
any party under this Agreement.
(i) The Board of Directors of USCS will recommend to the stockholders of
USCS the approval of the Merger, unless the Board of Directors reasonably
determines in good faith in connection with an Acquisition Proposal, after
consultation with outside counsel, that such action would be inconsistent with
its fiduciary duties to stockholders as required by law and, if such
determination is made, will give written notice to DST of such determination
within two Business Days of the making of such determination. Upon the issuance
of such written notice to DST, and upon the written election of DST, USCS will
negotiate in good faith with DST for a period of two Business Days regarding
such adjustments in the terms of the Merger as would enable the Board of
Directors of USCS, consistent with its fiduciary duties to the stockholders, to
proceed to recommend the Merger to the stockholders of USCS as contemplated in
this Agreement, provided, that there shall be no obligation, express or implied,
on the part of DST to agree to any terms or conditions which may be different
from those set forth in this Agreement.
(j) Upon the request of DST, USCS will prepare and deliver to DST, within
thirty days after such request, such financial statements (including audited
financial statements) as may be required by DST to meet its financial reporting
obligations (including requirements under applicable securities laws).
21
(k) USCS shall take no action that reasonably could be expected to
adversely affect the qualification of the Merger as a reorganization under
Section 368(a) of the Code.
SECTION 5.2 CONDUCT OF BUSINESS OF DST. Prior to the Effective Time,
except as contemplated, permitted or required by this Agreement:
(a) DST will conduct, and will cause each of its Subsidiaries to conduct,
its business in the ordinary course in accordance with past practice, and will
use, and will cause each of its Subsidiaries to use, its reasonable best efforts
to preserve intact its present business organization and to preserve
relationships with customers, suppliers and others having business dealings with
them.
(b) DST will not take or agree to take, and will cause its Subsidiaries
not to take or agree to take, any action that would (i) make any representation
or warranty of DST set forth in this Agreement untrue or incorrect so as to
cause the condition set forth in Article VII of this Agreement not to be
fulfilled as of the Effective Time or (ii) result in any breach of this
Agreement or cause any of the other conditions of this Agreement not to be
satisfied as of the Effective Time.
(c) The Board of Directors of DST will recommend to the stockholders of
DST the approval of the Merger.
(d) DST shall take no action that reasonably could be expected to
adversely affect the qualification of the Merger for pooling-of-interests
accounting treatment under GAAP.
(e) DST shall take no action that reasonably could be expected to
adversely affect the qualification of the Merger as a reorganization under
Section 368(a) of the Code.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 ACCESS AND INFORMATION. USCS and its Subsidiaries will afford
to DST and to DST's accountants, counsel and other representatives full and
reasonable access during normal business hours (and at such other times as the
parties may mutually agree) throughout the period prior to the Effective Time to
all of USCS' and its Subsidiaries properties, books, contracts, commitments,
records and personnel, subject to the confidentiality requirements set forth in
Section 6.6.
SECTION 6.2 SEC FILINGS.
(a) USCS and DST will prepare jointly, and as soon as reasonably
practicable after the date of this Agreement, file with the SEC a joint proxy
statement/registration statement (the "Preliminary Joint Proxy
Statement/Prospectus") comprising preliminary proxy materials of USCS and DST
under the Exchange Act with respect to the Merger and a Registration Statement
on Form S-4 and preliminary prospectus of DST under the Securities Act with
respect to the DST Common Stock to be issued in the Merger, and will thereafter
use their respective
22
reasonable best efforts to respond to any comments of the SEC with respect
thereto and to cause a definitive joint proxy statement/registration statement
(including all supplements and amendments thereto, the "Joint Proxy
Statement/Prospectus") and proxy to be mailed to USCS' and DST's stockholders as
promptly as practicable.
(b) As soon as reasonably practicable after the date hereof, USCS and DST
will prepare and file any other filings relating to the Merger and the other
transactions contemplated hereby that are required to be filed by each under the
Exchange Act, including, without limitation, the filing or amending of a Form S-
8 Registration Statement promptly after the Effective Time to cover the DST
Common Stock issuable upon exercise of the USCS Options assumed by DST, and
other applicable Legal Requirements (collectively "Other Filings"), and will use
their reasonable best efforts to respond to any comments of the SEC or any other
appropriate government official with respect thereto.
(c) USCS, on the one hand, and DST, on the other, will cooperate with each
other and provide all information necessary to prepare the Preliminary Joint
Proxy Statement/Prospectus, the Joint Proxy Statement/Prospectus and the Other
Filings (collectively "SEC Filings") and will provide promptly to the other
party any information that such party may obtain that could necessitate amending
any such document.
(d) Each of USCS and DST will notify the other promptly of the receipt of
any comments from the SEC or its staff or any other government official and of
any requests by the SEC or its staff or any other government official for
amendments or supplements to any of the SEC Filings or for additional
information and will supply the other with copies of all correspondence between
USCS or any of its representatives or DST or any of its representatives, as the
case may be, on the one hand, and the SEC or its staff or any other government
official, on the other hand, with respect thereto. If at any time prior to the
Effective Time, any event occurs that should be set forth in an amendment of, or
a supplement to, any of the SEC Filings, USCS and DST promptly will prepare and
file such amendment or supplement and will distribute such amendment or
supplement as required by applicable Legal Requirements, including, in the case
of an amendment or supplement to the Joint Proxy Statement/Prospectus, mailing
such supplement or amendment to USCS' stockholders.
(e) DST covenants that the SEC Filings (other than any information
provided by USCS for inclusion in the SEC Filings) (i) will comply in all
material respects with the Securities Act and the Exchange Act and (ii) will not
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
contained therein, in light of the circumstances under which they are made, not
misleading.
(f) USCS covenants that the SEC Filings (other than any information
provided by DST for inclusion in the SEC Filings) (i) will comply in all
material respects with the Securities Act and the Exchange Act and (ii) will not
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.
23
(g) DST will be responsible for all reasonable expenses incurred in
complying with this Section 6.2, including all registration, qualification and
filing fees, printing expenses, fees and disbursements of counsel (other than
counsel to USCS) and applicable blue-sky fees and expenses.
(h) (i) Each of DST and Acquisition Sub will indemnify, defend, and hold
harmless USCS, its officers, directors, employees and agents and each other
Person, if any, who controls any of the foregoing within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, against any losses,
claims, damages or liabilities (collectively, "Losses"), joint or several, to
which any of the foregoing may become subject under the Securities Act or the
Exchange Act or otherwise, insofar as such Losses (or actions in respect
thereof) arise out of or are based upon (A) an untrue statement or alleged
untrue statement of a material fact contained in any SEC Filing, or (B) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that such
misstatement or omission was based on or omitted from information provided by
DST in writing for inclusion in the SEC Filings or was made in reliance upon and
in conformity with such information. DST promptly will reimburse USCS and each
such officer, director, employee, agent and controlling Person for any legal or
any other expenses reasonably incurred by any of them in connection with
investigating or defending any such Losses (or action in respect thereof).
(ii) If this Agreement is terminated prior to the consummation of
the Merger, USCS will indemnify, defend and hold harmless each of DST and
Acquisition Sub and their officers, employees and agents and directors and each
other Person, if any, who controls any of the foregoing within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, against any
Losses, joint or several, to which any of the foregoing may become subject under
the Securities Act or the Exchange Act or otherwise, insofar as such Losses (or
actions in respect thereof) arise out of or are based upon (A) an untrue
statement or alleged untrue statement of a material fact contained in any USCS
SEC Filing or (B) the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, provided
that the misstatement or omission was based on or omitted from information
provided by USCS in writing for use in the SEC Filings or was made in reliance
upon and in conformity with such information. USCS promptly will reimburse DST
and Acquisition Sub and each such officer, director, employee, agent and
controlling Person for any legal or any other expenses reasonably incurred by
any of them in connection with investigating or defending any such Losses (or
action in respect thereof).
(iii) For purposes of this Section 6.2, (A) "Indemnifying Party"
means the Person having an obligation hereunder to indemnify any other Person
pursuant to this Section 6.2, (B) "Indemnified Party" means the Person having
the right to be indemnified pursuant to this Section 6.2 and (C) any information
concerning USCS that is included in any SEC Filing that is provided to USCS or
its counsel for review within a reasonable period before filing or use thereof
and to which USCS has not provided written notice of objection to DST will be
deemed to have been provided by USCS for inclusion in such SEC Filing. Whenever
any claim for indemnification arises under this Section 6.2, the Indemnified
Party will promptly notify the Indemnifying Party in writing of such claim and,
when known, the facts constituting the basis
24
for such claim (in reasonable detail). Failure by the Indemnified Party so to
notify the Indemnifying Party will not relieve the Indemnifying Party of any
liability hereunder except to the extent that such failure materially prejudices
the Indemnifying Party.
(iv) After such notice, if the Indemnifying Party undertakes to
defend any such claim, then the Indemnifying Party will be entitled, if it so
elects, to take control of the defense and investigation with respect to such
claim and to employ and engage attorneys of its own choice to handle and defend
such claim, at the Indemnifying Party's cost, risk and expense, upon notice to
the Indemnified Party of such election, which notice acknowledges the
Indemnifying Party's obligation to provide indemnification hereunder. The
Indemnifying Party will not settle any third-party claim that is the subject of
indemnification without the written consent of the Indemnified Party, which
consent will not be unreasonably withheld; provided however, that the
Indemnifying Party may settle a claim without the Indemnified Party's consent if
the settlement (A) makes no admission or acknowledgment of liability or
culpability with respect to the Indemnified Party, (B) includes a complete
release of the Indemnified Party and (C) does not require the Indemnified Party
to make any payment or forego or take any action. The Indemnified Party will
cooperate in all reasonable respects with the Indemnifying Party and its
attorneys in the investigation, trial and defense of any lawsuit or action with
respect to such claim and any appeal arising therefrom (including the filing in
the Indemnified Party's name of appropriate cross claims and counterclaims) and
the Indemnifying Party will reimburse the Indemnified Party for all reasonable
direct out-of-pocket expenses incurred by the Indemnified Party in connection
with such cooperation. The Indemnified Party may, at its own expense,
participate in any investigation, trial and defense of such lawsuit or action
controlled by the Indemnifying Party and any appeal arising therefrom. If, after
receipt of a claim notice pursuant to Section 6.2(h)(iii), the Indemnifying
Party does not undertake to defend any such claim, the Indemnified Party may,
but will have no obligation to, contest any lawsuit or action with respect to
such claim and the Indemnifying Party will be bound by the result obtained with
respect thereto by the Indemnified Party (including the settlement thereof
without the consent of the Indemnifying Party). If there are one or more
defenses available to the Indemnified Party that conflict with, or are
additional to, those available to the Indemnifying Party, the Indemnified Party
will have the right, at the expense of the Indemnifying Party, to participate in
the defense of the lawsuit or action; provided however, that the Indemnified
Party may not settle such lawsuit or action without the consent of the
Indemnifying Party, which consent will not be unreasonably withheld.
(v) If the indemnification provided for in this Section 6.2(h) is
for any reason unavailable to the Indemnified Party in respect of any Losses (or
action in respect thereof) then the Indemnifying Party will, in lieu of
indemnifying the Indemnified Party, contribute to the amount paid or payable by
the Indemnified Party as a result of such Losses (or action in respect thereof),
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the Indemnified Party on the other with
respect to the statement or omission that resulted in such Losses (or action in
respect thereof) as well as any other relevant equitable considerations.
Relative fault with respect to an untrue or alleged untrue statement or omission
of a material fact will be determined by reference to whether the untrue or
alleged untrue statement or omission of a material fact related to information
supplied by the Indemnifying Party on the one hand or the Indemnified Party on
the other, the intent of the parties and their relative Knowledge, access to
information and opportunity to correct or prevent
25
such statement or omission. The amount paid or payable by the Indemnified Party
as a result of the Losses (or action in respect thereof) referred to above will
be deemed to include any legal or other expenses reasonably incurred by the
Indemnified Party in connection with investigating, trying or defending any such
action or claim. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.
SECTION 6.3 MEETINGS OF STOCKHOLDERS. Each of USCS and DST will take all
action necessary, in accordance with the DGCL, the rules and regulations of the
NYSE, the Chicago Stock Exchange, the NASDAQ Stock Market and the NASD and the
certificate of incorporation and bylaws of USCS or DST, as applicable, to duly
call, give notice of, convene and hold a meeting of its stockholders as promptly
as practicable, to consider and vote upon the adoption and approval of this
Agreement (as a plan of merger under Section 251 of the DGCL), the Merger and
the other transactions contemplated by this Agreement (each, individually, the
"Meeting"), to the extent such approval is required by the DGCL, the NYSE, the
Chicago Stock Exchange, the NASDAQ Stock Market, the NASD or the certificate of
incorporation of USCS or DST, as applicable. Each of USCS and DST will use its
best efforts to hold such meetings at the same date and time.
SECTION 6.4 COMPLIANCE WITH THE SECURITIES ACT. Prior to the Closing
Date, USCS will cause to be delivered to DST a letter from USCS, identifying all
Persons who are, in its opinion, as of the date of this Agreement, "affiliates"
of USCS as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act and a written agreement from each such Person substantially in
the form of Exhibit 6.4. DST may cause the DST Certificates evidencing shares
of DST Common Stock issued to such Persons to bear a legend referring to the
applicability of paragraphs (c) and (d) of Rule 145 under the Securities Act.
SECTION 6.5 OTHER ACTIONS. Without limiting the termination and other
rights of the parties under this Agreement (and subject to the parties' rights
to take certain actions pursuant to Section 5.1(h) and Section 5.1(i) consistent
with the fiduciary duties of their respective Boards of Directors) each of the
parties to this Agreement will use its commercially reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable Legal
Requirements to consummate and make effective the transactions contemplated by
this Agreement in the most expeditious manner practicable, including the
satisfaction of all conditions to the Merger.
SECTION 6.6 CONFIDENTIALITY AND PUBLIC ANNOUNCEMENTS. Each party to this
Agreement agrees that it will treat this Agreement and all negotiations and
communications between them relating to this Agreement, the Merger or otherwise,
and all information disclosed to a party by the other party, as confidential.
No party to this Agreement will make any public announcements or otherwise
communicate with any news media with respect to this Agreement or any of the
transactions contemplated by this Agreement without prior approval of the other
party, which approval will not unreasonably be withheld or delayed, as to the
timing and contents of any such announcement as may be reasonable under the
circumstances; provided however, that nothing contained herein will prevent any
party from promptly making all filings with Governmental Entities that may, in
its reasonable judgment, be required or advisable in connection with the
execution and delivery of this Agreement or the consummation of the
26
transactions contemplated by this Agreement, or from making any disclosures
required by Legal Requirements, so long as such party gives timely notice to the
other parties of the anticipated disclosure and cooperates with the other party
in designing reasonable procedural and other safeguards to preserve, to the
maximum extent possible, the confidentiality of all information furnished by the
other party pursuant to this Agreement. Except as expressly set forth above, all
of the terms and conditions of the Mutual Non-Disclosure Agreement by and
between DST and USCS, dated April 20, 1998, shall remain in full force and
effect until the Effective Time, but not any of the amendments thereto, each of
which is hereby superseded and replaced by this Section 6.6.
SECTION 6.7 NOTIFICATION. In the event of, or after obtaining Knowledge
of the occurrence or threatened occurrence of, any fact or circumstance that
would cause or constitute a breach or violation of any of its representations,
warranties, covenants or other agreements set forth herein, each party to this
Agreement promptly will give notice thereof to the other party and will use its
best efforts to prevent or remedy such breach.
SECTION 6.8 HSR ACT FILINGS. DST and USCS each will make or cause to be
made, and will use their reasonable best efforts to cause each of their
respective stockholders to make (if required under the HSR Act), an appropriate
filing of a Notification and Report Form pursuant to the HSR Act no later than
15 Business Days after the date of this Agreement. Each such filing will
request early termination of the waiting period imposed by the HSR Act. USCS
and DST each will use its reasonable best efforts to respond or cause a response
to be made as promptly as reasonably practicable to any inquiries received from
the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") for additional information or
documentation and to respond as promptly as reasonably practicable to all
inquiries and requests received from any other Governmental Entity in connection
with antitrust matters; provided however, that nothing contained herein will be
deemed to preclude either USCS or DST from negotiating reasonably with any
Governmental Entity regarding the scope and content of any such requested
information or documentation. USCS and DST each will use their respective
reasonable best efforts to overcome any objections that may be raised by the
FTC, the Antitrust Division or any other Governmental Entity having jurisdiction
over antitrust matters. Notwithstanding the foregoing, neither DST nor USCS
will be required to make any significant change in the operations or activities
of the business (or any material assets employed therein) of DST or any of its
Affiliates, or of USCS or any of its Affiliates, as the case may be, if DST or
USCS, as the case may be, determines in good faith that such change would be
materially adverse to the operations or activities of the business (or any
material assets employed therein) of DST or any of its Affiliates or USCS or any
of its Affiliates, as the case may be.
SECTION 6.9 USCS DIRECTOR AND OFFICER INDEMNIFICATION.
(a) From and after the Effective Time, DST will, and will cause the
Surviving Corporation to, fulfill and honor in all respects the obligations of
USCS pursuant to (i) each indemnification agreement identified in Section 6.9 of
the USCS Disclosure Schedule in effect on the date hereof between USCS and any
person who was a director or officer of USCS and (ii) the indemnification
provisions set forth in USCS' Certificate of Incorporation or Bylaws as each is
in effect on the date hereof. (The persons to be indemnified pursuant to the
provisions
27
of this Section 6.9(a) are referred to as the "USCS Indemnified Parties.") For a
period of one year following the Effective Time, the indemnification and
exculpation of liability provisions set forth in USCS' Certificate of
Incorporation and Bylaws as in effect on the date hereof shall not be eliminated
or changed in any manner that would adversely affect the rights thereunder of
the USCS Indemnified Parties.
(b) This Section 6.9 shall survive consummation of the Merger at the
Effective Time and is intended to be for the benefit of, and enforceable by,
USCS, DST, the Surviving Corporation, each of the USCS Indemnified Parties and
their heirs and representatives, and shall be binding upon all successors and
assigns of DST and the Surviving Corporation.
SECTION 6.10 TERMINATION OF USCS RIGHTS AGREEMENT. Prior to the Effective
Time, USCS shall take all necessary action to terminate the USCS Rights Plan
without issuing any securities or making any cash payment.
SECTION 6.11 ACTIONS UNDER STOCKHOLDER AGREEMENT. DST shall promptly
provide the notices and take all such other actions required of it under the
Stockholder Agreement attached as Exhibit E-2 hereto.
SECTION 6.12 CONSENTS/WAIVERS. With respect to each agreement identified
in Section 3.5 of the USCS Disclosure Schedule with any customer of USCS or its
Subsidiaries which would permit the customer to declare a breach or default or
to terminate such agreement because of the execution or delivery of this
Agreement or the consummation of the transactions contemplated by this
Agreement, (a "Change of Control Agreement") DST and USCS agree to take the
actions set forth in Schedule 6.12.
SECTION 6.13 USCS DEFERRED COMPENSATION PLANS. DST shall guarantee the
obligations of the Surviving Corporation with respect to the USCS Deferred
Salary Plan and the USCS Deferred Bonus Plan (as described in Section 3.11 of
the USCS Disclosure Schedule) for those participants under such plans who agree
to waive application of the change in control provisions under such plans to the
transactions contemplated by this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger will be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) This Agreement, the Merger and the transactions contemplated by this
Agreement shall have been duly approved, to the extent required by applicable
law or rule by (i) the holders of the outstanding USCS Stock entitled to vote
and (ii) the holders of the outstanding DST Common Stock entitled to vote.
(b) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been earlier terminated.
28
(c) The Registration Statement on Form S-4 that includes the Joint Proxy
Statement/Prospectus shall have become effective in accordance with the
provisions of the Securities Act and any necessary state securities law
approvals shall have been obtained and no stop orders with respect thereto shall
have been issued by the SEC and remain in effect.
(d) No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any Legal Requirement that remains in effect and has the
effect of making the transactions contemplated by this Agreement illegal or
otherwise prohibiting the transactions contemplated by this Agreement, or that
questions the validity or the legality of the transactions contemplated by this
Agreement and that could reasonably be expected to materially and adversely
affect the value of the business of USCS, it being agreed that each party will
use its reasonable best efforts to have any such injunction lifted. All
material consents of Governmental Entities required to be obtained with respect
to the Merger and the other transactions contemplated by this Agreement shall
have been obtained.
(e) As of the Effective Time, the shares of DST Common Stock issued in
connection with the Merger will be approved for listing on the NYSE and the
Chicago Stock Exchange, subject to satisfaction of applicable NYSE and Chicago
Stock Exchange requirements upon official notice of issuance.
(f) DST and USCS shall have each received the written opinion of its
respective counsel, Xxxxxxxxxxxx Xxxx & Xxxxxxxxx and Xxxxxx & Xxxxx LLP, or
other evidence, in form and substance reasonably satisfactory to it, to the
effect that the Merger will constitute a reorganization within the meaning of
Section 368 of the Code. In rendering such opinions, such counsel may rely upon
representations of the parties contained herein and in certificates of officers
of DST, USCS and others.
(g) DST and USCS shall have each received letters from
PricewaterhouseCoopers LLP ("PWC") dated as of the Closing Date confirming that
the Merger may be accounted for as a pooling of interests in accordance with
GAAP, Accounting Principles Board Opinion No. 16 and all published rules,
regulations and interpretations of the SEC.
(h) The Spin-off referred to in Exhibit E-2 hereto shall not have occurred
within thirty (30) days prior to the Effective Time.
SECTION 7.2 CONDITIONS TO OBLIGATION OF USCS TO EFFECT THE MERGER. The
obligation of USCS to effect the Merger will be subject to the fulfillment at or
prior to the Effective Time of the additional following conditions:
(a) The representations and warranties of DST contained in this Agreement
shall be true and correct in all material respects as of the Effective Time,
with the same force and effect as if made as of the Effective Time, except (i)
for changes contemplated by this Agreement, (ii) for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), and (iii) in all such cases, for such
breaches or inaccuracies of such representations and warranties as do not have a
Material Adverse Effect on DST, and USCS shall have received a certificate of
DST to such effect signed by the Chief Executive Officer of DST. For purposes
of determining whether there has been
29
a failure to satisfy the condition set forth in this Section 7.2(a), there shall
not be considered any change in the stock price of capital stock of DST after
the date of this Agreement.
(b) DST shall have performed or complied in all material respects with all
material agreements and covenants required by this Agreement to be performed or
complied with by it prior to the Effective Time, and USCS shall have received a
certificate of DST to such effect signed by the Chief Executive Officer and by
the Chief Financial Officer of DST.
(c) Xxxxxx Xxxxxxx and Xxxxx Xxxxxx shall have been appointed to the Board
of Directors of DST effective as of the Effective Time.
(d) The opinion of Xxxxxxx Xxxxx & Co. referenced in Section 3.4 shall not
have been withdrawn (unless withdrawn at the request or direction of USCS).
(e) USCS shall have received the following documents: (i) Affiliate
Agreements in the form of Exhibit 7.2(e)(i) hereto executed by each Person who
may be reasonably deemed an "affiliate" of DST (except for the DST Major
Stockholder, whose agreement is set forth in Exhibit E-2); (ii) an Agreement in
the form of Exhibit E-2 hereto executed by the DST Major Stockholder; (iii) the
legal opinion of Xxxxxxxxxxxx Xxxx & Xxxxxxxxx dated as of the Closing Date in
the form of Exhibit 7.2(e)(ii) hereto; and (iv) the Registration Rights
Agreement in the form of Exhibit 7.2(e)(iv) hereto executed by DST.
SECTION 7.3 CONDITIONS TO OBLIGATIONS OF DST AND ACQUISITION SUB TO EFFECT
THE MERGER. The obligations of DST and Acquisition Sub to effect the Merger
will be subject to the fulfillment at or prior to the Effective Time of the
additional following conditions:
(a) The representations and warranties of USCS contained in this Agreement
shall be true and correct in all material respects as of the Effective Time,
with the same force and effect as if made as of the Effective Time, except (i)
for changes contemplated by this Agreement, (ii) for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), and (iii) in all such cases, for such
breaches or inaccuracies of such representations and warranties as do not have a
Material Adverse Effect on USCS, and DST shall have received a certificate of
USCS to such effect signed by the Chief Executive Officer and by the Chief
Financial Officer of USCS.
(b) USCS shall have performed or complied in all material respects with all
material agreements and covenants required by this Agreement to be performed or
complied with by it on or prior to the Effective Time, and DST shall have
received a certificate of USCS to such effect signed by the Chief Executive
Officer and by the Chief Financial Officer of USCS.
(c) DST shall have received the following documents: (i) Affiliate
Agreements in the form of Exhibit 6.4 hereto executed by each Person who may be
reasonably deemed an "affiliate" of USCS; (ii) Agreements in the form of Exhibit
E-1 executed by the USCS Major Stockholders; (iii) the legal opinion of Xxxxxx &
Xxxxx LLP dated as of the Closing date, in the form of Exhibit 7.3(c)(iii); and
(iv) comfort letters from PWC with respect to USCS dated no more than two
business days before the date on which the Joint Proxy Statement/Prospectus
becomes effective, in scope and substance equivalent to letters customarily
delivered by
30
independent public accountants in such circumstances and reasonably acceptable
in form and substance to DST.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of USCS or DST:
(a) by mutual written consent of the Board of Directors of DST and the
Board of Directors of USCS;
(b) by either DST or USCS (i) if at the Meeting of its stockholders
(including any postponement or adjournment thereof), the Merger is not approved
and adopted by the affirmative vote required by law, or (ii) after the later of
January 31, 1999 or, if the Spin-off occurs in January, 1999, that day which is
thirty days after the Spin-off, or (iii) if the letter of its independent
accounts referred to in Section 7.1(g) is withdrawn;
(c) by DST, if it receives notice from USCS of the determination of the
Board of Directors of USCS as provided in Section 5.1(i) or by USCS, if a period
of two Business Days has elapsed since receipt by DST of such notice and no
election to negotiate has been received from DST or if the two Business Day
negotiation period set forth in Section 5.1(i) has expired without an agreement
being reached;
(d) by DST, if any Person (other than DST or any of its Affiliates) shall
have acquired before the Effective Time or the termination of this Agreement
fifty percent (50%) or more of the outstanding USCS Stock, unless such Person
shall have delivered to DST within two Business Days of such acquisition
definitive written confirmation to the effect that such Person will vote in
favor of the Merger at the Meeting and take no action to prevent or delay the
Merger.
SECTION 8.2 REMEDIES.
(a) In the event of the termination of this Agreement or breach of any
provision of this Agreement by either DST or USCS, DST and USCS shall be
entitled to all remedies available at law. Notwithstanding anything to the
contrary in this Agreement, in the event of a breach of any provision of this
Agreement prior to the termination of this Agreement, the non-breaching party
shall be entitled to all available equitable remedies.
(b) Subject to Section 8.2(c), if (i) (w) DST receives notice from USCS of
the determination of the Board of Directors of USCS as provided in Section
5.1(i), (x) the Board of Directors of USCS fails to recommend to the
stockholders of USCS the approval of the Merger or withdraws such
recommendation, or (y) the Merger is not consummated as a result of the failure
of USCS to obtain stockholder approval as provided in Section 7.1(a)(i), if such
failure or withdrawal is not the result of the failure of DST to satisfy the
conditions set forth in Section 7.2(a) or Section 7.2(b) and within twelve
months after such failure USCS enters into
31
a merger, acquisition, consolidation or similar transaction involving, or any
purchase of all or any significant portion of the assets or any equity
securities of, USCS or any of its Subsidiaries with any person other than DST or
a Subsidiary of DST, or (ii) any Person (other than DST and any of its
Affiliates) shall have acquired before the Effective Time or the termination of
this Agreement 50 percent or more of the outstanding USCS Stock and such Person
fails to timely deliver the written confirmation to DST as provided in Section
8.1(d), or (iii) USCS shall have terminated this Agreement pursuant to Section
8.1(c), USCS will promptly pay to DST by wire transfer, in immediately available
funds, the Termination Fee.
(c) Notwithstanding anything to the contrary herein, no party shall have
any liability under the Agreement, including Section 8.2(a) or Section 8.2(b),
in the event the Agreement is terminated or terminable as a consequence of the
nonfulfillment of any of the conditions set forth in Section 7.1(b), Section
7.1(c), Section 7.1(d), Section 7.1(e) or Section 7.1(g), unless such
nonfulfillment is caused by that party's material breach of any of its covenants
or obligations under this Agreement.
SECTION 8.3 AMENDMENT. This Agreement may be amended by DST and USCS by
or pursuant to action taken by their respective Boards of Directors at any time
before or after approval of this Agreement by the stockholders of USCS and DST
and prior to the Effective Time, but, after either such approval, no amendment
will be made that changes the Exchange Ratio or in any other way materially
adversely affects the rights of such stockholders, without the further approval
of such stockholders. This Agreement may not be amended except by an instrument
in writing signed on behalf of DST and USCS.
SECTION 8.4 WAIVER. At any time prior to the Effective Time, subject to
Section 8.3, DST and USCS, by or pursuant to action taken by their respective
Boards of Directors, may (i) extend the time for performance of any of the
obligations or other acts of the other party to this Agreement, (ii) waive any
inaccuracies in the representations and warranties set forth in this Agreement
or in any documents delivered pursuant to this Agreement and (iii) waive
compliance with any of the agreements or conditions set forth in this Agreement.
Any agreement on the part of a party to this Agreement to any such extension or
waiver will be valid if set forth in an instrument in writing signed on behalf
of such party.
ARTICLE IX
DEFINITIONS; GENERAL PROVISIONS
SECTION 9.1 DEFINITIONS. As used in this Agreement, the following terms
with initial capital letters will have the meanings set forth below:
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, controls, is under common control with, or is controlled by, such
Person. As used in this definition, "control" (as well as "controlling,"
"controlled by" and "under common control with") means possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person (whether through the ownership of voting securities, by
contract or otherwise).
32
"Business Day" means any day on which commercial banks are open for
business in Kansas City, Missouri.
"Code" means the Internal Revenue Code of 1986, as amended.
"DST Common Stock" means the shares of common stock, par value $.01 per
share, of DST.
"Environmental Law" means any applicable Legal Requirement relating to the
protection of human health, protection, preservation or restoration of the
environment (including, air, water vapor, surface water, ground water, drinking
water supply, surface land, subsurface land, plant and animal life or any other
natural resource).
"Equity Affiliate" means, as to any Person, any other Person in which such
Person or any of its Subsidiaries holds a five percent or greater equity
interest.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means, as to any Person, any trade or business (whether
or not incorporated) that is treated as a single employer with such Person under
Section 414(b), (c), (m) or (o) of the Code.
"Executive Officer" means, as to DST, any Person identified in its most
recent Annual Report to Shareholders as an executive officer and, as to USCS,
any Person identified in its most recent Annual Report to Shareholders as
management.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"USCS Common Stock" means the shares of common stock, par value $.05 per
share, of USCS.
"USCS Disclosure Schedule" means the Schedule designated as such and
attached to this Agreement as Exhibit A and incorporated herein.
"USCS Rights Plan" means the Stockholder Rights Plan, as amended, between
USCS and ChaseMellon Shareholder Services, LLC.
"USCS Stock Plans" means the following USCS Stock Option Plans: 1988 Stock
Option Plan; 1996 Stock Option Plan; 1996 Directors' Stock Option Plan; 1993
Stock Option Plan; and 1990 Stock Option Plan.
"Intellectual Property" means copyrights, patents, trademarks, service
marks, service names, trade names, applications therefor, technology rights and
licenses, computer software (including any source or object codes therefor or
documentation relating thereto), trade secrets, franchises, know-how,
inventions, and other intellectual property rights, either registered, issued,
applied for or common law.
33
"Knowledge" means the present actual knowledge of a Person that is a human
being and, in the case of a Person that is not a human being, the present actual
knowledge of any Executive Officer (or any human being having duties comparable
to those of an Executive Officer) of such Person.
"Legal Requirement" means any statute, ordinance, code, law, rule,
regulation, order or other requirement, standard or procedure enacted, adopted
or applied by any Governmental Entity, including judicial decisions applying
common law or interpreting any other Legal Requirement or any agreement entered
into with a Governmental Entity in resolution of a dispute or otherwise.
"Lien" means any lien, security interest, pledge, charge, claim, option,
right to acquire, restriction on transfer, voting restriction or encumbrance of
any nature.
"Market Price" means (i) with respect to DST Common Stock, the closing
quotation from the New York Stock Exchange Composite Transactions as reported in
THE WALL STREET JOURNAL, and (ii) with respect to USCS Common Stock, the closing
quotation from the NASDAQ National Market Issues as reported in THE WALL STREET
JOURNAL.
"Material Adverse Effect" means a material adverse effect on the business,
properties, assets, known or reasonably foreseeable prospects, financial
condition, liabilities or operations of a Person and its Subsidiaries, taken as
a whole, or on the ability of such Person to perform its obligations under this
Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" means the over-the-counter market of the NASD.
"NYSE" means the New York Stock Exchange.
"Person" means any human being or any partnership, limited liability
company, corporation, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Entity or other entity.
"SEC" means the United States Securities and Exchange Commission.
"Spin-off" means the spin-off of FAM by the DST Major Stockholder referred
to in Exhibit E-2 and the date of such Spin-off shall mean the date the shares
of FAM are distributed to the stockholders of the DST Major Stockholder.
"Subsidiary" means, with respect to any Person, any other Person more than
50% of whose outstanding voting securities or partnership or other equity
interests, as the case may be, are directly or indirectly owned by such Person.
"Tax" means all federal, state, local and foreign income, profits,
estimated, franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise and other taxes,
34
duties and assessments of any nature whatsoever together with all interest,
penalties and additions imposed with respect to such amounts.
"Termination Fee" means cash in the amount of $25,000,000.
SECTION 9.2 OTHER DEFINITIONS. The following terms are defined in the
Sections indicated:
================================================================================
TERM SECTION
---- -------
Acquisition Proposal 5.1 (h)
Acquisition Sub Preamble
Agreement Preamble
Antitrust Division 6.8
Certificate of Incorporation 1.1(a)
Certificate of Merger 1.2
Closing 2.9
Closing Date 2.9
USCS Preamble
USCS Benefit Plans 3.11(a)
USCS Options 2.7
USCS Permits 3.8(a)
USCS SEC Reports 3.7(a)
USCS Stock 2.1(b)
USCS Stock Certificates 2.2(a)
DGCL 1.1
Effective Time 1.2
Exchange Act 3.6
Exchange Agent 2.2(a)
Exchange Ratio 2.1(a)
FTC 6.8
Governmental Entity 3.8(a)
HSR Act 3.6
================================================================================
35
================================================================================
DST Preamble
DST Certificates 2.2(a)
DST SEC Reports 4.6(a)
Indemnified Party 6.2(h)(iii)
Indemnifying Party 6.2(h)(iii)
Joint Proxy Statement/Prospectus 6.2(a)
Losses 6.2(h)(i)
Meeting 6.3
Merger Recital A
Most Recent USCS Balance Sheet 3.7(c)
Most Recent DST Balance Sheet 4.6(c)
Other Filings 6.2(b)
Preliminary Joint Proxy Statement/Prospectus 6.2(a)
Secretary 1.2
SEC Filings 6.2(c)
Securities Act 3.6
Surviving Corporation 1.1
Tax 9.1
================================================================================
SECTION 9.3 USE OF TERMS. Terms used with initial capital letters will
have the meanings specified, applicable to both singular and plural forms, for
all purposes of this Agreement. All pronouns (and any variations) will be
deemed to refer to the masculine, feminine or neuter, as the identity of the
Person may require. The singular or plural includes the other, as the context
requires or permits. The word "include" (and any variation) is used in an
illustrative sense rather than a limiting sense. The word "day" means a
calendar day. All accounting terms not otherwise defined in this Agreement will
have the meanings ascribed to them under GAAP.
SECTION 9.4 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
No representations and warranties contained in this Agreement will survive
beyond the Closing Date. This Section 9.4 will not limit any covenant or
agreement of the parties to this Agreement that by its terms requires
performance after the Closing Date.
36
SECTION 9.5 NOTICES. All notices or other communications under this
Agreement will be in writing and will be given (and will be deemed to have been
duly given upon receipt) by delivery in person, by cable, telegram, telex or
other standard form of telecommunications, or by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to USCS: USCS International, Inc.
0000 Xxxxxxxx Xxxx Xxxxx
Xxxxxx Xxxxxxx, XX 00000
Attn: Chief Executive Officer
With a copy to: Xxxxxx X. Xxxxx, Esq.
Xxxxxx & Xxxxx LLP
000 Xxxxxxx Xxxx, 00xx Xxxxx
Xxxxxxxxxx, XX 00000
If to DST: DST Systems, Inc.
000 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxxxxx Xxxx, XX 00000
Attn: President
With a copy to: Xxxx X. Xxxxxx, Esq.
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
or to such other addresses as any party may have furnished to the other parties
in writing in accordance with this Section 9.5.
SECTION 9.6 FEES AND EXPENSES. Except as otherwise expressly provided in
this Agreement, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement will be paid by the party incurring such expenses.
SECTION 9.7 SPECIFIC PERFORMANCE. The parties to this Agreement agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that, in accordance with
Section 8.2(a), the parties will be entitled to enforce specifically the terms
and provisions of this Agreement in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity, and no party will raise any defense to the
institution of such equitable relief other than with respect to the factual
allegations concerning the claims for which relief is sought.
SECTION 9.8 ENTIRE AGREEMENT; MISCELLANEOUS. This Agreement will be of no
force or effect until executed and delivered by all of the parties to this
Agreement. This Agreement (including the documents and instruments referred to
in this Agreement) when executed and delivered, constitutes the entire agreement
and supersedes all other prior agreements and
37
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter of this Agreement except for the Mutual Non-
Disclosure Agreement dated as of April 20, 1998 but not the amendments thereto.
All parties have participated in the preparation of this Agreement and the
interpretive principle of construing a document against the drafter shall have
no application to this Agreement. This Agreement may be executed in two or more
counterparts which together will constitute a single agreement. This Agreement
may be delivered by facsimile. Any certificate delivered pursuant to this
Agreement will be made without personal liability on the part of the officer or
employee of the Person giving such certificate.
SECTION 9.9 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL.
(a) This Agreement shall be deemed to be made under, and in all respects
shall be interpreted, construed and governed by and in accordance with, the law
of the State of Delaware. The parties hereby irrevocably submit to the
exclusive jurisdiction of the courts of the State of Delaware and the Federal
courts of the United States of America located in the State of Delaware solely
in respect of the interpretation and enforcement of the provisions of this
Agreement and of the documents referred to in this Agreement, and in respect of
the transactions contemplated hereby, and hereby waive, and agree not to assert,
as a defense in any action, suit or proceeding for the interpretation or
enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a Delaware State or Federal
court. The parties hereby consent to and grant any such court jurisdiction over
the person of such parties and over the subject matter of such dispute and agree
that mailing of process or other papers in connection with any such action or
proceeding in the manner provided in Section 9.5 or in such other manner as may
be permitted by law shall be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY
RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH PARTY CERTIFIES AND
ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.9.
38
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by
their respective officers thereunder duly authorized all as of the date first
written above.
DST SYSTEMS, INC.
By: /s/ Xxxxxx X. XxXxxxxxx
-----------------------------------
Name: Xxxxxx X. XxXxxxxxx
Title: President and Chief
Executive Officer
DST ACQUISITIONS, INC.
By: /s/ Xxxxxx X. XxXxxxxxx
-----------------------------------
Name: Xxxxxx X. XxXxxxxxx
Title: President
USCS INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxx
------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Chief Executive Officer
1
